CONTENTS Vision and Mission Statement Organization Directors Report to the Unit Holders Fund Manager s Report Performance Table / Key Financial Data R

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2 CONTENTS Vision and Mission Statement Organization Directors Report to the Unit Holders Fund Manager s Report Performance Table / Key Financial Data Review Report to the Unit holders on Statement of Compliance with Best Practices of Code of Corporate Governance Statement of Compliance with the Code of Corporate Governance Report of the Shariah Supervisory Council Shariah Compliance Auditors Report to the Unit Holders Trustee Report to the Unit Holders Independent Auditors Report to the Unit Holders Statement of Assets and Liabilities Income Statement Statement of Comprehensive Income Cash Flow Statement Statement of Movement in Unit Holders Fund Distribution Statement Notes to the Financial Statements Annual Report

3 VISION To be recognized as a responsible asset manager respected for continuingly realizing goals of its investors. MISSION To build JS Investments into a top ranking Asset Management Company; founded on sound values; powered by refined knowhow; supported by a committed team operating within an accountable framework of social, ethical and corporate responsibility a strong and reliable institution for its shareholders to own; an efficient service provider and value creator for clients; an exciting and fulfilling work place for employees; and a participant worth reckoning for competitors. BROAD POLICY OBJECTIVES Value creation for clients on a sustainable basis Maintain high standards of ethical behaviors and fiduciary responsibility Manage Investments with Prudence and with the aim of providing consistent returns better than that of peers Take Products and Services to the People; Create awareness on understanding financial goals, risks and rewards Professional Excellence Adapt, Evolve and Continuously Improve Maintain highly effective controls through strong compliance and risk management A talented, diligent and diverse HR 02 Annual Report 2011

4 Lt. General (Retd.) Masood Parwaiz Lt. General (Retd.) Masood Parwaiz Annual Report

5 DIRECTORS REPORT TO THE UNIT HOLDERS The Board of Directors of JS Investments Limited, the Management Company of JS Islamic Fund (the Fund), is pleased to present the Annual Report for the year ended June 30, Market Review The equity market performance remained strong during FY11 with KMI-30 index depicting a 43.66% YoY appreciation, however, returns were skewed largely towards 1HFY11 with the following half providing near zero growth. Meanwhile market turnover witnessed a sharp contraction of 38% YoY to average 53mn shares during the year as a result of the implementation of Capital Gains Tax (CGT ) from July 1, 2010 onwards. The year started on the worst note with devastating floods hitting Pakistan causing huge damage to its crops and cultivatable lands, exacerbating shortage of food supply. Consequently the headline inflation that came down to 12.3% in July 2010, shot up to record a peak of 15.7% in September With Pakistan already facing burgeoning deficit, the SBP raised the discount rate cumulatively by 150bps during the first six months to reach 14% in order to control the climbing inflation rate. On the other hand, the current account of the country benefited substantially from robust remittance inflows and squeezing trade deficit, as international cotton prices touched record highs, boosting exports. This bode well for the local currency which depreciated only slightly by 1% against the USD during 1HFY11 and combined with attractive domestic equity valuations, led to healthy FIPI inflows worth USD 249mn. The current account continued to show impressive performance during 2HFY11 and culminated in an overall FY11 surplus of USD 542mn (as opposed to a deficit of USD 3.9bn last year). With the government putting a lid over its borrowings, inflation slipped down to 13.1% for June 2011 and prompted the SBP to maintain the discount rate at 14% in 3 consecutive monetary policy reviews. The discount rate has since been reduced by 50 basis points on July 30, Market sentiments paled post disturbances in the MENA region at the start of the calendar year, which saw international oil prices cross USD 120/bbl and made investors increasingly wary about the weaknesses of the domestic economy. Further, Pak- US relations deteriorated rapidly as a result of a direct military operation by US inside the Pakistani territory in May Meanwhile, IMF s patience with the local authorities also ran out with regards to the control over the country s fiscal deficit and curbing of the energy crisis. As a result, foreign inflows from Pakistan s largest contributors, US and IMF went in to suspension. Consequently FIPI inflows retarded during 2HFY11 to end at USD 30mn, culminating in a full year inflow of USD 279mn, down by 49% YoY. Review of Fund Performance The Fund earned a net profit of Rs million during the year under review. The net assets of the Fund were Rs million as on June 30, 2011 compared to Rs million as on June 30, The net asset value (NAV) per unit as on June 30, 2011 was Rs compared to ex-distribution NAV of Rs per unit as on June 30, 2010, showing an increase of 40.23%. The Fund underperformed its benchmark return by 3.43% during the year ended June 30, The Board of Directors of the Management Company, on July 6, 2011, has declared a distribution of Rs per unit. An investor holding 100 units as at June 30, 2011 will get units on ex-distribution price of Rs per unit. As the distribution is more than 90% of the realized income for the year, the income of the fund will not be subject to tax under clause 99 of the Part I of the Second Schedule of Income Tax Ordinance, Fund and Asset Manager Rating The matter of mutual funds performance ratings continues to be under discussion between Mutual Funds Association of Pakistan, SECP and the country s two rating agencies. Updated Fund rating will be obtained by the Management Company after SECP s final decision on this matter. JCR-VIS Credit Rating Company Limited has assigned Management Quality Rating of AM2- (AM-Two Minus) to JS Investments Limited. The rating denotes high management quality of the Management Company. Corporate Governance and Financial Reporting Framework The Board of Directors of the Management Company states that: 04 Annual Report 2011

