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Investment project Document Transcript

  • 1. Table of Contents: 1. Introduction 3 2. History 3 3. Vision 3 4. Mission 3 5. Objectives 3 6. Risk Return 4 7. Products & services 4 I. JSIL income fund 4 II. UTP Islamic fund: 5 III. Capital protected fund series 5 IV. Unit trust of Pakistan 5 8. Investors of JSIL 6 9. Investments of JSIL 7 I. Investment in Pakistan industry 7 a) Al Abbas Industries 7 b) Al Abbas Sugar Mills 7 c) Azgard 9 7 d) Pakistan International Container Terminals 8 e) Pak American Fertilizer Limited 8 f) JSIL Property 8 g) JSIL Transportation 8 10. Performance analysis of JSIL 10 I. Asset Management Industry 10 II. Equity Market Performance 10 III. Fixed Income Market Outlook 11 IV. Performance Review 12 V. New Products and Initiatives 14 VI. Asset Manager and Entity Rating 14 VII. Future Outlook 15 11. Financial Reporting 15 1 JSIL
  • 2. ACKNOWLEDGEMENTI am grateful to Almighty ALLAH for helping and enabling me to complete the project. I wouldlike to appreciate and thank my project supervisor for her incessant guidance throughout projectcompletion process; she has been available whenever I needed her guidance, assistance. I reallyappreciate her positive comments for improving and bring out the utmost optimum consequencesout of my endeavors. Without her guidance and support I would have never been able toorganize and complete the project tasks as optimal and with in time constraints .It would beimpossible to acknowledge individually all the professionals who extended their kind personalassistance in gathering information and relevant data required for data analysis for projectconclusion. I would like to thank all my friends and colleagues for their support throughout myproject duration. 2 JSIL
  • 3. Introduction:JS Investments Limited (JSIL) is the oldest and one of the largest private sector AssetManagement Companies in Pakistan, with over PKR 11.71 billion (as at September 30, 2011) inassets under management, spread across various mutual funds, pension funds and separatelymanaged accounts. The company is listed on the Karachi Stock Exchange and has a marketcapitalization of over PKR 368 million (as at September 30, 2011). History:Founded in 1995, JS Investments Limited (JSIL) is the oldest and one of the largest privatesector asset management companies in Pakistan with assets under management spread acrossvarious mutual funds, pension funds and separately managed accounts. JSILs successful trackrecord, creative and diverse thinking and product offering has helped set the asset managementindustry standards in Pakistan by always endeavoring to innovate and to be the first to bring newfinancial products to Pakistan. JSIL is part of the Jahangir Siddiqui Group, one of Pakistansmost diversified and prestigious financial institutions. The Jahangir Siddiqui Group maintains astrong presence in the nations investment banking, corporate finance, equity market operations,and debt factoring and insurance sectors. Vision:To be recognized as a responsible asset manager respected for continuingly realizing goals of itsinvestor. Mission:To build JS investment into a top ranking asset management company; founded on sound values;powered by refined know how; supported by a committed team operating within an accountableframework of social, ethical and corporate responsibility a strong and reliable institution for itsshareholders to own; an efficient service provider and value creator for clients; an exciting andfulfilling work place for employees; and a participant worth reckoning competitors. Broad Policy Objectives:  Value creation for clients on a sustainable basis 3 JSIL
  • 4.  Maintain high standards of ethical behaviors and fiduciary responsibility  Professional excellence adapt, evolve and continuously improve  Maintain highly effective controls through strong compliance and risk management  A talented, diligent and diverse HRUnderstand risk-return and find out what kind ofinvestor you are:Different investments avenues offer different potentials forreturn. It is important to understand the level of risk involvedwith your investments. Successful investors base theirperformance expectations on historic average returns, andkeep short-term market movements in perspective. Investment 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 resultsHow regularly should you invest?Its better in the long run to invest small amounts regularly than to invest larger sumsoccasionally. How much should you invest each month? More is better, but some, even smallamounts, will add up over time. Saving steadily for your goals is a good habit to develop.Investing your savings on a regular basis is even better. Investing consistently puts morehorsepower into your savings and can put you on track to reach your financial goals. PRODUCTS & SERVICES:JSIL INCOME FUND:JSIL Income Fund is the second open-end mutual fund launched by JS Investments Limited.JSIL-IF is a diversified investment program in fixed income securities through a singleinvestment. The fund aims at achieving a high rate of current income consistent with reasonable 4 JSIL
