financial analysis of jahangir siddiqui investment limited (final draft)

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

Institute of Business and Technology 2


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.



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.



CHAPTER - 1 INTRODUCTION

1.1 Introduction 1.2 Research Objectives 1.3 Research Methodology 1.4 Literature Review



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

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.



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



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

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

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.



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.



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



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



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



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



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



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



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.



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.



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



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



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



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

launched by the company which include the following open and close end Institute of Business and Technology 24


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


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,



(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



CHAPTER - 4 Financial Analysis

4.1 Financial Highlights

4.2 Ratio Analysis

4.3 Horizontal Analysis

4.4 Cash Flow Statement



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.



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



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%



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



(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



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)



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



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



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



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



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



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



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.



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



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.



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).



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


financial analysis of jahangir siddiqui investment limited (final draft)

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