Confidence Mutual Funds Limited - Annual Reports

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Confidence Mutual Fund Limited

Annual Report 2000

Contents

Company Information

Board of Directors

Mr. Muhammad Saleem Adam (Chief Executive)

Mr. Shafiq A. Khan

Mr. M. Habib-ur-Rahman

Mr. Munaf Ibrahim

Mr. Aftab Q. Munshi

Saiyid Azher Alam

Ms. Nayab Fakhir Qazi

Investment Adviser

Confidence Financial Services Limited

1306-1307, Chapal Plaza,

Hasrat Mohani Road,

Karachi-74000.

Custodian

Faysal Bank Limited

I.I. Chundrigar Road,

Karachi.

Auditors

Taseer Hadi Khalid & Co.,

Chartered Accountants

Bankers

Faysal Bank Limited

Metropolitan Bank Limited

Shares Department

5th Floor, Karachi Chambers,

Hasrat Mohani Road,

Karachi-74000.

Ph: 2424826-2412754

Registered Office

1306-1307, Chapal Plaza,

Hasrat Mohani Road,

Karachi-74000.

Notice of Annual General Meeting

Notice is hereby given that the 6th Annual General Meeting of Confidence Mutual Fund Limited

will be held at the registered office of the Company situated at 1306-1307, Chapal Plaza, Hasrat

Mohani Road, Karachi on Saturday December 16, 2000 at 11.00 a.m. to transact the following

business:

1. To confirm the minutes of 5th Annual General Meeting held on December 29, 1999.

2. To receive, consider and adopt, the audited accounts together with Directors' and Auditors'

Reports thereon for the year ended June 30, 2000.

3. To approve the payment of cash dividend for the year ended June 30, 2000. The Directors

have recommended the payment of final cash dividend @ 16% i.e. Rs.l.60 per share on

the ordinary share of Rs. 10 each.

4. To appoint auditors for the year 2000-2001 and to fix their remuneration. The present auditors,

M/s. Taseer Hadi Khalid & Co. Chartered Accountants, retire and being eligible, have

offered themselves for re-appointment.

5. To transact such other business as may be placed before the meeting with the permission

of the Chain

By order of the Board

Karachi

Aftab Q. Munshi

Dated: October 21, 2000

Company Secretary

NOTES:

1. The share transfer books of the Company will remain closed from December 09, 2000

to December 16, 2000 (both days inclusive) and no transfer will be accepted during

this period. Transfer received at the Shares Department of the Company at the close

of business on December 08, 2000 will be considered in time for the entitlement of

cash dividend.

2. A member entitled to attend and vote at this Meeting may appoint another member as his/

her proxy to attend and vote on his/her behalf. Proxies in order to be valid must be received

at the registered office of the company duly stamped and signed not less than 48 hours

before the time for holding the meeting. A corporation may appoint a person, who is a

not a member, as proxy.

3. The shareholders are advised to notify to the shares department, of any change of their

address to ensure prompt delivery of mails. Further, any shares for transfer etc., should

be lodged with the Shares Department of Confidence Mutual Fund Limited situated

at 5th Floor, Karachi Chambers, Hasrat Mohani Road, Karachi (Phone No.2424826,

2412754).

Statement Under Section 241(2)

of The Companies Ordinance, 1984

explaining the reasons for Non-Compliance

with the provisions of Section 241(1)

of The Companies Ordinance, 1984

The Chief Executive of the Company Mr. Mohammad Saleem Adam is out of

Pakistan. The Directors Report, Balance Sheet, Profit & Loss Account, Distri-

bution Statement, Statement of Movement in Equity and Reserves and Statement

of Changes in Financial Position of the Confidence Mutual Fund Limited for

the year ended 30 June 2000 have been signed by the other three directors of

the Company.

Karachi

Dated: October 21, 2000

M. Habib-ur-Rahman

Munaf Ibrahim

Saiyid Azher Alam

Director

Directors' Report

The Board of Directors of Confidence Mutual Fund Limited (CMF), are pleased to present the

5th Annual Report of the Company, along with the Audited Accounts for the year ended June

30, 2000.

1. OPERATING RESULTS

a- Profit during the year

The Company has earned a net profit of Rs. 16.703 million (1999: Rs. 15.955 million),

that translates into an earning per share of Rs. 1.67 (1999: Rs. 1.59 per share). The Directors

have recommended a cash dividend of 16% i.e. Rs. 1.60 per share (1999: 15% i.e. Rs.

1.50 per share). An amount of Rs. 16.00 million has been appropriated as dividend (1999:

Rs. 15.00 million), which works out to a payout of 95.79% (1999: 94.02%) for the year.

The retained earnings of Rs. 3.018 million have been carried forward to the next year. As

over 90% of the net profit has been appropriated as dividend to the shareholders, there

is no liability of income-tax under clause 102D part I of the Second Schedule of the Income

Tax Ordinance, 1979.

b- Composition of Assets

On June 30, 2000, the composition of assets of your Company at their market values was

as under:

June 30, 2000

June 30, 1999

Rs.

