First Capital Mutual Funds Limited - Annual Reports

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First Capital Mutual Fund Limited

Annual Report 2001

CONTENTS

COMPANY INFORMATION

Board of Directors

Mr. Salmaan Taseer

Chairman

Mr. Mumtaz H Syed

Chief Executive

Lt. Gen. (R) Humayun Khan Bangash

Mr. Muhammad Ashraf Ali

Mr. Muhammad Shuaib Yousaf

Mr. Aamer Nasim Chishti

Mr. Usman Haider

Company Secretary

Mr. Sardar Ali Wattoo

Investment Committee

Mr. Salmaan Taseer (Chairman)

Mr. Mumtaz H Syed

Mr. Sardar Ali Wattoo

Auditors

Messrs. Taseer Hadi Khalid & Co.

Chartered Accountants

Legal Advisers

Chima & Ibrahim

Advocates, Lahore

Custodian

Crescent Investment Bank Limited

Registered Office / Head Office

103-C/II, Gulberg-III

Lahore, Pakistan

Tel: (042) 5757591-4

Fax: (042) 5757590, 5877920

Investment Advisers

First Capital Investments (Pvt.) Limited

103-C/II, Gulberg-III, Lahore

Registrar and Shares Transfer O

THK Associates (Pvt.) Limited

Ground Floor

Sheikh Sultan Trust Building No.2

Beaumont Road

Karachi

Tel: (021) 5689021

Notice of Annual General Meeting

Notice is hereby given that the 7th Annual General Meeting of the shareholders of First Capital Mutual Fund Limited will

be held on 29 December 2001 at 10:30 a.m. at the Registered Office of the Company, 103-C/II, Gulberg-III, Lahore, to

transact the following business:

1. To confirm the minutes of the last Annual General Meeting;

2. To receive, consider and adopt the financial statements of the Company for the year ended 30 June 2001 together

with the Directors' and Auditors' reports thereon;

3. To appoint auditors for the year ending 30 June 2002 and fix their remuneration;

4. To transact any other business with the permission of the Chair.

By order of the Board

Lahore

(SARDAR ALI WATTOO)

08 December 2001

Company Secretary

Notes:

The Members Register will remain closed from 22 December 2001 to 29 December 2001 (both days inclusive).

Transfers received at TIIK Associates (Pvt.) Limited, Ground Floor, Sheikh Sultan Trust Building No.2,

Beaumont Road, Karachi, the Registrar and Share Transfer Office of the Company, by the close of business on

21 December 2001 will be treated in time.

2) A member eligible to attend and vote at the meeting may appoint another member as proxy to attend and vote in

the meeting. Proxies in order to be effective must be received by the company at the Registered Office not later

than 48 hours before the time for holding the meeting.

3) In order to be valid, an instrument of proxy and the power of attorney or other authority (if any) under which it is

singed, or a notarially certified copy of such power of attorney, must be deposited at the registered office of the

company, 103-C/II, Gulberg-III, Lahore, not less than 48 hours before the time of the meeting.

4) a) Individual beneficial owners of CDC entitled to attend and vote at the meeting must bring his/her participant

ID and account/sub-account number along with original NIC or passport to authenticate his/her identity. In

case of Corporate entity, resolution of the Board of Directors/Power of attorney with specimen of nominees

shall be produced (unless provided earlier) at the time of meeting.

b) For appointing of proxies, the individual beneficial owners of CDC shall submit the proxy form as per above

requirement along with participant ID and account/sub-account number together with attested copy of their

NIC or Passport. The proxy form shall be witnessed by two witnesses with their names, addresses and NIC

numbers. The proxy shall produce his/her original NIC or Passport at the time of meeting. In case of

Corporate entity, resolution of the Board of Directors/Power of attorney along with specimen signatures

shall be submitted (unless submitted earlier) along with the proxy form.

5. Members are requested to notify any change in their registered address immediately.

DIRECTORS' REPORT TO THE SHAREHOLDERS

It gives us great pleasure to present the seventh annual audited financial statements of First Capital

Mutual Fund Ltd. ("FCMF") for the period ending June 30,2001.

In the year under review FCMF outperformed the KSE-100 index by 5%. Whereas the KSE-100

index lost 10% of its value as it fell from 1520 to 1366, FCMF lost 5% of its Net Asset Value (NAV).

