Critically examine the features of various common money market instruments available in corporate sector of Pakistan.

Also give theoretical background of the topic. Introduction:

The money market is a component of the financial markets for assets involved in short-term borrowing and lending with original maturities of one year or shorter time frames. Trading in the money markets involves Treasury bills, commercial paper, bankers' acceptances, certificates of deposit, federal funds, and short-lived mortgage- and asset-backed securities. It provides liquidity funding for the global financial system. Common money market instruments

Certificate of deposit - Time deposits, commonly offered to consumers by banks, thrift institutions, and credit unions. Repurchase agreements - Short-term loansnormally for less than two weeks and frequently for one dayarranged by selling securities to an investor with an agreement to repurchase them at a fixed price on a fixed date.

Commercial paper - Unsecured promissory notes with a fixed maturity of one to 270 days; usually sold at a discount from face value.

Eurodollar deposit - Deposits made in U.S. dollars at a bank or bank branch located outside the United States. Federal agency short-term securities - (in the U.S.). Short-term securities issued by government sponsored enterprises such as

the Farm Credit System, the Federal Home Loan Banks and the Federal National Mortgage Association.

Federal funds - (in the U.S.). Interest-bearing deposits held by banks and other depository institutions at the Federal Reserve; these are immediately available funds that institutions borrow or lend, usually on an overnight basis. They are lent for the federal funds rate.

Municipal notes - (in the U.S.). Short-term notes issued by municipalities in anticipation of tax receipts or other revenues. Treasury bills - Short-term debt obligations of a national government that are issued to mature in three to twelve months. For the U.S., see Treasury bills.

Money funds - Pooled short maturity, high quality investments which buy money market securities on behalf of retail or institutional investors.

Foreign Exchange Swaps - Exchanging a set of currencies in spot date and the reversal of the exchange of currencies at a predetermined time in the future.

Short-lived mortgage- and asset-backed securities

Money market is a market for securities (debt or equity), where business enterprises (companies) and governments can raise longterm funds. It is defined as a market in which money is provided for periods longer than a year[1], as the raising of short-term funds takes place on other markets (e.g., the money market). The capital market includes the stock market (equity securities) and the bond market (debt). Financial regulators, such as the UK's Financial Services Authority (FSA) or the U.S. Securities and Exchange Commission (SEC),

oversee the capital markets in their designated jurisdictions to ensure that investors are protected against fraud, among other duties. Capital markets may be classified as primary markets and secondary markets. In primary markets, new stock or bond issues are sold to investors via a mechanism known as underwriting. In the secondary markets, existing securities are sold and bought among investors or traders, usually on a securities exchange, over-the-counter, or elsewhere. The money market consists of financial institutions and dealers in money or credit who wish to either borrow or lend. Participants borrow and lend for short periods of time, typically up to thirteen months. Money market trades in short-term financial instruments commonly called "paper." This contrasts with the capital market for longer-term funding, which is supplied by bonds and equity. The core of the money market consists of banks borrowing and lending to each other, using commercial paper, repurchase agreements and similar instruments. These instruments are often benchmarked to (i.e. priced by reference to) the London Interbank Offered Rate (LIBOR) for the appropriate term and currency. Finance companies, such as GMAC, typically fund themselves by issuing large amounts of asset-backed commercial paper (ABCP) which is secured by the pledge of eligible assets into an ABCP conduit. Examples of eligible assets include auto loans, credit card receivables, residential/commercial mortgage loans, mortgage-backed securities and similar financial assets. Certain large corporations with strong credit ratings, such as General Electric, issue commercial paper on their own credit. Other large corporations arrange for banks to issue commercial paper on their behalf via commercial paper lines.

In the United States, federal, state and local governments all issue paper to meet funding needs. States and local governments issue municipal paper, while the US Treasury issues Treasury bills to fund the US public debt.

