http://www.jsil.com/downloads/reports/2011/JS_INVESTMENTS.pdf
INSTITUTE OF BUSINESS AND TECHNOLOGY
Financial Analysis of Jahangir Siddiqui Investment Limited
Prepared By
Ambreen Tai(BEM-931)
Course Code : MKT-606
EMBA (Finance)
FACULTY OFMANAGEMENT AND SOCIAL SCIENCES
SPRING-2010
Financial Analysis of JS Investments Ltd
CONTENTS
ACKNOWLEDGEMENT…………………………………………….03
ABSTRACT…………………………………………………………...04
CHAPTER - I INTRODUCTION 1.1Introduction................................................................... 06 1.2Research Objectives…………………………………….. 061.3Research Methodology………………………………….. 061.4Literature Review………………………………………….07
CHAPTER - II MUTUAL FUNDS 2.1 Introduction……………………………………………….. 092.2Mutual Funds Basics…………………………………….. 102.3Types of Mutual Funds…………………………………...132.4Mutual Funds Advantages/Disadvantages……………..142.5Risks in Mutual Funds…………………………………….18
CHAPTER - III JS INVESTMENTS LIMITED (JSIL) 3.1 Overview of JSIL…………………………………………..223.2 Fund Manager Profiles………………………………...... 243.3 Products & Services……………………………………... 243.4 Investment Committee……………………………………26
CHAPTER - IV FINANCIAL ANALYSIS 4.1 Financial Highlights……………………………………… 294.2 Ratio Analysis……………………………………………. 314.3 Horizontal Analysis……………………………………… 324.4 Cash Flow Statement……………………………………. 33
CHAPTER - V CORPORATE SOCIAL RESPONSIBILITIES 5.1 The Mahvash & Jahangir Siddiqui Foundation……….. 355.2 Health Care………………………………………………..355.3 Education…………………………………………………..355.4 Social Enterprises and Sustainable Development…….35
CHAPTER - VI CONCLUSION & RECOMMENDATIONS 6.1 Conclusion…………………………………………………376.2 Recommendations………………………………………..37
BIBLIORAPHY……………………………………………...44
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ACKNOWLEDGEMENT
I am grateful to Almighty ALLAH for helping and enabling me to complete the
project. I would like to appreciate and thank my project supervisor Dr. Noor Ahmed
Memon for his incessant guidance through out project completion process; he has
been available whenever I needed his guidance, assistance. I really appreciate his
positive comments for improving and bring out the utmost optimum consequences
out of my endeavors. Without his guidance and support I would have never been
able to organize and complete the project tasks as optimal and with in time
constraints.
It would be impossible to acknowledge individually all the professionals who
extended their kind personal assistance in gathering information and relevant data
required for data analysis for project conclusion. I would like to thank all my friends
and colleagues for their support throughout my project duration.
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Financial Analysis of JS Investments Ltd
INSTITUTE OF BUSINESS AND TECHNOLOGY
ABSTRACT SUBMITTED BY: Ambreen Tai
DISCIPLINE: EMBA (Finance)
TITLE OF PROJECT REPORT: Financial Analysis of JS investments Ltd.
MONTH OF SUBMISSION: APRIL 2010
NAME OF PROJECT SUPERVISOR: Dr. Noor Ahmed Memon
ABSTRACT
Mutual funds are one of most important vehicle of investing in the stock market.
Mutual funds have played very important role in Pakistani stock market. The reasons
why I have selected JS Investments Limited (JSIL) is because it’s one of the oldest
and largest Asset Management Company (AMC) in Private sector, with over PKR
38.3 billion in assets under management, spread across various mutual funds,
pension funds and separately managed accounts. The purpose of this report is to
present the mutual fund introduction, structures, types as well as the basics of
mutual funds. This report describes the introduction of JS investments Ltd the fund
manager’s details who maintain the books of funds and invests into the stock market
on behalf of clients & financial analysis of JS Investment Ltd. The JSIL also provides
social services and has built Jahangir Siddiqui foundation that supports needy
people in education, and health care.
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Financial Analysis of JS Investments Ltd
CHAPTER - 1 INTRODUCTION
1.1 Introduction 1.2 Research Objectives 1.3 Research Methodology 1.4 Literature Review
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Financial Analysis of JS Investments Ltd
1. INTRODUCTION
1.1 Introduction
This topic covers mutual funds, Mutual fund structures, mutual fund categories and
the reason of investment in mutual fund. Financial Analysis of JS Investments as it is
one of the oldest and largest asset management company in private sector. We will
also have horizontal and vertical analysis of the JSIL. We will discuss the growth of
JS investment Ltd along with comparisons with other Investment Companies
1.2 Research Objectives
The Objective of this research is to review the performance of JS
Investments. The hick ups, the rise and fall of investments returns and to
highlight the strategies of JS Investments Ltd in utilizing their strengths to
gain maximum and reduce the impact of up coming threats & to analyze
earnings of organization. In actual we want to figure it out that where JS
Investments stands if we compare with others. The entire working will be
done through Financial Analysis. The objective is to review the yearly
performance of the JS Investments Ltd about the Net Assets at the end of
2008
1.3 Research Methodology
Here we will use secondary methodology because secondary methodology is much
less expensive than if the researchers had to carry out the research themselves and
in this methodology we can get the data from different sources for example Financial
Institutions Government Sources , Company-Provided Information, News and Media
Sources, Market ,Research Companies, from Securities & Exchange Commission of
Pakistan, And MUFAP (Mutual Fund Association of Pakistan), FMA (Financial
Market Association Pakistan. The following sources can help me out in the
completion of my research
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Financial Analysis of JS Investments Ltd
Secondary Resource
By using secondary methodology model, I met with the management of JS
Investments Limited, Staff members, visited web sites, analysis of Annual Reports to
collect the data.