6 a. The financial statements present fairly the state of affairs of the Fund, the results of its operations, cash flows and movement in net assets of the Fund. b. Proper books of accounts of the Fund have been maintained. c. Appropriate accounting policies have been consistently applied in preparation of financial statements, and financial estimates are based on reasonable and prudent judgment. d. International Accounting Standards, as applicable in Pakistan, provisions of the Non-Banking Finance Companies (Establishment & Regulation) Rules, 2003, Non-Banking Finance Companies and Notified Entities Regulations, 2008 and directives of the Securities and Exchange Commission of Pakistan have been followed in preparation of the financial statements. e. The system of internal control is sound in design and has been effectively implemented and monitored. f. There are no significant doubts upon the Fund s ability to continue as a going concern. g. There has been no material departure from the best practices of the Code of Corporate Governance, as detailed in the listing regulations. h. A performance table / key financial data is given on page 07 of this annual report. i. The Directors have signed the Statement of Ethics and Business Practices. j. The Chief Executive, directors and executives and their spouses do not hold any unit in the fund as at June 30, k. Summary of units acquired / redeemed during the year by the Chief Executive, directors and executives, their spouses and minor children is provided below: Name Designation Units Acquired Units Redeemed Ms. Nazia Enam Siddiqui Fund Manager l. The value of investments of the staff provident fund of JS Investments Limited, as per the audited accounts for the year ended June 30, 2011 was Rs million. Meetings of the Directors During the year six meetings of the Board of Directors were held. The attendance of each director for these meetings is disclosed in the notes to the financial statements. Distribution to Charitable Institutions According to the instructions of the Shariah Supervisory Council, during the current year the Non Shariah Compliant income amounting to Rs. 1,250,000 had been distributed among the following charitable institutions Sind Institute of Urology and Transplantation Rs. 500,000 The Citizens Foundation Rs. 500,000 Fatmid Foundation Rs, 250, Rs. 1,250,000 Auditors The external auditors of the Fund Messrs KPMG Taseer Hadi & Co., Chartered Accountants, retire and being eligible offers themselves for reappointment. The Audit Committee of the Board has recommended appointment of KPMG Taseer Hadi & Co., Chartered Accountants, as the Fund s auditors for the ensuing year ending June 30, Acknowledgment The Directors express their gratitude to the Securities and Exchange Commission of Pakistan for its valuable support, assistance and guidance. The Board also thanks the employees of the Management Company for their dedication and hard work and the unit holders for their confidence in the Management. Karachi: September 9, 2011 Rashid Mansur Chief Executive Officer Annual Report

