| First Capital Mutual Fund Limited |
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| (Annual
Report 1997) |
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| CONTENTS |
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| Company
Information |
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| Notice
of Meeting |
|
| Director's Report to the
Shareholders |
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| Auditors
Report to the Members |
|
| Balance
Sheet |
|
| Profit
and Loss Account |
|
| Cash
Flow Statement |
|
| Notes
to the Accounts |
|
| Statement
of Income & Expenditure |
|
| Pattern
of Shareholding |
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|
|
|
|
| Company
Information |
|
|
| Board
of Directors |
|
| Mr.
Salmaan Taseer |
|
| Chairman |
|
| Mr.
Zahid Zia |
|
| Chief
Executive |
|
| Mr.
Khurshid Hadi |
|
| Mr.
Mian Jahangir Elahi |
|
| Mr.
Abdul Waheed Alavi |
|
| Mr.
Bashir A. Sheikh |
|
| Mr.
Humayun Nabi Jan |
|
|
| Company
Secretary |
|
| Mr.
Jamil Raza Syed |
|
|
| Investment
Committee |
|
| Mr.
Zahid Zia - Chief Executive |
|
| Dr.
Amjad Waheed - Chief Operating Officer |
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|
| Auditors |
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| M/s
Taseer Hadi Khalid & Company |
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| Chartered
Accountants |
|
| Lahore. |
|
|
| Registered
Office |
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| 103-C/II,
Gulberg III, Lahore. |
|
|
| Custodian |
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| Crescent
Investment Bank Ltd. |
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| 45-Shahrah-e-Quaid
-e-Azam, Lahore. |
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|
| Legal
Advisors |
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| M/s
Chima & Ibrahim |
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| Advocates |
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| Lahore. |
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|
| Investment
Advisers |
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| First
Capital Investments (Pvt) Limited |
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| 103-C
II, Gulberg-III, Lahore. |
|
|
| Shares
Department |
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| First
Capital Mutual Fund Ltd. |
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| Ground
Floor, |
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| Sh.
Sultan Trust Building No. 2 |
|
| Beaumont
Road, Karachi. |
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| Notice
of Meeting |
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| Notice
is hereby given that the 3rd Annual General Meeting of the shareholders of
the Company will be held on |
|
| December
30, 1997 at 11:00 a.m. at 103-C/II, Gulberg-III, Lahore to transact the
following business:- |
|
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| 1.
To confirm the minutes of the second Annual General Meeting of the Members. |
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| 2.
To receive, consider and adopt the annual audited accounts of the Company
together with the Auditors' and |
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| Director's
Report for the year ended June 30, 1997. |
|
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| 3.
To appoint Auditors for the year ending June 30, 19o8 and to fix their
remuneration. The present auditors M/s |
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| Taseer
Hadi Khalid & Company, Chartered Accountants, being eligible for
appointment, offer themselves for re- |
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| appointment. |
|
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| 4.
To transact any other business of the Company with the permission of the
Chair. |
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|
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|
By the Order of the Board |
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|
JAMIL RAZA SYED |
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| Dated:
09-12-1997 |
|
(Company Secretary) |
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| Notes: |
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| 1.
The share transfer book of the Company will remain closed from 31st December,
1997 to 7th January, 1998 (both |
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| days
inclusive). |
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| 2.
A member entitled to attend and vote at the meeting may appoint another
member as his/her proxy to attend the |
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| meeting
and vote on his/her behalf. Proxies in order to be effective, must be
received by the Company at least 48 |
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| hours
before the meeting. |
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| 3.
