| Al Meezan Mutual Fund Limited |
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| Annual
Report 1998 |
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| CONTENTS |
|
|
| Company
Information |
|
| Notice
of Third Annual General Meeting |
|
| Directors'
Report |
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| Auditors'
Report to the Members |
|
| Balance
Sheet |
|
| Profit
& Loss Account |
|
| Cash
Flow Statement |
|
| Notes
to the Accounts |
|
| Statement
of Income & Expenditure in Relation to the Investment Company |
|
| Pattern
of Shareholding |
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|
|
| COMPANY
INFORMATION |
|
|
| BOARD
OF DIRECTORS |
|
|
| Mr.
Irfan Siddiqui |
|
Chairman |
|
|
| Mr.
Mohmmad Shoaib |
|
Chief Executive |
|
| Mr.
Charles Blackmore |
|
| Mr.
Andrew Douglas Eu |
|
| Mr.
Nasim Beg |
|
| Mr.
Wusooq Khaleeli |
|
| Mr.
Tasnim ul Haq Farooqui |
Company Secretary |
|
|
| INVESTMENT
ADVISOR |
|
| Al-Meezan
Investment & Financial Services (Pvt.) Limited |
|
|
| AUDITORS |
|
| A.F.
Ferguson & Co., |
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| Chartered
Accountants |
|
|
| CUSTODIAN |
|
| Muslim
Commercial Bank Limited |
|
|
| BANKERS |
|
| Faysal
Bank Limited |
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| Muslim
Commercial Bank Limited |
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| National
Bank of Pakistan |
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| Prime
Commercial Bank Limited |
|
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| REGISTERED
OFFICE & SHARES DEPARTMENT |
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| 4TM
Floor, Block "C", |
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| Finance
& Trade Centre, |
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| Shahrah-e-Faisal,
Karachi 74400. |
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|
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| NOTICE
OF THIRD ANNUAL GENERAL MEETING |
|
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| Notice
is hereby given that the Third Annual General Meeting of the members of
Al-Meezan Mutual Fund |
|
| Limited
will be held on Saturday, December 26, 1998 at 8:00 a.m. at 4th Floor, Block
"C", Finance & Trade |
|
| Centre,
Shahrah-e-Faisal, Karachi-74400, to transact the following business: |
|
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| 1.
To receive, consider, and adopt Audited Accounts of the Company together with
the Directors' and |
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| Auditors'
Report thereon for the year ended 30th June 1998. |
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|
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| 2.
To appoint Auditors of the Company and fix their remuneration for the year
ending 30th June 1999. |
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| The
present Auditors M/s. A. F. Ferguson & Company, Chartered Accountants,
retire and being |
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| eligible,
offer themselves for re-appointment. |
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|
|
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| 3.
To transact any other business that may be placed before the meeting with the
permission of the Chair. |
|
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| By
order of the Board, |
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|
|
|
| TASNIM
UL HAQ FAROOQUI |
|
Karachi |
|
| Company
Secretary |
|
December 3, 1998 |
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| Notes: |
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| 1.
The share transfer books of the Company will remain closed from December 10,
1998 to December |
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| 26,
1998 (both days inclusive). |
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|
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| 2.
A member entitled to attend and vote at the meeting may appoint a proxy to
attend and vote instead of |
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| him
/ her at the meeting. Proxies must be deposited at the Company's Registered
Office not less than |
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| 48
hours before the time of holding the meeting. A proxy must be a member. |
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|
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| 3.