1.4 Literature Review
Self Experiences, Departmental peers experience.
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CHAPTER - 2 MUTUAL FUNDS
2.1 Introduction 2.2 Mutual Funds Basics 2.3 Types of Mutual Funds 2.4 Mutual Funds Benefits/Advantages 2.5 Risks in Mutual Funds
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2. MUTUAL FUNDS
2.1 Introduction
Mutual Fund is a pool of money provided by various participants and then invested
into equity & fixed income markets with the objective to provide safety of capital and
returns to investors. The pool is managed on behalf of the investors by a team of
specialized individuals, commonly known as Fund Mangers or Investment Advisors
It can also be defined as: A mutual fund is a professionally managed type of
collective investment scheme that pools money from many investors and invests it in
stocks, bonds, short-term money market instruments, and other securities. The
mutual fund will have a fund manager that trades the pooled money on a regular
basis and distributes the profits in the form of dividends as well
Currently, the worldwide value of all mutual funds totals more than $26 trillion. Since
1940, there have been three basic types of investment companies in the United
States: open-end funds, also known in the US as mutual funds; unit investment
trusts (UITs); and closed-end funds. Similar funds also operate in Canada. However,
in the rest of the world, mutual fund is used as a generic term for various types of
collective investment vehicles, such as unit trusts, open-ended investment
companies (OEICs), unitized insurance funds, and undertakings for collective
investments in transferable securities (UCITS).
Mutual funds provide an easy way for small investors to make long-term,
diversified, professionally managed investments at a reasonable cost. If
an investor only has a small amount of money with which to invest, then
he/she will most likely not be able to afford a professional money
manager, a diversified basket of stocks, or have access to low trading
fees. With a mutual fund, however, a large group of investors can pool
their resources together and make these benefits available to the entire
group. There are no “perks” for the largest investor and no penalties to the
smallest--all mutual fund holders pay the same fees and receive the same
benefits.
Mutual funds are also popular because they provide an excellent way for
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anyone to direct a portion of their income towards a particular investment
objective. Whether you're looking for a broad-based fund or a narrow
industry-focused. You’re almost certain to find a fund that meets your
needs. Although the various style and category types are virtually endless,
here's a quick summary of some of the various choices available to equity
investors:
2.2 Mutual Funds Basics
Establishing an investment plan is an essential first step toward successful
investing. Understanding the investments best suited to helping you achieve your
goals is equally important. Mutual funds can fit well into either your long- or short-
term investment strategy, but the success of your plan depends on the type of fund
you choose. Because all investments in funds come with some level of risk, it is
important to have realistic expectations about the risk vs. return potential and
choose funds which are best suited to your individual needs.
You can make money from a mutual fund in three ways:
1) Income is earned from dividends on stocks and interest on bonds. A fund pays
out nearly all of the income it receives over the year to fund owners in the form of a
distribution
2) If the fund sells securities that have increased in price, the fund has a capital gain.
Most funds also pass on these gains to investors in a distribution.
3) If fund holdings increase in price but are not sold by the fund manager, the fund's
shares increase in price. You can then sell your mutual fund shares for a profit.
Funds will also usually give you a choice either to receive a check for
distributions or to reinvest the earnings and get more shares. For example
if a person going to invest with JS Investments Limited then the following
steps will be taken by the investor. And he should why he is going to
invest and what are the reasons behind his investment what kind of return
he will earn either he wants to have short term investments or long term
investments then customer relations team will guide investor accordingly
below mentioned chart tells us few steps how to go through the process of
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investments.
her important thing that with the time an investor can switch his investment from one
fund to another
Type of investments
There are different types of investments where people invest and get return
accordingly. There are following types of investments
Bank deposits (current, saving, term deposits)
Commodities (gold, silver, platinum)
Property (land, house, apartment)
Capital market instruments
If we invest in bank deposits and capital market instruments we don’t need to have
much money we can start investment with the lowest amount. On the other hand if
we talk about investing in commodities and property we need a huge amount of
capital and that will not affordable for everyone.
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Reason of investment
A person invests due to following reasons:
Value of money diminishes over time
We invest to appreciate its worth in real terms (after adjusting for inflation/
devaluation) or to aim to maintain value of money.
Type of investors
There are two types
1) Employed Individuals (all income segments)
2) Institutions (large, SME, family businesses, partnerships)
Investment in Mutual Funds
The simple fact is that most people do not have time outside their work
and family life to scrutinize dozens of stocks and bonds before putting
their money in for investment. This job can be left to professional
managers. Anyone can pick and buy certain hot stocks and make money
in the process. However, this fact should not make us believe that we will
always hit a sixer. It is an established fact that majority of part-time
speculators lose in the game of speculation. One should not confuse
speculation for investment. Investment through mutual funds is an ideal
option for those investors who do not have time to explore investment
opportunities in today’s dynamic and ever changing capital market
conditions.
Risk & Return Equation
Logically if you invest heavy amount you will get high return but with higher risk in
the same way slight investment will give you low return and you will face less risk
against your investment.
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Investments opportunities with high return potential usually also have high risk.
Risk is generally mitigated as tenor of investment increases
Please keep in mind that past performance is not indicative of future results
2.3 Types of Mutual Funds
There are two generic types of funds available in the market
Closed end Fund
Open end Fund
Close end Fund
Closed-end mutual funds are more like the stock of a listed company, a fixed
number of whose shares are traded on an exchange. The shares of closed-end
mutual funds are priced at market value determined by supply and demand and are
not priced at the fund’s net assets per share value and thus may trade below or
above the net asset value; if the shares of a closed-end fund trade above the net
asset value the fund is said to be trading at a "premium" and if it is trading below the
fund is said to be trading at a "discount". A feature of closed-end funds is that they
can be converted into open-end funds.