Members are requested to notify any change in address immediately. |
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|
| Director's
Report to the Shareholders |
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| For the year ended June 30, 1997 |
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| The
Directors have pleasure in presenting their report and the audited financial
statements for the year ended June 30, |
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| 1997. |
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|
| 1996-1997
REVIEW |
|
|
| Fiscal
year 1997 was a tough year where we saw sacking of an elected government by
the President, an interim gov- |
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| ernment
that failed to improve the economic situation, and then a pro-business
government forced to do too much in |
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| too
little a time. The KSE-100 index dropped 6.6% from 1703.8 on July 1, 1996 to
1566 by June 30, 1997. Similarly, |
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| State
Bank General Share Price Index dropped 16.2% from 171 in June 1996 to 143 in
June 1997. The net asset value |
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| of
your Fund rose by 1.1% during the same time period, thus outperforming market
indices by a healthy margin. |
|
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| The
net asset value of your Fund as of June 30, 1997 was Rs 7.03 per share which
was at a significant premium to the |
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| market
price of Rs 2 per share. The market price of the Fund is determined by demand
and supply forces and is affect- |
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| ed
by sentiments among investors towards the stock market in general and the
mutual fund industry in particular. As |
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| these
sentiments improve the market price is expected to move closer to its net
asset value. |
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| FUTURE
OUTLOOK |
|
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| As
a result of investor friendly budget and an improvement in business and
investor confidence the stock market has |
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| experienced
a bull run in the first quarter of the current financial year and your fund
has risen with the market. |
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| Pakistani
stock market is cheap at present with shares trading at attractive levels. A
resolution of the political crisis and |
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| release
of the second tranche by the IMF in February 1998 could result in the next
bull rally at that time. This being |
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| the
case, we expect the net asset value of the fund to exceed Rs 10 per share by
June 1998. |
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|
| FINANCIAL |
|
|
|
1997 |
1996 |
|
|
(Rupees) |
(Rupees) |
|
| Profit
before taxation |
|
1,496,726 |
(29,447,156) |
|
| Taxation |
|
(270,148) |
(51,956) |
|
|
--------- |
--------- |
|
| Profit
after taxation |
|
1,226,578 |
(29,499,112) |
|
| Accumulated
loss brought forward |
|
(45,816,132) |
(16,317,020) |
|
|
---------- |
---------- |
|
| Accumulated
loss carded forward |
|
(44,589,554) |
(45,816,132) |
|
|
========== |
========== |
|
| DIVIDEND |
|
|
| The
Directors do not recommend payment of a Dividend due to the accumulated
losses brought forward. |
|
|
| BOARD
OF DIRECTORS |
|
|
| Subsequent
to the year end Mr. Salmaan Taseer resigned as the Chief Executive of the
Company. Mr. Zahid Zia was |
|
| appointed
by the Board to fill in the casual vacancy of the Chief Executive. He is a
qualified Chartered Accountant |
|
| and
brings with him over three years of rich experience of finance and stock
market. Mr. Salmaan Taseer, however, |
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| will
remain the Chairman of the Board. |
|
|
| PATTERN
OF SHAREHOLDING |
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| The
pattern of shareholding is attached with this report. |
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|
| AUDITORS |
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| The
present auditors' M/s Taseer Hadi Khalid & Co. retire and being eligible,
offer themselves for |
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| reappointment. |
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| Auditors'
Report to the Members |
|
| For
