Prepared By:

Nikita Patra (12)

Payal Chauhan (14)
Dhruv Bansal (16)
Arun Kumar (17)
Pallavi Sharma
Karan Karamchandani
Win Smith, vice chairman of JMC was thinking over his options w.r.t. the
impending sale of $100 mn principal amount of subordinate debentures by
Sensormatic Electronic Corp.
SEC was largest holding in Jupiter Ventures investment portfolio and
having more than doubled in price during its 18 months in the portfolio.
Held 353,300 shares for $6.9 Mn and hold seventh largest equity position
in the portfolio.
Smith was considering to substitute convertibles for some or perhaps all of
the funds Sensormatic common stock.

Jupiter Ventures investment was lagging behind those of direct
competitors and stock indices.
Shortfall in year 1991 results to a heavy influx of new cash into the
fund.
Sharp rise in the stock market and recession in the economy led to
lack of attractively priced stock to absorb the inflows.
Cash comprised of 37% of funds net assets.

















Mutual fund is a collective investment scheme that pools money from
many investors to purchase securities.
Categories of equity funds: Aggressive growth, Long term growth, Growth
and income and Equity income.
Other category Funds:
Small company growth funds, high technology funds and Utilities funds.
Domestic funds, Global funds and International funds.
Taxable and tax free funds.
Balanced Funds and asset location funds.


In 1977 JM entered the mutual fund business.
Net asset grew from $51 bn in 1976 to $1069 bn in 1990 because of
general prosperity and aggressive marketing by fund sponsors.
Mutual Fund became the third largest intermediary in the U.S.
financial System after commercial banks and life insurance
companies.
Other Reasons: Bull market of 1980s, rapid growth in individual
retired accounts and increasing sophistication of affluent consumers.
At end of 1990, money market funds which invested exclusively in
short term taxable or tax exempt instruments comprised nets assests of
$498 bn.
Taxable and tax free bonds-$325 bn.
Equity Funds-$246 bn.
62.6 Mn mutual fund shareholders accounts with an average balance
of about $17,000.
All mutual funds were managed by external sponsoring organisation.

Prominent sponsors: Brokerage firms, Investment advisory firms,
LIC and large mutual fund complexes.
Sponsors organised the fund, established its investment objectives,
marketed its shares in consideration of a management fee which was
generally a percentage of average net assets.
Investment advisory contract governed the relationship between the
fund and the sponsors and the funds Board of Directors supervised
the sponsors activities.

Medium sized but rapidly growing and highly profitable money
management firm.
Entry into mutual fund business proved to be a major success
benefiting from both superior investment results and rapid growth in
mutual fund assests.
In 1991 JM had about $7.7 bn of net assets out of which mutual
fund comprised of $5.9 bn.
Hard to compete with the mutual fund giants because of lack resources in
terms of advertising, technology and product line extension.
Superior performance in management of equity portfolios was cornerstone
for success.
Focused on small and medium sized companies with limited Wall street
research coverage and the potential for significant near to medium term
price appreciation.
Objective was to buy the stock only when it was deemed to be substantially
undervalued and to sell when it was fully valued.


JMs long run objective was to create a family of funds that could
satisfy all of the investment needs of the high income household.
In 1991 there were five equity funds: Two bond funds and three
money market funds.
Out of $5.9 bn of mutual fund net assets, equity funds accounted for
$2.7 bn.
Minimum initial investment was $5,000 and @2,000 for individual
accounts and individual retirement accounts and other tax deferred
saving plans.
It was a direct descendant of the Jupiter Fund.
It was launched in mid 1985 to fill the specialty niche one once
occupied by the older fund.
Objective was to maximise long term growth of capital primarily
from the investment in the common stocks of small capitalisation.
JVs risk level was higher than that of JF.
It was managed by Win Smith from its inception and in 1990 it
recorded a compound annual total return of 17.3%.
It was a rapidly growing fully integrated manufacturer of electronic
system.
Systems were used to deter shoplifting and other theft in retail stores
and increasingly in non retail settings.
Product line:
EAS-78% revenues
CCTV-13% revenues
Access control systems-6% revenues
Net proceeds to be used initially to pay $25 million of domestic
bank debt and to augment cash reserves.
Straight debt financing was relatively unattractive.
Private placement of straight debt would have required a coupon of
at least 12.5%-12.75%.
Amount : $100,00,000
Maturity : May 15, 2001


With respect to the new Sensormatic issue, the options for JV were:
1) Increase the funds overall position in Sensormatic Securities by
purchasing convertibles
2) To replace some or all the of the existing common stock position with
convertibles
3) To maintain the current position
4) To reduce or eliminate this position
Smith considered that sale of convertibles would increase Sensormatics
liquidity and ensure capital for its ambitious expansion plan.
Smith expected the convertibles to be priced at par with a coupon of 7% at
conversion price of $23.50 for a conversion premium of 20.5%.
Bright long term prospects revenues expected to grow at 20% or more
per annum.
Short term earnings were vulnerable to unquantifiable uncertainties
because of Sensormatics majors bet on hard good market.