7 FUND MANAGER'S REPORT Investment philosophy JS Islamic Fund [JSISF] aims to grow investor s capital in the long term in adherence with principles of Shariah compliance as advised by the Shariah Advisory Council (SAC) of this fund while ensuring liquidity. The fund investments are limited to those approved by the Shariah Advisory Council (SAC) and all companies under investment consideration are regularly screened for Shariah compliance. Performance (%) Key information 20% 12.65% Fund type Open end 3.77% Category Shariah Compliant Islamic - Equity Scheme Fund launch date 27 December, % -0.43% Net Assets (PKR mn) % Management fee 2.00% -20% Trustee Central Depository Company of Pakistan Ltd. 1M 6M 1Y 2Y 3Y 5Y 7Y Auditor KPMG Taseer Hadi & Co. Risk profile High Asset allocation (%) Listing Lahore Stock Exchange Jun-11 Benchmark KMI-30 Index Cash 1.71 Equity Market Review Other including receivables 2.81 Although the equity market performance remained strong during FY11 with KSE-30 index depicting a 21% YoY appreciation, returns were skewed largely towards 1HFY11 with the following half providing near zero growth. Meanwhile market turnover witnessed a sharp contraction of 38% YoY to average 53mn shares during the year from its already low levels of 86mn shares in FY10 as a result of the implementation of Capital Gains Tax (CGT ) from 1st July, 2010 onwards. The year started on the worst possible note with devastating floods hitting Pakistan and ruining its crops and cultivatable lands; exacerbating shortage of food supply. Consequently after coming down from 13.3% in April 10 to 12.3% in July 10, headline inflation shot up to record a peak of 15.7% in September 10 and compelled the SBP to raise discount rate cumulatively by 150bps during the first 6 month period. But market sentiments paled post disturbances in the MENA region at the start of the calendar year, which saw international oil prices crossing USD 120/bbl and made investors increasingly wary about the weaknesses of the domestic economy. Furthermore, Pak-US relations deteriorated rapidly during the 6 months span and IMF s patience with the local authorities also ran out with regard to the control over the country s fiscal deficit and curbing of the energy crisis. As a result, foreign inflows from Pakistan s largest contributors, US and IMF went into suspension. Despite this, Pakistan s current account continued to show impressive performance and culminated in an overall FY11 surplus of USD 542mn (as opposed to a deficit of USD 3.9bn last year). With the government putting a lid over its borrowings, inflation slipped down to 13.1% for Jun 11 and prompted the SBP to maintain the discount rate at 14% in 3 consecutive monetary policy reviews. Fund vs Benchmark Comparison 1M 1Y 2Y 3Y Launch Split of Units Fund Benchmark n/a Difference n/a Annualized Returns 80% 60% 40% 40.23% 63.11% Total Equity sector breakdown (%) Jun-11 Oil & Gas Chemicals Banks Construction & Materials 4.61 Fixed Line Telecommunication 2.54 Others - Total Statistical analysis Fund Benchmark Beta Standard Deviation 22.6% 27.6% Largest Month Gain 11.9% 20.2% Largest Month Loss -28.7% -37.1% % Positive Months 67.0% 62.4% Investment Committee Members Mr. Rashid Mansur - Chief Executive Officer Dr. Ali Akhtar Ali - Chief Investment Officer Mr. Arslan Asif Soomro - Fund Manager Mr. Suleman Lalani - Executive Director & CFO Mr. Assad Hameed Khan, Head of BPD Mr. Muhammad Salman Siddiqui, Head of Research & RM The Fund has not carried out any certificate split exercise during the year % Distribution for the Year Ended June 30, 2010 Stock dividend of Rs has been announced for JS Islamic Fund. Effects on the NAV after Split n/a Distribution for the Year Ended June 30, 2011 Stock dividend of Rs has been announced for JS Islamic Fund. Effects on the NAV after Distribution NAV per unit as on June 30, 2011 Cum NAV (PKR) Ex-NAV (PKR) Other Disclosures The Management Company and / or any of its delegates have not received any soft commission from its brokers / dealers by virture of transactions conducted by the Fund. Disclaimer : This publication is for informational purposes only and nothing herein should be construed as a solicitation, recommendation or an offer to buy or sell any fund. All investments in mutual funds are subject to market risks. The NAV based prices of units and any dividends/returns thereon are dependent on forces and factors affecting the capital markets. These may go upor down based on market conditions. Past performance is not necessarily indicative of future results. 06 Annual Report 2011

8 PERFORMANCE TABLE / KEY FINANCIAL DATA Net assets - Rupees in '000 Total realized income / (loss) - Rupees in '000 Total unrealized gain / (loss) in portfolio - Rupees in '000 Total expenses - Rupees in '000 Net income / (loss) - Rupees in '000 Total expense to net assets ratio (%) Total dividend distribution - Rupees in '000 Accumulated capital growth - Rupees in ' , , , , , , ,203 36, ,550 (186,694) 96, , , ,367 43,181 (49,518) (71,960) (129,261) 21,601 (95,113) (125,971) 7,218 16,502 11,360 32,184 37,451 33,737 36, ,730 66,338 (270,014) (65,365) 181, ,858 38, ,245 60, , ,148 74,984 (212,836) (269,321) (275,447) (5,433) 59,932 65,226 56,516 Outstanding Units Units in issue June 30th - Number 2,879,938 5,524,029 5,818,555 7,591,825 6,299,615 5,523,955 7,498,410 Data Per Unit Net assets value - Rupees Net income / (loss) - Rupees Stock / cash dividend - Rupees Date of announcement of stock / cash dividend Dividend as % of NAV at the beginning of the year Selling price as at June 30 - Rupees Repurchase price as at June 30 - Rupees Highest issue price during the year - Rupees Lowest issue price during the year - Rupees Higest redemption price during the year - Rupees Lowest redemption price during the year - Rupees (46) (9) July 6, 2011 July 7, 2010 July 7, 2009 July 9, 2008 July 7, 2007 July 8, 2006 July 9, The income distribution have been shown against the year to which they relate although these were declared and distributed subsequently to the year end. - JS Islamic Fund was launched on December All previous years' figures have been restated due to change in par value from Rs. 500 to Rs. 100 with effect from February 20, Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as go up. Annual Report