the year ended June 30, 1997 |
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|
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| We
have audited the annexed balance sheet of FIRST CAPITAL MUTUAL FUND LIMITED
as at June 30, 1997 |
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| and
the related profit and loss account and cash flow statement together with the
notes to the accounts for the year then |
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| ended.
Our examination was made in accordance with the generally accepted auditing
standards and accordingly |
|
| included
such tests of the accounting records and such other auditing procedures as
were considered necessary in the |
|
| circumstances
and we state that we have obtained all the information and explanations which
to the best of our knowl- |
|
| edge
and belief were necessary for the purposes of our audit and we report that: |
|
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| a)
in our opinion, proper books of account have been kept by the Company as
required by the Companies |
|
| Ordinance,
1984 and Rule 16 of the Investment Companies and Investment Adviser's Rules,
1971; |
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| b)
in our opinion: |
|
|
| i)
the balance sheet and profit and loss account together with the notes thereon
have been drawn up in confor- |
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| mity
with the Companies Ordinance, 1984 and in accordance with the provisions of
the Investment |
|
| Companies
and Investment Adviser's Rules, 1971 and are in agreement with the books of
account and are |
|
| further
in accordance with accounting policies consistently applied; |
|
|
| ii)
the expenditure incurred during the period was for the purposes of the
Company's business; |
|
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| iii)
the business conducted, investments made and the expenditure incurred during
the period were in accordance |
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| with
the investment policy of the Company and Investment Companies and Investment
Adviser's Rules, |
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| 1971; |
|
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| iv)
the company has not contravened the provisions of Rule 8 of the Investment
Companies and Investment |
|
| Adviser's
Rules, 1971; and |
|
|
| c)
in our opinion and to the best of our information and according to the
explanations given to us, the balance |
|
| sheet,
the profit and loss account and the cash flow statement together with the
notes forming part thereof |
|
| give
the information required by the Companies Ordinance, 1984 and Investment
Companies and Investment |
|
| Adviser's
Rules, 1971 in the manner so required and respectively give a true and fair
view of the state of the |
|
| Company's
affairs as at June 30,1997 and of the profit and cash flow for the year ended
on that date; |
|
|
| d)
in our opinion, no zakat was deductible at source under the Zakat and Ushr
Ordinance, 1980. |
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|
| LAHORE |
|
TASEER HADI KHALID &
CO. |
|
| 06
DEC, 1997 |
|
Chartered Accountants |
|
|
|
|
|
| Balance
Sheet |
|
| As at June 30, 1997 |
|
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|
1997 |
1996 |
|
|
Note |
(Rupees) |
(Rupees) |
|
|
| SHARE
CAPITAL |
|
|
| Authorised
capital: |
|
| 20,000,000 ordinary shares of |
|
200,000,000 |
200,000,000 |
|
| Rs. 10/-each |
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| Issued,
subscribed and paid-up capital: |
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| 15,000,000 ordinary shares of |
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| Rs. 10/-each issued as fully |
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| paid-up
in cash |
|
150,000,000 |
150,000,000 |
|
|
| Accumulated loss |
|
|
44,589,554 |
(45,816,132) |
|
|
|
|
------------ |
------------ |
|
|
105,410,446 |
104,183,868 |
|
|
| DEFERRED
EXPENDITURE PAYABLE |
3 |
3,318,744 |
4,978,121 |
|
| CURRENT
LIABILITIES |
|
| Current maturity of deferred |
3 |
1,659,377 |
1,659,377 |
|
| expenditure
payable |
|
|
|
|
| Due
to investment adviser |
|
4 |
2,729,096 |
1,103,511 |
|
| Creditors
and other liabilities |
5 |
2,961,233 |
13,854,755 |
|
| Provision
for taxation |
|
325,071 |
54,923 |
|
|
7,674,777 |
16,672,566 |
|
|
----------- |
----------- |
|
|
116,403,967 |
125,834,555 |
|
|
| DEFERRED
EXPENDITURE |
|
6 |
4,887,973 |
6,517,296 |
|
| CURRENT
ASSETS |
|
| Marketable
securities - Net |
|
7 |
96,727,411 |
112,185,106 |
|
| Trade
