Pakistan Equity Market

1. Pakistan Equity Market 

2. Page 2 Table of Contents

3. Page 3 Table of Contents (Contd’)

4. Page 4 JS Group is one of the largest financial services groups and a diversified investor in Pakistan. It employs over 10,000 people and with revenues of over US$700 million. In addition to financial services, the Group has five core areas of operation. Introduction to JS Group

5. Page 5 Growth Through Partnerships JS Group has grown over the last four decades through forging partnerships with globally recognised and leading organisations. Allianz (Insurance) AMVESCAP (Asset management) DCD Group (Islamic banking, property) Dubai Bank (Islamic banking) Experian (Credit bureau) General Motors Acceptance Corp. (Trade Finance) IFC (Asset management)

6. Page 6 Financial Services

7. Page 7 Non Financial Businesses

8. Page 8 Jahangir Siddiqui Capital Markets (JSCM) JSCM provides equities & fixed income brokerage and corporate finance advisory services JSCM, by virtue of its pedigree, is one of the top 3 brokers in Pakistan Long term AA- and short term A1+ rating by Pakistan Credit Rating Agency (PACRA). Only few brokerage houses have been rated in Pakistan. CFA Association ranked Jahangir Siddiqui Capital Markets as the ‘Best Equity Brokerage House’ for 2005 Winner of ‘Best Equity House’ & ‘Best Bond House’ awards from Asiamoney in 2004 #1 inter bank foreign exchange broker Previously as JS & Co., achieved many significant milestones including: Financial advisor to Hub Power Co. equity offering (acclaimed by Asiamoney as ‘1994 Deal of the Year’) Assisting its then JV partner, Bear Stearns, in the Government of Pakistan’s first sovereign Eurobond offer of US$150mn ‘Euromoney Award for Excellence 2000’ for ‘Best Domestic Securities House’ in Pakistan Global Investment House K.S.C.C. (Global), a leading Kuwait-based investment & securities firm, is in the process of making a strategic investment in JSCM through acquisition of approximately 42% equity stake in JSCM.

9. Page 9 Research JS Group is the pioneer in macroeconomic & equity research in Pakistan It is among the top research houses in the country providing the largest coverage of Pakistan Equity Market The research team is one of the largest with 7 analysts along with 4 support staff. Research team recipient of ‘Best Analyst’ award from the CFA Association in 2003 and 2004. JS Research provides active coverage on the companies which constitute JS Universe. JS Universe which comprises 46 active companies and represents more than 85% of the KSE 100 Index Since 1991, JS Research has also been the exclusive provider of research and data on Pakistan to Standard & Poor’s Emerging Markets Database. JSCM was also a research provider to the Hong Kong based Pakistan Investment Fund, the first dedicated off-shore investment fund in Pakistan.

10. Page 10 Equity Sales One of the largest securities brokerage firm in Pakistan with more than 1000 clients Among the top 3 equity brokers by volume in Pakistan (Broker ranking not available in Pakistan) Handling a large portion of foreign fund businesses in Pakistan The sales team includes 13 dedicated equity dealers providing services to leading local and foreign clients Support staff consists of 6 customer service officers and 16 executives in operations departments enjoying excellent working relationships with all major custodian banks ranked JSCM brokerage as the ‘Best Equity Brokerage House’ for 2005 JSCM was also recognized by as the ‘Best Equity House’ for 2004

11. Page 11 Investment Banking & Fixed Income Advisory

12. Page 12 Stock Market In Pakistan Currently three Stock Exchanges in Pakistan at Karachi, Lahore & Islamabad Karachi Stock Exchange (KSE) is the main bourse with 652 listed companies as of Aug 31, 2006 KSE started operations in 1947 but came into limelight in early 1990s due to financial sector liberalization KSE has 200 fixed members. Around 157 are active. Out of 200, 113 are corporate and rest work as sole proprietor. Only 9 are listed Approx 85% of turnover occurs at KSE, 14% at Lahore & 1% at Islamabad The process of demutualization has began

13. Page 13 Stock Market In Pakistan (Contd’) Financial institutions (Mutual Funds, Commercial Banks, DFIs, etc) and high net-worth individuals are main players in the market Retail investor base is increasing. Record 1.4mn people applied for KAPCO (Kot Addu Power Company) IPO Trading at KSE is screen based through a number of terminals. Each and every trade is recorded There is one depository company in Pakistan (Central Depositary Company) . Average 97% of KSE volume settled through CDC and rest in physical shares Pakistan’s has 0.22% weight in the MSCI EMF Derivatives trading (single stock futures) re-started in 2001.