  • 5. concern for safety of capital and provides the investors with the convenience to join or leave thefund at their discretion.UTP ISLAMIC FUND:UTP- Islamic Fund (UTP- ISF) is an open-end Shariah-compliant mutual fund managed by JSInvestments Limited. The fund was launched in December 2002 with the Central DepositoryCompany as the Trustee and has been given a 5-star rating by PACRA. The fund is intended forlong term investors who seek high returns with the peace of mind that their money is beingmanaged according to Islamic rules of investing.CAPITAL PROTECTED FUND SERIES:UTP- Capital Protected Fund (UTP-CPF) was the first open-end capital protected fund inPakistan, established under a Trust Deed dated November 27, 2006 between JS InvestmentsLimited as the management company and Standard Chartered Bank (Pakistan) Limited as theexclusive distributor. Following the tremendous success of this unique fund, 3 more CapitalProtected Funds were launched jointly by JS Investments and SCBPL.A Capital Protected Fund aims at protecting investor capital through the investment structure byplacing a significant percentage of the Fund as bank deposit(s) or in other return-based fixedincome instruments, and uses the remaining funds to gain exposure into equity markets or anyother investment instruments permissible by SECP that the Management Company feels wouldbe appropriate to maximize return. The fund has a fixed tenor (e.g. 1 year or 3 years) which is theminimum period of holding for capital protection to be in force.UNIT TRUST OF PAKISTAN:Unit Trust of Pakistan (UTP) is the first open-end mutual fund in Pakistans private sector. UTPfollows a balanced investment strategy which means that it switches its investments from fixed-income to equity & vice versa depending upon the investment outlook. When the stock marketappears volatile, the funds normally switch portfolios to fixed-income & debt based instrumentsand reverts back to equity when the situation becomes stable. 5 JSIL
  • 6. INVESTORS OF JSIL:These institutions invest in JSIL & they required submitting Board Resolution Memorandum andArticles of Association Power of Attorney listing Authorized Signatories by Laws (Societies)N.I.C for investment in JSIL.  Companies  Corporate Bodies  Financial Institutions & Banks Barclays:  Barclyas is one of the lasrgest initustion to helping hand to provides investment to funds offered by JSIL Standard chartard  Partners of a Firm  Insurance Companies  Individuals  Government  Foreign Nationals and Companies outside Pakistan: Foreign individuals and foreign companies can also invest in JSIL by fulfilling the requirement of submitting N.I.C/Passport Subject to the regulations of the State Bank of Pakistan and Ministry of Finance  Provident, Pension and Gratuity Funds, Non Profit Institutions, funds, trusts, societies or other organizations, and Societies incorporated in Pakistan Non-profit organization and different kinds of funds invest in JSIL by submitting Power of Attorney listing Authorized Signatories Resolution authorizing investment Bye Laws/Trust Deed N.I.Cs to JSIL. 6 JSIL
  • 7. INVESTEMENTS OF JSIL:Investment in Pakistan IndustryAs Pakistan’s macroeconomic performance continues to improve, Pakistan industry has gonethrough steady expansion in its capital investment base and production capacity in the last fiveyears. Given Pakistan’s comparatively small industrial base, the investments across manyindustrial sectors is significant. There are several industrial sectors which we believe offerparticularly attractive investment opportunities. Pakistan’s companies are becoming increasinglyglobal in outlook. Through exploiting Pakistan’s comparative cost advantages in certain sectors,these businesses are able to drive significant and sustainable growth.In some areas of the economy, Pakistan has a high standard of infrastructure for an emergingmarket economy. However, there are a number of infrastructure bottlenecks which provideexciting development opportunities as Pakistan’s economic performance continues to accelerateJSIL investments in Pakistan’s industrial sector include:Al Abbas Industries –steel, chemicals and fiber boardThis business was established in 2002 to develop three buildings materials projects. Thecompany’s fibre board plant is Pakistan’s largest producer of Medium Density Fibre (“MDF”)boards. The company’s ferro-alloy plant produces about half of the ferro-alloy requirements ofPakistan’s steel industry. The company also has a calcium carbide plant.Al Abbas Sugar Mills – sugar and ethanolIn 1991, JS invested in this leading sugar and ethanol producer. Al Abbas Sugar Mills has a ratedcane crushing capacity of 5,500 tons per day and operates two distillery units for superfineethanol production.Azgard 9 – composite denimAzgard 9 is a prominent player in the textile industry of Pakistan. It is a fully-integrated,specialized denim textile mill. It manufactures specialized yarns, denim fabrics and denimgarments. These textile products are marketed through a global sales and distribution network 7 JSIL
  • 8. including offices in five countries. JSIL has been the second largest shareholder in Azgard 9 formore than two decades.Pakistan International Container Terminals (PICT) – port operations and containerhandlingPICT is the East Wharf container terminal at the Karachi Port. The company is sponsored byPremier Mercantile Services and JSIL is its second largest shareholder. IFC and the OPECDevelopment Fund are lenders to PICT. It is the only container terminal managed by a Pakistanioperator and has a handling capacity of 550,000 TEU per annum.Pak American Fertilizer Limited (PAFL) –Fertilizer JSIL led a USD 270 million buyout of PAFL in partnership with Azgard 9 from theGovernment of Pakistan as part of the privatization programs. PAFL has a production capacity of600 metric tons per day of ammonia and 1050 tons per day of urea. The plant has been designedand engineered by Toyo Engineering Corporation of Japan. The plant is fully-compliant with alldomestic and international environmental standards including ISO14000JSIL PropertyJSIL Property acts as a financial partner internationally and a project developer within Pakistan.We are one of the largest real estate developers in Pakistan. The property market in Pakistan has,since 2002, been developing rapidly in both the commercial and residential sectors. JSILProperty is currently developing seven commercial and residential sites in Karachi and one inIslamabad.JSIL TransportationAirline passenger traffic and, to a lesser extent, cargo traffic has grown significantly in recentyears both within the Pakistani domestic and international travel markets. This has made theaviation sector an interesting investment opportunity, despite escalating fuel costs 8 JSIL
  • 9. JSIL Income fund Investment Strategy:JS-IF will generally invest in assets that pay a fixed rupee amount, e.g. investment grade debtsecurities, treasury bills, term finance certificates, bank deposits and Government bonds. Theyare generally not affected by the volatility at the Stock Exchanges. The element of risk is low andso is the return.UTP Investment Strategy:UTP focuses on preserving the initial capital while providing maximum diversification, alongwith liquidity, growth & consistent returns. In order to achieve these, the fund invests in threetypes of high quality assets. These include: Shares of companies which are either consistently dividend paying having growth prospects actively traded Debt instruments with good credit rating Short-term money market instruments In National Insurance Company Limited (NICL), the management invested Rs 2,000.000 million on March 13, 2009 through Pre-Initial Public Offer (IPO) commitment in JS Principal Secure Fund-I for the minimum period of 03 years and 06 weeks under the recommendations of first meeting of Investment Committee of NICL held on March 12, 2009 which was approved by the Chairman on March 13, 2009UTP-ISF Investment Strategy:UTP-ISF aims to grow investor’s capital in the long term in adherence with principles of Shariahcompliance as advised by the Shariah Advisory Board (SAB) of this fund while ensuringliquidity. The fund investments are limited to asset classes approved by the Shariah AdvisoryBoard and all companies under investment consideration are regularly screened for Shariahcompliance. 9 JSIL
  • 10. Performance analysis of JSIL 2009-2010 annual reports:Asset Management Industry PerformanceThe assets under management (AUM) of Pakistan’s mutual fund industry closed at Rs. 199billion as on June 30, 2010 depicting a decline of 2.3% over the last one year. This decline in theindustry AUM was relatively better than the sizeable decline of 39% experienced in the previousfinancial year ended on June 30, 2009. As on June 30, 2010, the AUM of the industry asrepresented by open-end and closed-end funds aggregated around Rs. 168 billion and Rs. 31billion, respectively. The income funds category with funds size at Rs. 60 billion in June 2010witnessed significant decline of 20.8% amid increased volatility in returns mainly due to theadverse price movements in corporate debt instruments during the year. This resulted indiminishing the investor’s interest towards the category during the year. The equity fundscategory also could not gain the preference of majority of the investors and lost its industryAUM share since June 30, 2009, declining by 36% mainly amid disbursements made by thelargest state owned mutual fund redemptions to its LOC holders. On the other hand moneymarket funds category witnessed sizeable growth during the year and its net assets closed at Rs.32 billion as on June 2010, depicting an increase of over 8.7 times over the last one year. Theprimary reason behind this growth was to cater to from the shift in investor’s preference towardsvery low risk investment products that aimed to provide competitive interest based returns fromvery high quality and short duration portfolio of assets with the ability to provide them withbetter liquidity.Equity Market PerformanceThe equity markets recovered considerably during the Fiscal Year 2010, as the KSE-30 Indexsurged 26.22% to close the FY10 at 9,556 points. The index rebounded sharply on the back of alower base and continued economic improvements. Despite a modest yet fragile economicgrowth, a major confidence boosting indicator has been the active injections due to foreigner’sinterest in Pakistan s bourse, as the net Foreign Portfolio Investment (FPI) was recorded at US$556 million for FY10. Improved macroeconomic conditions, coupled with extremely attractivevaluations, have been the prime drivers of the equity markets. In contrast, there exists a liquidity 10 JSIL
  • 11. conundrum due to the absence of a leveraged product to cash-strapped investors, withconsequent impact on average daily trading value of US$ 84 million. The local investors,however, still remain jittery while seeking clarity on the modalities of Capital Gains Tax (CGT)and viability of Value Added Tax s implementation. The latter s impact on already soaringinflation rates also remain a cause for concern. Nevertheless, astounding equity valuations a 38%P/E discount to regional peers and 2010E P/E of 6.9 xs packaged with possible reemergence of akeenly-awaited leveraged product are imminent key triggers to attract both foreign and localinvestor’s interest in Fiscal Year 2011.Fixed Income Market Outlook The money marketremained fairly stable during the Fiscal Year 2010.Fixed Income Market OutlookThe money market remained fairly stable during the Fiscal Year 2010. The pressures observedon the inflationary indicators cautioned the policy makers of State Bank of Pakistan (SBP) tokeep the Discount Rate (DR) at 12.5% by the end of FY10. Rekindling of sustainable economicgrowth remains to be the prime focus for the government, albeit with monetary and fiscalstability. During the FY10, the 6 Months KIBOR averaged 12.40% and attained a maximum of12.88%.The stabilization endeavors have yielded affirmative results as the CPI rate for June2010 was clocked in at 12.69% on YoY as compared to the previous year s figure of 20.8%.However, steady elimination of subsidies, reformed tax framework and increased internationaloil prices are the factors likely to keep the inflation rates in the higher bounds going forward.Moreover, the liquidity level is also dependent upon the extent of fiscal and public sectorborrowing from the banking system. The SBP, nevertheless, remains focused on balancing therisks between inflation and financial stability as seen in the recent hike in the policy rate by 50basis points announced by the State Bank in its Monetary Policy on July 30, 2010.Performance ReviewThe Company earned profit after tax of Rs. 45.453 million during the year ended June 30, 2010.During the year under review, the Company earned management fee income of Rs. 361.248million from funds under management compared to Rs. 439.880 million during the last yearshowing a decline of 17.9%. The decline in management fee income is primarily due to thedecline in assets under management which stood at Rs. 16,508 million compared to Rs. 21,247million on June 30, 2009 a decline of 22.3%. Dividend income during the year was Rs. 40.077 11 JSIL
  • 12. million compared to Rs. 21.499 million earned last year. Net after tax profit from discontinuedoperations of Investment Finance Services was Rs. 17.767 million compared to a loss of Rs.274.749 million during the last year. Administration expenses for the year declined by 20% andwere recorded at Rs. 281.945 million against last year s Rs. 352.544 million. Financial chargeswere also brought down by 34.3% compared to last year by reducing the borrowings. Earningsper share for the year were Rs. 0.45. Key Indicators FY 10 FY 09 PerformanceReturn on assets % 2.42 (54.71)Total assets turnover Days 97 20Receivables turnover Days 3 25 Return on equity % 10.62 (601.12)Liquidity FY10 FY09Current times 1.71 1.44Quick times 1.70 1.42 12 JSIL
  • 13. Valuation FY10 FY09Earnings per shares Rs. 0.45 (17.21)Historical trends FY10 FY09Management fee (Rs. in 361 440Millions)Operating profit (Rs. in 212 (1,496)Millions)Profit before tax (Rs. in 46 (1774)Millions)Profit after tax (Rs. in 45 (1,721)Millions)Assets under management 16,508 21,247(Rs. in Millions)Share capital (Rs. in 1,000 1,000Millions)Shareholders’ equity (Rs. 428 286in Millions)Total assets (Rs. in 1,735 2,015Millions) 13 JSIL
