| Security Stock Fund Limited |
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| Annual
Report 1997 |
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| Contents |
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| Company
Information |
|
| Notice
of Meeting |
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| Directors'
Report |
|
| Pattern
of Holding of the Shares |
|
| Auditors'
Report |
|
| Balance
Sheet |
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| Profit
& Loss Account |
|
| Statement
of Changes in Financial Position |
|
| Notes
to the Accounts |
|
| Statement
of Income & Expenditure in |
|
| relation
to the Investment Company |
|
|
|
| Company
Information |
|
|
| Board
of Directors |
|
|
| Mr.
A. K. M. Sayeed |
|
| Mr.
Asim Iftikhar |
|
|
| Mr.
Farrukh H. Khan |
|
| Mr.
Iqbal Usman |
|
|
| Mr.
Imran Iqbal |
|
|
| Mr.
Jan Mohammad |
|
|
| Mr.
Mohammad Rashid Zahir |
|
| Mr.
Salim Rathod |
|
|
| Mr.
Shahid A. Khan |
|
|
| Mr.
Sikander Gulzar |
|
| Mr.
Zulfiqar Hussain |
|
|
| Chief
Executive |
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|
| Mr.
Iqbal Usman |
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| Company
Secretary |
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|
| Mr.
Anwar Zafar |
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| Investment
Advisor |
|
|
| Security
Fund Management Limited |
|
| Auditors |
|
|
|
| M.
Yousuf Adil & Co. |
|
| Legal
Advisor |
|
|
| Mohsin
Tayebaley |
|
| Custodian |
|
|
| Muslim
Commercial Bank Ltd. |
|
| Registered
Office |
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| &
Shares Department |
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| 220,
2nd Floor, Uni Tower, |
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| I.
I. Chundrigar Road, |
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| Karachi. |
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| Tel:
2417770 Fax: 2419296 |
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| E-mail:
fund@cyber.net.pk |
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|
| Notice of 3rd Annual General
Meeting |
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| Notice
is hereby given that the third Annual General Meeting of the Security Stock
Fund |
|
| Limited
will be held on Friday, the 19th December, 1997, at 10:30 A.M. at the Best
Western |
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| Plaza
Hotel, Karachi, to conduct following business. |
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|
| 1.
To receive, consider, and adopt Audited Accounts of the Company for the
period ended |
|
| 30th
June, 1997. |
|
|
| 2.
To appoint Auditors of the Company for the year ending 30th June, 1998. |
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| 3.
To transact any other business that may be placed before the meeting. |
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| Notes:. |
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| 1.
The share transfer books of the Company will remain closed from 11 December,
1997 |
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| to
18 December, 1997 (both days inclusive). |
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| 2.
A member entitled to attend and vote at the meeting is entitled to appoint
another member |
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| of
the Company as a Proxy to attend and vote on his/her behalf. Proxies in order
to be |
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| effective
must reach the registered office of the Company duly stamped not later than |
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| 48
hours before the meeting. |
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|
|
| Directors'
Report |
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| We
are pleased to present the results for the |
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| financial
year ended 30th June 1997. In this |
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| period
the Net Asset Value of your Fund rose |
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| substantially
- from Rs.8.73 to Rs. 10.2. This |
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| increase
of 16.8% was managed in a market that |
|
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| fell
by 8% (based on KSE 100). Even this |
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| decrease
of the stock market does not give the |
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| whole
picture because it takes some highly |
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| capitalized
stock into account which have seen |
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|
| substantial
activity in this period. |
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| As
you are aware that ever since the-launch of |
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|
| the
fund the market had been sliding continuously |
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| downward
and it is only in the last quarter of the |
|
|
| year
that it has stabilized. The provision for the |
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|
| diminution
in the market value of securities in |
|
|
| previous
years overshadowed the positive cash |
|
|
| flow
of your fund. If not for this highly negative |
|
|
| impact
of the initial two years - the effect of |
|
|
| which
was restricted due to the cautioned exposure |
|
|
| in
equities- your fund would have been in a |
|
|
| position
to offer markedly better results. Following |
|
|
| graph
captures the performance of your fund |
|
|
| against
the market. |
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| The
performance of the stock market in the period |
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| under
review remained dismal. The KSE Index |
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| started
its downward movement from the level |
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| of
l703 in June last year and hovered below 1400 |
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| mark
in September 1996. Subsequent events |
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|
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| culminating
in elections and expectations of |
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| change
in government gave a boost to the activity |
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| on
the market but the effect remained salutary. |
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|
| Finally
the installation of a new government |
|
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| though
welcomed by the market but was unable |
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|
| to
have immediate effect owing to unresolved |
|
|
| issues
with IMF and intense speculation about |
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| the
budget. In last quarter of the year market |
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| showed
signs of stability and moved around |
|
|
| 200
points plus than its lowest level in September |
|
|
| last
year. |
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| Throughout
the year the trading activity remained |
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| restricted
to a limited segment of the market, |
|
|
| however.