Units trade on a stock exchange which is the only exit route
Trade at last price determined by the market which may be greater than,
equal to or less than the NAV
Do not continually offer units for sale
No sales load (front end or back end), only management fee
Some funds follow the practice of sharing excess profits above benchmark to
align fund manager goals with that of the investor
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Open end Fund
Open-end mutual funds are also called unit trusts, because they are registered as
trusts. An open-end fund unit holder can redeem or purchase units at any time. Units
are priced at their Net Asset Value (NAV) on per unit basis and its unit price is
determined by the net increase and/or decrease in the share prices of the stocks
that the fund owns along with any dividends and capital gains received. The units of
an open-end mutual fund can be bought directly or through the Asset Management
Company.
Registered as trusts
Bought through the management company at offer price, which is
NAV plus front end load, if any
Redeemed through the management company at redemption price
which is NAV less the back end load, if any
In addition to sales load, if any, flat management fee is charged
Some funds follow the practice of sharing excess profits above
benchmark to align fund manager goals with that of the investor.
2.4 Mutual Funds Benefits/Advantages & Disadvantages
Advantages of Mutual Funds Investments
Mutual funds allow investors to benefit from the collective strength of the group
(pool). The benefits include:
Services of Investment Professionals:
An average investor may not be well-versed with the capital markets, or have
access to adequate information to invest successfully or simply may not have the
time to acquire information and analyze it. By investing through a mutual fund, the
investor is able to acquire the services of a team of professionals dedicated to the
investment business, whose cost is spread over the entire pool and thus is at a very
low cost for the investor
Ability to Diversify An average investor will normally invest small amounts of money and will not be
able to achieve an adequate level of diversification if invested directly in the Capital
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Market. Where as even a small amount in a mutual fund will achieve immediate
diversification by becoming a part owner of the entire portfolio of the mutual fund
Less volatile By investing in diversified assets, mutual funds are generally less volatile than the
average equities portfolio of an individual investor
Ability to invest very small amounts An investor, who wishes to invest very small amounts, even Rs.1,000, can
do so by investing in some mutual funds (normally open-end funds). The
same amount of Rs.1,000 will not be entertained by any broker in the
capital markets, which are normally the exclusive domain of the rich and
wealthy.
Ability to multiply savings If an investor wishes to build up savings of small amounts every month, he does not
have to wait to first build up large enough amounts to invest meaningfully. By
investing every month in a mutual fund, the investor can make the monthly savings
earn and grow as these are accumulated
Ability to diversify price volatility risk At the point in time when an investor has some funds to invest, the market
may be rising (bullish) or declining (bearish). He is never too sure if he is
entering the market at the right time. By investing small amounts in
mutual funds regularly, the investor is able to average out the fluctuations
in the purchase price - some investment will be made when the market is
high and some when it is low; the average investment is likely to be at the
mid-point.
Size does matter With the growth in the size of funds under mutual fund management, the reach and
dimension of that fund in itself enhances its ability to exploit investment and trading
opportunities in the market
Liquidity Money invested in mutual funds can be redeemed either by selling the shares of a
closed-end fund in the market or by simply asking the Fund Manager for redemption
(refund at current market price) in the case of an open-end fund. There are no
penalties for early termination of the investment, which one may have to suffer in the
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Financial Analysis of JS Investments Ltd
case of term deposits with banks or other savings schemes. Below mentioned table
can also make your concepts clear regarding mutual funds benefits
You can also have a quick eye on the below mentioned table that will make your
concepts regarding mutual funds investments. The benefits has been summarized
for your convenience
Liquidity
Mutual Funds provide the opportunity for long term growth without any long term commitment required. In fact, Mutual Funds provide the option to redeem your investment on a daily basis.
Tax Benefits
Mutual funds in Pakistan are exempted from tax as Mutual Funds have to distribute 90% of their income to Unit Holders. Additionally, bonus units may be redeemed without any tax liability
Professional ManagementDedicated research team, specialized portfolio
management, and risk management oversight and controls.
Diversification regardless of small Investment Amount
Mutual Funds provide the opportunity to establish a well diversified portfolio without the large investment typically required to achieve this diversification.
Active Management
Given that Asset Management Companies specialize in managing your investments, investments with mutualfunds attempt to weather all storms - taking advantage of ups & downs in the market.
Accessibility
A Mutual Fund allows you to invest without requiring a large investment - in fact at JSIL you can invest for as little as PKR 100. This means that small amounts may be invested over a period of time.
Security
Net Assets of a Mutual Fund are completely under the custody the Trustee which ensures that the fund is operating within the investment policy as detailed in the Trust Deed.
Disadvantages of Mutual Funds Investments Changing market conditions can create fluctuations in the value of a
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mutual fund investment.
There are fees and expenses associated with investing in mutual funds that do not
usually occur when purchasing individual securities directly.
As with any type of investment, there are drawbacks associated with mutual funds.
No Guarantees. The value of your mutual fund investment, unlike a
bank deposit, could fall and be worth less than the principle initially
invested. And, while a money market fund seeks a stable share
price, its yield fluctuates, unlike a certificate of deposit. In addition,
mutual funds are not insured or guaranteed by an agency of the
U.S. government. Bond funds, unlike purchasing a bond directly,
will not re-pay the principle at a set point in time.
The Diversification "Penalty." Diversification can help to reduce
your risk of loss from holding a single security, but it limits your
potential for a "home run" if a single security increases dramatically
in value. Remember, too, that diversification does not protect you
from an overall decline in the market.