The operating results of the company for the year are as follows:

2001

Rupees

Capital gain on sale of marketable securities

(4,961,106)

Dividend income

2,497,820

Mark-up on bank deposits

Provision for diminution in value of securities

Excess provision written back

(272,745)

Net profit/(Loss) for the period

(4,641,038)

Accumulated loss brought forward

57,554,434

Accumulated loss carried forward

62,337,228

The Fund is well diversified and has been constructed keeping in mind the relative correlation

between different sectors and stocks. In line with our sector forecasts, more allocation has been

made to sectors that are likely to perform well. The Fund's top five sectors are (in terms of market

value):

Sector

Allocation as a % of Market Value of Fund

Telecommunications

42.3%

Engineering

16.4%

Fuel & Energy

10.5%

Chemical & Pharmaceuticals

8.1%

Vanaspati & Allied

3.9%

A number of macro economic factors affected the market in this period. As a result the entire equity

market showed a dismal performance. Economic growth remained slack caused both by weak

domestic indicators as well as the international recessionary environment. The agricultural sector,

which is the mainstay of the Pakistan economy, was adversely affected by the severe drought.

Other factors that impacted the downward movement at KSE were the hike in interest rates that

made institutional investors shy away from equity investments, lackluster interest from foreign

investors, and new trading procedures announced by the Securities and Exchange Commission of

Pakistan (SECP).

The recent events followed by the lifting of international sanctions and resumption of relations with

the industrialized world augur well for the stock market in Pakistan. Given the enhanced support

from international donor agencies as well as direct support from international governments,

Pakistan's economic prospects are likely to improve over the next period. In this backdrop we expect

more interest in equity investments, and the KSE- 1 O0 index should perform well.

Pattern of Shareholding

The pattern of shareholding is annexed to this report.

Auditors

The Present auditors Messers: Taseer Hadi Khalid and Co., Chartered Accountants shall retire and

may be considered for re-appointment for the year 2001-2002.

Board of Directors:

Mr. Shaan Taseer, Mr. Sadiq Y Yalmaz resigned and were replaced by Mr. Usman Haider and

Mr. Humayun Khan Bangash. The Directors wish to place on record well wishes for outgoing

directors and welcome the new Directors.

For and on behalf of the Board

Aamer Nasim Chishti

Lahore, December 01, 2001

Director

AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed balance sheet of First Capital Mutual Fund Limited as at 30 June 2001 and the

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

and reserves together with the notes forming part thereof (here-in-after referred to as the" financial

statements"), 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 purpose 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 financial statements in conformity with the approved accounting standards and

the requirements of the Companies Ordinance, 1984 and rule 16 of 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 International Standards on Auditing as applicable in Pakistan.

These standards require that we plan and perform the audit to obtain reasonable assurance about whether the

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

evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing

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

presentation of the financial 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 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 second schedule to the Investment Companies and Investment Adviser's

Rules, 197 l, 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 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;

the balance sheet, profit and loss account, cash flow statement, distribution statement and

statement of changes in equity and reserves together with the notes forming part thereof

conform with approved accounting standards as applicable 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 2001 and of the loss, its cash flows,

its distributions and changes in equity and reserves for the year then ended; and

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

ISLAMABAD

TASEER HADI KHALID & CO.

December 01,2001

CHARTERED ACCOUNTANTS

BALANCE SHEET AS AT 30 JUNE 2001

NOTE

2001

2000

Rupees

ASSETS

Marketable securities

82,525,659

87,470,794

OTHER ASSETS

Accounts receivable

950,941

1,792,563

Security deposits

300,000

Bank balances

6,591,617

7,494,606

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

7,842,558

9,587,169

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

TOTAL ASSETS

90,368,217

97,057,963

CURRENT LIABILITIES

Due to Investment Adviser - an associated compan

1,788,914

1,458,291

Accounts payable

557,307

2,775,191

Provision for taxation

359,224

378,915

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

2,705,445

4,612,397

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

NET ASSETS

87,662,772

92,445,566

==========

SHAREHOLDERS' EQUITY

SHARE CAPITAL

150,000,000

ACCUMULATED LOSS

(62,337,228)

(57,554,434)

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

87,662,772

92,445,566

==========

The annexed notes form an integral part of these accounts.

LAHORE

DIRECTOR

PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 30 JUNE 2001

NOTE

2001

2000

Rupees

INCOME

CAPITAL (LOSS) / GAIN ON

MARKETABLE SECURITIES

(4,961,106)

15,134,570

OTHER INCOME

2,497,820

5,388,660

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

(2,463,286)

20,523,230

OPERATING EXPENSES

Administrative expenses

670,247

2,845,220

Financial expenses

236,460

Remuneration of investment adviser

6.1

1,753,250

924,460

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

2,423,497

4,006,140

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

OPERATING (LOSS) / PROFIT

4,886,783)

16,517,090

PROVISION FOR DIMINUTION IN VALUE

OF MARKETABLE SECURITIES

(287,503)

EXCESS OF PROVISION FOR DIMINUTION

IN VALUE OF MARKETABLE SECURITIES

WRITTEN BACK

272,745

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

(Loss) / PROFIT BEFORE TAXATION

4,614,038)

16,229,587

PROVISION FOR TAXATION

(168,756)

(181,811)

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

LOSS FOR THE YEAR

4,782,794)

16,047,776

==========

(LOSS) / EARNINGS PER SHARE- BASIC

(0.32)

1.07

==========

The annexed notes form an integral part of these accounts.

