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 OF MANAGEMENT AND SOCIAL SCIENCES SPRING-2010
Financial Analysis of JS Investments Ltd
CONTENTS
ACKNOWLEDGEMENT. 03 ABSTRACT...04 CHAPTER - I INTRODUCTION
1.1 Introduction................................................................... 06 1.2 Research Objectives.. 06 1.3 Research Methodology.. 06 1.4 Literature Review.07
CHAPTER - II
MUTUAL FUNDS
2.1 Introduction.. 09 2.2 Mutual Funds Basics.. 10 2.3 Types of Mutual Funds...13 2.4 Mutual Funds Advantages/Disadvantages..14 2.5 Risks in Mutual Funds.18
CHAPTER - III
3.1 3.2 3.3 3.4
JS INVESTMENTS LIMITED (JSIL)

Overview of JSIL..22 Fund Manager Profiles...... 24 Products & Services... 24 Investment Committee26
CHAPTER - IV
4.1 4.2 4.3 4.4
FINANCIAL ANALYSIS
Financial Highlights 29 Ratio Analysis. 31 Horizontal Analysis 32 Cash Flow Statement. 33
CHAPTER - V
5.1 5.2 5.3 5.4
CORPORATE SOCIAL RESPONSIBILITIES

The Mahvash & Jahangir Siddiqui Foundation.. 35 Health Care.. 35 Education..35 Social Enterprises and Sustainable Development.35
CHAPTER - VI
6.1 6.2
CONCLUSION & RECOMMENDATIONS

Conclusion37 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
INSTITUTE OF BUSINESS AND TECHNOLOGY

ABSTRACT SUBMITTED BY: DISCIPLINE: TITLE OF PROJECT REPORT: MONTH OF SUBMISSION: NAME OF PROJECT SUPERVISOR: Ambreen Tai EMBA (Finance) Financial Analysis of JS investments Ltd. APRIL 2010 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 its 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 managers 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 1.2 1.3 1.4 Introduction Research Objectives Research Methodology 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 2.2 2.3 2.4 2.5 Introduction Mutual Funds Basics Types of Mutual Funds Mutual Funds Benefits/Advantages 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. Youre 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 shortterm 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 dont 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 conditions.
Risk & Return Equation
in
todays
dynamic
and
ever
changing
capital
market
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 funds 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 Disadvantages of Mutual Funds Investments 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. 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 Dedicated research team, specialized portfolio Professional Management management, and risk management oversight and controls. Mutual Funds provide the opportunity to establish a well diversified portfolio without the large investment typically required to achieve this diversification. Given that Asset Management Companies specialize in managing your investments, investments with mutual funds attempt to weather all storms - taking advantage of ups & downs in the market. 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. 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.
Liquidity
Tax Benefits
Diversification regardless of small Investment Amount
Active Management
Accessibility
Security
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.
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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 tradeoff. 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 shortterm 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 belowaverage 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 fluctuationsand 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
redeemor callits 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 The possibility that a group of stocks in a single industry will possibility that increases in the cost of living will reduce or
a result of falling overall interest rates.

Industry Risk.
decline in price due to developments in that industry.

Inflation Risk. The
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.
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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
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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 Pakistans 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
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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
24
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 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
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Services provided by JSIL

JSIL provides the number of services to the institutions as well as the individual 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
27
CHAPTER - 4 Financial Analysis

4.1 Financial Highlights 4.2 Ratio Analysis 4.3 Horizontal Analysis 4.4 Cash Flow Statement
28
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)

5000 4000 PKR 3000 2000 1000 0 2009 2008 2007 2006 2005 2004 YEARS
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 couldnt 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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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
30
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 Debt Ratio Total Liability/Total Asset Rate of Return on Total Asset Net Income/Total Asset Earning Per Share Time Interest Earned Ratio Return on Equity Net Income/No. of Shares EBIT/Financial Cost 2.29% 0.54% 0.13% 5.49% 3.84%
Net Income/Total Current Equity 32.58%
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4.3 Horizontal Analysis of JSIL Profit and Loss Account for the year 2009
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2009
2009 2008 Rupees INCOME Remuneration from funds under management Commission from open end funds under management Dividend Underwriting commission 687,500 (Loss) / gain on sale of investments - net Income on Continuous Funding System (CFS) transactions 51,155 Return on bank deposits Mark up on term finance certificates Mark up on letter of placement Mark up on financing against shares 5,363,397 Mark up on commercial papers Commission income and share of profit from management of discretionary client portfolios Amortisation of discount 175,188,713 1,217,890,668 Impairment loss on available for sale equity securities (1,138,905,263) 1,217,890,668 OPERATING EXPENSES Administrative and marketing expenses 1,856,904 4,959,647 44,518,534 32,157,918 742,482 3,291,015
439,879,978 626,928,164 4,753,743 24,492,527 33,772,067 153,704,538
(355,151,304) 353,627,560
4,633,801 1,123,711 129,794 11,503,536 52,714
(1,314,093,976)
27 357,290,849 445,130,348 (1,496,196,112) 772,760,320 28 1,231,254 11,206,920 29 291,423,117 211,194,387 Institute of Business and Technology 32
OPERATING (LOSS) / PROFIT Other operating expenses Financial charges
(1,788,850,483) 550,359,013 Other operating income 23,234,754 (Loss) / profit before taxation (1,774,022,112) 573,593,767 (52,847,112) 24,225,129 (1,721,175,000) 549,368,638
14,828,371
Taxation - net
(Loss) / profit after taxation
(Loss) / earnings per share for the year 5.49 The annexed notes 1 to 42 form an integral part of these financial statements.
(17.21)
4.4 Cash Flow Statement for the year 2009