That is whatever the trail blazer foreign |
|
|
| portfolio
investment favoured. Broader outlook |
|
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| still
remained bleak pending the translation of |
|
|
| the
optimism in genuine growth and corporate |
|
|
| profitability.
Market capitalization of almost all |
|
|
| the
sectors save four, declined. Few companies |
|
|
| dared
to offer shares for subscription. Total amount |
|
|
| offered
for subscription was less than 50% of the |
|
|
| figure
for previous year and less than 11% of the |
|
|
| year
before that. Even for that offering the |
|
|
| subscription
was not forthcoming and only about |
|
|
| a
quarter of the amount offered was subscribed. |
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| The
new government announced several incentive |
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|
| packages
aimed at reviving the economy. The |
|
|
| financial
sector also benefited from this. The |
|
|
| issue
of double taxation was finally resolved and |
|
|
| mutual
funds distributing 90% of their income |
|
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| were
exempted from income tax. The withholding |
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| tax
on Term Finance Certificates was also withdrawn |
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| to
generate interest of the investors in such securities |
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| which
give breadth to the market. These incentives |
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|
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| and
several others are expected to increase the |
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| scope
of mutual fund activities. |
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| The
presence of substantial discount in the market |
|
|
| prices
to their net asset Value of the mutual funds |
|
|
| has
continued to persist. This is a worrying |
|
|
| trend.
It not only effects the shareholders but the |
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|
|
|
|
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| growth
of the sector as well. There are several |
|
|
|
| factors
responsible for this, performance being |
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|
|
| one
of them but not the sole cause. The performance |
|
|
| of
the close end mutual fund sector is a mix bag |
|
|
| anyway
and even the funds which have performed |
|
|
|
| well
do not witness this gap between NAV and |
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|
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| market
value narrowing. It appears that the major |
|
|
| reason
is the fact that the appetite for stock |
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| market
investment so vigorously displayed by |
|
| the
general public until 1994 has subsided. The |
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| trading
activity in the stock market has become |
|
| restricted
to a very small number of scrips leaving |
|
| the
broader market in the general depression |
|
| which was set in
three years ago. So the continued |
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| disparity
between the performance of the funds |
|
| and
their market value is not peculiar to them and |
|
| mutual
funds too are victim of the disillusionment |
|
| of
the general public from the stock market. To |
|
| remedy
the situation at its level the Mutual Fund |
|
| Association
of Pakistan has started to collect |
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| NAVs
of its members and to make it public |
|
| regularly.