debts - Unsecured (considered good) |
8 |
2,515,542 |
1,093,117 |
|
| Advances,
deposits, prepayments and other receivables |
9 |
2,260,648 |
222,653 |
|
| Cash
and bank balances |
|
10 |
10,012,393 |
5,816,383 |
|
|
|
------------ |
------------ |
|
|
111,515,994 |
119,317,259 |
|
| CONTINGENCIES
AND COMMITMENTS |
11 |
-- |
-- |
|
|
111,515,994 |
119,317,259 |
|
|
------------ |
------------ |
|
|
116,403,967 |
125,834,555 |
|
|
============ |
============ |
|
|
| These
accounts should be read in conjunction with the annexed notes. |
|
|
| LAHORE |
|
CHIEF EXECUTIVE |
|
DIRECTOR |
|
|
|
| Profit
and Loss Account |
|
| For
the year ended June 30, 1997 |
|
|
|
Note |
1997 |
1996 |
|
|
|
(Rupees) |
(Rupees) |
|
|
|
|
| INCOME |
|
|
|
|
|
|
| Loss on sale of marketable |
|
12 |
(12,156,573) |
(10,584,031) |
|
| securities |
|
|
|
|
|
|
|
| Dividend |
|
|
5,402,951 |
1,039,123 |
|
| Mark-up
on bank deposits |
|
|
605,401 |
2,281,804 |
|
| Other
income |
|
|
-- |
23,000 |
|
|
|
------------ |
------------ |
|
|
|
|
|
(6,148,221) |
(7,240,104) |
|
|
|
|
|
| OPERATING
EXPENSES |
|
|
|
|
|
|
|
|
| Administrative |
|
13 |
2,347,314 |
2,919,175 |
|
| Financial |
|
14 |
626,185 |
829,603 |
|
| Remuneration
to the Investment Adviser |
15 |
2,151,234 |
2,126,201 |
|
|
|
5,124,733 |
5,874,979 |
|
|
|
------------ |
------------ |
|
|
|
(11,272,954) |
(13,115,083) |
|
|
|
|
|
| Provision for diminution in
value |
|
|
-- |
(16,332,073) |
|
| of
marketable securities |
|
|
|
|
| Excess of provision for
diminution |
|
|
|
|
| in value of marketable
securities |
|
|
|
|
| written
back |
|
|
12,769,680 |
-- |
|
|
|
------------ |
------------ |
|
| PROFIT
/ (LOSS) BEFORE TAXATION |
|
|
1,496,726 |
(29,447,156) |
|
| Provision
for taxation |
|
|
(270,148) |
(51,956) |
|
|
|
------------ |
------------ |
|
|
|
1,226,578 |
(29,499,112) |
|
| Accumulated
loss brought forward |
|
|
(45,816,132) |
(16,317,020) |
|
|
|
------------ |
------------ |
|
| ACCUMULATED
LOSS AFTER TAXATION |
|
|
(44,589,554) |
(45,816,132) |
|
| CARRIED
FORWARD |
|
|
|
|
| These
accounts should be read in conjunction with the attached notes. |
|
|
|
|
|
|
|
|
| Cash
Flow Statement |
|
| For
the year ended June 30, 1997 |
|
|
|
1997 |
1996 |
|
|
(Rupees) |
(Rupees) |
|
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
| Profit
/ (loss) after taxation |
|
1,226,578 |
(29,499,112) |
|
|
|
|
| ADJUSTMENT
OF ITEMS NOT INVOLVING |
|
|
|
| MOVEMENT
OF CASH |
|
|
|
|
|
|
| Amortization
of deferred cost |
|
1,629,323 |
1,629,323 |
|
| Excess
of provision written back |
|
(12,769,680) |
|
|
| Provision
for diminution in value of shares |
|
|
16,332,073 |
|
| Provision
for taxation |
|
270,148 |
51,956 |
|
|
(10,870,209 |
18,013,352 |
|
|
------------ |
------------ |
|
| CASH
FLOWS FROM OPERATING ACTIVITIES BEFORE |
|
|
|
| ADJUSTMENTS
OF WORKING CAPITAL |
|
(9,643,631) |
(11,485,760) |
|
|
|
|
| WORKING
CAPITAL CHANGES |
|
|
|
|
|
|
| (INCREASE)/DECREASE
IN CURRENT ASSETS |
|
|
|
|
|
|
| Marketable
securities |
|
|
28,227,375 |
(72,580,679) |
|
| Advances,
deposits, prepayments and other receivables |
|
|
(2,037,995) |
(192,243) |
|
| Accounts
receivable |
|
(1,422,425) |
( 1,093,117) |
|
|
24,766,955 |
(73,866,039) |
|
|
------------ |
------------ |
|
|
15,123,324 |
(85,351,799) |
|
| INCREASE/(DECREASE)
IN CURRENT LIABILITIES |
|
|
|
|
|
|
| Due
to investment adviser |
|
1,625,585 |
1,171,317 |
|
| Creditors
and other liabilities |
|
(10,893,522) |
3,840,038 |
|
|
(9,267,937) |
5,011,355 |
|
|
----------- |
----------- |
|
| NET CASH IN/(OUT) FLOWS FROM
OPERATING |
|
5,855,387 |
(80,340,444) |
|
| ACTIVITIES |
|
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
| Deferred
cost paid to investment adviser |
|
|
(1,659,377 |
(1,659,377 |
|
|
|
|
----------- |
----------- |
|
| NET
CASH OUT FLOWS FROM FINANCING ACTIVITIES |
|
(1,659,377) |
(1,659,377) |
|
|
|
|
| NET
INCREASE/(DECREASE) IN CASH AND CASH |
|
|
|
| EQUIVALENTS |
|
4,196,010 |
(81,999,821 |
|
| CASH
AND CASH EQUIVALENTS AT THE BEGINNING |
|
|
|
| OF
THE YEAR |
|
5,816,383 |
87,816,204 |
|
| CASH
AND CASH EQUIVALENTS AT THE END |
|
------------ |
------------ |
|
| OF
THE YEAR |
|
10,012,393 |
5,816,383 |
|
|
============ |
============ |
|
|
|
|
|
|
|
|
| Notes
to the Accounts |
|
| For
the year ended June 30, 1997 |
|
|
| 1.
STATUS AND NATURE OF BUSINESS |
|
| 1.1
The company was incorporated on January 8, 1995 as a public limited company
under the Companies |
|
| Ordinance,
1984 and commenced its operations on March 14, 1995. It has been registered
as an |
|
| Investment
Company under the Investment Companies and Investment Adviser's Rules, 1971.