Costs. In some cases, the efficiencies of fund ownership are offset
by a combination of sales commissions, 12b-1 fees, redemption
fees, and operating expenses. If the fund is purchased in a taxable
account, taxes may have to be paid on capital gains. Keep track of
the cost basis of your initial purchase and new shares that are
acquired by reinvesting distributions. It's important to compare the
costs of funds you are considering. Always look at "net" returns
when comparing fund performances. Net return is the bottom line;
an investment's true returns after all costs are deducted.
Prospectuses will not contain all the costs that affect the net return on your
investment. This is why it is important to compare net returns whether or not the
fund in a no-load or load fund.
2.5 Risks in Mutual Funds
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Risk Every type of investment, including mutual funds, involves risk. Risk refers to the
possibility that you will lose money (both principal and any earnings) or fail to make
money on an investment. A fund's investment objective and its holdings are
influential factors in determining how risky a fund is. Reading the prospectus will
help you to understand the risk associated with that particular fund.
Generally speaking, risk and potential return are related. This is the risk/return trade-
off. Higher risks are usually taken with the expectation of higher returns at the cost
of increased volatility. While a fund with higher risk has the potential for higher
return, it also has the greater potential for losses or negative returns. The school of
thought when investing in mutual funds suggests that the longer your investment
time horizon is the less affected you should be by short-term volatility. Therefore, the
shorter your investment time horizon, the more concerned you should be with short-
term volatility and higher risk.
Defining Mutual fund risk
Different mutual fund categories as previously defined have inherently different risk
characteristics and should not be compared side by side. A bond fund with below-
average risk, for example, should not be compared to a stock fund with below
average risk. Even though both funds have low risk for their respective categories,
stock funds overall have a higher risk/return potential than bond funds. Of all the
asset classes, cash investments (i.e. money markets) offer the greatest price
stability but have yielded the lowest long-term returns. Bonds typically experience
more short-term price swings, and in turn have generated higher long-term returns.
However, stocks historically have been subject to the greatest short-term price
fluctuations—and have provided the highest long-term returns. Investors looking for
a fund which incorporates all asset classes may consider a balanced or hybrid
mutual fund. These funds can be very conservative or very aggressive. Asset
allocation portfolios are mutual funds that invest in other mutual funds with different
asset classes. At the discretion of the manager(s), securities are bought, sold, and
shifted between funds with different asset classes according to market conditions.
Mutual funds face risks based on the investments they hold. For example, a bond
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fund faces interest rate risk and income risk. Bond values are inversely related to
interest rates. If interest rates go up, bond values will go down and vice versa. Bond
income is also affected by the change in interest rates. Bond yields are directly
related to interest rates falling as interest rates fall and rising as interest rise. Income
risk is greater for a short-term bond fund than for a long-term bond fund.
Similarly, a sector stock fund (which invests in a single industry, such as
telecommunications) is at risk that its price will decline due to developments in its
industry. A stock fund that invests across many industries is more sheltered from
this risk defined as industry risk.
Following is a glossary of some risks to consider when investing in mutual
funds.
Call Risk. The possibility that falling interest rates will cause a bond issuer to
redeem—or call—its high-yielding bond before the bond's maturity date.
Country Risk. The possibility that political events (a war, national elections), financial problems (rising inflation, government default), or natural disasters (an earthquake, a poor harvest) will weaken a country's economy and cause investments in that country to decline.
Credit Risk. The possibility that a bond issuer will fail to repay interest and
principal in a timely manner. Also called default risk.
Currency Risk. The possibility that returns could be reduced for Americans
investing in foreign securities because of a rise in the value of the U.S. dollar
against foreign currencies. Also called exchange-rate risk.
Income Risk. The possibility that a fixed-income fund's dividends will decline as
a result of falling overall interest rates.
Industry Risk. The possibility that a group of stocks in a single industry will
decline in price due to developments in that industry.
Inflation Risk. The possibility that increases in the cost of living will reduce or
eliminate a fund's real inflation-adjusted returns.
Interest Rate Risk. The possibility that a bond fund will decline in value because
of an increase in interest rates.
Manager Risk. The possibility that an actively managed mutual fund's
investment adviser will fail to execute the fund's investment strategy
effectively resulting in the failure of stated objectives.
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Market Risk. The possibility that stock fund or bond fund prices overall will
decline over short or even extended periods. Stock and bond markets tend to
move in cycles, with periods when prices rise and other periods when prices
fall.
Principal Risk. The possibility that an investment will go down in value, or "lose
money," from the original or invested amount.
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CHAPTER - 3 JS INVESTMENTS LIMITED (JSIL)
3.1 Overview of JSIL
3.2 Fund Manager Profiles
3.3 Products and Services
3.4 Investment Committee
3. JS INVESTMENTS LTD
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3.1 Overview of JSIL
Founded in 1995, JS Investments Limited (JSIL, formerly JS ABAMCO Limited) is
the oldest and largest private sector Asset Management Company (AMC) in
Pakistan, with over PKR 38.97 billion (as at June 30, 2009) in assets under
management, spread across various mutual funds, pension funds and separately
managed accounts. The company is listed on the Karachi Stock Exchange and has
a market capitalization of around 10 billion (as at June 30, 2009).
Our Founding partners include INVESCO PLC (formerly known as AMVESCAP
PLC) - one of the world's largest fund managers with global reach, managing assets
in excess of US$370 billion and International Finance Corporation (IFC) - the private
sector arm of the World Bank Group. JS Investments Limited is part of the Jahangir
Siddiqui Group, one of Pakistan’s most diversified and prestigious financial
institutions. The Jahangir Siddiqui Group maintains a strong presence in the nation's
investment banking, corporate finance, equity market operations, and debt factoring
and insurance sectors.