Percentage

Rs.

Percentage

In million

Equity securities

15.663

12.82

13.759

11.37

Term Finance Certificates

13.826

11.32

26.070

21.53

Government Securities

74.344

61.40

Receivables

1.368

1.12

6.127

5.06

Cash & Bank balances

91.283

74.74

0.778

0.64

------------------

122.14

100

121.078

100

2. CHANGE OF DIRECTORS

The controlling interest in Confidence Financial Services Limited, the investment adviser

has been acquired by ABAMCO Limited. It may be mentioned that ABAMCO is a subsidiary

of Jahangir Siddiqui & Company Limited and is managing Unit Trust of Pakistan, an open-

ended mutual fund in the private sector and BSJS Balanced Fund Limited a closed end

mutual fund. With the change in management Mr. Haji Mohammad, Mr. Abdul Mooed,

Mr. Mohammad Nasir, Ms. Bilquies Saleem and Mr. Naveed Altaf, Directors of the Company

have resigned and in their place Mr. M. Habib-ur-Rahman, Mr. Munaf Ibrahim, Mr. Aftab

Q. Munshi, Saiyid Azher Alam and Ms. Nayab Fakhir Qazi were co-opted as directors.

The Securities and Exchange Commission of Pakistan has approved the acquisition of shares

of Confidence Financial Services Limited by ABAMCO Limited and change in the Board

of Directors, vide their letter dated September 13, 2000. Mr. Aftab Q. Munshi, has been

appointed Secretary of the Company in place of Mr. Naveed Altaf.

3. AUDITORS

Messers Taseer Hadi Khalid & Company, Chartered Accountants retire, and being eligible,

offer themselves for re-appointment.

4. SHAREHOLDERS

A Statement showing pattern of shareholding in the Company as on June 30, 2000 is given

on page # 22.

5. THANKS

The Board of Directors of the Company thanks the Securities and Exchange Commission

of Pakistan, for their valuable support, understanding and guidance.

For and on behalf of the Board

(M. Habib-ur-Rahman)

Karachi: October 21, 2000

Director

Auditors' Report to the Members

We have audited the annexed balance sheet of Confidence Mutual Fund Limited as at 30 June 2000

and the related profit and loss account, cash flow statement and statement of changes in equity 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.

It is the responsibility of the company's management to establish and maintain a system of internal control,

and prepare and present the above said statements in conformity with the approved accounting standards

and the requirements of the Companies Ordinance, 1984 and the Investment Companies and Investment

Adviser's Rules, 1971. Our responsibility is to express an opinion on these statements based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These stan-

dards require that we plan and perform the audit to obtain reasonable assurance about whether the above

said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence

supporting the amounts and disclosures in the above said statements. An audit also includes assessing

the accounting policies and significant estimates made by management, as well as, evaluating the overall

presentation of the above said statements. We believe that our audit provides a reasonable basis for our

opinion and, after due verification, we report that:

a) in our opinion, proper books of account have been kept by the Company as required by the Com-

panies Ordinance, 1984 and 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 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 except for the changes

as stated in note 2.3 with which we concur;

ii) the expenditure incurred during the year was for the purpose of the Company's business; and

iii) the business conducted, investments made and the expenditure incurred during the year were

in accordance with the objects of the company;

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, cash flow statement and statement of changes in equity

together with the notes forming part thereof confirm with approved accounting standards as ap-

plicable in Pakistan, and, give the information required by the Companies Ordinance, 1984 and

the 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 30 June 2000 and

of the profit, its cash flows and changes in equity for the year then ended; and

d) in our opinion no Zakat was deducted at source under the Zakat and Ushr Ordinance, 1980 (XVIII

of 1980).

Taseer Hadi Khalid & Co.,

Karachi: October 21, 2000

Chartered Accountants

Balance Sheet as at 30 June 2000

Note

2000

1999

ASSETS

Marketable securities

- Equity Securities

15,663,018

13,759,455

- Term Finance Certificates

13,825,788

26,069,936

------------------

29,488,806

39,829,391

Other Assets

Other Investments

74,343,581

Advances and other receivables

1,368,139

6,126,857

Cash and bank balances

91,282,971

778,290

------------------

92,651,110

81,248,728

------------------

Total Assets

122,139,916

121,078,119

LIABILITIES

Current Liabilities

Current maturity of deferred expenditure payable

799,637

799,636

Due to the Investment Adviser

2,153,988

2,092,305

Accounts payable and accrued expenses

86,000

50,788

Unclaimed dividend

26,866

20,792

Provision for taxation

54,983

Proposed dividend

16,000,000

15,000,000

------------------

19,121,474

17,963,521

Other Liabilities

Deferred expenditure payable

799,637

------------------

Total Liabilities

19,121,474

18,763,158

------------------

NET ASSETS

Rupees

103,018,442

102,314,961

==========

SHAREHOLDERS' EQUITY

Authorised capital

10,000,000 ordinary shares of Rs. 10 each

100,000,000

==========

Issued, subscribed and paid-up capital

10,000,000 ordinary shares of Rs. 10 each

issued as fully paid in cash

100,000,000

Unappropriated Profit

3,018,442

2,314,961

------------------

Rupees

103,018,442

102,314,961

==========

These accounts should be read in conjunction with the attached notes.