The shareholders are advised to notify Shares Department, A1-Meezan Mutual
Fund Limited, 4th |
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| Floor,
Block "C", Finance & Trade Centre, Shahrah-e-Faisal,
Karachi-74400, of any change in their |
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| addresses
to ensure prompt delivery of mail. Any shares for transfer etc. should be
lodged with the |
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| Shares
Department, A1-Meezan Mutual Fund Limited. |
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| DIRECTORS'
REPORT |
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| On
behalf of the Board of Directors, we present the Third Annual Report together
with the audited accounts |
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| for
the year ended June 30, 1998. |
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| Operations
Preview |
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|
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| The
deteriorating economic and political conditions in the country resulted in
substantial decline in the stock |
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| market
during the year under review. The KSE-100 index, which was recorded at 1565
as on June 30, 1997, |
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| increased
to 1753 as on December 31, 1997. However, the second half of the year turned
out to be very |
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| disappointing
from the point view of the economy in general and the stock market in
particular. Due to the |
|
| government
tussle with independent power producers (IPPs) and nuclear testing by
Pakistan on May 28. 1998 |
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| followed
by freezing of foreign currency accounts, the confidence of both local and
foreign investors was |
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| badly
shattered and KSE 100 index declined to 879 as on June 30, 1998. |
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|
| Financial
Highlights |
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| The
financial results depicted by the Company are as given below: |
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|
(Rupees) |
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|
| Investment
income |
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|
28,427,554 |
|
| Operating
expenses |
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|
4,953,327 |
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|
|
|
|
---------- |
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| Profit
before diminution in the value of marketable securities |
23,474,227 |
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| Provision
for diminution in the value of marketable securities |
90,517,857 |
|
|
|
|
|
---------- |
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| Profit/(Loss)
before taxation |
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|
(67,043,630) |
|
| Provision
for taxation |
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|
2,053,992 |
|
|
|
|
|
---------- |
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| Profit/(Loss)
for the year |
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|
(69,097,622) |
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| Profit/(Loss)
brought forward |
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|
20,486 |
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|
|
|
|
---------- |
|
| Accumulated
Profit/(Loss) |
|
|
(69,077,136) |
|
|
|
========== |
|
|
| During
the year, your Company earned Rs. 10.8 million in capital gains, Rs. 10.2
million as dividend income, |
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| and
Rs. 7.4 million as other income. |
|
|
| Comparison
of portfolio performance visa vis KSE 100 index. |
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| The
year under review turned out to be another bearish year for the KSE 100
index, which declined from |
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| 1565
to 879, i.e. a decline of 43.8%. By the Grace of Allah, the portfolio of your
Company once again |
|
| managed
to out perform the KSE 100 index. The Net Asset Value (NAV) of the Company
declined from Rs. |
|
| 10.00
to Rs. 7.24, i.e. a decline of 27.6%. Hence, out performance during the year
under review was 16.2% |
|
| compared
to 20.47% last year. |
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|
| The
top five stock holdings of the Company as on June 30, 1998 based on market
value were as follows: |
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| PTCL |
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|
Rs. 14.8 million |
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| Fauji
Fertilizer Company |
|
Rs. 11.6 million |
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| Hub
Power Company Limited |
|
Rs. 11.6 million |
|
| Engro
Chemicals Limited |
|
Rs. 10.9 million |
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| Pakistan
State Oil |
|
Rs. 9.3 million |
|
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| It
may be noted here that these five stocks are among the most liquid and
intrinsically valued stocks on the |
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| Karachi
Stock Exchange and any improvement in market sentiment would help the Company
in improving |
|
| performance
during the next year. |
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|
| Future
Outlook |
|
| The
performance of capital market depends largely on the political and economic
stability in the country. The |
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| freezing
of foreign currency accounts and nuclear testing by Pakistan and its
inability to service its foreign |
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| currency
debt has badly shattered the confidence of investors. The recent announcement
by United States to |
|
| waive
its economic sanctions on Pakistan on a one time basis and bail out package
by IMF is likely to save |
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| Pakistan
from default on its foreign currency obligations. However, the long term
solution to the problems |
|
| lies
in the structural reforms of the economy. We are hopeful that the government
will go ahead with the |
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| economic
and structural reforms to revive the economy of the country. |
|
|
| Board
of Directors |
|
| Mr.