At present these NAVs are being |
|
| published
in national press quarterly. Hopefully |
|
| the
disclosure will become more frequent, and |
|
| as
the stock market shakes off the lethargy of last |
|
| couple
of years the present discount inherent in |
|
| the
market prices of the close-end mutual fund |
|
| will
reduce. |
|
|
| The
Saudi Pak has nominated Mr. Zulfiqar Hussain |
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| to
replace Mr. Zaigham M. Rizvi on the Board |
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| of
the fund. We welcome Mr. Zulfiqar Hussain |
|
| and
thank Mr. Zaigham M. Rizvi for his tremendous |
|
| contribution
towards the management of the fund. |
|
|
|
|
|
|
| During
the year your fund earned Rs. 3,976,523 |
|
|
|
| as
dividend income - income form deposit and |
|
|
|
| fixed
income securities amounted to Rs. 5,637,205. |
|
|
|
| In
addition to that the value of marketable securities |
|
|
|
| held
by the fund also increased by Rs. 10,780,273. |
|
|
|
|
|
|
|
|
|
|
|
Rupees |
|
| Profit
before taxes |
|
|
16,782,902 |
|
| Provision
for taxes |
|
|
2,078,129 |
|
| Profit
after taxes |
|
|
14,704,773 |
|
|
|
|
|
|
| M/s
M. Yousuf Adil & Co., Chartered Accountants, |
|
|
| retire
and being eligible offer themselves for |
|
|
|
| reappointment. |
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|
| A
statement showing pattern of share holding in |
|
|
|
| the
Company as at 30th June 1997 is attached. |
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|
|
| For
and on behalf of the Board. |
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|
|
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|
|
| Pattern
of Holding of the Shares held by the Shareholders 1 |
|
| As
at June 30, 1997 |
|
|
| No.
of Shares |
Share Holdings |
|
Total Shares |
|
| Holders |
|
|
|
|
Held |
|
|
|
|
| 111 |
From |
1 |
to |
100 |
Shares |
11,100 |
|
| 14,441 |
From |
101 |
to |
500 |
Shares |
7,183,000 |
|
| 15 |
From |
501 |
to |
1,000 |
Shares |
15,000 |
|
| 18 |
From |
1,001 |
to |
5,000 |
Shares |
46,000 |
|
| 9 |
From |
5,001 |
to |
10,000 |
Shares |
82,000 |
|
| 1 |
From |
10,001 |
to |
15,000 |
Shares |
11,300 |
|
| 2 |
From |
40,001 |
to |
45,000 |
Shares |
84,000 |
|
| 1 |
From |
995,001 |
to |
1,000,000 |
Shares |
1,000,000 |
|
| 1 |
From |
1,565,001 |
to |
1,570,000 |
Shares |
1,566,900 |
|
| ---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
|
| 14,599 |
|
10,000,000 |
|
| ========== |
========== |
========== |
========== |
========== |
========== |
========== |
|
|
|
| Categories
of |
|
|
Shares |
|
|
| Shareholders |
|
Number |
Held |
Percentage |
|
|
|
|
| INDIVIDUALS |
|
14,596 |
7,392,100 |
73.92 % |
|
| INVESTMENT
COMPANIES |
1 |
41,000 |
0.41% |
|
| JOINT
STOCK COMPANIES |
1 |
1,000,000 |
10.00 % |
|
| FINANCIAL
INSTITUTIONS |
1 |
1,566,900 |
15.67 % |
|
|
|
---------- |
---------- |
---------- |
|
|
|
14,599 |
10,000,000 |
100.00 % |
|
|
========== |
========== |
========== |
|
|
|
|
|
| Auditors'
Report to the Members |
|
|
| We
have audited the annexed balance sheet of SECURITY STOCK
FUND LIMITED as at June |
|
| 30,
1997 and the related profit and loss account and statement of changes in
financial position |
|
| (Cash
Flow Statement), together with the notes forming part thereof, for the year
then ended |
|
| and
we state that we have obtained all the information and explanations which to
the best or |
|
| our
