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Confidence Mutual Fund Limited

Annual Report 1999

Contents

Company Information

Board of Directors

Mohammad Saleem Adam (Chief Executive)

Haji Mohammad

Shafiq A. Khan (MCB Nominee)

Abdul Moeed

Mohammad Nasir

Bilquies Saleem

Naveed Altaf (Company Secretary)

Investment Adviser

Confidence Financial Services Limited

6th Floor, Al-Falah Court,

I.I. Chundrigar Road,

Karachi.

Custodian

Faysal Bank Limited

I.I. Chundrigar Road,

Karachi.

Auditors

Taseer Hadi Khalid & Co.

Chartered Accountants

Bankers

Faysal Bank Limited

Metropolitan Bank Limited

Habib Bank A.G. Zurich

Shares Department

5th Floor, Karachi Chambers,

Hasrat Mohani Road,

Karachi.

Ph : 2424826 - 2412754

Registered Office

6th Floor, A1-Falah Court,

I.I. Chundrigar Road,

Karachi-74200. Pakistan.

Ph : 2634249-51

Fax No. 021-2631310

Notice of Annual General Meeting

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

will be held at the registered office of the company situated at 6th Floor, A1-Falah Court, I.I.

Chundrigar Road, Karachi on Wednesday, December 29, 1999 at 12:00 Noon to transact the

following business:

- To confirm the minutes of the Extraordinary General Meeting held on January 30, 1999.

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

Reports thereon for the year ended June 30, 1999.

- To approve the payment of cash dividend @ 15% for the year ended June 30, 1999. The

Directors' have recommended the payment of final cash dividend @ 15% i.e. Rs.l.50 per

share on the ordinary share of Rs. 10 each.

- To appoint auditors for the year 1999-2000 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.

- To transact such other business as may be placed before the meeting with the permission of

the Chair.

By order of the Board

Karachi:

Dated: November 20, 1999

Company Secretary

NOTES:

1. The share transfer books of the company will remain closed from December 23, 1999 to

December 29, 1999 (both days inclusive) and no transfer will be accepted during this

period. Transfer received in order at the Shares Department of company upto the close

of business hours on December 22, 1999 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 not less than 48 hours before the time for holding the

meeting. A proxy must be a member.

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

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

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 in

connection with the medical treatment of his son. As such the Directors Report, Balance Sheet,

Profit & Loss Account, Distribution 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 1999 have been signed by the other three directors of the company.

Director

Karachi:

Dated : November 20, 1999

Directors' Report

The Directors of Confidence Mutual Fund Limited are pleased to present the Annual Report together

with the Audited Accounts for the year ended 30 June 1999 to the shareholders.

The financial Results are very encouraging given the difficult economic climate throughout the past two

years and following the nuclear test. Your Fund has performed well during the year under review despite

the pressure on the corporate front and under performance by most of the strong scripts, resulted higher

selling pressure in stock market and fall in stock values.

The net asset value (NAV) of your Fund has never been fallen below its par value since the inception of

this Fund, during the year it stood at between Rs. 10 to Rs. 11.70 and remain unchanged till date.

Market Review

The financial year 1998-99 has proved another difficult year in the economic history of the country.

Besides East Asian economic turmoil, the economy was subjected to economic sanctions putting severe

pressure on the balance of payments. This led to major regulatory changes during the year.

To enhance foreign exchange reserves at an appropriate level, the Government suspended forex payments.

This resulted in erosion of Investor's confidence, decline in the stock markets, shrinkage of the external

official inflows, curtail down the level of remittances and private capital inflows, and depreciation of the

rupee in the free market. This was followed by the introduction of the dual exchange rate system.

The Karachi Stock exchange 100 index dropped to the level of 945 on December 31, 1998 and finally

closed at 1054 on June 30, 1999. Main reasons being the Government IPP tussle, which continue till date,

the East Asian crises, nuclear blast of May 1998 and massive off loading of existing positions by foreign

Investors.

