| First Capital Mutual Fund Limited |
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| Annual
Report 1998 |
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| CONTENTS |
|
|
| Company
Information |
|
| Notice
of Annual General Meeting |
|
| Directors'
Report to the Shareholders |
|
| Auditors'
Report to the Members |
|
| Balance
Sheet |
|
| Profit
& Loss Account |
|
| Cash
Flow Statement |
|
| Notes
to the Accounts |
|
| Statement
of Income & Expenditure |
|
| Pattern
of Shareholding |
|
|
|
| COMPANY
INFORMATION |
|
|
| Board
of Directors |
Mr. Salmaan Taseer, |
|
|
|
Chairman |
|
|
|
|
Mr. Zahid Zia |
|
|
|
Chief Executive |
|
|
|
Mr. Shaan Taseer |
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|
|
Mr. Jamil Raza Syed |
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|
Mr. Syed Akbar Naqi Zaidi |
|
|
|
Mr. Bashir A. Sheikh |
|
|
|
Mr. Muhammad Faisal Opal |
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|
| Company
Secretary |
Mr. Muhammad Faisal Opal |
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|
|
|
| Investment
Committee |
Mr. Salmaan Taseer -
Chairman |
|
|
|
Mr. Zahid Zia - Chief
Executive |
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|
|
|
| Auditors |
|
M/s Taseer Hadi Khalid
& Company |
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|
|
Chartered Accountants |
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|
|
Lahore. |
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|
|
|
| Registered
Office |
103-C/II, Gulberg-IlI,
Lahore. |
|
|
| Custodian |
|
Crescent Investment Bank
Limited |
|
|
|
45-Shahrah - e - Quaid -
-e-Azam, Lahore |
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|
|
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| Legal
Advisors |
M/s Chima & Ibrahim |
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|
|
Advocates |
|
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|
Lahore. |
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|
|
|
| Investment
Advisers |
First Capital Investments
(Pvt.) Limited |
|
|
|
103-C II, Gulberg III,
Lahore. |
|
|
| Share
Department |
First Capital Mutual Fund
Limited |
|
|
|
Ground Floor, |
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|
Sh. Sultan Trust Building
No. 2 |
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|
Beaumont Road, |
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|
Karachi. |
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| NOTICE
OF ANNUAL GENERAL MEETING |
|
|
| Notice
is hereby given that the 4th Annual General Meeting of the shareholders of
the Company will be |
|
| held
on February 15, 1999 at 11:00 a.m. at 103-C/II, Gulberg-III, Lahore to
transact the following |
|
| business:- |
|
|
| 1.
To confirm the minutes of the 3rd 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 Director's Report for file year ended June 30, 1998. |
|
|
|
|
| 3.
To elect seven Directors as fixed by the Board for the term of three years in
pursuance of Section 178 |
|
| of
the Companies Ordinance, 1984. The retiring Directors are: Mr. Salmaan
Taseer, Mr. Zahid Zia, |
|
| Mr.
Shaan Taseer, Mr. Bashir A. Sheikh, Mr. Jamil Raza Syed, Mr. Akbar Naqi and
Mr. Muhammad |
|
| Faisal
Opal. |
|
|
| 4.
To appoint Auditors for the year ending June 30, 1999 and to fix their
remuneration. The present |
|
| auditors
M/s Taseer Hadi Khalid & Company, Chartered Accountants, being eligible
for appointment, |
|
| offer
themselves for re-appointment. |
|
|
| 5.
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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| Lahore: |
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|
MUHAMMAD FAISAL OPAL |
|
| January
25, 1999 |
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|
(Company Secretary) |
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|
| NOTES: |
|
|
| 1.
The share transfer book of the Company will remain closed from 16th February,
1999 to 22nd |
|
| February,
1999 (both days inclusive). |
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|
|
|
| 2.
A member entitled to vote at the meeting may appoint another member as
his/her proxy to attend the |
|
| meeting
and vote on his/her behalf. Proxies in order to be effective, must be
received by the Company |
|
| at
least 48 hours before the meeting. |
|
|
| 3.