Trading companies often purchase bankers' acceptances to be tendered for payment to overseas suppliers. Retail and institutional money market funds Banks Central banks Cash management programs Arbitrage ABCP conduits, which seek to buy higher yielding paper, while themselves selling cheaper paper. Merchant Banks

The Markets Index: It is an investment tool that tracks the value of traditional investment-grade U.S. capital market securities. CPMKTS is a real-time, market-weighted index. It includes approximately 9,500 equity, fixed income and money market instruments. CPMKTS index was launched by Dorchester Capital Management Company of Houston, Texas on May 4, 2006. The Capital Markets Index is carried on the American Stock Exchange under the symbol CPMKTS with updates every 15 seconds. Product Details: Index measures the capital markets on a consolidated basis. Rather than further subdivide the market as other indexes do, CPMKTS views the capital markets on a broader basis and therefore includes stocks, bonds and money market instruments. It satisfies the needs of
4

both professional and lay investors for a measurement tool for mixed or blended portfolios and provides the basis for a wide variety of investment instruments. Other indexes within the CPMKTS family measure sub-segments of the market. The Amex also publishes sub-indexes CPMKTE, CPMKTB and CPMKTL, tracking equities, bonds and liquidity, respectively. The CPMKTS and its family of indexes were created to meet the market's need for:
1. More sophisticated measures of capital market performance

2. Improved measures of risk and return 3. Better tools to make asset-allocation and investment decisions Highlights of index include: 1. Comprises stocks, bonds, and money market instruments from the US investment grade capital markets. 2. Component fixed income securities and money market instruments are revised monthly. Component equity securities are revised quarterly. All weightings are revised monthly. 3. Completely transparent rules-based selection criteria. 4. Has documented demand from investment professionals and individual investors as benchmark tool and as a basis for investment product basis, as documented by Harris Interactive/Quest Business Agency Market Research 5. Delivers capital market return for capital market risk 6. Replicates the capital markets' actual asset allocation

7. No known competitors in measuring the broader capital markets' performance 8. Back-tested to December 1979 using the same methodology employed for ongoing revisions and calculations.

How it works:
Dorchester [www.cpmkts.com] has collected over 30 years of historical dataincluding government statistics and market changeswhich now are stored in the company's computers (two systems in Houston and a redundant system in Chicago). Each day 200 million pieces of information are added. The data is organized, processed and updated every 15 seconds. This statistical selection removes the subjectivity associated with other indexes. It accurately represents the history, mix and behavior of the capital markets. How the index is calculated 1. Real-time and historical data have been acquired from multiple financial and government sources. 2. Data is organized, normalized and processed. 3. Dorchester's CPMKTIG is formulated, using all the investmentgrade capital market assets and allocations. 4. CPMKTS is the real-time index representation of the entire investment-grade U.S. capital market as derived from CPMKTIG and calculated by Dorchester and the AMEX. 5. The AMEX publishes CPMKTS and its component indexes on the "tape" every 15 seconds.

Company history

In the mid-1970s, while attending graduate school at the University of Chicago, Warren Schmalenberger, current President and CEO of [Dorchestor Capital Management Company] asked himself why no index had ever been devised that would measure the overall value of the U.S. capital markets. Equity indicesas exemplified by the well-known Dow Jones and Standard & Poor's indiceswere immediately recognizable. Yet no one was tracking bonds or money market investments - much less the total value of U.S. capital markets. As Mr. Schmalenberger considered this possibility, he became convinced that a capital markets index would have value not only among the professional investment community, but also among individual investors. In the ensuing years, Mr. Schmalenberger gave additional thought to the idea, even as he was building a career in the financial-services industry. Several new indexes were developed and launched during this period, and creative variations such as exchange-traded funds (ETFs) and index mutual fund gained huge popularity among investors. However, a capital markets index was not among those developed. In 1995, Mr. Schmalenberger founded [Dorchester Capital Management Co.] in Houston. By that time, bond indexes were firmly established within the fixed-income markets, but there was still no index tracking liquidity, the total value of the U.S. capital markets or the asset allocation among equities, bonds and money market instruments. He continued to believe that a capital markets index made sense both intellectually and from a commercial standpoint. He also believed and subsequent research would validate his convictionthat there would be strong market demand for a more-sophisticated measure of

the performance of the entire capital market, an improved measure of risk-reward ratios, and better tools with which to make asset-allocation and investment decisions. The process of building the Capital Markets Index, known as CPMKTS, thus was under way.

Executives:
Warren Schmalenberger is the Founder and and CEO Warren officer F. of Schmalenberger founder chief executive

Dorchester Capital Management Company. Mr. Schmalenberger is responsible for the company's strategic direction, as well as product development. Prior to founding Dorchester, Mr. Schmalenberger was a managing director at Transamerica Fund Management Company, where in addition to his product development, communications and marketing responsibilities, he directed all fixed income investments. Previously, he served as vice chairman of the asset-liability committee at a savings and loan association, where he oversaw investment, finance and liquidity strategies and implementation. Earlier in his career, he worked at Bank of America in the bank investment securities division. During this period, he designed and built the first database of daily commercial financial statistics, which is currently in use by hundreds of institutions worldwide, and authored a weekly economic and bond market newsletter. He later served as a member of the team that managed the bank's multibillion-dollar portfolio of U.S. Treasury, federal agency, mortgage-backed and municipal securities, and was a member of the bank's interest rate committee. Mr. Schmalenberger received a bachelor's degree from St. Johns College, "Great Books Program," and earned his MBA while studying
8

with individuals who would later become Nobel Prize Laureates at The University of Chicago. Paul Stockton Paul E. Stockton is responsible primarily for Sales and Marketing and serves on the company's Advisory Board. Mr. Stockton has broad and diverse experience spanning research, marketing, sales, general management and consulting for global market leaders. Alan D. Vera, CDC Alan D. Vera is a noted marketing communications expert who has pioneered the application of consumer product marketing techniques to the marketing of a broad spectrum of industrial, financial, technical and professional products and services. Mr. Vera advises Dorchester on the development and implementation of both short- and long-term marketing and sales strategies to further the company's business goals. Jean McFadden Jean McFadden has over 15 years experience in product and project management in the financial services industry focused on development and marketing of mutual funds, tax-deferred products product indexes. Brandon Wallace Brandon Wallace has over 15 years experience developing financial analytics software. His areas of expertise include fixed income analytics, portfolio management tools, database design, data gathering, and accounting. Brandons responsibilities with Dorchester include designing and implementing the index equity and fixed income analytics, the securities database, and the automated for retirement and college with saving launch and ETFs. Her and responsibilities with Dorchester include researching new investment opportunities, assisting coordination, providing training for investment products based on Dorchester

systems which acquire, standardize, and merge the data from our various financial data providers. Matthew Lott Matthew Lott has over a decade of computer development experience, the last six years in the financial sector. His areas of expertise include developing software for portfolio management, trade management, and fixed income and money market analytics. Matthews primary area of responsibility with Dorchester was the development of the application to calculate the CPMKTL and CPMKTB real-time Liquidity and Bond indexes. Joshua J. Perryman Josh Perryman has over a decade in technology management and software development experience. His areas of expertise areas of include technology with security, systems have maintenance been & monitoring, and operational procedure development. Joshs primary responsibility Dorchester systems management and the implementation of the index constituent selection process.

Practical Study on JS Investments Limited

JS Investments Limited (formerly JS ABAMCO Limited) was incorporated on February 22, 1995 and has been licensed by the Securities and Exchange Commission of Pakistan (SECP) to act as an investment advisor under the repealed Investment Companies and Investment Advisors Rules, 1971, on February 27, 1995 and as an asset management company under the repealed Asset Management Companies Rules 1995. JS Investments is listed on Karachi Stock Exchange (KSE) vide KSE letter reference KSE/N-2225 dated April 19, 2007.

Investment Advisory and Asset Management Services:

10

SECP

has

granted

renewed

license

No.NBFC-

II/22/ABAMCO/AMC&IA/05/2007, dated June 11, 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 JS Investments Limited (formerly JS ABAMCO Limited) is one of the largest asset management companies in Pakistan. The Company manages PKR 40 billion in investments on behalf of hundreds of institutions and thousands of individuals. JS Investments Limited (formerly JS ABAMCO Limited) is rated AM2+ by PACRA and is the first asset management company in Pakistan to be rated as such. JS Investments Limited (formerly JS ABAMCO 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 nations investment banking, corporate finance, equity market operations, debt factoring and insurance sectors.

11

JS

Investments

Limited

(formerly

JS

ABAMCO

Limited)

asset

management and investment advisory is what makes your money grow. Our knowledge of investment markets, coupled with the strengths and capabilities of the Jahangir Siddiqui Group (JS Group), provides our investors with the investment initiatives in both open and closed end Mutual Funds. There are many benefits of choosing JS Investments Limited (formerly JS ABAMCO Limited) Mutual Funds over others.