A.K.M. Sayeed and Mr. Shahid Ghaffar representing NIT resigned and were
replaced by Mr. Nasim Beg |
|
| and
Mr. Wusooq Khaleeli as nominees of NIT. Mr. Julian M.I. Reid and Mr. Jonathan
Boyer representing |
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| Jardine
Fleming Investment Management International Limited also resigned and were
replaced by Mr. |
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| Charles
Blackmore and Mr. Andrew Douglas Eu. The Directors wish to place on record
valuable services |
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| rendered
to the Company by the outgoing Directors Mr. A.K.M. Sayeed, Mr. Shahid
Ghaffar, Mr. Julian M.I. |
|
| Reid
and Mr. Jonathan Boyer and welcome the new Directors. |
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|
| Year
2000 Problem and Compliance |
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| The
arrival of year 2000 will pose a serious challenge to many companies around
the world. Your Company |
|
| has
already started the exercise to address this particular issue. The aim is to
ensure that not only the |
|
| Company's
systems are millennium compliant but also those of its counterparts. For this
purpose your |
|
| Company
has set a deadline of June 30, 1999 and hopes to become fully Year 2000
compliant by that date. |
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|
| Acknowledgement |
|
| We
offer our sincere gratitude to the Board of Directors for their continued
guidance and support. We also |
|
| wish
to place on record our appreciation for the auditors, shareholders, and
investment advisor of the |
|
| Company. |
|
|
| Mohammad
Shoaib |
|
Nasim Beg |
|
| Chief
Executive |
|
Director |
|
|
| Karachi:
December 3, 1998 |
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|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of A1-Meezan Mutual Fund Limited as at
June 30, 1998 and the |
|
| related
profit and loss account and the 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 |
|
| of
our knowledge and belief were necessary for the purposes of our audit and,
after due verification thereof, |
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| 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 |
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| Companies
Ordinance, 1984; |
|
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| b)
in our opinion: |
|
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| (i)
the balance sheet and profit and loss account together with the notes thereon
have been |
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| drawn
up in conformity with the Companies Ordinance, 1984 and are in agreement with |
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| the
books of account and are further in accordance with accounting policies
consistently |
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| applied; |
|
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|
|
| (ii)
the expenditure incurred during the year was for the purposes of the
company's business; and |
|
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| (iii)
the business conducted, investments made and the expenditure incurred during
the year |
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| were
in accordance with the objects of the company; |
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|
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| 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 cash flow statement together
with the notes |
|
| forming
part thereof, give the information required by the Companies Ordinance, 1984
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 the cash flows for the year then ended;
and |
|
|
| d)
in our opinion zakat deductible at source under the Zakat and Ushr Ordinance,
1980 was deducted |
|
| by
the company and deposited in the General Zakat Fund established under section
7 of the |
|
| Ordinance. |
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|
| A.
F. FERGUSON & COMPANY |
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| Chartered
Accountants |
|
|
| Karachi:
November 26, 1998 |
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|
|
| BALANCE
SHEET AS AT JUNE 30, 1998 |
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|
|
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|
1998 |
1997 |
|
|
Note |
(Rupees) |
(Rupees) |
|
|
|
|
| SHARE
CAPITAL AND RESERVES |
|
|
|
|
|
| Authorised
share capital |
|
|
| 25,000,000
ordinary shares |
|
|
| of
Rs. 10 each |
|
250,000,000 |
250,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid up share capital 25,000,000 |
|
| ordinary
shares of Rs. 10 each fully paid in cash |
|
250,000,000 |
250,000,000 |
|
|
|
|
| Accumulated
(loss)/unappropriated profit |
|
(69,077,136) |
20,486 |
|
|
|
---------- |
---------- |
|
|
|
180,922,864 |
250,020,486 |
|
|
|
|
| LONG
TERM LIABILITY |
|
3 |
1,878,602 |
2,817,902 |
|
|
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
|
| Current
maturity of a long term liability |