Members are requested to notify any change in address immediately. |
|
|
| 4.
Any shareholder who seeks to contest election at the office of Director shall
whether he is a retiring |
|
| Director
or otherwise, file with the Company, not later than 14 days before the date
of the meeting a |
|
| notice
of his intention to offer himself for election as a Director, together with
his consent to act as |
|
| Director. |
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|
|
|
|
| Director's
Report to the Shareholders |
|
| For
the year ended June 30, 1998 |
|
|
| The
Board of Directors is pleased to present the audited financial statements for
the year ended June 30, 1998. |
|
|
| 1997-98
REVIEW |
|
| During
the fiscal year 1998, the stock market remained fragile due to lack of
confidence among the investors. |
|
| The
collapse of South East Asian markets, law and order situation, rising trade
deficits, international |
|
| sanctions,
devaluation of Pak rupee, tussle between the government and the judiciary,
corruption charges |
|
| levied
on the Independent Power Projects (IPP'S) officials along with the unsolved
tariff issues. All these |
|
| continuing
problems had an adverse effect on the Pakistan economy and KSE index. |
|
|
| In
the wake of the nuclear tests conducted by Pakistan and India, the Pakistan
economy witnessed one of the |
|
| severe
crisis since its independence. Freezing of the foreign currency accounts,
introduction of a multiple |
|
| exchange
rate system and declaration of a state emergency, all these led to a steep
decline in the country's |
|
| foreign
exchange reserves. |
|
|
| The
KSE index fell by 43% i.e. from 1566 at the start of the year to 880 points
at the end of the year. Large- |
|
| scale
withdrawals of investment in securities were made during the year. Since then
the KSE index has had to |
|
| struggle
to retain its current level. The net asset value of your fund as of June 30,
1998 was Rs. 5.18 per share. |
|
|
| FINANCIAL: |
|
|
|
|
|
|
|
|
|
1998 |
1997 |
|
|
|
|
| Capital
Gain on sale of marketable securities |
|
1,859,201 |
(12,156,573) |
|
| Dividend
Income |
|
|
|
3,916,485 |
5,402,951 |
|
| Mark-up
on bank deposits |
|
|
2,060,950 |
605,401 |
|
| Provision
for diminution in value of securities |
|
(29,999,854) |
- |
|
| Excess
provision written back |
|
|
- |
12,769,680 |
|
| Net
Profit/(Loss) for the period |
|
|
(27,643,176) |
1,226,578 |
|
| Accumulated
loss brought forward |
|
|
(44,589,554) |
(45,816,132) |
|
| Accumulated
loss carried forward |
|
|
(72,232,730) |
(44,589,554) |
|
|
| FUTURE
OUTLOOK: |
|
| The
behavior of stock market will largely depend on the sustained political
stability in the country and the |
|
| easing
of economic crisis. We believe that your fund would be able to show better
earnings and rise in value in |
|
| the
next fiscal year as the government is trying to implement new monetary
reforms as well as reform packages |
|
| for
various industries and sectors. All these reform packages will have a
positive impact on the economy as |
|
| well
as the equity market. |
|
|
| DIVIDEND |
|
| The
Directors do not recommend payment of a dividend due to the accumulated
losses carried forward |
|
|
| BOARD
OF DIRECTORS |
|
| During