M. Habib-ur-Rahman

Munaf lbrahim

Saiyid Azher Alam

Director

Profit and Loss Account

For the year ended 30 June 2000

Note

2000

1999

INCOME

Capital gain

4,890,778

Dividend income

1,651,111

839,273

Return on Investments and PLS account

5,596,624

11,448,319

Profit on Term Finance Certificates

3,494,961

4,306,345

Profit on sale of Government Securities

30,558

950,771

------------------

15,664,032

17,544,708

Reversal of provision for diminution in value of

marketable securities

4,726,463

1,302,211

Cumulative effect of change in accounting policy

for valuation of investments - provision for

diminution in value of marketable securities

(939,005)

------------------

19,451,490

18,844,919

OPERATING EXPENSES

Administrative

318,676

415,293

Financial

184,058

349,212

Remuneration to Investment Adviser

2,094,180

2,046,299

------------------

2,596,914

2,810,804

------------------

Profit before taxation

16,854,576

16,034,115

Taxation

(151,095)

(79,253)

------------------

Profit after taxation

Rupees

16,703,481

15,954,862

==========

These accounts should be read in conjunction with the attached notes.

M. Habib-ur-Rahman

Munaf lbrahim

Saiyid Azher Alam

Director

Statement of Changes in Financial Position

For the year ended 30 June 2000

2000

1999

CASH FLOW FROM OPERATING ACTIVITIES

Profit before taxation

16,854,576

16,034,115

Adjustments for:

Reversal of provision for diminution in value of

marketable securities

(4,726,463)

(1,300,211)

Cumulative effect of change in accounting policy

for valuation of investments - provision for

diminution in value of marketable securities

939,005

------------------

Operating profit before working capital changes

13,067,118

14,733,904

(Increase)/Decrease in current assets

Marketable securities

14,128,044

(3,712,156)

Other investments

74,343,581

(9,343,581)

Advances and other receivables

1,219,662

669,423

Increase/(Decrease) in current liabilities

Due to investment adviser

61,683

(210,606)

Accounts payable and accrued expenses

35,212

(27,040)

------------------

102,855,300

2,109,944

Taxes refunded / (paid)

3,442,944

(1,306,701)

------------------

Cash generated from / (used for) operations

106,298,244

803,243

CASH FLOW FROM FINANCING ACTIVITIES

Dividend paid

(14,993,926)

(10,026,907)

Deferred expenditure paid

(799,637)

(799,636)

------------------

Net cash (used) for financing activities

(15,793,563)

(10,826,543)

------------------

Net increase/(decrease) in cash and bank balances

90,504,681

(10,023,300)

Cash and bank balances at the beginning of the year

778,290

10,801,590

------------------

Cash and bank balances at the end of the year

Rupees

91,282,971

778,290

==========

M. Habib-ur-Rahman

Munaf Ibrahim

Saiyid Azher Alam

Director

Distribution Statement

For the year ended 30 June 2000

2000

1999

Unappropriated profit as at 1 July

2,314,961

1,360,099

Profit for the year

16,703,481

15,954,862

------------------

Profit available for appropriation

19,018,442

17,314,961

APPROPRIATION

Proposed cash dividend @ 16% (1999: 15%)

16,000,000

15,000,000

------------------

Unappropriated profit as at 30 June

Rupees

3,018,442

2,314,961

==========

M. Habib-ur-Rahman

Munaf Ibrahim

Saiyid Azher Alam

Director

Statement of Movement in Equity and Reserves

For the year ended 30 June 2000

2000

1999

Net Assets as at 1 July

102,314,961

101,360,099

Profit for the year

16,703,481

15,954,862

Dividend declared

(16,000,000)

(15,000,000)

------------------

Net assets as at 30 June

Rupees

103,018,442

102,314,961

==========

M. Habib-ur-Rahman

Munaf Ibrahim

Saiyid Azher Alam

Director

Notes to the Accounts

For the year ended 30 June 2000

1. STATUS AND NATURE OF BUSINESS

The Company was incorporated on 16 June 1994 as a public limited company under Companies

Ordinance, 1984 and was registered as an investment company under the Investment Companies

and Investment Adviser's Rules, 1971. The Company obtained certificate of commencement of

business on 23 May 1995 and is listed on Karachi Stock Exchange. The Company has entered into

an agreement with an associated company, Confidence Financial Services Limited to act as its "In-

vestment Adviser".

2. ACCOUNTING POLICIES

The significant accounting policies are summarised below: