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TRANSCRIPT
JS Fund of FundsHalf Yearly Report for the period
ended December 31, 2018
Managing Mutual Funds Better!
JS Fund of Funds
01
CONTENTS
Vision and Mission Statement
Organization
Directors’ Report to the Unit Holders
Trustee Report to the Unit Holders
Report on review of Condensed Interim �nancial information to the Unit Holders
Condensed Interim Statement of Assets and Liabilities
Condensed Interim Income Statement
Condensed Interim Statement of Comprehensive Income
Condensed Interim Cash Flow Statement
Condensed Interim Statement of Movement in Unit Holders’ Fund
Notes to the Condensed Interim Financial Statements
02
03
04
06
07
08
09
10
11
12
13
02
JS Fund of Funds
VISION
To be recognized as a responsible asset manager respected for continuingly realizing goals of its investors.
MISSION
To build JS Investments into a top ranking Asset Management Company; founded on sound values; powered by re�ned knowhow; supported by a committed team operating within an accountable framework of social, ethical and corporate responsibility - a strong and reliable institution for its shareholders to own; an e�cient service provider and value creator for clients; an exciting and ful�lling work place for employees; and a participant worth reckoning for competitors.
BROAD POLICY OBJECTIVES
Value creation for clients on a sustainable basis
Maintain high standards of ethical behaviors and �duciary responsibility
Manage Investments with Prudence and with the aim of providing
consistent returns better than that of peers
Take Products and Services to the People, Create awareness on
understanding �nancial goals, risks and rewards
Professional Excellence – Adapt, Evolve and Continuously Improve
Maintain highly e�ective controls through strong compliance and risk
management
A talented, diligent and diverse HR
JS Fund of Funds
03
ORGANIZATION Management Company JS Investments Limited
7th Floor, The Forum, G-20 notfilC ,9-kcolB ,imaJ-e-nabayahK
00657-ihcaraK 42716353)12-29( :xaF 626-222-111 )12-29( :leT
moc.lisj@ofni:liam-E moc.lisj.www :etisbeW
Board of Directors Basir Shamsie Chairman Hasnain Raza Nensey Chief Executive O�cer Syed Tauqir Haider Rizvi Non Executive Director
Suleman Lalani Non Executive Director Babbar Wajid Non Executive Director
Kamran Jafar Non Executive Director Ahsen Ahmed Independent Director Asif Reza Sana Independent Director
Audit Committee Asif Reza Sana Chairman Ahsen Ahmed Member Suleman Lalani Member
Chief Financial O�cer & Company Secretary Muhammad Khawar Iqbal
Trustee Central Depository Company of Pakistan Limited CDC House, 99-B, Block ‘B’, S.M.C.H.S.,Main Sharah-e-Faisal, Karachi-74400 Pakistan.Tel: (92-21) 111-111-500Fax: (92-21) 34326040
Auditors Deloitte Yousuf Adil
Chartered Accountants
Legal Adviser Bawaney & Partners 31-enaL ,C-86 ,roolF ht4 & dr3
Bokhari Commercial Area ihcaraK ,AHD IV-esahP
04
JS Fund of Funds
DIRECTORS’ REPORT TO THE SHAREHOLDERS
The Board of Directors of JS Investments Limited has pleasure in presenting to you the un-audited �nancial statements of JS Fund of Funds (The Fund) for the half year ended December 31, 2018.
Economic Review:Pakistan’s economy grew by 5.79% in �nancial year 2018 (FY18); even as GDP growth hit a 12 year high, econom-ic vulnerabilities unraveled in second half of 2018 (2HFY18) and continued into �rst half of 2019 (1HFY19). The economic malaise primarily emanated from worsening current account and �scal account de�cits.
The current account de�cit for the �rst half of 2019 (6MFY19) clocked in at USD 7,790 million, down 2.9% year on year (YoY). The de�cit is in sharp contrast to the �rst half of 2018 (6MFY18) de�cit of USD 3,615 million. The current account de�cit worsened primarily due to a sharp jump in imports (31% in two years) which was not met by a commensurate increase in exports or remittances, the two main sources of balance of payments (BOP) �nancing.
The import bill rose due to rising oil prices (Brent crude rose ~27% YoY in 1HFY19 and ~49% from 1HFY17 levels) which were propped by an OPEC production cut in early 2017. Quantitative easing in US and Europe post 2008 led to low interest rates and high global growth, which acted as a further positive trigger for oil prices.
In addition to the rise in oil prices, currency parity being held back over the past few years, �scal imprudence and low domestic interest rates, raised income levels. The �scal de�cit rose from 5.8% of GDP in 2017 to 6.6% of GDP in 2018 due to falling revenues and a higher primary de�cit (tax revenues have low buoyancy in Pakistan due to structural issues).
Due to the challenging economic situation, the State Bank of Pakistan raised the Discount Rate from 7.0% to 10.5% and devalued the PKR by ~14% against the US Dollar. This was in addition to the 0.75% rise in the Discount rate and 10% PKR devaluation during 2HFY18.
In times of economic distress, Pakistan has a history of opting for IMF programs to prop up the economy. Under the ambit of the IMF, the country has usually taken a strict dose of monetary and �scal tightening while structural reforms have taken a backseat as they are di�cult to execute and politically unpopular. To this end, the government endeavored to arrange non-IMF �nancing to reduce reliance on the Fund; so far, the government has secured ~USD 12.0 billion in �nancing from Saudi Arabia and the United Arab Emirates. Negotiations with the IMF continue, albeit at a slower pace as the government negotiates a less severe austerity package from the Fund with a stricter focus on structural reforms.
Equity Market Review:The worsening economic situation and delay in acquiring an IMF program by the government led to consid-erable uncertainty for the capital market. The government aims to delay or reduce securing of funds from the IMF in order to maintain economic sovereignty. While this is a commendable e�ort, but policy uncertainty, and the rise in interest rates have been negative for the equity markets.
As a result, the KSE100 index declined by 11.6% in 1HFY19. The decline in the index was broad based with the exception of the Tobacco sector. Commercial banks were the largest negative contributors, primarily due to Habib Bank Limited and United Bank Limited. Both stocks declined due to company speci�c concerns. Oil & Gas Exploration was the second largest contributor due to the fall in oil prices in the latter part of 1HFY18. Brent crude fell from a high of ~$85/bbl and touched the $50/bbl mark due to extension in US sanctions on oil exports by Iran, rising oil output from Saudi Arabia, United States and Russia and concerns over a global economic slowdown due to the Sino-American trade war and rising global interest rates.
Similarly, both the KMI30 and the KSE30 indices were down 10.6% and 5.9% respectively. The decline in the former was more pronounced due to the higher weight of the Oil & Gas Exploration sector.
Going forward, we believe equity performance will be selective. The banking sector is expected to be the biggest bene�ciary of rising interest rates while Oil & Gas Exploration may bene�t from a bounce back in oil prices as OPEC production cuts take e�ect from January 2019. On the other hand, Fertilizer and Oil Marketing sectors will continue to maintain stable earnings as their business models are not linked to the broader economic performance.
JS Fund of Funds
05
The focus in 2019 is likely to shift towards �xed income securities and mutual funds as investors adopt a more conservative approach.
Money Market Review:The State Bank of Pakistan raised the Discount Rate from 7.0% to 10.50% in 1HFY19 in order to curb aggregate demand and reduce the current account de�cit. Anticipating the rise in interest rates, our primary focus was on �oating rate �xed income securities with the objective to maximize interest rate sensitivity for the income and money market mutual funds by investing at the very short end of the yield curve.
The strategy paid dividends in 1HFY19 as the SBP raised the Discount rate by 4.25% between January and November 2018. During the period, based on careful evaluation we selectively invested in Term Finance Certi�cates and Sukuks issued by blue chip corporations which were expected to be relatively una�ected by the economic slowdown and exhibit healthy interest coverage ratios.
The market for government securities continued to shift towards the shorter end in 1HFY19. In the govern-ment auction, the o�ered amount for Pakistan Investment Bonds totaled PKR 109 billion in 1HFY19, 41% of this was in the shortest tenor three year category. Against this only PKR 39 billion were accepted i.e. 35.7% of the o�ered amount at a weighted average yield of 11.5%.
The prices of Ijara Sukuk experienced signi�cant decline due to the policy rate hike of 425 basis points. Out of the four outstanding Islamic bonds, Ijara XVI being the �oater was a preferable investment in the Islamic Bond market. The government borrowing through Ijara Sukuk constitutes less than 4.00% of the total debt pro�le, and is expected to shrink further with the upcoming maturities of Ijara XVII, XVIII, and XVIIII in February, March and June 2019 respectively. Furthermore, there was no news on the issuance of fresh Ijara Sukuk during 1HFY19.
Going forward we believe interest rates may peak over the coming 12 months. If Pakistan does enter a Fund program, the requirement to reduce government borrowing from the State Bank may be imposed similar to previous programs. Such a requirement would increase activity in government securities. Participation in PIBs is also expected to be higher than in 1HFY19, if interest rates peak out. This may lead to a sharp jump in �xed income mutual fund yields, which may further reduce the incentive to invest in the equity market.
Review of Fund Performance:The Fund return was -3.38% during the six months period ended December 31, 2018 against the benchmark return of -1.33%. Net Assets moved from PKR 275.59 million (June 30, 2018) to PKR 217.33 million as at December 31, 2018.
Fund and Asset Manager Rating:The matter in respect of de�ning the methodology of the rating of schemes falling in the 'Fund of Funds category’ is under consideration by the two rating agencies. In view of the same, JSIL shall continue to follow up with the respective rating agencies and shall proceed with the formal rating once the matter is concluded.
JCR-VIS Credit Rating Company Limited has a�rmed JS Investments’ Management Quality Rating of “AM2“(AM-Two) and has upgraded the outlook to “positive”. The rating denotes High Management Quality.
Acknowledgment:The directors express their gratitude to the Securities and Exchange Commission of Pakistan and Central Depository Company Limited (CDC) for their valuable support, assistance and guidance. The Board also thanks the employees of the Management Company for their dedication and hard work and the unit holders for their con�dence in the Management.
Hasnain Raza NenseyKarachi: February 21, 2019 Chief Executive O�cer
06
JS Fund of Funds
JS Fund of Funds
07
AUDITOR'S REPORT TO THE UNIT HOLDERS ON REVIEW OFCONDENSED INTERIM FINANCIAL INFORMATION
Introduction
We have reviewed the accompanying condensed interim statement of assets and liabilities of JS Fund of Funds (the “Fund”) as at December 31, 2018, and the related condensed Interim income statement, condensed interlm statement of comprehensive income, condensed Interim statement of movement In unit holders' fund. condensed Interim cash �ow statement and notes to the condensed interim �nancial Informa-tion for the six months period ended December 31, 2018 (here-Iniafter referred to as the ‘condensed Interim �nancial Information’). JS Investments Limited (the “Management Company") is responsible for the prepara-tion and presentation of this condensed interim �nancial information In accordance with accounting and reporting standards as applicable in Pakistan for interim �nancial reporting. Our responsibility is to express a conclusion on thiscondensed interim �nancial information based on our revlew. The �gures of the condensedInterim Income statement and condensed interim statement of comprehensive Income, for the three months period ended December 31, 2018 have not been reviewed, as we are required to review only the cumulative �gures for the six months period ended December 31, 2018.
Scope of Review
We conducted our review In accordance with international Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity", A review of condensed interim �nancial Information consists of making Inquiries, primarily of persons responsible for �nancial and accounting matters, and applying analytical and other reVIew procedures A review is substantially less In scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all signi�cant matters that might be identi�ed In an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim �nancial information is not prepared, In all material respects, in accordance with account-ing and reporting standards as applicable in Pakistan for interim �nancial reporting,
Chartered AccountantsEngagement PartnerNaresh Kumar Date: February 27 ,2019Place: Karachi
08
JS Fund of Funds
CONDENSED INTERIM STATEMENT OF ASSETS AND LIABILITIESAS AT DECEMBER 31, 2018
Chief Executive O�cer Chief Financial O�cer Director
For JS Investments Limited(Management Company)
Assets Bank balances Investments Accrued return on bank balances Deposits, prepayment and other receivable Total assets Liabilities Payable to the Management Company Remuneration payable to the Trustee Annual fee payable to the Securities and Exchange Commission of Pakistan Accrued expenses and other liabilities Total liabilities Net assets Contingencies and commitments Unit holders' fund Number of units in issue (Numbers) Net assets value per unit The annexed notes from 1 to 18 form an integral part of this condensed interim �nancial information.
67
8
9
10
14
57,533,178 161,696,164
684,297 257,551
220,171,190
88,550 59,454
123,295 2,574,607
2,845,906
217,325,284
217,325,284
4,273,166
50.86
146,624,609 131,701,563
313,056 243,800
278,883,028
230,655 57,535
273,860 2,726,075
3,288,125
275,594,903
275,594,903
5,235,292
52.64
31 December2018
(Unaudited)Note
30 June2018
(Audited)
-------Rupees-------
JS Fund of Funds
09
CONDENSED INTERIM INCOME STATEMENT (UNAUDITED)FOR THE SIX MONTHS AND THREE MONTHS PERIOD ENDED DECEMBER 31, 2018
Chief Executive O�cer Chief Financial O�cer Director
For JS Investments Limited(Management Company)
Income
(Loss) / gain on sale of investments - netUnrealized loss on investments - netDividend incomeReturn on bank balancesOther Income
Expenses
Remuneration of the Management CompanySindh sales tax on Management Company's remunerationRemuneration of the TrusteeSindh sales tax on Trustee remunerationAnnual fee to the Securities and Exchange Commission of PakistanBank and settlement charges Auditors' remunerationListing feePrinting charges Accounting and operational chargesReversal for Sindh Workers' Welfare FundSECP supervisory fees
Net loss for the period after taxation
Taxation
Net loss for the period after taxation
Allocation of net (loss) / income for the period
Income already paid on units redeemed
Accounting income available for distribution:Relating to capital gains Excluding capital gains
The annexed notes from 1 to 18 form an integral part of this condensed interim �nancial information.
11
13
(5,239,218) (6,189,569)
143,559 5,360,081
28,500
(5,896,647)
633,557
82,370 352,875
45,872
123,320 7,107
215,973 12,500
- 129,809
- 1,250
1,604,633 (7,501,280)
-
(7,501,280)
-
- - - -
(10,234,978) (410,995)
143,559 1,887,316
2,731
(8,612,367)
190,244
24,732 176,438
22,937
58,457 4,730
105,774 6,250
- 61,532
(37,017) 625
614,702 (9,227,069)
-
(9,227,069)
-
- - - -
(9,475,915) (33,608,801)
705,524 1,032,039 -
(41,347,153)
790,555
102,773 352,877
45,874
140,433 9,845
230,848 12,500 84,546
147,632 -
1,250 1,919,133
(43,266,286)
-
(43,266,286)
-
- - - -
87,326 (13,816,788)
- 397,997
-
(13,331,465)
378,224
49,170 176,439
22,937
67,094 1,843
113,137 6,250
55,588 70,624
- 625
941,931 (14,273,396)
-
(14,273,396)
-
- - - -
Note
2018 2017 2018 201731 December
Three months period ended31 December
Six months period ended
------------------------------------- (Rupees) -------------------------------------
10
JS Fund of Funds
CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)FOR THE SIX MONTHS AND THREE MONTHS PERIOD ENDED DECEMBER 31, 2018
Chief Executive O�cer Chief Financial O�cer Director
For JS Investments Limited(Management Company)
Net loss for the period after taxation
Other comprehensive income for the period
Total comprehensive income for the period
The annexed notes from 1 to 18 form an integral part of this condensed interim �nancial information.
(7,501,280)
-
(7,501,280)
(9,227,069)
-
(9,227,069)
(43,266,286)
-
(43,266,286)
(14,273,396)
-
(14,273,396)
2018 2017 2018 201731 December
Three months period ended31 December
Six months period ended
------------------------------------- (Rupees) -------------------------------------
JS Fund of Funds
11
CONDENSED INTERIM CASH FLOW STATEMENT (UNAUDITED)FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2018
Chief Executive O�cer Chief Financial O�cer Director
For JS Investments Limited(Management Company)
CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period before taxation Adjustments for: Loss on sale of investments - net Dividend income Return on bank balances Unrealized loss on investments - net (Increase) / decrease in assets Interest income received on bank balances Investments - net Dividend income received on investments Deposits, prepayment and other receivable (Decrease) / increase in liabilities Remuneration payable to the Management Company Remuneration payable to the Trustee Annual fee payable to Securities and Exchange Commission of Pakistan
Accrued expenses and other liabilities Net cash used in from operating activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of units Payments on redemption of units Net cash (used in) / generated from �nancing activities Net decrease in cash and cash equivalents during the period Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period The annexed notes from 1 to 18 form an integral part of this condensed interim �nancial information.