The group has offices throughout the major cities in Pakistan and manages its
international operations from its London and Dubai offices. The group comprises
businesses with over 18,000 employees and revenues of over US$750 million in
2006.JSIL is to date the best rated asset manager in Pakistan with a rating of AM2+,
the first asset management company in Pakistan to be rated as such, and credit
rating of AA-/ A1+ (long/ short term) awarded by The Pakistan Credit Rating Agency
Limited (PACRA).
JSIL's mutual fund product suite provides the most diverse range of products under
a single Asset Management Company including funds for every investment strategy
and risk profile
Scope of Services:
JSIL possesses a diverse set of licenses catering to investment requirements at
both the individual and institutional level.
Investment Advisory and Asset Management Services
SECP has granted renewed license, dated June, 2007 to JS Investments under
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Rule 5(2) of the Non-Banking Finance Companies (Establishment and Regulation)
Rules 2003, to undertake investment advisory and asset management services.
Investment Finance Services
SECP has granted license No. NBFC-22/IFS-10/2006, dated June 30, 2006 to JS
Investments under Rule 5(2) of the Non-Banking Finance Companies
(Establishment and Regulation) Rules 2003, to undertake or carry out Investment
Finance Services.
Pension Fund Manager SECP has granted Registration No. SECP/PW/Reg-03/2007, dated
January 8, 2007 to JS Investments under Rule 5(2) of the Voluntary
Pension System Rules 2005, to commence business as a Pension Fund
Manager
3.2 Fund Manager Profiles
Kashif Rafi
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Mr. Rafi earned his MBA (Finance) from IBA Karachi, CA Foundation from ICAP and
CFA Level 1 from CFA Institute. He started his career with BMA Capital
Management, in May 2001 and worked their for 1-1/2 years as money market
dealer, joined Security Leasing Corporation Ltd, in November 2002 and worked their
for 6 months as treasury manager. He remained associated with Arif Habib
Investment Management as a Vice President, Fixed Income Funds, promoted to
SVP & Head of Fixed Income Funds, his total work experience at AHIML is 4 years
i.e. from May 2003 to May 2007.He joined JS Investments Limited as a Vice
President (Fund Manager) in May 2007 and has recently been promoted to SVP.
Syed Rehan Mobin Mr. Mobin brings with him 10 years of highly specialized experience in the field of
Debt and Equity Markets. He is an MBA with majors in Finance. He has extensive
exposure of Fixed Income and Equity Portfolio Management, Research and Risk
Management. In his last assignment, he worked as Head of Fixed Income Funds at
National Asset Management Company Limited. Prior to that, he was engaged in
wealth management consultancy for high net-worth individual clients. He
successfully structured and managed Fixed Income Hedge Portfolio worth PKR
2,500 million and an Equity Portfolio worth PKR 200 million. He started his
professional career with Khadim Ali Shah Bukhari & Company Limited, where he
managed Fixed Income and Money Market department.
3.3 Products & Services JSIL has launched a number of mutual funds and provides a number of services to
institutional investor as well as indivisual investors
Products of JSIL From the establishment of JS Investments a number of funds have been
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Financial Analysis of JS Investments Ltd
funds
Open End Funds
Unit Trust of Pakistan
JS Income Fund
UTP Islamic Fund
JS Aggressive Asset Allocation Fund
JS Fund of Funds
UTP A30
JS Capital Protected Fund I
JS Capital Protected Fund II
JS Capital Protected Fund III
JS Capital Protected Fund IV
JS Aggressive Income Fund
JS Pension Saving Fund I
Close End Fund
JS Value Fund Limited
UTP Large Capital Fund
JS Growth Fund
Services provided by JSIL
JSIL provides the number of services to the institutions as well as the individual Institute of Business and Technology 25
Financial Analysis of JS Investments Ltd
investors. People invest and get return accordingly
Institutional Investors
Investment Advisory Services Provides professional analysis of securities to institutional investors as to the advisability of investing in, purchasing or selling of securities for remuneration.
Mutual Funds JSIL's mutual fund product suite provides the most diverse range of products under a single Asset Management Company. Review fund details to expand your organization's investment portfolios.
Pension funds JSIL's Pension fund product suite allows and alleviates your organization of administrative burden of maintaining Provident & Gratuity fund while providing your employees with diverse investment options.
Separately Managed Accounts Manage portfolios of securities, including stocks and, shares, pension and provident fund, participation term certificates and other negotiable and debt
Individual Investors
Mutual Funds JSIL's mutual fund product suite provides the most diverse range of
products under a single Asset Management Company. This includes funds for every
investment strategy and risk profile.
Pension Fund Government employees have historically been the only people in
Pakistan with access to pension schemes while a sizeable majority of the
population, salaried professionals and self-employed individuals has never had
access to a structured and well regulated pension plans.
3.4 Investment Committee
The Investment Committee (IC) is responsible for recommending to the Board of
Directors the investment policies and strategies for the management of the Funds
and monitoring the performance of the Trustees, Auditors, Investment Managers
and other Fiduciaries. The Board of Directors through its Audit Committee monitors
the performance of the IC. The prime obligation of the IC is (a) to protect the
principal assets of the Fund, (b) to maximize the return to the unit/certificate holders,
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(c) to maintain reasonable costs relating to managing the investments of the Fund,
and (d) to ensure the Funds assets are prudently invested in accordance with the
Investment Management Policy.