3 |
939,300 |
939,300 |
|
| Due
to the Investment Adviser- an associated |
|
|
| undertaking |
|
4 |
3,028,457 |
5,590,410 |
|
| Creditors,
accrued expenses and other liabilities |
5 |
15,883,910 |
39,672,050 |
|
| Proposed
dividend |
|
|
- |
29,500,000 |
|
|
|
|
---------- |
---------- |
|
|
|
|
19,851,667 |
75,701,760 |
|
|
|
|
---------- |
---------- |
|
|
|
|
202,653,133 |
328,540,148 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
| Accounts
receivable - unsecured and considered good |
51,045,827 |
86,922,823 |
|
| Marketable
securities |
|
6 |
105,662,574 |
177,218,846 |
|
| Prepayments
and other receivables |
|
7 |
4,103,613 |
4,113,832 |
|
| Bank
balances |
|
8 |
41,841,119 |
60,284,647 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
202,653,133 |
328,540,148 |
|
|
|
|
========== |
========== |
|
|
| Chief
Executive |
|
Director |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
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| FOR
THE YEAR ENDED JUNE 30, 1998 |
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|
1998 |
1997 |
|
|
Note |
(Rupees) |
(Rupees) |
|
|
|
|
| INVESTMENT
INCOME |
|
|
|
|
|
|
| Capital gain |
|
9 |
10,804,135 |
12,646,868 |
|
| Dividend
income |
|
|
10,186,674 |
6,554,048 |
|
| Other income |
|
10 |
7,436,745 |
13,121,421 |
|
|
|
|
---------- |
---------- |
|
|
|
|
28,427,554 |
32,322,337 |
|
|
|
|
|
| OPERATING
EXPENSES |
|
|
|
|
|
|
|
|
| Administrative
expenses |
|
11 |
1,924,870 |
1,261,364 |
|
| Remuneration
to the Investment Adviser |
4 |
3,028,457 |
5,590,410 |
|
| Provision/(reversal)
for diminution in the |
|
|
| value
of marketable securities |
|
|
90,517,857 |
(4,766,494) |
|
|
|
|
---------- |
---------- |
|
|
|
95,471,184 |
2,085,280 |
|
|
|
|
---------- |
---------- |
|
| (LOSS)/PROFIT
BEFORE TAXATION |
|
(67,043,630) |
30,237,057 |
|
|
|
|
| PROVISION
FOR TAXATION |
|
|
|
|
|
|
| Current |
-
for the year |
|
1,890,652 |
- |
|
|
-
for prior year |
|
163,340 |
(526,732) |
|
|
|
---------- |
---------- |
|
|
|
2,053,992 |
(526,732) |
|
|
|
|
---------- |
---------- |
|
| (LOSS)/PROFIT
FOR THE YEAR |
|
|
(69,097,622) |
30,763,789 |
|
|
|
|
| UNAPPROPRIATED
PROFIT/ACCUMULATED |
|
|
| (LOSS)
BROUGHT FORWARD |
|
20,486 |
(1,243,303) |
|
| ACCUMULATED
(LOSS)/PROFIT AVAILABLE |
|
|
---------- |
---------- |
|
| FOR
APPROPRIATION |
|
|
(69,077,136) |
29,520,486 |
|
|
|
|
| APPROPRIATION: |
|
|
|
| Proposed
dividend Nil (1997:11.80%) |
|
|
- |
29,500,000 |
|
|
|
|
---------- |
---------- |
|
| ACCUMULATED
(LOSS)/UNAPPROPRIATED PROFIT |
|
| CARRIED
FORWARD |
|
|
(69,077,136) |
20,486 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
| Chief
Executive |
|
Director |
|
|
|
|
|
| CASH
FLOW STATEMENT |
|
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
|
|
|
|
1998 |
1997 |
|
|
|
Note |
(Rupees) |
(Rupees) |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
|
|
|
| (Loss)/profit
before taxation |
|
(67,043,630) |
30,237,057 |
|
|
|
|
| Adjustments
for: |
|
|
|
| Provision/(reversal)
for diminution in the |
|
| value
of marketable securities |
|
|
90,517,857 |
(4,766,494) |
|
| Dividend
income |
|
|
(10,186,674) |
(6,554,048) |
|
| Financial
income |
|
|
(7,436,745) |
(12,092,235) |
|
| Dividends
received |
|
|
8,953,051 |
5,379,498 |
|
| Financial
income received |
|
|
8,235,816 |
16,317,952 |
|
|
|
|
---------- |
---------- |
|
| Profit
before changes in working capital |
|
23,039,675 |
28,521,730 |
|
|
|
|
| (Increase)/decrease
in current assets |
|
|
|
|
| Accounts
receivable |
|
|
35,876,996 |
(77,132,873) |
|
| Marketable
securities |
|
|
(18,961,585) |
(73,575,210) |
|
| Prepayments
and other receivables |
|
|
(100,000) |
- |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
16,815,411 |
(150,708,083) |
|
|
|
|
| Increase/(decrease)
in current liabilities |
|
| Creditors,
accrued expenses and other liabilities |
|
(26,738,140) |
24,986,686 |
|
| Due
to the Investment Adviser - an associated undertaking |
(2,561,953) |
5,590,410 |
|
|
|
---------- |
---------- |
|
|
|
(29,300,093) |
30,577,096 |
|
|
|
---------- |
---------- |
|
| Cash
generated from/(used) for operations |
|
10,554,993 |
(91,609,257) |
|
| Income
tax paid |
|
(1,509,221) |
(2,327,199) |
|
|
|
---------- |
---------- |
|
|
|
9,045,772 |
(93,936,456) |
|
|
|
|
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
|
| Long
term liability |
|
(939,300) |
(939,300) |
|
| Dividend
paid |
|
(26,550,000) |
- |
|
|
|
---------- |
---------- |
|
| Net
cash outflow from financing activities |
|
(27,489,300) |
(939,300) |
|
|
|
|
---------- |
---------- |
|
| Net
decrease in cash and cash equivalents |
|
(18,443,528) |
(94,875,756) |
|
| Bank
balances at the beginning of the year |
|
60,284,647 |
155,160,403 |
|
|
|
|
---------- |
---------- |
|
| Bank
balances at the end of the year |
|
8 |
41,841,119 |
60,284,647 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
| Chief
Executive |
|
Director |
|
|
|
|
| NOTES
TO AND FORMING PART OF THE ACCOUNTS |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
| 1.