(7,501,280)
5,239,218 (143,559)
(5,360,081) 6,189,569 5,925,147
4,988,840 (41,423,388) (36,434,548)
143,559 (13,751)
(36,304,740)
(142,105) 1,919
(150,565) (151,468) (442,219)
(38,323,092)
672,258 (51,440,597) (50,768,339) (89,091,431) 146,624,609
57,533,178
(43,266,286)
9,475,915 (705,524)
(1,032,039) 33,608,801 41,347,153
925,761 (15,519,876) (14,594,115)
705,524 (102,095)
(13,990,686)
(109,447) (6,812)
(332,008) (4,682,345) (5,130,612)
(21,040,431)
35,611,062 (31,817,743)
3,793,319 (17,247,112)
42,606,940
25,359,828
2018 201731 December
Six months period ended
------ (Rupees) -----
12
JS Fund of Funds
CONDENSED INTERIM STATEMENT OF MOVEMENT IN UNIT HOLDERS' FUND (UNAUDITED)FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2018
Chief Executive O�cer Chief Financial O�cer Director
For JS Investments Limited(Management Company)
CapitalValue
Undistributedincome /
(loss) Total
CapitalValue
Undistributedincome /
(loss) Total
Net assets as at the beginning of the period 280,123,094 (4,528,191) 275,594,903 284,277,845 27,637,779 311,915,624
Issuance of 12,749 units (2017: 630,305 units)
- Capital value (at net asset value per unit at the beginning of the period) 671,130 - 671,130 36,677,419 - 36,677,419
- Element of Income / (loss) 1,128 - 1,128 (1,066,357) - (1,066,357)
Total proceeds on issuance of units 672,258 - 672,258 35,611,062 - 35,611,062
Redemption of 974,875 units (2017: 609,718 units)
- Capital value (at net asset value per unitat the beginning of the period) (51,319,121) - (51,319,121) (34,126,005) - (34,126,005)
- Element of (loss) / income (121,476) - (121,476) 2,308,262 - 2,308,262
Total payments on redemption of units (51,440,597) - (51,440,597) (31,817,743) - (31,817,743)
Net loss for the period - (7,501,280) (7,501,280) - (43,266,286) (43,266,286) Other comprehensive income for the period - - - - - -
Total comprehensive income for the period - (7,501,280) (7,501,280) - (43,266,286) (43,266,286)
Net assets as at the end of the period 229,354,755 (12,029,471) 217,325,284 288,071,164 (15,628,507) 272,442,657
(Accumulated loss) / undistributed income brought forward
Relating to realized (loss) / gain (479,642) 28,954,152
Relating to unrealized loss (4,048,549) (1,316,373)
(4,528,191) 27,637,779
Net loss for the period (7,501,280) (43,266,286)
Accumulated loss carried forward (12,029,471) (15,628,507)
Accumulated loss carried forward
Relating to realized (loss) / gain (5,840,053) 16,428,090 Relating to unrealized loss (6,189,418) (32,056,597)
(12,029,471) (15,628,507)
Net asset value per unit at the beginning of the period 52.64 58.19
Net asset value per unit at end of the period 50.86 50.63
The annexed notes from 1 to 18 form an integral part of this condensed interim �nancial information.
Six months period ended
December 31,---------------------------------- 2018 ---------------------------------------------------------------------- 2017 ------------------------------------
-------------------------------------------------------- Rupees ----------------------------------------------------------
JS Fund of Funds
13
NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION (UNAUDITED)FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2018
LEGAL STATUS AND NATURE OF BUSINESS JS Fund of Funds ("the Fund") was established under the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 (NBFC Rules) as an open-end unit trust scheme. The Fund is governed under Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 and Non-Banking Finance Companies and Noti�ed Entities Regulations, 2008. The Fund was constituted under a Trust Deed, dated 19 April 2005 between JS Investments Limited as the Manage-ment Company, a company incorporated under repealed the Companies Ordinance, 1984 (now replaced by Companies Act, 2017) and the Central Depository Company of Pakistan Limited as the Trustee, also incorporated under the repealed Companies Ordinance, 1984 (now replaced by the Companies Act, 2017). The Fund is an open end mutual fund categorized as "Asset Allocation Fund of Funds scheme" and the Fund is listed on Pakistan Stock Exchange Limited. Units are o�ered for public subscription on a continuous basis. The units are transferable and can also be redeemed by surrendering them to the Fund. The Fund's primary activity is to invest in the leading equity, �xed income, money market and balanced funds, including funds managed by JS Investments Limited, and provide investors an opportunity to gain from the performance of these funds through one investment in the Fund. Under the Securities and Exchange Commission of Pakistan's (SECP's) guidelines, the Fund is also allowed to maintain balance in the bank accounts. The registered o�ce of JS Investments Limited is situated at 7th Floor, The Forum, G-20 Khayaban- e-Jami, Block-9, Clifton, Karachi, Pakistan. Title to the assets of the Fund is held in the name of Central Depository Company of Pakistan Limited as a Trustee of the Fund. BASIS OF PREPARATION Statement of compliance This condensed interim �nancial information has been prepared in accordance with the accounting and reporting standards as applicable in Pakistan for interim �nancial reporting. The accounting and reporting standards comprise of:
Wherever provisions of and directives issued under the Companies Act, 2017, the requirements of the Trust Deed, the NBFC Rules, the NBFC Regulations or the directives issued by the SECP di�er with the requirements of the IFRS, the provisions of and directives issued under the Companies Act, 2017, requirements of the Trust Deed, the NBFC Rules, the NBFC Regulations or the directives issued by the SECP shall prevail.
-
-
-
International Financial Reporting Standards ("IFRSs") issued by the International Accounting Standards Board as are noti�ed under the Companies Act, 2017; Provisions of and directives issued under the Companies Act, 2017; and The requirements of the Trust Deed, the NBFC Rules, the Non-Banking Finance Companies and Noti�ed Entities Regulations, 2008 (the "NBFC Regulations") and the directives issued by the SECP.
1.
2.
2.1
14
JS Fund of Funds
The disclosures made in this condensed interim �nancial information have, however, been limited based on the requirements of the International Accounting Standard 34, 'Interim Financial Report-ing'. This condensed interim �nancial information does not include all the information and disclosures required in a full set of �nancial statements and should be read in conjunction with the annual published �nancial statements of the Fund for the year ended June 30, 2018. In compliance with schedule V of the Non-Banking Finance Companies and Noti�ed Entities Regula-tions, 2008, the directors of the Management Company hereby declare that this condensed interim �nancial information gives a true and fair view of the state of the Fund's a�airs as at December 31, 2018.
SIGNIFICANT ACCOUNTING POLICIES The accounting policies, basis of accounting estimates applied and method of computation adopted in the preparation of this condensed interim �nancial information and �nancial risk management objectives and policies are the same as those applied in the preparation of the �nancial statements of the Fund for the year ended June 30, 2018 except as explained in note 3.2. IFRS 9 'Financial Instruments' IFRS 9 'Financial Instruments' was issued on July 24, 2017. This standard is adopted locally by the Securities and Exchange Commission of Pakistan and is e�ective from accounting periods beginning on or after July 1, 2018, and consequently has been adopted by the Fund. Accordingly, the Fund has applied the requirements of IFRS 9 to instruments that continue to be recognised as at July 01, 2018 and has not applied the requirements to instruments that have already been derecognised as at July 01, 2018. Comparative amounts in relation to instruments that continue to be recognised as at July 01, 2018 have not been restated as allowed by IFRS 9. IFRS 9 introduces new requirements for:
1) The classi�cation and measurement of �nancial assets and �nancial liabilities, 2) Impairment of �nancial assets, and 3) General hedge accounting. Details of these new requirements as well as their impact on the Fund's �nancial statements are described below except the General Hedge Accounting which the Fund does not apply. The Fund has applied IFRS 9 in accordance with the transition provisions set out in IFRS 9. Classi�cation and measurement of �nancial assets IFRS 9 contains three principal classi�cation categories for �nancial assets: - Measured at amortized cost (“AC”), - Fair value through other comprehensive income (“FVTOCI”) and - Fair value through pro�t or loss (“FVTPL”). Financial asset at amortised cost A �nancial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:
1) the asset is held within a business model whose objective is to hold assets to collect contractual cash �ows; and
2.2
2.3
3.
3.1
3.2
3.2.1
JS Fund of Funds
15
2) the contractual terms of the �nancial asset give rise on speci�ed dates to cash �ows that are solely payments of principal and interest on the principal amount outstanding. Financial Asset at FVTOCI A �nancial asset is measured at FVTOCI only if it meets both of the following conditions and is not designated as atFVTPL: 1) the asset is held within a business model whose objective is achieved by both collecting contrac tual cash �ows and selling �nancial assets; and 2) the contractual terms of the �nancial asset give rise on speci�ed dates to cash �ows that are solely payments of principal and interest on the principal amount outstanding. FVTOCI �nancial assets are subsequently measured at fair value with gains and losses arising due to changes in fair value recognised in OCI. Financial asset at FVTPL All other �nancial assets are classi�ed as measured at FVTPL (for example: equity held for trading and debt securities not classi�ed either as AC or FVTOCI). Business Model Assessment Under IFRS 9, a necessary condition for classifying a loan or receivable at amortized cost or FVTOCI is whether the asset is part of a group or portfolio that is being managed within a business model whose objective is to collect contractual cash �ows (Amortized Cost), or to both collect contractual cash �ow and to sell (FVTOCI). Otherwise, the asset is classi�ed and measured at FVTPL. The business model is determined under IFRS 9 at a level that re�ects how groups of �nancial assets are managed together to achieve a particular business objective. It is not an instrument-by-instru-ment analysis; rather it can be performed at a higher level aggregation. It is typically observable through the activities that the entity undertakes to achieve the objective of the business model; all relevant evidence that is available at the date of the assessment (including history of sales of the �nancial assets) are considered. Following three business models are de�ned under the IFRS 9: 1) Hold to collect business model 2) Hold to collect and sell business model 3) FVTPL business model Hold to collect business model If an entity’s objective is to hold the asset (or portfolio of assets) to collect the contractual cash �ows, the assets (or the portfolio) will be classi�ed under the ‘hold to collect’ business model, subjective to meeting the Sole Payment of Principle and Interests (SPPI) requirements.
Hold to collect and sell business model
An entity can hold �nancial assets to achieve a particular objective by both collecting contractual cash �ow and selling �nancial assets; this will qualify for the “hold to collect and sell business model” (also known as the FVTOCI business model), subjective to meeting the Sole Payment of Principle and Interests (SPPI) requirements. The objective of this business model is achieved by collecting contrac-tual cash �ows and selling �nancial assets, unlike the ‘hold to collect’ business model discussed above.
16
JS Fund of Funds
FVTPL business model If a �nancial asset or group of �nancial assets is not held within the ‘hold to collect’ or the ‘hold to collect and sell’ business model, then it is measured at FVTPL, the default category. Classi�cation and measurement of �nancial liabilities With regard to the measurement of �nancial liabilities designated as at fair value through pro�t or loss, IFRS 9 requires as follows:
3.2.2
Impairment of �nancial assets The SECP/Commission has through its letter no. SCD/AMCW/RS/MUFAP/2017-148 dated November 21, 2017 has deferred the applicability of the impairment requirements of IFRS 9 for debt securities on mutual funds. Therefore the Fund will not be subject to the impairment provisions of IFRS 9. Meanwhile, asset management companies shall continue to follow the requirements of Circular 33 of 2012. Impact of change in accounting policies due to adoption of IFRS 9 There were no �nancial assets or �nancial liabilities which the Fund had previously designated as at FVTPL under IAS 39 that were subject to reclassi�cation or which the Fund has elected to reclassify upon the application of IFRS 9. There were no �nancial assets or �nancial liabilities which the Fund has elected to designate as at FVTPL at the date of initial application of IFRS 9.
The table below shows information relating to classi�cation of �nancial assets and �nancial laibilities of the fund as a result of transition to IFRS 9.
3.2.3
3.2.4
-
-
The amount of change in the fair value of a �nancial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of such changes in other comprehensive income would create or enlarge an accounting mismatch in pro�t or loss. Changes in fair value attributable to a �nancial liability's credit risk are not subsequently reclassi�ed to pro�t or loss. Under IAS 39, the entire amount of the change in the fair value of the �nancial liability designated as fair value through pro�t or loss is presented in pro�t or loss.