knowledge and belief were necessary for the purposes of our audit and, after
due verification |
|
| thereof,
we report that: |
|
|
| (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; |
|
|
| (b)
in our opinion: |
|
|
| (i)
been drawn up in conformity 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 by applied; |
|
|
| (ii)
the expenditure incurred during the year was for the purpose of the company's |
|
| business; |
|
|
|
| (iii)
the business conducted, investments made and expenditure incurred during the |
|
| period
were in accordance with the investment policy of the company and Investment |
|
| Companies
and Investment Adviser's Rules, 1971; and |
|
|
| (iv)
the company has not contravened the provisions of Rule 8 of the Investment |
|
| Companies
and Investment Adviser's Rules, 1971 |
|
|
| (c)
in our opinion and to the best of our information and according to the
explanations given |
|
| to
us, the balance sheet profit and loss account and the statement of changes in
financial |
|
| position
(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
the changes in financial position for the year then ended; and |
|
|
| (d)
in our opinion, no zakat was deductible at source under the Zakat and Ushr
Ordinance, |
|
| 1980. |
|
|
|
|
|
|
|
M. Yousuf Adil & Co. |
|
| Karachi:
13 November, 1997 |
|
Chartered Accountants |
|
|
|
| Balance
Sheet as at June 30, 1997 |
|
|
|
|
|
1997 |
1996 |
|
|
|
Note |
Rupees |
Rupees |
|
|
| SHARE
CAPITAL |
|
| Authorised |
|
| 10,000,000
ordinary shares of Rs. 10/- each |
|
100,000,000 |
100,000,000 |
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up |
|
|
| 10,000,000
ordinary shares of Rs. 10/- each |
|
100,000,000 |
100,000,000 |
|
| fully
paid in cash |
|
|
|
|
|
| Unallocated
profit / (loss) |
|
|
2,099,980 |
(12,604,793) |
|
|
|
|
--------- |
--------- |
|
|
|
|
102,099,980 |
87,395,207 |
|
|
|
|
| DEFERRED
EXPENDITURE |
|
|
3 |
1,427,203 |
2,412,891 |
|
|
| CURRENT
LIABILITIES |
|
| Current
maturity of deferred expenditure |
|
985,688 |
985,688 |
|
| Due
to Investment Adviser |
|
4 |
5,507,088 |
3,652,631 |
|
| Creditors
and accrued expenses |
|
5 |
41,219 |
216,735 |
|
| Income
Tax |
|
|
|
2,384,287 |
759,658 |
|
|
|
|
8,918,282 |
5,614,712 |
|
|
| CONTINGENCIES |
|
6 |
|
|
--------- |
--------- |
|
|
|
112,445,465 |
95,422,810 |
|
|
========== |
========== |
|
| The
annexed notes from I to 18 form an integral part of these accounts. |
|
|
|
| DEFERRED
EXPENDITURE |
|
|
7 |
2,038,228 |
3,023,916 |
|
|
| CURRENT
ASSETS |
|
|
|
|
| Marketable
Securities |
|
|
8 |
91,793,947 |
48,901,565 |
|
|
| Short
term investment |
|
|
9 |
4,000,000 |
26,000,000 |
|
| Advances
and other receivables |
|
10 |
1,246,959 |
36,000 |
|
| Cash
and bank balances |
|
|
11 |
13,366,331 |
17,461,329 |
|
|
|
--------- |
--------- |
|
|
|
110,407,237 |
92,398,894 |
|
|
--------- |
--------- |
|
|
|
112,445,465 |
95,422,810 |
|
|
========== |
========== |
|
|
|
|
| Profit
and Loss Account |
|
| For
the Year Ended June 30, 1997 |
|
|
|
|
1997 |
1996 |
|
|
|
Note |
Rupees |
Rupees |
|
|
| REVENUE |
|
|
| Capital
(Loss)/Gain |
|
|
12 |
(158,779) |
1,621,503 |
|
| Dividend
income |
|
|
|
3,976,523 |
934,207 |
|
| Return
on investment and bank deposits |
13 |
5,637,205 |
7,660,719 |
|
|
|
|
|
--------- |
--------- |
|
|
|
|
|
9,454,949 |
10,216,429 |
|
| EXPENDITURE |
|
|
|
|
|
| Operating
expenses |
|
|
14 |
120,308 |
64,869 |
|
| Amortization
of deferred expenditure |
|
|
985,688 |
985,688 |
|