Objective of reviewing the overall investments of the funds under
management
Scope includes devising strategies and taking appropriate
investment actions for all economic scenarios
Meetings are scheduled weekly to approve quarterly investment
plan, review fund & manager performance in light of set targets
Meetings can be event-triggered depending upon the prevailing economic
and market environment
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Financial Analysis of JS Investments Ltd
CHAPTER - 4 Financial Analysis
4.1 Financial Highlights
4.2 Ratio Analysis
4.3 Horizontal Analysis
4.4 Cash Flow Statement
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Financial Analysis of JS Investments Ltd
4. FINANCIAL ANALYSIS
4.1 Financial Highlights
Below mentioned graph shows the performance of total assets of JS Investments it
clearly shows the picture from the year 2004 to 2009 initially it starts from 1000
Million and gradually increase till 2008 with the time it increases and sudden change
after 2007 because of foreign investments as we all know 2007 to 2009 foreign
investor showed deep interest in Pakistan for investment purpose and with in the
year total assets of JS Investments shoot-up from 3.2 Million to 5 Million
Total Assets (PKR in Millions)
0
1000
2000
3000
4000
5000
2009 2008 2007 2006 2005 2004
YEARS
PK
R
Further if we move on we will get to know about profit of the company after
taxation in 2003 and after that in 2004 we can see the slight movement in
profit and increase 100 Million and after that a slight decline have been
checked in 2005 initially company couldn’t performed well in first 3 years
because of market crises and then with the time from year 2006 to 2009
profit increased 198 Million to 500 Million and in 2009 it goes to 600
Million.
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Financial Analysis of JS Investments Ltd
Earnings per share actually present the performance of the company. Initially Stages Company could not earn much but as the profit and net assets of the company increases earning per share of the company shoot up from Rs. 2 to 5.5 and finally has been decreased to Rs. 16 in 2009
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Financial Analysis of JS Investments Ltd
As we move on we will get to know about the shareholders equity of the JS Investments that also gradually increases. Another thing is the people were unaware with the mutual fund industry and people used to get returns from the banks. As people knew about the high returns with high investments public in actually wanted to divert their investments where they can get more profit as compare to banks because it all works with the Karachi stock exchange and with the country circumstances Karachi stock exchange rises or decreases you can see in the below mentioned graph that shareholders equity gradually increases and in 2009 it goes up to 400 Million.
4.2 Ratio Analysis
JSIL Current Ratio Current Asset/current Liability 2.29% Debt Ratio Total Liability/Total Asset 0.54% Rate of Return on Total Asset Net Income/Total Asset 0.13%
Earning Per Share Net Income/No. of Shares 5.49% Time Interest Earned Ratio EBIT/Financial Cost 3.84%
Return on Equity Net Income/Total Current Equity 32.58%
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Financial Analysis of JS Investments Ltd
4.3 Horizontal Analysis of JSIL
Profit and Loss Account for the year 2009
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2009
20092008
Rupees
INCOMERemuneration from funds under management 439,879,978
626,928,164
Commission from open end funds under management 4,753,74324,492,527
Dividend 33,772,067153,704,538
Underwriting commission
687,500(Loss) / gain on sale of investments - net (355,151,304)
353,627,560Income on Continuous Funding System (CFS) transactions
51,155
Return on bank deposits 1,856,9044,959,647
Mark up on term finance certificates 44,518,53432,157,918
Mark up on letter of placement 742,4823,291,015
Mark up on financing against shares
5,363,397Mark up on commercial papers 4,633,801
1,123,711
Commission income and share of profit from
management of discretionary client portfolios 129,79411,503,536
Amortisation of discount 52,714175,188,713 1,217,890,668
Impairment loss on available for sale equity securities (1,314,093,976)(1,138,905,263) 1,217,890,668
OPERATING EXPENSESAdministrative and marketing expenses 27 357,290,849
445,130,348
OPERATING (LOSS) / PROFIT (1,496,196,112)772,760,320
Other operating expenses 28 1,231,25411,206,920
Financial charges 29 291,423,117211,194,387
(1,788,850,483) 550,359,013
Other operating income 14,828,37123,234,754
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Financial Analysis of JS Investments Ltd
(Loss) / profit before taxation (1,774,022,112)573,593,767
Taxation - net (52,847,112)24,225,129
(Loss) / profit after taxation (1,721,175,000)549,368,638
(Loss) / earnings per share for the year (17.21)5.49
The annexed notes 1 to 42 form an integral part of these financial statements.
4.4 Cash Flow Statement for the year 2009
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Financial Analysis of JS Investments Ltd
CASH FLOW STATEMENTFOR THE YEAR ENDED JUNE 30, 2009
CASH FLOWS FROM OPERATING ACTIVITIES(Loss) / profit for the year before taxation
Adjustment for non-cash and other items:Remuneration from funds under managementCommission from open end funds under managementDividendDepreciationAmortisation of intangible assetsFinancial chargesInterest / mark-up incomeLiabilities no longer required written backGain/ (loss) on disposal of fixed assets
Increase / decrease in assets and liabilitiesLoans and advancesLong-term receivable from related partiesDeposits, prepayments and other receivablesAccrued and other liabilities
Taxes paidRemuneration and commission received from funds under management
Net cash (outflow) / inflow from operating activities
CASH FLOWS FROM INVESTING ACTIVITIESInvestments - netInvestment in subsidiaryFixed capital expenditure incurredDividend receivedReturn on bank depositsProceeds from disposal of fixed assets
Net cash inflow / (outflow) on investing activities
CASH FLOWS FROM FINANCING ACTIVITIESRepayment of principal amount relating to the securitised management fee Dividend paid
Money market borrowingsRepayments of long-term financingFinancial charges paid
Net cash (outflow) / inflow on financing activities
Net increase / (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
The annexed notes 1 to 42 form an integral part of these financial statements.