the year Mr. Abdul Waheed Alavi and Mr. Khurshid Hadi resigned. They were
replaced by Mr. Jamil |
|
| Raza
Syed and Mr. Akbar Naqi Ziadi. |
|
|
| PATTERN
OF SHAREHOLDING |
|
| The
pattern of shareholding is attached with this report. |
|
|
| AUDITORS' |
|
| The
present auditors" M/S Taseer Hadi Khalid & Co. retire and being
eligible offer themselves for |
|
| reappointment. |
|
|
|
On behalf of the Board |
|
|
|
|
|
|
|
ZAHID ZIA |
|
|
Lahore |
|
|
Chief Executive |
|
|
January 22, 1999 |
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|
|
| Auditors'
Report to the Members |
|
| For
the year ended June 30, 1998 |
|
|
| We
have audited the annexed balance sheet of FIRST CAPITAL MUTUAL FUND LIMITED
as at |
|
| June
30, 1998 and the related profit and loss account and cash flow statement
together with the notes to |
|
| the
accounts for the year then 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 knowledge and
belief were |
|
| necessary
for the purposes of our audit and 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)
the balance sheet and profit and loss account together with the notes thereon
have 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 applied; |
|
|
|
| ii)
the expenditure incurred during the year was for the purposes of the
Company's |
|
| business; |
|
|
|
|
|
|
| iii)
the business conducted, investments made and the expenditure incurred during
the year |
|
| were
in accordance with the investment policy of the Company and Investment |
|
| Companies
and Investment Adviser's Rules, 1971; |
|
|
|
| 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, 1998 and of the loss 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. |
|
|
|
| LAHORE |
|
|
TASEER HAD1 KHALID & CO. |
|
| 22
January, 1999 |
|
|
Chartered Accountants |
|
|
|
| Balance
Sheet |
|
| As
at June 30, 1998 |
|
|
|
Note |
1998 |
1997 |
|
|
|
(Rupees) |
(Rupees) |
|
|
|
|
| SHARE
CAPITAL |
|
|
|
|
|
|
| Authorised
capital: |
|
|
|
| 20,000,000
ordinary shares of Rs. 10/- each |
|
200,000,000 |
200,000,000 |
|
|
|
|
========== |
========== |
|
|
|
|
| Issued,
subscribed and paid-up capital: |
|
| 15,000,000
ordinary shares of RS. 10/- each issued as fully |
|
| paid
in cash |
|
150,000,000 |
150,000,000 |
|
|
|
|
|
| Accumulated
loss |
|
(72,232,730) |
(44,589,554) |
|
|
|
---------- |
---------- |
|
|
|
77,767,270 |
105,410,446 |
|
|
|
|
| DEFERRED
EXPENDITURE PAYABLE |
|
3 |
1,659,372 |
3,318,744 |
|
| CURRENT
LIABILITIES |
|
|
|
| Current
maturity of deferred expenditure payable |
3 |
1,659,372 |
1,659,377 |
|
| Due
to investment adviser |
|
4 |
1,932,792 |
2,729,096 |
|
| Creditors
and other liabilities |
|
5 |
463,943 |
2,961,233 |
|
| Provision
for taxation |
|
|
170,961 |
228,548 |
|
|
|
|
---------- |
---------- |
|
|
|
|
4,227,068 |
7,578,254 |
|
|
|
|
---------- |
---------- |
|
|
|
|
83,653,710 |
116,307,444 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| DEFERRED
EXPENDITURE |
|
6 |
3,258,650 |
4,887,973 |
|
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
|
| Marketable
securities - Net |
|
7 |
47,944,922 |
96,727,411 |
|
| Trade
debts - Unsecured (considered good) |
8 |
12,336,698 |
2,515,542 |
|
| Dividend
receivable |
|
|
661,667 |
2,164,125 |
|
| Cash
and bank balances |
|
9 |
19,451,773 |
10,012,393 |
|
|
|
|
---------- |
---------- |
|
|
|
|
80,395,060 |
111,419,471 |
|
| CONTINGENCIES
AND COMMITMENTS |
|
10 |
0 |
0 |
|
|
|
|
---------- |
---------- |
|
|
|
|
80,395,060 |
111,419,471 |
|
|
|
|
---------- |
---------- |
|
|
|
|
83,653,710 |
116,307,444 |
|
|
|
|
========== |
========== |
|
|
| 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, 1998 |
|
|
|
Note |
1998 |
1997 |
|
|
|
(Rupees) |
(Rupees) |
|
|
|
|
| INCOME |
|
|
|
|
|
|
| Profit/(Loss)
on sale of marketable securities |
11 |
1,859,201 |
(12,156,573) |
|
| Dividend |
|
|
3,916,485 |
5,402,951 |
|
| Mark-up
on bank deposits |
|
|
2,060,950 |
605,401 |
|
|
|
|
---------- |
---------- |
|
|
|
|
7,836,636 |
(6,148,221) |
|
|
|
|
|
| OPERATING
EXPENSES |
|
|
|
|
|
|
|
|
| Administrative |
|
12 |
2,277,247 |
2,347,314 |
|
| Financial |
|
13 |
1,419,801 |
626,185 |
|
| Remuneration
of the Investment Adviser |
14 |
1,587,087 |
2,151,234 |
|
|
|
|
---------- |
---------- |
|
|
|
|
5,284,135 |
5,124,733 |
|
|
|
|
---------- |
---------- |
|
|
|
|
2,552,501 |
(11,272,954) |
|
|
|
|
| Provision
for diminution in value of marketable securities |
(29,999,854) |
0 |
|
| Excess
provision for diminution in value of marketable |
|
|
| securities
written back |
|
0 |
12,769,680 |
|
|
|
---------- |
---------- |
|
| (LOSS)/PROFIT
BEFORE TAXATION |
|
|
(27,447,352) |
1,496,726 |
|
| Provision
for taxation |
|
|
(195,824) |
(270,148) |
|
|
|
|
---------- |
---------- |
|
| (LOSS)/PROFIT
AFTER TAXATION |
|
|
(27,643,176) |
1,226,578 |
|
| Accumulated
loss brought forward |
|
|
(44,589,554) |
(45,816,132) |
|
|
|
|
---------- |
---------- |
|
| ACCUMULATED
LOSS CARRIED FORWARD |
|
|
(72,232,730) |
(44,589,554) |
|
|
|
|
========== |
========== |
|
|
| These
accounts should be read in conjunction with the annexed notes. |
|
|
| LAHORE |
|
CHIEF EXECUTIVE |
|
DIRECTOR |
|
|
|
| Cash
Flow Statement |
|
| For
the year ended June 30, 1998 |
|
|
|
|
|
1998 |
1997 |
|
|
|
|
(Rupees) |
(Rupees) |
|
|
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
| (loss)/Profit
after taxation |
|
|
(27,643,176) |
1,226,578 |
|
|
|
|
|
|
|
| ADJUSTMENT
OF ITEMS NOT INVOLVING |
|
|
|
|
| MOVEMENT
OF CASH |
|
|
|
|
|
| Amortization
of deferred cost |
|
|
1,629,323 |
1,629,323 |
|
| Excess provision for diminution
in |
|
|
| value
of marketable securities writtenback |
|
0 |
(12,769,680) |
|
| Provision
for diminution in value of marketable securities |
29,999,854 |
0 |
|
| Provision
for taxation |
|
|
|
195,824 |
270,148 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
31,825,001 |
(10,870,209) |
|
|
|
|
|
|
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES BEFORE |
|
|
| ADJUSTMENT
OF WORKING CAPITAL CHANGES |
|
4,181,825 |
(9,643,631) |
|
|
|
|
| WORKING
CAPITAL CHANGES |
|
|
|
|
|
|
|
| (INCREASE)/DECREASE
IN CURRENT ASSETS |
|
|
| Marketable
securities |
|
18,782,636 |
28,227,375 |
|
| Advances,
deposits, prepayments and other receivables |
14,960,401 |
(2,037,995) |
|
| Accounts
receivable |
|
(9,821,156) |
(1,422,425) |
|
|
|
---------- |
---------- |
|
|
|
10,457,520 |
24,766,955 |
|
|
|
---------- |
---------- |
|
|
|
14,639,345 |
15,123,324 |
|
|
|
|
|
|
|
| INCREASE/(DECREASE)
IN CURRENT LIABILITIES |
|
|
| Due
to investment adviser |
|