The |
|
| Company
is listed on Karachi and Lahore Stock Exchanges. The object of the company is
to carry on |
|
| the
business of a close-end mutual fund and to invest its assets in securities
which are listed or proposed |
|
| to
be listed on the Stock Exchanges. |
|
|
| 1.2
The Company has entered into an agreement with an associated company, First
Capital Investments |
|
| (Pvt)
Limited to act as its "Investment Adviser". Crescent Investment
Bank is the approved custodian of |
|
| the
company. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.1
Accounting Convention |
|
| These
accounts have been prepared under the historical cost convention. |
|
|
| 2.2
Marketable securities |
|
|
| Listed |
|
| These
are valued at the lower of average cost and market value determined on
aggregate portfolio basis. |
|
| The
provision for diminution in value of shares required against marketable
securities is charged to the |
|
| Income
currently. |
|
|
| Market
value has been taken from Karachi Stock Exchange quotations as on the last
working day of the |
|
| income
year. |
|
|
| Pre-IPO's |
|
|
| These
are companies for which application has been made but which have not been
listed at the balance |
|
| sheet
date. These pre-initial public offerings are stated at the lower of average
cost and break-up value |
|
| determined
on the basis of latest available financial statements. |
|
|
|
| 2.3 Revenue recognition |
|
|
| i.
Dividend income is recognized at the time of closure of share transfer books
of the company declaring |
|
| dividend
and is recorded net of Zakat. |
|
|
| ii.
Sale and purchase of securities are recorded on the date of execution of
contract. Capital gain and losses |
|
| on
sale of investments is taken to income of the period in which it arises. |
|
|
| iii.
Return on bank deposits and securities other than shares of the company is
recognized on accrual basis. |
|
|
|
| 2.4
Deferred expenditure |
|
| These
will be amortized over a period of five years starting from financial year
1995-96. |
|
|
| 2.5
Taxation |
|
|
| Provision
for current taxation is based on taxable income at current rates of taxation
after taking into account tax |
|
| credits
and rebates available, if any. The company provides for deferred taxation on
liability method for all major |
|
| timing
differences. However, net deferred tax debits are not recognized. |
|
|
| The
company has provided tax at 5% on the dividend income for the year. |
|
|
|
1997 |
1996 |
|
|
(Rupees) |
(Rupees) |
|
|
| 3. DEFERRED EXPENDITURE PAYABLE |
|
|
| Deferred
costs |
|
4,978,121 |
6,036,486 |
|
| Add:
Additions during the year |
|
-- |
601,012 |
|
|
----------- |
----------- |
|
|
4,978,121 |
6,637,498 |
|
| Less: Current maturity of
deferred |
|
(1,659,377) |
(1,659,377) |
|
| expenses
payable |
|
----------- |
----------- |
|
|
3,318,744 |
4,978,121 |
|
|
============ |
============ |
|
| The
expenditure incurred on the incorporation and floatation of First Capital
Mutual Fund Limited was paid by |
|
| First
Capital Investments (Private) Limited, the investment adviser. |
|
|
| These
expenses are to be repaid to First Capital Investments (Private) Limited over
a period of five years in equal |
|
| annual
installment. Interest is being charged at the rate of 9% accruing from the
month in which the expenditure is |
|
| incurred. |
|
|
|
|
Note |
1997 |
1996 |
|
|
|
(Rupees) |
(Rupees) |
|
|
| 4.
DUE TO INVESTMENT ADVISER |
|
| Opening
balance |
|
1,103,511 |
82,449 |
|
| Add: |
|
| Investment
advisory fee |
|
2,151,234 |
2,126,201 |
|
| Markup
on deferred costs |
|
520,862 |
701,816 |
|
| Others |
|
57,000 |
107,863 |
|
|
2,729,096 |
2,935,880 |
|
|
------------ |
------------ |
|
|
3,832,607 |
3,018,329 |
|
|
| Less: |
|
| Payments/adjustments
during the year |
|
1,103,511 |
1,914,818 |
|
|
------------ |
------------ |
|
|
2,729,096 |
1,103,511 |
|
|
============ |
============ |
|
|
|
|
| 5.
CREDITORS AND OTHER LIABILITIES |
|
|
| Payable
against trading of shares |
5.10 |
2,901,233 |
13,802,755 |
|
| Other
payable |
|
60,000 |
52,000 |
|
|
------------ |
------------ |
|
|
2,961,233 |
13,854,755 |
|
|
============ |
============ |
|
| 5.1
Payable against trading of shares includes Rs. 2,301,933 (1996: Rs.
8,357,605) payable to First Capital Securities |
|
| Corporation
Limited, an associated company. The maximum balance due to associated
undertakings (excluding |
|
| deferred
expenses, referred to in Note -10) at the end of any month during the year
was Rs. 2,301,933 (1996: |
|
| Rs.
9,351,254). |
|
|
|
1997 |
1996 |
|
|
(Rupees) |
(Rupees) |
|
|
| 6. DEFERRED EXPENDITURE |
|
|
| Public
Issue |
|
3,654,442 |
3,654,442 |
|
| Salaries,
wages and benefits |
|
528,758 |
528,758 |
|
| Telephone,
fax, etc. |