We are the first private sector asset management company in Pakistan. We are managing the largest fund size. We are the first asset management company with AM2+ Asset Management Intrinsic rating by PACRA. We are part of the Jahangir Siddiqui Group, which is one of the most prestigious and diversified financial institutions in Pakistan.

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 USD 370 billion and International Finance Corporation (IFC) - The private sector arm of the World Bank Group.

Our Founding Partners

12

Jahangir Siddiqui & Co. Ltd.

Jahangir Siddiqui & Co. Ltd. (JSCL) is one of the largest investment firms in Pakistan with shareholders equity of PKR 4,346 million (USD 73 million), assets of PKR 13,956 million (USD 234 million) and profits after tax for the year ended June 30, 2005 of PKR 1,181 million (USD 20 million).

JSCL has a long term credit rating of AA+ and a short term credit rating of A1+ by Pakistan Credit Rating Agency. JSCL was the first securities firm to boast a Wall Street pedigree by virtue of its joint venture with Bear Stearns. JSCL in collaboration with Bear Stearns issued the Government of Pakistans first Sovereign Eurobond of USD 150 million in 1994.

JSCL issued Pakistans first 10 year corporate bond in 2004. JSCL is the only non-banking company to be a Primary Dealer

for government securities in Pakistan. The Pakistan Credit Rating Agency (Pvt) Limited (PACRA), has assigned both the long-term and short-term ratings of the Company at "AA+" (Double A plus) and "A1+" (A one plus) respectively. Jahangir Siddiqui & Co. Ltd. is listed on the Karachi Stock Exchange (Guarantee) Limited.

INVESCO Plc: (Formerly AMVESCAP Plc.)

INVESCO Plc. (Formerly AMVESCAP Plc.) is one of the world's largest independent investment management organizations dedicated to helping people worldwide build their financial security, with more

13

than USD 491.3 billion as on May 31 , 2007 in assets under management and a worldwide network of over 80 countries. INVESCO Plc is a FTSE 100 company, listed on the London Stock Exchange. INVESCO Plc. and its subsidiaries provide investment management and related services to a wide range of institutional, retail and high net worth clients, including regulated investment companies and other pooled investment schemes, INVESCO Plc strives to deliver outstanding performance and service across a comprehensive array of investment products for individuals and institutions around the world.

International Finance Corporation

International Finance Corporation (IFC) is a member of the World Bank Group, which is a multilateral development organization, and is headquartered in Washington, D.C. The IFC was established in 1956 and promotes sustainable private sector investment in developing countries as a way to bring economic development and to improve the quality of the lives of people in its developing member countries. IFC is the largest multilateral source of loan and equity financing for private sector projects in the developing world. Its equity capital is provided by its member countries, both developed and developing, which collectively determine its policies and activities including:

Financing private sector projects located in the developing world. Helping private companies in the developing world mobilize financing in international financial markets advice and technical assistance to businesses and

Providing

governments.
14

Why do we observe differences in economic performance among countries; across industries in the same economy; and across firms belonging to the same industry? What could be the role of the financial system in explaining cross-country and cross-industry variations in economic performance? While determinants of cross-country economic growth have been of great interest to development economists and growth economic theory, the role of financial markets and institutions has traditionally received very little attention. Recent finance literature reports strong relations between indicators of financial development and economic performance in the real sector, indicating a positive role for capital markets and institutions. In this study, I utilize a corporate finance framework to investigate empirically the finance growth link by examining possible channels through which financial market functions could influence economic performance at industry level.

Conclusion
JS investment limited is a much known investment organization that are directly link with the capital and money market. I begin from a premise that financial markets and institutions play two critical roles in an economy: allocation of risk capital through saving mobilization and risk-pooling and sharing; and promotion of responsible governance and control through providing outside investors a variety of mechanisms for monitoring inside decision makers. In its allocation function, the financial system helps transfer resources from individual savers to agents with managerial and entrepreneurial talents with investment opportunities and provides firms and investors risk-pooling and sharing facilities.

15

As its governance function, it provides monitoring and information production services by which it helps mitigate the various agency problems of the firm resulting in better project evaluation and selection even in the absence of external finance need. While recognizing the twin roles of the financial system, modern corporate finance theory emphasizes the monitoring and information production function; in contrast, the recent finance growth literature focuses on the capital mobilization role.

16