9 REVIEW REPORT TO THE UNIT HOLDERS ON STATEMENT OF COMPLIANCE WITH BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate Governance prepared by the Board of Directors of the Management Company of JS Islamic Fund ( the Fund ) to comply with the listing regulations of the Lahore Stock Exchange, where the Fund is listed. The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the Management Company of the Fund. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Fund s compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the Fund personnel and review of various documents prepared by the Fund to comply with the Code. As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board statement on internal control covers all risks and controls, or to form an opinion on the effectiveness of such controls, the Fund s corporate governance procedures and risks. Further sub-regulation (xiii-a) of Listing Regulations 35 notified by the Lahore Stock Exchange (Guarantee) Limited requires the Fund to place before the Board of Directors for their consideration and approval related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm s length transactions and transactions which are not executed at arm s length price recording proper justification for using such alternate pricing mechanism. Further, all such transactions are also required to be separately placed before the audit committee. We are only required and have ensured compliance of requirement to the extent of approval of related party transactions by the board of directors and placement of such transactions before the audit committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arm s length price or not. Based on our review, nothing has come to our attention, which causes us to believe that the Statement of Compliance does not appropriately reflect the Fund s compliance, in all material respects, with the best practices contained in the Code of Corporate Governance as applicable to the Fund for the year ended 30 June Karachi: September 9, 2011 KPMG Taseer Hadi & Co. Chartered Accountants 08 Annual Report 2011

10 STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE FOR THE YEAR ENDED JUNE 30, 2011 This Statement is being presented in compliance with the Code of Corporate Governance ( the Code ) contained in the listing regulations of Lahore Stock Exchange where the Fund is listed. The purpose of the Code is to establish a framework of good governance, whereby a listed entity is managed in compliance with the best practices of corporate governance. JS Investments Limited (Management Company) which manages the affairs of the Fund has applied the principles contained in the Code in the following manner: 1. The Management Company encourages representation of independent non-executive directors and directors representing minority interests on its Board of Directors (the Board). Presently, the Board includes five non-executive directors. 2. The directors have confirmed that none of them is serving as a director in more than ten listed companies, including the Management Company. 3. All the resident directors of the Management Company have confirmed that they are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFC or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange. 4. During the year Mr. Fayaz Anwar tendered his resignation from the Board and Mr. Mazharul Haq Siddiqui was appointed to fill the casual vacancy after obtaining prior approval from SECP. 5. The Management Company has prepared a Statement of Ethics and Business Practices, which has been signed by all the directors and employees of the Management Company. 6. The Management Company has developed a vision / mission statement, overall corporate strategy and significant policies of the Fund which have been approved by the Board. A complete record of particulars of significant policies has been maintained. 7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the Chief Executive Officer and other executive directors, have been taken by the Board. 8. The meetings of the Board were presided over by the Chairman, and in his absence, by a director elected by the Board for this purpose and the Board met at least once in every quarter during the year. Written notices of the meetings of the Board, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. 9. The company has established adequate procedures and systems for related party transactions vis-à-vis the pricing method for related party transactions. All the related party transactions are placed before the Audit Committee and Board of Directors for their review and approval. 10. The Board is well aware of the requirements of the Code of Corporate Governance. Mr. Munawar Alam Siddiqui, Chairman and Mr. Suleman Lalani, Executive Director have passed the Board Development Series Certificate program conducted by the Pakistan Institute of Corporate Governance. 11. During the year, there was no change of Chief Financial Officer / Company Secretary and Head of Internal Audit. Their remuneration and terms and conditions of employment have been approved by the Board. 12. The Directors Report has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed. 13. The financial statements of the Fund have been prepared in accordance with the approved accounting standards as applicable in Pakistan and were duly endorsed by the Chief Executive Officer and Chief Financial Officer before approval of the Board. Annual Report

11 14. The directors, Chief Executive Officer and executives do not hold any interest in the units of the Fund other than those disclosed in the Directors Report. 15. The Management Company has complied with all other corporate and financial reporting requirements of the Code with respect to the Fund. 16. The Board has formed an Audit Committee. It comprises of three non-executive directors. 17. The meetings of the Audit Committee are held every quarter prior to approval of interim and annual results of the Fund as required by the Code. The Board has approved terms of reference of the Audit Committee. 18. The Board has set-up an effective internal audit function headed by the Head of Internal Audit & Compliance. 19. The statutory auditors of the Fund have confirmed that they have been given a satisfactory rating under the quality control review program of the Institute of Chartered Accountants of Pakistan (ICAP), that they or any of the partners of the firm, their spouses and minor children do not hold units of the Fund and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on Code of Ethics as adopted by the ICAP. 20. The statutory auditors or the persons associated with them have not been appointed to provide other services to the Company except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard. 21. We confirm that all other material principles contained in the Code have been complied with. Karachi: September 9, 2011 Rashid Mansur Chief Executive Officer 10 Annual Report 2011