Operations Review

30 June

1999

1998

(Rupees)

Financial Results:

Investment income

17,544,708

18,617,674

Reversal/(Provision) for diminution

in value of marketable securities

1,300,211

(5,359,623)

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

18,844,919

13,258,051

Operating expenses

(2,810,804)

(2,599,307)

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

Operating profit for the year before taxation

16,034,115

10,658,744

Taxation - Prior year

(79,253)

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

Profit for the year

15,954,862

10,658,744

Unappropriated profit brought forwarded

1,360,099

701,355

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

Profit available for appropriation

17,314,961

11,360,099

Appropriation

Proposed cash dividend @ Rs. 1.50 per share

i.e. 15% (1998: 10%)

15,000,000

10,000,000

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

Unappropriated profit carried forward

2,314,961

1,360,099

==========

During the year your Fund has earned Rs. 18.845 million after reversal for diminution in value of

marketable securities as compared to Rs. 13.258 million last year. It shows significant increase of 42.14 %

from the previous financial year. It proves growth, development and increasing financial strength of the

Fund.

Operating expenditures enhanced by very nominal effect i-e 8 % due to increase in remuneration to

Investment Adviser fee and Professional Tax, CDC Subscription and stamp charges under the head of

administrative expenses. The Profit after taxation improved to Rs. 15.955 million as compared to Rs.

10.659 million of the previous year. Thus it has increased by 49.69% as compared to the last financial year.

The Directors have recommended a Final Cash Dividend of 15% i.e. Rs.l.50 per ordinary share of Rs. 10

each. So rupees 15 million has to be distributed among the shareholders from the available profit of rupees

15.955 million which comes to 94% distribution from the total profit for the year.

Future Outlook

The overall economic performance of the fiscal year showed some improvement. The stock market showed

some sign of recovery from the third quarter of fiscal 1998-99 and before dipping back to 1054 points on

June 30, 1999 touched the level of 1300. The rescheduling of debts by the Paris and London club and

partial withdrawal of sanctions was also made positive impact on stock market.

We believe if some economic revival policy take place, the stock market will definitely show a positive

response to the changes, rather the effects would be slow and in response to changes as they happen. We

expect the market to get stable with the renewed entry of the foreign investors, they wait for the policy

changes.

Further (i) The reduction in rate of return on national saving schemes, (ii) 10% tax on all excess reserves of

any company which pays out less than 40% of current year earnings, (iii) Government recovery drive from

defaulters and (iv) The approval of the rules for shares buy-back and asset backed securitisation by the

policy board of the Securities and Exchange Commission of Pakistan will also prove the positive impact on

the stock market. The asset backed securitisation rules will enable companies to issue Bonds / TFC's meant

to improve their financial status.

The Status Of "The Year 2000 Compliance Of Computer System"

We assure that the financial accounting system of the Confidence Mutual Fund Limited has ready and

completed for the year 2000 compliance. The software duly developed considering the requirements of year

2000, it has integrated and has capabilities to process all sorts of accounting and financial data beyond 31

December, 1999.

Earning Per Share

Earning on each share certificates of Rs. 10 each works out to be Rs. 1.59 this year as against Rs. 1.06 in

the preceding year.

Appointment Of Auditors

The present auditors, Messrs. Taseer Hadi Khalid & Co., retire and offer themselves for reappointment.

Members are requested to appoint auditors for the ensuing year 1999-2000 and fix their remuneration.

Associated Companies

The name of Associated Companies in which the Directors of the company are also holding office of the

director are (i) Confidence Financial Services Limited (ii) Confidence Modaraba Management (Pvt.)

Limited (A management company of First Confidence Modaraba).

Acknowledgment

We offer our sincere gratitude to the Board of Directors for their continued guidance and support. We wish

to thank the Security and Exchange Commission of Pakistan and other regulatory authorities for their

cooperation, guidance and support. We wish to place on record our appreciation of all the shareholders of

the Fund and the dedicated efforts made by all the Employees of the Fund.

The Pattern of Shareholding as required by section 236 of the Companies Ordinance, 1984 is enclosed.

For and on behalf of the Board of Directors

Director

Karachi: November 20, 1999

Taseer Hadi Khalid & Co.

Chartered Accountants

First Floor,

Telephone +92 (21) 568 5847

Sheikh Sultan Trust Building No. 2,

Fax +92 (21) 568 5095

Beaumont Road,

Karachi 75530 Pakistan

Auditors' Report to the Members

We have audited the annexed Balance Sheet of Confidence Mutual Fund Limited as at 30 June

1999 and the related Profit and Loss Account and Statement of Changes in Financial Position,

together with the notes to the accounts 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 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 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;

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 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 and the Profit and Loss Account and the Statement of Changes in

Financial Position 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 30 June 1999 and of the profit and cash flows for the year

ended on that date;

d) in our opinion, zakat deductible at source under the Zakat and Ushr Ordinance, 1980 was

deducted by the company and deposited in the central zakat fund established under section 7

of that ordinance.

Taseer Hadi Khalid & Co.

Karachi: 20 Nov 1999

Chartered Accountants

Balance Sheet As at 30 June 1999

Note

30 June

1999

1998

Assets

Marketable securities

- Equity Securities

13,759,455

13,205,366

- Term Finance Certificates

26,069,936

21,611,658

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

39,829,391

34,817,024

Long Term Security Deposit

200,000

Other Assets

Other Investments

74,343,581

65,000,000

Advances and other receivables

5,926,857

5,568,832

Cash and bank balances

778,290

10,801,590

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

81,048,728

81,370,422

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

Total Assets

121,078,119

116,187,446

Liabilities

Current Liabilities

Current maturity of deferred expenditure payable

799,636

Due to the Investment Adviser

2,092,305

2,302,911

Accounts payable and accrued expenses

50,788

77,828

Unclaimed dividend

20,792

47,699

Proposed dividend

15,000,000

10,000,000

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

17,963,521

13,228,074

Other Liabilities

Deferred expenditure payable

799,637

1,599,273

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

Total Liabilities

18,763,158

14,827,347

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

Net Assets

Rupees

102,314,961

101,360,099

==========

Shareholders' Equity

Authorised Capital

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

Rupees

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

2,314,961

1,360,099

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

Rupees

102,314,961

101,360,099

==========

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

Director

Profit and Loss Account

For the year ended 30 June 1999

Year ended

Note

30 June

1999

1998

Income

Capital gain

1,134,544

Dividend income

839,273

1,376,100

Return on Investments and PLS account

11,448,319

10,032,403

Profit on Term Finance Certificates

4,306,345

4,442,067

Profit on sale of Government Securities

950,771

1,632,560

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

17,544,708

18,617,674

Reversal/(Provision) for diminution in value of

marketable securities

1,300,211

(5,359,623)

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

18,844,919

13,258,051

Operating Expenses

Administrative

415,293

171,986

Financial

349,212

400,119

Remuneration to Investment Adviser

2,046,299

2,027,202

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

2,810,804

2,599,307

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

Profit before Taxation

16,034,115

10,658,744

Taxation - Prior year

(79,253)

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

Profit after Taxati

Rupees

15,954,862

10,658,744

==========

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

Director

Distribution Statement

For the year ended 30 June 1999

Year ended

30 June

1999

1998

Unappropriated profit as at 01 July

1,360,099

701,355

Profit for the year

15,954,862

10,658,744

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

Profit available for appropriation

17,314,961

11,360,099

Appropriation

Proposed cash dividend @ 15% (1998: 10%)

15,000,000

10,000,000

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

Unappropriated profit as at 30 June

Rupees

2,314,961

1,360,099

==========

Director

Statement of Movement in Equity and Reserves

For the year ended 30 June 1999

Year ended

30 June

1999

1998

Net Assets per share as at 01 July

10.14

10.07

Profit for the year - per share

1.59

1.07

Dividend declared

(1.50)

(1.00)

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

Net assets per share as at 30 June

Rupees

10.23

10.14

==========

Director

Statement of Changes in Financial Position

For the year ended 30 June 1999

Year ended

30 June 1999

30 June 1998

Cash Flow From Operating Activities

Profit before taxation

16,034,115

10,658,744

Adjustments for:

(Reversal)/Provision for diminution in value of

marketable securities

(1,300,211)

5,359,623

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

Operating profit before working capital changes

14,733,904

16,018,367

(Increase)/Decrease in current assets

Marketable securities

(3,712,156)

2,508,162