Financial assets
Bank balances LR AC 146,624,609 146,624,609 -
Open end mutual funds - quoted HFT FVTPL 131,701,563 131,701,563 -
Accrued return on bank balances LR AC 313,056 313,056 -
Deposits LR AC 100,000 100,000 -
Financial liabilities
Payable to the Management Company OFL AC 230,655 230,655 -
Remuneration payable to the Trustee OFL AC 57,535 57,535 -
Accrued expenses and other liabilities OFL AC 611,205 611,205 -
-"LR" is loans and receivables
-"AC" is ammortised cost
-"HFT" is held for trading
-"FVTPL" is fair value through pro�t or loss
-"OFL" is other �nancial liabilities
-------------------- Rupees ---------------------------
E�ect onJuly 01, 2018on Retained
Earnings
Financial assets and �nancial liabilities
Originalclassi�cation
as perIAS 39
Newclassi�cation
as perIFRS 9
Carrying amount on
initial adoption of
IFRS 9 on July 01,
2018
Carryingamount as per IAS 39
as onJune 30, 2018
JS Fund of Funds
17
ESTIMATES AND JUDGEMENTS The preparation of this condensed interim �nancial information in conformity with accounting and reporting standards requires management to make estimates, assumptions and use judgements that a�ect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. Estimates, assumptions and judgments are continually evaluated and are based on historical experience and other factors, including reasonable expectations of future events. Revisions to accounting estimates are recognised prospectively commencing from the period of revision.
The signi�cant estimates, judgements and assumptions made by the management in applying the accounting policies and the key sources of estimation uncertainty are same as those that applied to �nancial statements as at and for the year ended June 30, 2018 except as explained in note 3.2. FINANCIAL RISK MANAGEMENT The Fund's �nancial risk management objectives and policies are consistent with that disclosed in the �nancial statements as at and for the year ended June 30, 2018.
4.
5.
This includes balances of Rs. 0.665 million (30 June, 2018: Rs. 10.89 million) with JS Bank Limited (a related party) and Rs. 0.609 million (30 June, 2018: Rs. 0.041 million) with Bank Islami Pakistan Limited (a related party). These accounts carry pro�t at the rates of 9.5% (30 June, 2018: 6.75%) and 10.5% (30 June, 2018: 6.50%) per annum respectively. Other PLS accounts of the Fund carry pro�t at the rates of 3% to 11.35% (30 June, 2018: 3% to 8%) per annum.
6.1
December 2018
(Unaudited)Note ----------- Rupees ------------
6. BANK BALANCES
6.1 57,533,178 In pro�t and loss sharing accounts (PLS)
June 30,2018
(Audited)
146,624,609
December 31,2018
(Unaudited)Note
7. INVESTMENTS
At fair value through pro�t or loss
Open end mutual funds - quoted 7.1 161,696,164
June 30,2018
(Audited)
131,701,563
-------------- Rupees ---------------
18
JS Fund of Funds
Clause 47B of Part IV of the Second Schedule to the Income Tax Ordinance, 2001 provides exemption from withholding tax deduction on dividends received by the collective investment scheme from investee companies.
However a letter dated June 30, 2010 issued by Federal Board of Revenue to Assistant Director, Central Directorate of National Savings, Islamabad states that the said exemption will be applicable if exemption certi�cate under section 159 (1) of Income Tax Ordinance, 2001 is issued by the concerned Commissioner of Inland Revenue.
Based on the above letter, above amount of withholding tax has been deducted by the certain investee companies on dividends. An exemption certi�cate was issued by the concerned Commis-sioner of Inland Revenue e�ective up to June 30, 2018. Accordingly the management is in the process of recovering the above tax amount deducted. Furthermore, a stay order has also been obtained by the Management Company of the Fund from further deduction of income tax at source.
8.1
7.1 Open end mutual funds - at fair value through pro�t or loss
Sectors / Collective Investment Schemes
Managed by JS Investments Limited
Related party
JS Cash Fund (related party) 100 - 1,064,605 156,678 907,927 92,222,339 92,771,948 42.69 3.22 JS UTP Fund (related party) 100 - 121,212 - 121,212 20,000,000 18,242,424 8.39 1.39 JS Value Fund (related party) 100 296,921 1,535,276 1,704,096 128,101 27,829,885 26,076,186 12.00 3.50 JS Large Cap. Fund (related party) 100 483,719 847,968 1,127,389 204,298 27,833,509 24,605,606 11.32 3.46
Managed by Nafa Asset Management Limited
NAFA Stock Fund 10 - 1,351,648 1,351,648 - - - - -
Held-for-trading investments167,885,733 161,696,164 74.40
Cost of investments 167,885,582
* The investee capital represents the net assets of the investee funds as at December 31, 2018.
Carrying value before revaluation
as atDecember 31,
2018
Market value / carrying value
as at December 31, 2018 (after revaluation)
% of Net
Assets
% of Investe
e Capital
'……………………. Number of units …………………………................... Rupees ……..............
Par value
(Rupees)
Holding at the
beginning of the period
Acquired during
theperiod
Disposed during
theperiod
Holding at the
endof the
period
December 31, June 30,2018 2018
(Unaudited) (Audited)Note
8. DEPOSITS, PREPAYMENT AND OTHER RECEIVABLES
Security deposit with Central Depository Company of Pakistan Limited 100,000 100,000
Prepaid listing fee 13,750 -
Income tax recoverable 8.1 143,801 143,800
257,551 243,800
-------------- Rupees ---------------
JS Fund of Funds
19
The legal status of applicability of Sindh workers' welfare fund is same as that disclosed in note 12.1 to the annual audited �nancial statements of the Fund for the year ended June 30, 2018.
As there is loss for the six months period year ended December 31, 2018, therefore, no provision for SWWF has been recognised in these condensed interim �nancial statements. Had the provision not been recognized, the NAV per unit of the Fund as at December 31, 2018 would have been higher by Rs.0.36 per unit (June 30, 2018: 0.29 per unit).
The legal status of applicability of Federal Excise Duty on the Fund is same as disclosed in note 12.2 to the annual audited �nancial statements of the Fund for the year ended June 30, 2018, and the appeal, �led by tax authorities against the order in the Honourable Supreme Court of Pakistan dated July 16, 2016, is pending for decision.
In view of above, the Management Company, as a matter of abundant caution, is carrying provision for FED for the period from January 13, 2013 to June 30, 2016 aggregating to Rs. 0.451 million. Had the provision not been retained, NAV per unit of the Fund as at December 31, 2018 would have been higher by Rs. 0.11 per unit (June 30, 2018: Rs. 0.086 per unit). The Sindh Provincial Government has levied Sindh Sales Tax at the rate of 13% on Management Company's remuneration.
10.1
10.2
10.3
December 31, June 30,2018 2018
(Unaudited) (Audited)Note
9. PAYABLE TO THE MANAGEMENT COMPANY
Remuneration payable to the Management Company 68,894 118,257 Accounting and operational charges 18,989 39,383 Sales load and other expense incurred 667 73,015
88,550 230,655
10. ACCRUED EXPENSES AND OTHER LIABILITIES
Provision for Sindh Workers' Welfare Fund 10.1 1,519,908 1,519,908
Capital gain tax payable 239 6,342
Federal excise duty payable on Management 10.2 451,833 451,833 Company's remuneration
Auditors' remuneration 218,923 197,650
Zakat Payable 4,428 -
Mutual fund rating fee payable 116,000 116,000
Sindh sales tax payable on Management Company's remuneration 10.3 74,975 81,897
Printing, stationery & postage - 59,139
Sindh sales tax payable on Trustee remuneration 7,727 7,481
Withholding tax payable 37,397 47,409
Sales load payable 9,616 -
Others 133,561 238,416
2,574,607 2,726,075
-------------- Rupees ---------------
20
JS Fund of Funds
ACCOUNTING AND OPERATIONAL CHARGES
In accordance with the provisions of the NBFC Regulations amended vide S.R.O 1160(I) / 2015 dated November 25, 2015, the Management Company of the Fund is entitled for reimbursement of fee and expenses incurred by the Management Company in relation to registrar service, accounting, operation and valuation services related to Fund maximum up to 0.1% of average annual net assets of the scheme or actual which ever is less. Accordingly, the Management Company has charged accounting and operating expenses to the Fund at a rate of 0.1% per annum of the average annual net assets of the Fund or actual whichever is less for the six months period year ended December 31, 2018. EXPENSE RATIO
The total expense ratio (TER) of the Fund for the period ended December 31, 2018 is 0.62% YTD which includes 0.10% representing government levies on the Fund such as federal excise duties and sales taxes, Sindh Workers' Welfare Fund, annual fee payable to the SECP, etc. This ratio is within the maximum limit of 2.5% prescribed under the NBFC Regulations for a collective investment scheme categorised as an "Fund of Funds" scheme.
TAXATION
The Fund's income is exempt from Income Tax as per clause 99 of Part I of the Second Schedule to 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, provided that for the purpose of determining distribution of not less than 90% of its accounting income for the year, the income distributed through bonus units shall not be taken into account. Furthermore, as per regulation 63 of the Non-Banking Finance Companies and Noti�ed Entities Regulations, 2008, the Fund is required to distribute 90% of the net accounting income other than capital gains to the unit holders. The Fund is also exempt from the provisions of Section 113 (minimum tax) under Clause 11A of Part IV of the Second Schedule to the Income Tax Ordinance, 2001. The management intends to distribute at least 90% of the income earned during the year by the Fund to the unit holders, if by then it earns pro�t. CONTINGENCIES AND COMMITMENTS
There were no contingencies and commitments as at December 31, 2018 and June 30, 2018. TRANSACTIONS WITH CONNECTED PERSONS / RELATED PARTIES Connected persons / related parties include JS Investments Limited (JSIL) being the Management Company of the Fund, CDC-Trustee being the Trustee of the Fund, JS Bank Limited (JSBL) being the Holding Company of JSIL (Holding 65.16% shares of JS Investment Limited), Jahangir Siddiqui and Co. Limited (JSCL) (Holding 75.02% shares of JS Bank Ltd.) being the Holding Company of JSBL, JS Global Capital Limited (JSGCL) (67.16% shares held by JS Bank) being the fellow subsidiary of JSBL, and other associated companies of JSBL, JSIL and its subsidiaries, Key Management Personnel of the above entities and other funds being managed by JSIL and includes entities holding 10% or more in the units of the Fund as at 31 December 2018. It also includes sta� retirement bene�t funds of the above related parties / connected persons. Details of balances and transactions with the related parties / connected persons not disclosed elsewhere are as follows:
Transactions with the connected persons are carried out in normal course of business at contracted rates and thus determined in accordance with the market rates.
Remuneration of the Management Company is determined in accordance with the provisions of the Regulations and the Trust Deed. Remuneration of the Trustee is determined in accordance with the provisions of the Trust Deed.
11.
12.
13.
14.
15.
JS Fund of Funds
21
December 31, June 30,2018 2018
(Unaudited) (Audited)Note
15.1 Detail of balances with related parties / connected persons as at period / year end
JS Investments Limited - management company
Remuneration payable to the management company 15.3 68,894 118,257
Sales tax payable on management company's remuneration * 74,975 81,897
FED on management company's remuneration * 451,833 451,833
Units held: 2,772,987 (June 2018: 3,441,521) 141,034,115 181,161,670
Allocation of expenses relating to the Fund payable to the Management Company 15.3 18,989 39,383
Sales load payable 667 73,015
Central Depository Company of Pakistan Limited - Trustee
Remuneration payable to the trustee 15.3 59,454 57,535
Sales tax payable on trustee remuneration ** 7,727 7,481
Settlement charges payable 565 565
Security deposit 100,000 100,000
JS Bank Limited - Holding Company of the Management Company(JSBL holds 65.16% of JSIL shares)
Bank balance 664,754 10,921,279
Pro�t receivable 29,452 184,220
Bank Islami Pakistan Limited (Associate)(JSCL - Ultimate Parent Company holds 21.26%)
Bank balance 608,943 41,431 Pro�t receivable 154,777 -
-------------- Rupees ---------------
Details of related party balances in respect of investments made by the Fund have been disclosed in Note 7.1 of this condensed interim �nancial information. * Paid / payable to the Management Company for onwards payment to the Government. ** Paid / payable to the Trustee for onward payment to the Government.
15.1.1
22
JS Fund of Funds
15.2 Detail of transactions with related parties / connected persons during the period
2018 2017
JS Investments Limited - management company
Remuneration of the management company 633,557 790,555
Sales tax on management company's remuneration * 82,370 102,773
Sale of units: 668,534 (2017: nil ) 35,000,000 -
Expenses incurred 143,809 208,138
Sales load for the period 5,099 104,892
Central Depository Company of Pakistan Limited - Trustee
Remuneration of the trustee 352,875 352,877
Sales tax on trustee remuneration ** 45,872 45,874
Annual, transaction, custodian & CDS connection fee 3,390 3,390
JS Bank Limited - Holding Company of the Management Company(JSBL holds 65.16% of JSIL shares)
Return on bank balances 2,011,070 657,070
Bank Charges 1,907 3,453
Bank Islami Pakistan Limited (Associate)(JSCL - Ultimate Parent Company holds 21.26%)
Return on bank balances 154,777 21,963
Bank Charges - 500
JS Income Fund (Fund under JSIL Management)
Purchase of units: Nil (2017: 450,967 ) - 43,676,178
Sale of units: Nil (2017:10,254 ) - 1,000,000
Gain on redemption of units by the Fund - 6,870
JS Islamic Fund (Fund under JSIL Management)
Sale of units: Nil (2017: 237,315 ) - 27,700,748
(Loss) / gain on redemption of units by the Fund - (3,321,103)
JS Large Cap. Fund (Fund under JSIL Management)
Purchase of units: 847,968 (2017: 9,824) 118,000,000 1,493,000
Sales of units: 1,127,389 (2017: NIL ) 152,940,010 -
JS Value Fund (Fund under JSIL Management)
Purchase of units:1,535,274 (2017: NIL) 338,000,000 -
Sales of units:1,704,096 (2017:NIL ) 373,560,440 -
JS Cash Fund (Fund under JSIL Management)
Purchase of units: 1,061,342 (2017: Nil) 108,000,000 -
Sales of units: 156,678 (2017: Nil) 16,000,000 -
Refund of Capital units : 1,849 (2017: Nil) - -
Dividend Reinvest units : 1,414 (2017: Nil) 143,559 -
Unit Trust of Pakistan (Fund under JSIL Management)
Purchase of units: 121,212 (2017: Nil) 20,000,000 -
JS Growth Fund (Fund under JSIL Management)
Sales of units: Nil (2017 : 92,784 ) - 18,175,430
(Loss) / gain on redemption of units by the Fund - (2,338,153)
* Paid / payable to the Management Company for onwards payment to the Government.** Paid / payable to the Trustee for onwards payment to the Government.
(Unaudited)
Six month period endedDecember 31,
---------(Rupees)---------
JS Fund of Funds
23
Remuneration payable to the Management Company and the Trustee is determined in accordance with the provisions of NBFC Regulations, and the Trust Deed respectively. Details of related party transactions and balances in respect of investments made by the Fund have been disclosed in note 7.1 of this condensed interim �nancial information.
Purchase and redemptions of the units of other mutual funds are made at respective rates and amount declared by the said funds. Similarly purchase and redemption of the Fund's unit by related parties / connected persons are recorded at the applicable net asset value per unit. Dividend income are recorded at the rates and amount declared by the investee entities. Other transactions are at agreed rates.
This re�ects the position of related party / connected person status as at December 31, 2018.
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.
Underlying the de�nition of fair value is the presumption that the Fund 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 �nancial 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 �nancial assets held by the Fund is current bid price.
A �nancial 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 arm's length basis. IFRS 13, 'Fair Value Measurements' requires the Fund to classify fair value measurements using a fair value hierarchy that re�ects the signi�cance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 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 3 Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)
The Fund held the following �nancial instruments measured at fair value:
15.3
15.4
15.5
15.6
16.
24
JS Fund of Funds
Fair value through pro�t
& loss
Amortized cost
Total Level 2 Total
Note
On-balance sheet �nancial instruments
December 31, 2018
Financial assets measured at fair value
Open end mutual funds - quoted 7.1 161,696,164 - 161,696,164 161,696,164 161,696,164
Financial assets not measured at fair value
Bank balances 6 - 57,533,178 57,533,178 - - Accrued return on bank balances - 684,297 684,297 - - Deposit - 100,000 100,000 - -
- 58,317,475 58,317,475 - -
Financial liabilities not measured at fair value
Payable to the Management Company - 88,550 88,550 - - Remuneration payable to the Trustee - 59,454 59,454 - - Accrued expenses and other liabilities - 468,484 468,484 - -
- 616,488 616,488 - -
Carrying amount Fair value
----------------------------------------- Rupees --------------------------------------
Amortized cost Total Level 2 Total
NoteOn-balance sheet �nancial instruments
June 30, 2018
Financial assets measured at fair value
Open end mutual funds - quoted 7.1 131,701,563 - 131,701,563 131,701,563 131,701,563
Financial assets not measured at fair value
Bank balances 6 - 146,624,609 146,624,609 - - Accrued return on bank balances - 313,056 313,056 - - Deposit - 243,800 243,800 - -
- 147,181,465 147,181,465 - -
Financial liabilities not measured at fair value
Payable to the Management Company - 230,655 230,655 - - Remuneration payable to the Trustee - 57,535 57,535 - - Accrued expenses and other liabilities - 611,205 611,205 - -
- 899,395 899,395 - -
-------------------------------------------- Rupees ---------------------------------------------
Fair value through pro�t
and loss
Carrying amount Fair value
GENERAL
This condensed interim �nancial information are unaudited and have been reviewed by the auditors. Furthermore, the �gures for the three months period ended December 31, 2018 in this condensed interim �nancial information, wherever appearing, have not been reviewed by the auditors.
The corresponding �gures have been re-arranged wherever necessary.
Figures have been rounded o� to the nearest Rupee.
DATE OF AUTHORIZATION OF ISSUE
This condensed interim �nancial information were authorized for issue on February 21, 2019 by the Board of Directors of the Management Company.
17.
17.1
17.2
17.3
18.
Chief Executive O�cer Chief Financial O�cer Director
For JS Investments Limited(Management Company)
JS Fund of Funds
25