12 REPORT OF THE SHARIAH SUPERVISORY COUNCIL Shariah Audit Report for the year The Shariah Supervisory Council (SSC) of JS Investments Limited, through its two members, on request of the management made a review of the documents and the financial statements of JS Islamic Fund for the year ended June 30, All the transactions were observed to be compliant with the guidelines laid by Shariah Supervisory Council (SSC) with the exception of a following observation: There was an intra-day trade carried out in some stocks, which was liquidated the same day, without having any prior holdings of such scrip. The gain contributed by such transaction worth Rs. 129,867, shall be distributed as the charity by the asset management company. It has been highlighted for the last two years that:..the Fund deals in shares (buy and sell) which it has some holding. To identify whether the shares sold are the same which are bought the same day or are from the stock the Fund already has, it is now being instructed that the Fund should use different brokers for this purpose and also attach the CDC statement, unique ID with the sale proceeds. In few occasions, the above instructions were not carried out and the shares were bought and sold the same day with the same broker. Therefore, in order to avoid any potential non-compliance, the Management Company is advised to strictly comply with the above directives, as such transactions in future will not be approved, and the gains realized there from will have to be given to charity. Justice Muhammad Taqui Usmani Chairman Dr. Sajidur Rahman Siddiqi Member Karachi: September 27, 2011 Abdullah Siddiqi Member Annual Report

13 SHAHRIAH COMPLIANCE AUDITORS REPORT TO THE UNIT HOLDERS Independent Assurance Provider s Report on Shariah Compliance to the Unit Holders of JS Islamic Fund We have performed our independent assurance engagement of JS Islamic Fund ( the Fund ) to assess the Fund s compliance with the Shariah Guidelines prescribed by the Shariah Supervisory Council of the Fund for the year ended 30 June Management Company s responsibility Management Company of the Fund is responsible for the appointment of Shariah Supervisory Council of the Fund and for compliance with the Shariah Guidelines prescribed by the Shariah Supervisory Council, and for such internal control as the Management Company determines is necessary to ensure compliance with the Shariah Guidelines issued by the Shariah Supervisory Council of the Fund. Responsibility of independent assurance providers Our responsibility is to express our conclusion on the compliance based on our independent assurance engagement, performed in accordance with the International Standards on Assurance Engagements (ISAE 3000) Assurance Engagement other than Audits or Review of Historical Financial Information. This standard requires that we comply with ethical requirements and plan and perform the engagement to obtain reasonable assurance whether the Fund has complied with the Shariah Guidelines issued by the Shariah Supervisory Council. The procedures selected depend on our judgement, including the assessment of the risks of material non-compliances with the Shariah Guidelines. In making those risk assessments, we have considered internal controls relevant to the entity s compliance with the Shariah Guidelines in order to design our procedures that are appropriate in the circumstances, for gathering sufficient appropriate evidence that the Fund was not materially non-compliant with the Shariah Guidelines. Our engagement was not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Conclusion In our opinion, the Fund was in all material respects, in compliance with the Shariah Guidelines issued by the Shariah Supervisory Council of the Fund for the year ended 30 June Karachi: October 3, 2011 KPMG Taseer Hadi & Co. Chartered Accountants 12 Annual Report 2011

14 TRUSTEE REPORT TO THE UNIT HOLDERS Report of the Trustee pursuant to Regulation 41(h) and Clause 9 of Schedule V of the Non-Banking Finance Companies and Notified Entities Regulations, 2008 The JS Islamic Fund (the Fund), an open-end fund was established under a trust deed dated December 16, 2002, executed between JS Investments Limited, as the Management Company and Muslim Commercial Financial Services (Private) Limited (MCFSL), as the Trustee. As per deed of change of trustee and amendment of trust deed dated May 28, 2005 MCFSL retired as the trustee and Central Depository Company of Pakistan Limited was appointed as the Trustee of the Fund. In our opinion, the Management Company has in all material respects managed the Fund during the year ended June 30, 2011 in accordance with the provisions of the following: (i) (ii) (iii) Limitations imposed on the investment powers of the Management Company under the constitutive documents of the Fund; The pricing, issuance and redemption of units are carried out in accordance with the requirements of the constitutive documents of the Fund; and The Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003, the Non-Banking Finance Companies and Notified Entities Regulations, 2008 and the constitutive documents of the Fund. Karachi: September 29, 2011 Muhammad Hanif Jakhura Chief Executive Officer Central Depository Company of Pakistan Limited Annual Report