LAHORE

DIRECTOR

CASH FLOW STATEMENT

FOR THE YEAR ENDED 30 JUNE 2001

2001

2000

Rupees

CASH FLOW FROM OPERATING ACTIVITIES

(Loss) / profit before taxation

(4,614,038)

16,229,587

Adjustment for:

Amortization of deferred expenditure

1,629,325

Provision for diminution in value of shares/

(excess provision written back)

(272,745)

287,503

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

(272,745)

1,916,828

Operating (1oss)/profit before working

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

capital changes

(4,886,783)

18,146,415

(Increase)/decrease in:

Marketable securities

5,217,880

(8,352,945)

Accounts receivable

841,622

2,771,104

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

6,059,502

(5,581,841)

Increase/(decrease) in current liabilities

Due to investment adviser

330,623

(577,923)

Accounts payable

(4,623)

296

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

326,000

(577,627)

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

Net cash generated from operating activities

1,498,719

11,986,947

CASH FLOW FROM FINANCING ACTIVITIES

Deferred expenditure paid

(1,659,372)

Dividends paid

(2,213,261)

(4,896,477)

Tax paid

(188,447)

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

NET CASH USED IN FINANCING ACTIVITIES

(2,401,708)

(6,555,849)

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

NET (DECREASE)/INCREASE IN CASH

AND CASH EQUIVALENTS

(902,989)

5,431,098

CASH AND CASH EQUIVALENTS AT THE

BEGINNING OF THE YEAR

7,494,606

2,063,508

CASH AND CASH EQUIVALENTS AT THE

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

END OF THE YEAR

6,591,617

7,494,606

==========

The annexed notes form an integral part of these accounts.

LAHORE

DIRECTOR

DISTRIBUTION STATEMENT

FOR THE YEAR ENDED 30 JUNE 2001

2001

2000

Rupees

ACCUMULATED LOSS BROUGHT FORWARD

(57,554,434)

(66,102,210)

(LOSS) / PROFIT FOR THE YEAR

(4,782,794)

16,047,776

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

(62,337,228)

(50,054,434)

DIVIDEND - NIL (2000: 5%)

(7,500,000)

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

ACCUMULATED LOSS CARRIED FORWARD

62,337,228

(57,554,434)

==========

The annexed notes form an integral part of these accounts.

LAHORE

DIRECTOR

STATEMENT OF MOVEMENT IN EQUITY AND RESERVES

FOR THE YEAR ENDED 30 JUNE 2001

2001

2000

Rupees

NET ASSETS PER SHARE AS AT 01 JULY 2000

6.16

5.59

(LOSS) / GAIN ON SALE OF MARKETABLE

SECURITIES - PER SHARE

(0.33)

1.01

REVERSAL OF PROVISION / (PROVISION) FOR

DIMINUTION IN VALUE OF MARKETABLE

SECURITIES - PER SHARE

0.01

(0.02)

NET INCOME/(LOSS) FOR THE YEAR

EXCLUDING CAPITAL (LOSS)/GAIN - PER SHARE

0.01

0.08

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

PROFIT FOR THE YEAR - PER SHARE

(0.31)

1.07

DIVIDEND FOR THE YEAR - PER SHARE

(0.50)

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

NET ASSETS PER SHARE AS AT 30 JUNE 2001

5.85

6.16

==========

The annexed notes form an integral part of these accounts.

LAHORE

DIRECTOR

NOTES TO THE ACCOUNTS

FOR THE YEAR ENDED 30 JUNE 2001

1. STATUS AND NATURE OF BUSINESS

First Capital Mutual Fund Limited (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 Advisers 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.

The company has entered into an agreement with an associated company, First Capital Investment

(Private) 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 Statement of compliance

These accounts have been prepared in accordance with Accounting Standards issued by the

International Accounting Standards Committee ("IASC"), interpretations issued by the Standing

Interpretations Committee ("SIC") of the IASC and the requirements of the Investment Companies

and Investment Advisers Rules, 1971. and Companies Ordinance, 1984.

2.3 Marketable securities

Listed

Investments in quoted securities are valued at lower of cost and market value. Cost is determined on

moving average basis and market value is determined on an aggregate portfolio basis. Middle market

price has been used for calculating market value and it means the average of the highest and the

lowest quotation prevailing on the balance sheet date.

Pre-IPOs

These are companies for which application has been made but wh