THE SCHEME’S INVESTMENTS AND ASSETS

Analysis of Investments and Assets

The Fund’s Investments assets over the six year period to December, 2004 were as follows:

Source: Finance & Investments Department — LASF

The office building is occupied by the Fund for administration purposes. Part of the office building is occupied for business purposes and the other part is rented out to business organizations. Investment Properties are those real estate (i.e.) residential houses which are purely rented out for rental income.

The equity investment is as result of the debt /equity swap transaction that was concluded in September, 2003. Since the acquisition of the shares, the portfolio has grown from K7 billion to K12.8 billion recording a capital gain of K5.8 billion as at 31st December, 2004.

Performance of Share Prices

The Fund acquired its equity investment in September, 2003 after concluding the K7 billion debt equity swap transaction. Management has been monitoring the performance of the share prices.

The share prices at the time of acquisition and as recorded at the LuSE as at 3 1st December, 2004 were as follows:

The share prices for Zambia Sugar Plc, National Breweries Plc and British American Tobacco Plc recorded capital growth of 222%, 377% and 43% respectively.

(ii) Net Capital Gains

The net capital gains on the equity portfolio since acquisition in September, 2003 are therefore K5, 835,556,598.40.

REVENUE BUILDING INITIATIVES

In the Five Year Strategic Plan, the Fund identified collection of contributions as a strategic objective aimed at improving liquidity. LASF Management acknowledged that the income collection was on a downward trend from the year 1996 to 1999. By 1999, the total income for the Fund had dropped to K5 .7 billion per annum.

Given the above performance, LASF Management identified recovery of contributions arrears and broadening the income streams such as investment diversification as a strategic priority.

Among some of the initiative undertaken by the Fund as follows:

1. Recovery of contribution arrears through debt swaps, factoring, enhancing debt collection and payments in kind. The notable success has been the K7 billion debt equity swap with Government in September, 2003.
2. Entering into Payment Plans/Agreements with Associated Authorities.
3. Conversion of the contributions arrears into debt security instruments such as corporate bonds. In January, 2005, LASF submitted a proposal to ZESCO to convert K20 billion of the contributions arrears into Corporate Bonds with maturity periods ranging from 18 to 36 months.
4. Encouraging Associated Authorities to remit contributions using modern electronic arrangement such direct credits into LASF’s accounts. Associated Authorities have been given the account numbers for the Fund.
   
5. Open discussions with Chief Officers of the Fund’s member organizations on the benefits relating to compliance in remitting contributions.

In view of the initiative mentioned above, there has been a slight increase in the income levels although a lot still require to be done.
Over the last five years, the performance of actual income against the budgeted in has been as follows:

CORPORATE GOVERNANCE STRUCTURES ON FINANCE AND INVESTMENT ACTIVITIES OF THE FUND

The Fund has the following corporate governance structures aimed at enhancing accountability and transparency on finance and investment activities.

(i) Investment Committee of the Board

The Investment Committee of the Board review and approve Managements recommendations and reports on the Fund’s investment evaluation and performance.

(ii) Financial Performance and Budgetary Report to the Board

Management submit financial performance and Budgetary reports to the Board for review periodically.

(iii) Monthly Management Meeting

On a monthly basis, the financial and investment performance reports are prepared for discussion at Senior Management level with all deliberations minuted and endorsed.

(iv) Allocations Committee

The Allocations Committee sits to allocate funds received so as to promote transparent in financing benefits and administrative expenditure. The Committee is chaired by the Managing Director with all Directors and Managers heading Departments as members.

(v) Statutory Reviews

Financial and investment performance are subjected to review by External Auditors as a statutory requirement. The current auditor for
LASF is Grant Thornton.

The Fund is also required to be valued by Actuaries to asses the financial viability and sustainability. The current Actuaries are QED Actuaries and Consultants of South Africa.

(vi) Regulation under the Pensions and Insurance Authority

The Fund is regulated by the Pensions and Insurance Authority

CONCLUSION

In order to improve the financial position of the Fund and diversify the Fund’s investment portfolio, the Fund will continue its efforts to recover contributions through initiative that were identified in the Five Year Strategic Plan.