15 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS We have audited the accompanying financial statements of JS Islamic Fund ( the Fund ), which comprise of the statement of assets and liabilities as at 30 June 2011, and the income statement, statement of comprehensive income, distribution statement, cash flow statement, statement of movement in unit holders fund for the year ended 30 June 2011 and a summary of significant accounting policies and other explanatory notes. Management s responsibility for the financial statements Management Company of the Fund is responsible for the preparation and fair presentation of these financial statements in accordance with the requirements of the approved accounting standards as applicable in Pakistan, and for such internal control as the Management Company determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards as applicable in Pakistan. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the state of the Fund s affairs as at 30 June 2011, and of its financial performance, cash flows and transactions for the year ended 30 June 2011 in accordance with approved accounting standards as applicable in Pakistan. Emphasis of matter We draw attention to note 12 to the financial statements relating to contingent liability in respect of Worker s Welfare Fund (WWF) which refers to the pending outcome of the litigation regarding contribution to WWF which is currently pending decision in Honourable Sind High Court. In view of the matters more fully discussed in the above note, provision against WWF amounting to Rs million is not being maintained by the Fund. Our opinion is not qualified in respect of this matter. Other matters In our opinion, the financial statements have been prepared in accordance with the relevant provisions of the Non-Banking Finance Companies (Establishment and Regulation Rules, 2003) and Non-Banking Finance Companies and Notified Entities Regulations, The financial statements of the Fund for the year ended 30 June 2010 were audited by another firm of Chartered Accountants who vide their report dated 17 August 2010 issued an unqualified report thereon. Karachi: September 9, 2011 KPMG Taseer Hadi & Co. Chartered Accountants Amyn Pirani 14 Annual Report 2011

16 FINANCIAL STATEMENTS Annual Report

17 16 Annual Report 2011

18 STATEMENT OF ASSETS AND LIABILITIES AS AT 30 JUNE 2011 Note Assets Bank balances Investments Dividend and other receivables Security deposits Total assets 4 4,354,628 68,937, ,217, ,854, ,200,194 85, ,600,000 2,600, ,371, ,477,448 Liabilities Remuneration payable to the Management Company Remuneration payable to the Trustee Annual fee payable to the Securities and Exchange Commission of Pakistan Creditors, accrued and other liabilities Amount payable on redemption of units Total liabilities 8 52,436 63, ,534 64, , , ,381,545 3,599,837 2,082 2,814,939 1,755,936 6,970,423 Contingency Net assets 12 Rupees 235,615, ,507,025 Unit holders' funds (as per statement attached) 235,615, ,507,025 Number of units in issue Net assets value per unit 13 Numbers 2,879,938 5,524,029 Rupees The annexed notes from 1 to 21 form an integral part of these financial statements. For JS Investments Limited (Management Company) Rashid Mansur Chief Executive Officer Munawar Alam Siddiqui Chairman Annual Report

19 INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2011 Note Income Net gain on sale of held for trading investments - net Unrealaised gain / (loss) on held for trading investments- net Dividend income Return on bank balances Return on debt securities - Sukuk Amortization of discount on investment Element of income and capital gains included in prices of units sold less those in units redeemed - net 16 36,158, ,550,333 43,181,340 (49,517,741) 19,741,729 14,499,490 3,375,596 6,666, ,636-31,437 82,490, , ,947,724 82,840,550 Expenses Remuneration to the Management Company Remuneration to the Trustee Annual fee to the Securities and Exchange Commission of Pakistan Listing fee Bank and settlement charges Legal and professional charges Securities transaction cost Auditors' remuneration Printing, stationery and postage Workers Welfare Fund Mutual fund rating fee ,522,841 9,000, , , , ,520 30,000 55, , ,910 9,050 25,000 1,203,071 3,678, , , , ,549 (1,353,840) 1,353, ,000 7,217,846 16,502,204 Net income for the year Rupees 177,729,878 66,338,346 The annexed notes from 1 to 21 form an integral part of these financial statements. For JS Investments Limited (Management Company) Rashid Mansur Chief Executive Officer Munawar Alam Siddiqui Chairman 18 Annual Report 2011

20 STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE Net income for the year 177,729,878 66,338,346 Other comprehensive income for the year Appreciation on remeasurement of available-for-sale investments to fair value transferred to income statement on sale Total comprehensive income for the year - (749,599) Rupees 177,729,878 65,588,747 The annexed notes from 1 to 21 form an integral part of these financial statements. For JS Investments Limited (Management Company) Rashid Mansur Chief Executive Officer Munawar Alam Siddiqui Chairman Annual Report