STATUS AND NATURE OF BUSINESS |
|
| The
company was incorporated on July 13, 1995 as a public limited company under |
|
| the
Companies Ordinance, 1984 and has been registered as an 'Investment Company' |
|
| under
the Investment Companies and Investment Advisers Rules, 1971. The |
|
| certificate
of commencement of business' was obtained by the company on January |
|
| 1,
1996. The object of the company is to carry on the business of a closed-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 an agreement with A1 - Meezan Investment and Financial
Services |
|
| (Private)
Limited, an associated undertaking, to provide investment advisory |
|
| services. |
|
|
|
| 1.3
The company was formally listed on the Karachi Stock Exchange on September
16, |
|
| 1996
as a closed-end mutual fund. |
|
|
| 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
|
| 2.1
Accounting convention |
|
| These
accounts have been prepared under the historical cost convention. |
|
|
| 2.2
Marketable securities |
|
| Marketable
securities are stated at the lower of cost and market value determined on |
|
| an
aggregate portfolio basis. Cost of marketable securities portfolio is
determined on a |
|
| moving
average basis. The market value refers to the Karachi Stock Exchange closing |
|
| quotations,
on the last working day of the financial year. |
|
|
| 2.3 Taxation |
|
|
|
|
|
| Current: |
|
|
| The
charge for current taxation, if any, in the accounts is based on taxable
income at |
|
| the
current rates of taxation after taking into account tax credits and tax
rebates |
|
| available,
if any. |
|
|
|
|
| No
charge for current taxation is made in the accounts if the company intends to |
|
| distribute
90 percent or more of its current profit amongst its shareholders in |
|
| accordance
with the exemption available under clause 102D of the Second Schedule |
|
| to
the Income Tax Ordinance, 1979. |
|
|
| Deferred: |
|
|
| The
company accounts for deferred taxation arising on major timing differences,
if |
|
| any,
by using the liability method. However, no provision was required as at June
30, |
|
| 1998. |
|
|
|
| 2.4
Revenue recognition |
|
| (i)
Dividend income is stated net of zakat deduction thereon at source and is |
|
| recognised
at the time of closure of the share transfer books of the investee |
|
| company. |
|
|
|
|
|
|
| (ii)
Sale and purchase of marketable securities are recorded on the date of |
|
| contract.
Gains or losses on sale of marketable securities are also recorded on |
|
| the
date of contract. |
|
|
|
| (iii)
Profit on bank deposits is recognised on accrual basis. |
|
|
| 3.
LONG TERM LIABILITY |
|
|
|
|
|
|
|
|
|
|
1998 |
1997 |
|
|
|
|
|
(Rupees) |
(Rupees) |
|
|
|
|
| Expenses
incurred on incorporation and |
|
|
| floatation
- note 3.1 |
|
|
|
2,817,902 |
3,757,202 |
|
|
|
|
|
|
| Less:
Current maturity |
|
|
|
939,300 |
939,300 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
1,878,602 |
2,817,902 |
|
|
|
|
|
========== |
========== |
|
|
|
|
| 3.1
The expenditure incurred on the incorporation and floatation of A1-Meezan
Mutual |
|
| Fund
Limited, amounting to Rs 4,696,502 has been paid by A1-Meezan Investment |
|
| and
Financial Services (Private) Limited (the Investment Adviser). According to
rule |
|
| 7(3)
of the Investment Companies and Investment Advisers Rules, 1971 these |
|
| expenses
are to be repaid by A1- Meezan Mutual Fund Limited over a period of five |
|
| years
in equal annual installments. |
|
|
|
|
|
|
| 4.
DUE TO THE INVESTMENT ADVISER |
|
|
|
| - AN ASSOCIATED UNDERTAKING |
|
|
|
|
|
|
|
|
|
|
1998 |
1997 |
|
|
|
|
|
(Rupees) |
(Rupees) |
|
|
|
|
| Remuneration
at 2% of net assets for the |
|
|
| year
- note 4.1 |
|
|
|
3,618,457 |
5,590,410 |
|
|
|
|
| Less:
Adjustment of remuneration on account of the |
|
| year
ended June 30, 1997 |
|
|
590,000 |
- |
|
|