2009 2008 Rupees
(1,774,022,112) 573,593,767
(439,879,978) (626,928,164)(4,753,743) (24,492,527)(33,772,067) (153,704,538)34,999,098 45,211,2477,107,914 6,873,863291,423,117 211,194,387(1,856,904) (4,959,647)(2,172,740) (5,619,424)5,943,229 (1,504,614)(1,916,984,186) 19,664,350
3,536,738 4,000,1444,572,432 3,982,000(1,727,552) (17,485,865)(44,042,398) 35,834,958(37,660,780) 26,331,237(1,954,644,966) 45,995,587(30,406,979) (69,293,224)475,659,254 840,721,841(1,509,392,691) 817,424,204
2,551,427,941 (2,146,452,972)(37,500,000)
(4,446,577) (15,243,740)33,807,317 230,146,9762,014,587 5,222,9431,001,364 27,320,9302,583,804,632 (1,936,505,863)
(91,690,000) (280,000)(108,079,914) (140,587,304)41,000,000 523,000,000
(87,499,996)(297,967,670) (187,424,377)(456,737,584) 107,208,323
617,674,357 (1,011,873,336)(931,277,404) 80,595,932
36 (313,603,047) (931,277,404)
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Financial Analysis of JS Investments Ltd
CHAPTER - 5 Corporate Social Responsibilities
5.1 The Mahvash & Jahangir Siddiqui Foundation
5.2 Health Care
5.3 Education
5.4 Social Enterprises and Sustainable Development
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Financial Analysis of JS Investments Ltd
5. CORPORATE SOCIAL RESPONSIBILITIES
JS Investments Limited, like others JS Group entities, strongly believes in fulfilling its
Corporate Social Responsibility (CSR). The Company is a regular contributor of
donations to the Mahvash & Jahangir Siddiqui Foundation and other charities
5.1 The Mahvash & Jahangir Siddiqui Foundation
Established in 2003, The Mahvash & Jahangir Siddiqui foundation is a charitable, non profit organization. The primary focus areas of the foundation are health care, education and sustainable development through social enterprises. The foundation supports the following organizations
5.2 Health Care
Jahangir Siddiqui and co limited make contributions to the following health care institutions
The Cardiovascular Foundation
Sindh Institute Urology and Transportation
Karachi National Hospital
Patients’ Behbud Society for the Agha Khan University Hospital
The Medical Aid Foundation
Burhani Blood Bank & Thalessaemia Center
5.3 Education
Fakhr-e-Imdad Foundation
JS Academy for the deaf
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Financial Analysis of JS Investments Ltd
Lahore University of Management Sciences
5.4 Social Enterprises and Sustainable Development
Acumen Fund
Karachi Vocational Training Centre.
CHAPTER - 6 CONCLUSION & RECOMENDATIONS
6.1 Conclusion
6.2 Recommendations
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Financial Analysis of JS Investments Ltd
6. CONCLUSION & RECOMMENDATIONS
6.1 Conclusion
The JSIL’S profit after tax for the year ended June 30, 2008 amounted to
Rs 549.368 Million compared to Rs.520.543 Million for the previous year
showing an increase of 5.5%. The management fee income from funds
under management increased sharply by 35.8% and reached Rs 626.928
Million compared to Rs 461,647 Million earned last year. Net after tax
contribution from investment finance services segment was Rs 145.480
Million. Administration expenses for the year were recorded at Rs.441.246
showing an increase of 26% over last year. Earning per share for the year
was Rs.5.49.
Share price of the company also performed well in the stock market as the price
appreciated by 28% during the year and recorded at Rs 95.07 on June 30, 2008
against Rs. 73.90 per year share earlier. The company continues to maintain its
leadership position in the industry both in terms of the product suite and assets
under management was 12%, a growth of 20% compared to FY07 year end.
6.2 Recommendations
JS Investments is one of the oldest and largest asset management
companies in private sector and currently company has a very strong
market. Position in current situation where country is going through with
the tough time but still JS investments maintains its position and still
reaches at the top the reason behind this is the diversification in
investment. If any company increases it borrowing from the market and
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Financial Analysis of JS Investments Ltd
doesn’t return with in the time that can be very harmful for the
organization. In 2008 has short term borrowing of Rs 716 Million. I
personally believe that company should not borrow much from the market
apart from this the company has also increased its accrued and other
liabilities from 68 Million to 108 Million. I recommend that company should
have 60% to 40% ratio that will be good enough for the company and
should reduce the expenses. I as a part of JSIL feel proud to be a part of
this prestigious institution. Well I strongly recommend that investing in
mutual funds is much better than investing in somewhere else because in
mutual funds experienced fund managers look after your investment and
try to give maximum benefits to the clients
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Financial Analysis of JS Investments Ltd
LEARNING CENTER
Asset Allocation Funds These funds have highly fluid investment portfolios that target the best of any asset
class. They are a step ahead of balanced funds, meaning that they can invest up to
100% of their net assets in any particular asset class or in any combination of asset
classes. In a rising market, these funds generally take advantage of short term
spread transactions, realizing their profits in small and rapid steps. In declining
markets, they move swiftly towards safer asset classes. The element of risk in an
asset allocation fund is generally higher than that of a balanced fund, but the returns
are relatively higher as well.
Accessibility & Affordability
Most banks, financial institutions and other companies sell mutual funds and
facilitate clients on behalf of the management company. Additionally, the initial
amount is very small and this makes investing extremely easy and affordable.
Account Statement Means statement of transactions in Units in the folio of the Holder
Balanced Fund The objective of these funds is to provide a balanced mixture of safety, income and
capital appreciation. The strategy of balanced funds is to invest in a combination of
fixed income and equities. These funds maintain the debt and equity at certain ratios
which are adjusted periodically based on market conditions
Back-end Load Means Sales Load deducted from the Net Asset Value in determining the
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Financial Analysis of JS Investments Ltd
Redemption Price
Business Day Means a day on which Banks are open for business in Pakistan
Constitutive Document Means the Trust Deed that is the principal document governing the formation,
management or operation of the Trust.