21 CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2011 Cash flows from operating activities Net income for the year ,729,878 66,338,346 Adjustments for Net gain on sale of held for trading investments - net Amortisation of discount on investment Element of income included in prices of units sold less those in units redeemed - net Unrealised (gain) / loss on held for trading investments - net (Increase) / decrease in assets Sale of held for trading investments Purchase of held for trading investments Return on debt securities- Sukuk Dividend and other receivables (Decrease) / increase in liabilities Amount payable on redemption of units Remuneration payable to the Management Company Remuneration payable to the Trustee Annual fee payable to Securities and Exchange Commission of Pakistan Creditors, accrued and other liabilities Cash flows from operating activities (36,158,385) (110,550,333) - (31,437) (82,490,674) (442,438) (43,181,340) 49,517,741 (161,830,399) (61,506,467) 15,899,479 4,831, ,292, ,026,514 (345,315,802) (928,338,088) - (167,636) (3,114,326) 6,712, ,862,660 20,232,871 (2,812,857) 2,814,939 (10,929) (505,320) (7,228) 7,157 (165,181) (4,262) (2,218,290) (1,765,391) (5,214,485) 547, ,547,654 25,611,873 Cash flows from financing activities Amount received on issue of units Amount paid on redemption of units Cash flow from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year 27,284,084 69,214,194 (269,414,314) (98,224,322) (242,130,230) (29,010,128) (64,582,576) (3,398,255) 68,937,204 72,335,459 Rupees 4,354,628 68,937,204 The annexed notes from 1 to 21 form an integral part of these financial statements. For JS Investments Limited (Management Company) Rashid Mansur Chief Executive Officer Munawar Alam Siddiqui Chairman 20 Annual Report 2011

22 STATEMENT OF MOVEMENT IN UNIT HOLDERS' FUND FOR THE YEAR ENDED 30 JUNE Net assets as at beginning of the year Cash received on issue of 1,419,677 units (2010: 1,023,113 units) * Cash paid / payable on redemption of 4,063,768 units (2010: 1,317,638 units) 382,507, ,370,844 27,284,084 69,214,194 (269,414,314) (98,224,322) (242,130,230) (29,010,128) Element of income and capital gain included in prices of units sold less those in units redeemed - net (82,490,674) (442,438) Total Comprehensive income for the year Net assets as at end of the year Ex distribution net assets value per unit at beginning of the year Net assets value per unit at end of the year 177,729,878 65,588,747 Rupees 235,615, ,507, *Including 1,032,086 (2009: Nil) units issued as bonus units during the year. The annexed notes from 1 to 21 form an integral part of these financial statements. For JS Investments Limited (Management Company) Rashid Mansur Chief Executive Officer Munawar Alam Siddiqui Chairman Annual Report

23 DISTRIBUTION STATEMENT FOR THE YEAR ENDED 30 JUNE Realised loss - Unrealised loss Deficit at beginning of the year Final distribution of bonus units issued for the year ended 30 June Rs 10.9 per unit distributed on 7 July 2010 (2009: Nil) (93,810,659) (168,539,831) (115,299,030) (106,908,204) (209,109,689) (275,448,035) (60,211,914) - (269,321,603) (275,448,035) Net income for the year Deficit at end of the year 177,729,878 66,338,346 Rupees (91,591,725) (209,109,689) Representing: - Realised loss - Unrealised loss (55,363,377) (93,810,659) (36,228,348) (115,299,030) Rupees (91,591,725) (209,109,689) The annexed notes from 1 to 21 form an integral part of these financial statements. For JS Investments Limited (Management Company) Rashid Mansur Chief Executive Officer Munawar Alam Siddiqui Chairman 22 Annual Report 2011

24 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE LEGAL STATUS AND NATURE OF BUSINESS JS Islamic Fund (the Fund) was established under a Trust Deed executed between JS Investments Limited as management company, a company incorporated under the Companies Ordinance, 1984 (the Ordinance) and the MCB Financial Services Limited (MCBFSL) as a Trustee, which is a wholly owned subsidiary of MCB Bank Limited. The Trust Deed was executed on 16 December 2002 and was approved by the Securities and Exchange Commission of Pakistan (SECP) on 18 November 2002 under the Asset Management Companies Rules, 1995 [replaced by the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 (the Rules)]. During the year ended 30 June 2005 MCBFSL voluntarily retired as a trustee of the Fund and Central Depository Company of Pakistan Limited (CDC) was appointed as a new trustee under an amended Trust Deed dated 28 May Accordingly the Trust Deed was approved by the SECP on 27 January 2005 under the Rules. All the activities of the Fund are undertaken in accordance with the Islamic Shariah rules and principles. The management company has appointed a Shariah Supervisory Council whose advice is followed to ensure that activities of the Fund are in compliance with Shariah. The fund is an open end mutual fund and its units are listed on Lahore Stock Exchange. Units areoffered for public subscription on continuous basis and are transferrable and can be redeemed by surrendering them to the fund. The face value per unit has been changed from Rs 500 to Rs 100 with effect from 20 February The Management Company of the Fund has obtained license to act as an Asset Management Company under the Rules from SECP. The registered office of JS Investments Limited is situated at 7th Floor, The Forum, G-20 Khayaban -e-jami, Block-9, Clifton, Karachi. Title to the assets of the Fund is held in the name of Central Depository Company as a Trustee of the Fund. 2. BASIS OF PREPARATION The transactions undertaken by the Fund are in accordance with the process prescribed under the Shariah guidelines issued by the Shariah Advisor. 2.1 Statement of compliance These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984, requirements of Trust Deed, Non Banking Finance Companies (Establishment and Regulation) Rules, 2003 and Non-Banking Finance Companies and Notified Entities Regulations, 2008 (NBFC rules and regulations). In case, the requirements differ, the provisions or directives of the Companies Ordinance, 1984, the requirements of the Trust Deed and Non Banking Finance Companies (Establishment and Regulation) Rules, 2003, Non Banking Finance Companies and Notified Entities Regulations, 2008 shall prevail. 2.2 Basis of measurement These financial statements have been prepared under the historical cost convention, except that investments are measured at fair value. 2.3 Functional and presentation currency These financial statements are presented in Pak Rupees, which is the fund's functional and presentation currency. All financial information presented in Pak Rupees has been rounded off to the nearest of rupees. Annual Report