  • 14. Summary of operating results for the year ended June 30, 2010 is provided below: Rs. 000Profit after tax from continued operations 27,686Profit after tax from discontinued operations 17,767Total profit after tax for the year 45,453Less: Accumulated (loss) brought forward (800,127)Add: Transfer from surplus on revaluation of fixed assets to accumulated profit 6,599Un-appropriated loss carried forward (748,075)New Products and InitiativesDuring the year under review the Company launched two new funds namely JS Principal SecureFund II and JS Cash Fund. The Company continued expanding its distributor’s base during theyear. This included prestigious names like Barclays Bank and MCB Bank Limited. We believethat expanded distributors base would enhance our outreach and would enable us in providingour services to a larger retail segment across the countryAsset Manager and Entity RatingThe Asset Manager rating for JS Investments Limited is in progress and has not yet beenannounced by JCR-VIS Credit Rating Co. Limited. The asset manager rating for JS InvestmentsLimited last announced by PACRA was AM2. The said rating was subsequently withdrawn byPACRA on March 16, 2010 subsequent to JS Investments decision to discontinue the ratingrelationship with PACRA with immediate effect. Pakistan Credit Rating Agency (PACRA) hasassigned the long-term rating to the Company of A+ (Single A plus) and A1 (Aone) respectively.These ratings denote low expectation of credit risk emanating from a strong capacity for timelypayment of financial commitments. 14 JSIL
  • 15. Future OutlookMr. Rashid Mansur was appointed as the new Chief Executive Officer of your Company w.e.fApril 01, 2010. The incoming CEO carried out a detailed SWOT Analysis of your Company andthe Funds based on assessment of the prevailing Macroeconomic and Financial Market trends aswell as their impact on the mutual fund industry, generally, and on your Company, specifically.Based on this, the CEO reviewed and revised the Vision, Mission, and Statement of Broad PolicyObjectives of your Company to reposition your Company towards sustainable growth Thisinitiative has been branded as, JSIL 2010 Onwards ~ .The CEO also reassessed the Organizational Structure and initiated certain desired changes toenhance the operational efficiency of your Company. These include creation of a separate andindependent Risk Management, Research and Market Intelligence department; defining andaugmenting the role and responsibilities of Investment Committee and Fund Managers. Webelieve that a progressive and proactive approach to business will enhance the Brand Visibilityof your Company and its products, yielding higher returns for all stakeholders. At the same timea strong Prudential Risk Management would play fundamental role in working of yourCompany. We understand that Pakistan is passing through a challenging time on the economicfront, yet we are confident that your Company will continue to achieve sustainable growth basedon business model that aims to thrive on efficiency, innovation and transparency Corporate Governance and Financial Reporting FrameworkAs required by the Code of Corporate Governance the Directors are pleased to state as follows: a. The financial statements, prepared by the management of the Company present fairly its state of affairs, the results of itsoperations, cash flows and changes in equity. b. b. Proper books of accounts of the Company have been maintained. c. c. Appropriate accounting policies have been consistently applied in preparation of financial statements, and financial d. Estimates are based on reasonable and prudent judgment. e. International Accounting Standards, as applicable in Pakistan have been followed in preparation of the financial statements. 15 JSIL
  • 16. f. e. The system of internal control is sound in design and has been effectively implemented and monitored. g. f. There are no significant doubts upon the Company s ability to continue as a going concern. h. g. There has been no material departure from the best practices of the Code of Corporate Governance, as detailed in the i. Listing regulations. j. h. A summary of key financial data of last six years is given on page 09 of this annual report. k. i. The Directors have signed the Statement of Ethics and Business Practices. l. j. The value of investments of the staff provident fund of JS Investments Limited, as per the audited accounts for the year m. Ended June 30, 2010 was Rs. 15.978 million.BALANCE SHEET AS AT JUNE 30, 2010 2010 2009Total current assets 1,734,610,584 2, 014, 806, 74Total liabilities 1,162,980,118 1,578,323,201PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2010 2010 2009 45,453,282 (1,721,175,000) 16 JSIL
  • 17. CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2010 2010 2009 (306,281,131) (313,603,047)STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2010 428,071,953 17 JSIL
  • 18. https://docs.google.com/viewer?a=v&q=cache:umwRSD3xqHUJ:portal.alfalahsec.com/fundmart/do wnloads%255CFMR%255CJS.pdf+js+investment+limited+utilization+of+funds&hl=en&gl=pk&pid=bl &srcid=ADGEESj6bvL9O7- mTLWHQsHEkM0E9sXpqlalDQhK68s5pMafZ7I3wKaxOT9t54SMANPq9WeONrvBPayk3uKt5jYNSFIuYo 7g0TPPSX5NLkysBWSmfe0a_QnbksrRfZM9DhlmSaSMl8Nl&sig=AHIEtbRz06khx0nc8KlYUlbi6X4pNsVa owhttp://www.docstoc.com/docs/82095601/Financial-Analysis-of-Jahangir-Siddiqui-Investment-Limited-_Final-Draft_ 18 JSIL
  • 19. 19 JSIL