Contingent Load Means Sales Load deducted from the Net Asset Value in determining the
Redemption Price.
Certificate Means the definitive certificate acknowledging the number of Units registered in the
name of the Holder issued at the request of the Holder.
Custodian Means a bank, the Central Depository Company or any other Depository that for the
time being may be appointed by the Trustee with the approval of the Management
Company to hold and protect the Deposited Property or any part thereof as
custodian on behalf of the Trustee.
Core Investors Means the initial investors, who shall be required to subscribe to and to hold number
of Units of an amount to be in compliance with Rule 67-2 (f) for the minimum two
years from the date of payment in full of such Units.
Core Units Means such Units of the Trust that are issued to Core Investors with the condition
that these are not redeemable for a period of two years from the date of issue.
However, such Units are transferred with this condition and shall rank pari passu
with all other Units save for this restriction. Any transfer of these Core Units, during
the first two years of their issue, shall be affected only on the receipt by the Transfer
Agent of a written acceptance of this condition by the transferee.
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Financial Analysis of JS Investments Ltd
Diversification A risk management technique that mixes a wide variety of investments within a
portfolio. It is designed to minimize the impact of any one security on overall portfolio
performance.
Deposited Property
Means the aggregate proceeds of the sale of all Units at Offer Price after deducting
there from or providing there out any applicable Sales Load and Duties and Charges
and Transaction costs and any other expenses chargeable to the Fund; and includes
the Investment and all income, profit and other benefits arising there from and all
cash, bank balances and other assets movable or immovable and property of every
description for the time being held or deemed to be held upon trust by the Trustee
for the benefit of the Holders pursuant to this Deed but does not include any back-
end or contingent charges payable to the Management Company or any amount
standing to the credit of the Distribution Account.
Distributor/ Distribution Company
Means a company, firm or a Bank appointed by the Management Company and
after intimation to the Trustee for performing the Distribution Function and shall also
include the Management Company and the Trustee, subject to approval by the
Management Company, if they perform the Distribution Function
Distribution Function Mean with regard to:
Receiving applications for issue of Units together with the aggregate Offer
Price for Units applied for by the applicants
Issuing of receipts in respect of (a) above
Interfacing with and providing services to the Holders including receiving
redemption applications, transfer applications, conversion notices and
applications for change of address or issue of duplicate Certificates for
immediate transmission, in accordance with the instructions given by the
Management Company or the Trustee, to the Management Company or
The Transfer Agent as appropriate; and
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Financial Analysis of JS Investments Ltd
Accounting to the Trustee for all (1) moneys received from the applicants for
issuance of Units; (2) payments made to the Holders on redemption of Units;
and (3) expenses incurred in relation to the Distribution Function.
Equity These funds invest mainly in equity of companies and undertake the risk of price
movement at the stock exchange. Such funds are clearly expected to out-perform
other types of funds in a rising market. When the market declines, equity funds tend
to under-perform, when compared with other types of funds. Their strength is the
expected capital appreciation and windfall income through capital gains. However,
such funds are prone to losses when the market is declining.
Fixed-Income These funds primarily invest in assets that pay a fixed-Rupee amount e.g., bank
deposits, treasury bills, term finance certificates and government bonds. They are
generally not affected by volatility at the stock exchanges. The element of risk is low
and so is the return.
Front-end Load or Preliminary Charges Means the Sales Load that is included in the Offer Price of Units
Income Tax on Mutual Funds/ Investors The impact of taxation on investor, investing directly or through mutual funds is
neutral. Mutual funds distributing ninety percent of income as dividend are exempt
from payment of income tax. The unit/ shareholders are subject to tax on dividend
distribution by mutual funds at the applicable tax rates.
Initial Period or Initial Offering Period Means a period determined by the Management Company not exceeding ninety
days during which Units will be offered at the Initial Price in terms of the Offering
Document
Initial Price Means the price per Unit during the initial offering period determined by the Management Company.
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Financial Analysis of JS Investments Ltd
Liquidity A mutual fund allows you to request that your units be converted into cash at any time.
Mutual Funds A mutual fund is a pool of money provided by various participants and then invested
into equity and fixed income markets with the objective to provide safety of capital
and returns to investors. The pool is managed on behalf of the investors by a team
of specialized individuals, commonly known as fund managers or investment
advisors.
Net Asset Value (NAV) Means per Unit value of the Trust arrived at by dividing the Net Assets by the
number of Units issued.
Offering Document Means the prospectus, advertisement or other document (approved by SECP),
which contains the investment and distribution policy and all other information in
respect of the Unit Trust, as, required by the Rules and is circulated to invite offers
by the public to invest in the Unit Trust.
Professional Management Mutual funds being large entities are managed by professional portfolio managers
who have the right levels of qualifications and experience to handle and search for
best securities for the fund. These funds may have crucial, real time information from
the markets and are able to execute large trade volumes on timely and cost effective
basis.
Par Value Means the face value of a Unit that shall be determined by the Management
Company in consultation with the Trustee from time to time.
Regulatory Body/ Authority Mutual funds are regulated by the Securities and Exchange Commission of Pakistan
(SECP).
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BIBLIOGRAPHY
1. www.answer.com/topic/mutual-fund#history
2. http://www.atozinvestments.com/mutual-funds-history.html www.jsil.com
3. http://jsil.com/learningCenter.do
4. http://www.arifhabib.com.pk/mutual_funds/ppfl.aspx
5. http://www.arifhabib.com.pk/education/why_mutual_funds.aspx
6. www.investorwords.com
7. http://www.answers.com/topic/mutual-fund#History
8. Source: Ross Westerfield Jaffe (Corporate Finance 7th Edition)
9. Source: JSIL annual report 2009
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