(796,304) |
1,625,585 |
|
| Creditors
and other liabilities |
|
(2,497,290) |
(10,893,522) |
|
|
|
---------- |
---------- |
|
|
|
|
|
(3,293,594) |
(9,267,937) |
|
|
|
|
|
---------- |
---------- |
|
| NET
CASH IN/(OUT) FLOW FROM OPERATING ACTIVITIES |
|
11,345,751 |
5,855,387 |
|
| Tax paid |
|
|
|
(246,994) |
0 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
11,098,757 |
5,855,387 |
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
| Deferred
cost paid to investment adviser |
|
(1,659,377) |
(1,659,377) |
|
|
|
|
|
---------- |
---------- |
|
| NET
CASH OUT FLOW FROM FINANCING ACTIVITIES |
|
(1,659,377) |
(1,659,377) |
|
|
|
|
| NET
INCREASE/(DECREASE) IN CASH AND CASH |
|
|
| EQUIVALENTS |
|
|
|
9,439,380 |
4,196,010 |
|
| CASH
AND CASH EQUIVALENTS AT THE BEGINNING |
|
|
| OF THE YEAR |
|
|
|
10,012,393 |
5,816,383 |
|
| CASH
AND CASH EQUIVALENTS AT THE END |
|
---------- |
---------- |
|
| OF THE YEAR |
|
|
|
19,451,773 |
10,012,393 |
|
|
|
|
|
========== |
========== |
|
|
| LAHORE |
|
CHIEF EXECUTIVE |
|
DIRECTOR |
|
|
|
|
|
|
|
| Notes
to the Accounts |
|
| For
the year ended June 30, 1998 |
|
|
| 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
Investment (Pvt) Limited to act as its "Investment Adviser".
Crescent |
|
| Investment
Bank Limited 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 Income currently. |
|
|
| Market
values are 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. |
|
|
|
|
|
| ii.
Sale and purchase of securities are recorded on the date of execution of |
|
| contract.
Capital gain or loss on sale of investments is taken to income of the |
|
| period
in which it arises. |
|
|
|
|
|
| iii.
Return on bank deposits and securities are 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, if any, 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. The |
|
| management
believes that the gross sale proceeds of the shares sold during the period do |
|
| not
constitute turnover as implied in section 80D(i) of the Income Tax Ordinance,
1979. |
|
|
|
|
1998 |
1997 |
|
|
|
|
|
(RUPEES) |
(RUPEES) |
|
| 3.
DEFERRED EXPENDITURE PAYABLE |
|
|
|
| Deferred
costs |
|
|
|
3,318,744 |
4,978,121 |
|
|
|
|
|
0 |
0 |
|
|
| Add:
Additions during the year |
|
|
|
|
|
|
|
|
3,318,744 |
4,978,121 |
|
| Less:
Current maturity of deferred expenses payable |
(1,659,372) |
(1,659,377) |
|
|
|
---------- |
---------- |
|
|
|
1,659,372 |
3,318,744 |
|
|
|
========== |
========== |
|
|
| The
expenditure incurred on the incorporation and floatation of First Capital
Mutual Fund Limited |
|
| was
paid by First Capital Investments (Private) Limited, the company's investment
adviser. |
|
|
|
|
| These
expenses are to be repaid to First Capital Investments (Private) Limited over
a period of |
|
| five
years in equal annual installments. Interest is being charged at the rate of
9% accruing from |
|
| the
month in which the expenditure is incurred. |
|
|
|
|
Note |
1998 |
1997 |
|
|
|
(Rupees) |
(Rupees) |
|
|
|
|
| 4.
DUE TO INVESTMENT ADVISER |
|
|
|
|
|
|
|
| Opening
balance |
|
|
2,729,096 |
1,103,511 |
|
| Add: |
|
|
|
|
| Investment
advisory fee |
|
1,587,087 |
2,151,234 |
|
| Markup
on deferred costs |
|
305,235 |
520,862 |
|
| Others |
|
|
|
0 |
57,000 |
|
|
|
|
|
---------- |