CASH FLOW STATEMENT FOR 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 management Commission from open end funds under management Dividend Depreciation Amortisation of intangible assets Financial charges Interest / mark-up income Liabilities no longer required written back Gain/ (loss) on disposal of fixed assets Increase / decrease in assets and liabilities Loans and advances Long-term receivable from related parties Deposits, prepayments and other receivables Accrued and other liabilities Dividend received Return on bank deposits Proceeds from disposal of fixed assets Net cash inflow / (outflow) on investing activities CASH FLOWS FROM FINANCING ACTIVITIES Repayment of principal amount relating to the securitised management fee Dividend paid Money market borrowings Repayments of long-term financing Financial charges paid Net cash (outflow) / inflow on financing activities Net increase / (decrease) in cash and cash equivalents Cash 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.
Taxes paid Remuneration and commission received from funds under management Net cash (outflow) / inflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Investments - net Investment in subsidiary Fixed capital expenditure incurred Institute of Business and Technology 33
2008
2009 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 45,211,247 7,107,914 6,873,863 291,423,117 211,194,387 (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 4,572,432 (1,727,552) (44,042,398) (37,660,780) (1,954,644,966) (30,406,979) 475,659,254 (1,509,392,691)
4,000,144 3,982,000 (17,485,865) 35,834,958 26,331,237 45,995,587 (69,293,224) 840,721,841 817,424,204
2,551,427,941 (4,446,577) 33,807,317 2,014,587 1,001,364 2,583,804,632
(2,146,452,972) (37,500,000) (15,243,740) 230,146,976 5,222,943 27,320,930 (1,936,505,863)
(91,690,000) (108,079,914) 41,000,000 (297,967,670) (456,737,584) 617,674,357 (931,277,404) (313,603,047)
(280,000) (140,587,304) 523,000,000 (87,499,996) (187,424,377) 107,208,323 (1,011,873,336) 80,595,932 (931,277,404)
36
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 JSILS 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 doesnt at the top with the in reason time behind that this is the very diversification harmful for in the investment. If any company increases it borrowing from the market and return the can be 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
38
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 backend 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
45

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INSTITUTE OF BUSINESS AND TECHNOLOGY Financial Analysis of Jahangir Siddiqui Investment Limited Prepared By Ambreen Tai (BEM-931) Course

EMBA (Finance) FACULTY OF MANAGEMENT AND SOCIAL SCIENCES SPRING-2010

Financial Analysis of JS Investments Ltd

JS INVESTMENTS LIMITED (JSIL)

CORPORATE SOCIAL RESPONSIBILITIES

CONCLUSION & RECOMMENDATIONS

Financial Analysis of JS Investments Ltd

Institute of Business and Technology

Financial Analysis of JS Investments Ltd

INSTITUTE OF BUSINESS AND TECHNOLOGY

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Financial Analysis of JS Investments Ltd

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Financial Analysis of JS Investments Ltd

1.2 Research Objectives

1.3 Research Methodology

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Financial Analysis of JS Investments Ltd

1.4 Literature Review

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Financial Analysis of JS Investments Ltd

CHAPTER - 2 MUTUAL FUNDS

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Financial Analysis of JS Investments Ltd

Financial Analysis of JS Investments Ltd

2.2 Mutual Funds Basics

Financial Analysis of JS Investments Ltd

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Financial Analysis of JS Investments Ltd

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Financial Analysis of JS Investments Ltd

2.3 Types of Mutual Funds

Close end Fund

Financial Analysis of JS Investments Ltd

Open end Fund

2.4 Mutual Funds Benefits/Advantages & Disadvantages

Financial Analysis of JS Investments Ltd

Financial Analysis of JS Investments Ltd

Diversification regardless of small Investment Amount

Financial Analysis of JS Investments Ltd

The value of your mutual fund investment, unlike a

Institute of Business and Technology

Financial Analysis of JS Investments Ltd

2.5 Risks in Mutual Funds

Financial Analysis of JS Investments Ltd

redeemor callits high-yielding bond before the bond's maturity date.

The possibility that returns could be reduced for Americans

a result of falling overall interest rates.

decline in price due to developments in that industry.

eliminate a fund's real inflation-adjusted returns.

The possibility that a bond fund will decline in value because

of an increase in interest rates.

Financial Analysis of JS Investments Ltd

The possibility that an actively managed mutual fund's

The possibility that an investment will go down in value, or "lose

money," from the original or invested amount.

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Financial Analysis of JS Investments Ltd

CHAPTER - 3 JS INVESTMENTS LIMITED (JSIL)

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Financial Analysis of JS Investments Ltd

Financial Analysis of JS Investments Ltd

Investment Advisory and Asset Management Services