25 2.4 Use of estimates and judgments The preparation of financial statements in conformity with approved accounting standards, as applicable in Pakistan, requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Judgments made by management in the application of approved accounting standards, as applicable in Pakistan, that have significant effect on the financial statements and estimates with a significant risk of material judgment in the next year are as follow: - Classification and fair value of investments (Note and 17.6) - Workers welfare fund liability (Note 12) - Taxation (Note 3.6) - Other assets Judgment is involved in assessing the realisability of other assets balances. 2.5 Standards, interpretations and amendments to published approved accounting standards that are not yet effective The following standards, interpretations and amendments of approved accounting standards are effective for accounting periods beginning from the dates specified below: - IAS 24 Related Party Disclosures (revised 2009) (effective for annual periods beginning on or after 1 January 2011). The amendment would result in certain changes in disclosures. - Improvements to IFRSs 2010 IFRS 7 Financial Instruments: Disclosures (effective for annual periods beginning on or after 1 January 2011). This would result in certain changes in disclosures. - Improvements to IFRSs 2010 IAS 1 Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2011). This would result in certain changes in disclosures. Apart from above certain other standards, amendments to published standards and interpretations of accounting standards became effective for accounting periods beginning on or after 1 January 2011, however, they do not affect the Fund's financial statements. 3. SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these financial statements. 3.1 Investments All investments are initially recognised at cost, being the fair value of the consideration given including the transaction cost associated with the investment, except in case of held for trading investments, in which case the transaction costs are charged off to the Income Statement. 24 Annual Report 2011

26 3.1.2 The Fund classifies its investments in the following categories: Financial asset at fair value through profit or loss This category has two sub-categories, namely; financial instruments held for trading, and those designated at fair value through profit or loss upon initial recognition. Investments which are acquired principally for the purposes of generating profit from short term fluctuation in price or are part of the portfolio in which there is recent actual pattern of short term profit taking are classified as held for trading. Investments designated at fair value through profit or loss upon initial recognition include those group of financial assets which are managed and their performance evaluated on a fair value basis, in accordance with the documented risk management / investment strategy. After initial recognition, the investments in listed equity instruments are remeasured at fair value determined with reference to Stock Exchange quoted market prices at the close of period end. Gains or losses on investments on remeasurement of these investments are recognized in income. Available-for-sale After initial recognition, investments classified as available-for-sale are remeasured at fair value, determined with reference to the year-end quoted rates. Gains or losses on remeasurement of these investments are recognized directly in the unit holders' funds until the investment is sold, collected or otherwise disposed-off, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in unit holders' funds is included in income Debt Securities A debt securities whether traded or not shall be valued at the rate, notified by the Mutual Funds Association of Pakistan (MUFAP) based on the methodology prescribed by the SECP Trade date accounting All regular way purchases and sales of investments are recognised on the trade date, i.e. the date on which commitment to purchase / sale is made by the Company. Regular way purchases or sales of investment require delivery of securities within two days after transaction date as required by stock exchange regulations. 3.2 Issue and redemption of units Units are allocated at the offer price prevalent on the day on which applications for the purchase of units are received (however units are issued on realisation of cheques). The offer price represents the net assets value of units at the end of the day plus the allowable sales load. The sales load is payable to the Distribution Companies and the Management Company as processing fee. Units redeemed are recorded at the redemption price prevalent on the day on which the units are redeemed. The redemption price represents the net assets value at the end of the day. 3.3 Net asset value per unit The net assets value per unit disclosed in the statement of assets and liabilities is calculated by dividing the net assets of the Fund by the number of units in issue at the year end. Annual Report