| Financial
charges |
|
|
15 |
304,324 |
402,725 |
|
| Remuneration
of investment advisor |
|
2,042,000 |
1,747,904 |
|
|
|
|
--------- |
--------- |
|
|
|
|
3,452,320 |
3,201,186 |
|
| Profit
for the year |
|
|
6,002,629 |
7,015,243 |
|
| Reversal/(Provision)
of diminution in value |
|
|
|
| of
marketable securities |
|
|
10,780,273 |
(5,960,302) |
|
|
|
|
--------- |
--------- |
|
| Profit
before taxation |
|
|
16,782,902 |
1,504,941 |
|
|
|
|
|
|
| Provision
for taxation |
|
|
|
|
| Current
year |
|
|
1,245,115 |
1,652,143 |
|
| Prior
years' |
|
|
833,014 |
-- |
|
|
|
|
--------- |
--------- |
|
|
|
|
(2,078,129) |
(1,652,143) |
|
|
|
|
--------- |
--------- |
|
| Profit/(Loss)
for the year after taxation |
|
14,704,773 |
(597,202) |
|
| Accumulated
loss brought forward |
|
(12,604,793) |
(12,007,591) |
|
|
|
|
--------- |
--------- |
|
| Unallocated
profit/(loss) carried forward |
|
2,099,980 |
(12,604,793) |
|
|
=========== |
=========== |
|
| The
annexed notes from 1 to 18 form an integral part of these accounts |
|
|
|
| Statement
of Changes in Financial Position · |
|
| (Cash
Flow Statement) |
|
| For
the Year Ended June 30, 1997 |
|
|
|
|
|
|
|
1997 |
1996 |
|
|
|
|
|
|
Rupees |
Rupees |
|
| A.
CASH FLOW FROM OPERATING ACTIVITIES |
|
|
| Profit
before taxation |
|
16,782,902 |
1,054,941 |
|
| Adjustment
for items not involving movement of funds |
|
| Amortization
of deferred expenditure |
|
985,688 |
985,688 |
|
| Reversal/(Provision)
of diminution in value |
|
| of
marketable securities |
|
(10,780,273) |
5,960,302 |
|
|
---------- |
---------- |
|
|
|
|
(9,794,585) |
6,945,990 |
|
|
---------- |
---------- |
|
| Operating
profit before working capital changes |
|
6,988,317 |
8,000,931 |
|
|
| EFFECT
ON CASH FLOW DUE TO WORKING |
|
| CAPITAL
CHANGES |
|
|
| (Increase)/decrease
in current assets |
|
| Advances
and other receivables |
|
(651,500) |
165,575 |
|
|
---------- |
---------- |
|
|
|
|
6,336,817 |
8,166,506 |
|
| Increase/(decrease)
in current liabilities |
|
| Due
to Investment Adviser |
|
868,769 |
1,454,704 |
|
| Creditors
and accrued expenses |
|
(175,516) |
175,235 |
|
|
---------- |
---------- |
|
|
|
|
693,253 |
1,629,939 |
|
|
---------- |
---------- |
|
| Cash
used in operations |
|
|
7,030,070 |
9,796,445 |
|
| Deferred
expenditure paid |
|
|
-- |
(1,013,308) |
|
| Income
tax paid |
|
|
|
(1,012,959) |
(736,260) |
|
|
---------- |
---------- |
|
| Net
cash from operating activities |
|
6,017,111 |
8,046,877 |
|
| B.
CASH USED IN INVESTING ACTIVITIES |
|
| Marketable
securities |
|
|
(32,112,109) |
(27,373,667) |
|
| Short
term investment |
|
|
22,000,000 |
(15,008,904) |
|
|
---------- |
---------- |
|
| Net
cash used in investing activities |
|
(10,112,109) |
(42,382,571) |
|
|
---------- |
---------- |
|
| Net
decrease in cash and cash equivalents |
|
(4,094,998) |
(34,335,694 |
|
| Cash
and cash equivalent at the beginning of the year |
17,461,329 |
51,797,023 |
|
|
---------- |
---------- |
|
| Cash
and cash equivalents at the end of the year |
13,366,331 |
17,461,329 |
|
|
========== |
========== |
|
|
|
|
| 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 29, 1994, as a public
limited company under |
|
| the
Companies Ordinance, 1984 and has been registered as an Investment Company |
|
| under
the Investment Companies and Investment Adviser's Rules, 1971. The Company |
|
| is
listed on the Karachi, Lahore and Islamabad stock exchanges. The object of
the |
|