14. Page 14 Stock Market In Pakistan (Contd’)

15. Page 15 Sector Concentration at KSE

16. Page 16 Stock Concentration at KSE

17. Page 17 Top Turnover Stocks

18. Page 18 Share Free Float

19. Page 19 Karachi Stock Exchange Performance Stock market bull run began at the start of 2002 In 2005 gain was 54% (3383 points) Average annual gain in last 4 year was 68% (68% in US$). Last 5 year (2001 -2005) return arrived at 51% (51% in US$). Last 10-year gain was 29% annually (23% in US$) These gains are inclusive of dividends

20. Page 20 Karachi Stock Exchange Performance

21. Page 21 Karachi Stock Exchange Performance

22. Page 22 Reasons For 4 Year Bull Run

23. Page 23 Average turnover at KSE 305mn shares or US$632mn (last 8 months) Turnover velocity is one of the highest at 300%. Delivery based buying increasing Lower intra day trades means lower speculation. Is Pakistan Market Over-speculative?

24. Page 24 Is Pakistan Market very volatile?

25. Page 25 Stock Market Outlook Positive

26. Page 26 Historical Valuations

27. Page 27 Stock Market: Key Numbers/Projections

28. Page 28 Corporate Earnings Strong corporate profitability is identified as one major factor behind the last 4 years stock market rally During the last 4 years (FY02-05), average annual profitability growth was 25% (based on JS Universe companies which represents more than 80% of KSE Index) Major factors that have contributed to this growth were companies rising top line in the wake of booming economy that led to increase in industrial output Higher international oil prices was also responsible to this profitability growth For FY06, we expect corporate earnings to depict an above average growth of 23% mainly due to robust growth in E&P, Cement and Banking sectors In FY07-09, the pace of earnings growth will cool down in relative term due to higher base effect and declining oil price assumption built-in in our models

29. Page 29 Foreign Portfolio Investment Financial sector liberalization in early 1990’s During 1990s average net inflow in equity market was US$250mn a year In FY95 net portfolio inflow was US$1bn, highest ever in the history of Pakistan Nuclear explosion in 1998 and capital controls affected foreign investors’ sentiments Foreigners’ interest in Pakistan market again started in 2004 In FY05 foreign inflow in equity was US$154mn Whereas, in FY06, Pakistan received net inflow of US$358mn. Major investment came for USA Share of foreign investment is approx. 3.2% of capitalization and 16% of free float.

30. Page 30 Foreign Portfolio Investment (cont’d)

31. Page 31 Standard of living in Pakistan has improved over the past five years as population below poverty line has fallen to 24% in 2005 from 34% in 2001 There is growing consumerism across Pakistan. As in last 3 years local car sales have grown at a CAGR of 84%, whereas, cell phone subscribers have increased rapidly with 170% growth in 2006 to reach 35mn. On average 62K mobile users are increasing on daily basis Car penetration has increased to 10 cars per 1000 persons in 2005 from 6 in 2001. While teledensity (telephone users per 100 person) has reached 26% from just 3% in 2001 Consumer financing is on the rise. Share of consumer financing was 13.1% in total advances as on Mar 31, 2006 versus 10.4% a year earlier. As on Mar 31, 2006, disbursement through consumer financing depicted a growth of Rs94bn (56%YoY) as compared to overall banking sector advances of Rs357bn (21%YoY) The popularity of credit cards is growing depicting the changing life styles. However, there are only 1.5-2.0mn cards in the population of 150mn Pakistan’s Rising Consumerism

32. Page 32 Pakistan’s Ranking Currently, Pakistan’s foreign currency long term rating by S&P is B+ with Positive outlook. This is 4 notches below the Investment Grade. In last 7 years, Pakistan foreign currency rating by S&P has been upgraded by 7 notches to B+ from SD (Selective default) in 1999. After changing its methodology, Moody’s raised Pakistan foreign-currency ceiling by 2-notches from B2 to Ba3 with stable outlook. This is 3 notches below from the Investment Grade. Over the past 5 years, Pakistan’s grade on Moodys rating scale has increased to Ba3 from Caa1 in 2001 On Global Competitiveness Index (GCI), managed by the World Economic Forum, Pakistan stood at 83rd rank in 2005 out of 117 countries, up by 8 ranks from its 91st rank in 2004.   Recently, World Bank in its report “Doing Business 2007” has ranked Pakistan at 74th, whereas, India and China are at 134th and 93rd respectively.

33. Page 33 Contact Information Karachi Office 14th Floor, Chapal Plaza, Hasrat Mohani Road, Karachi 75600 Pakistan Tel: +92 21 243 1181-8 Fax: +92 21 243 1178 Website: www.js.com