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KASB Premier Fund Limited

Annual Report 1999

CONTENTS

COMPANY INFORMATION

Board of Directors

Muhammad Saleem Shaikh, Chairman

Qazi Mazharul Haque, Chief Executive

Ahmed Kamran

Javaid B. Sheikh

Liaquat Ali

Rizwan Khalid Butt

Syed Abid Raza

Company Secretary

Zulfiqar Hyder Khan

Investment Adviser

Khadim Ali Shah Bukhari & Co. Ltd.

Auditors

Taseer Hadi Khalid & Co.

Legal Adviser

Mohsin Tayebaly & Co.

Custodian

Deutsche Bank A.G.

Bankers

Deutsche Bank A.G.

Metropolitan Bank Ltd.

Registered Office

6th Floor, Trade Centre

I.I. Chundrigar Road

Karachi-74200, Pakistan

Share Department

Ground Floor

Sheikh Sultan Trust Building No. 2

Beaumont Road

Karachi-75530, Pakistan

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the Fifth Annual General Meeting of KASB Premier Fund Ltd. will be held on

Wednesday, December 08, 1999 at 10:00 a.m. at the registered office of the Company, 6th Floor, Trade Centre,

I.I. Chundrigar Road, Karachi to transact the following business:-

1. To confirm the minutes of the Fourth Annual General Meeting of the Company held on

December 14, 1998.

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

the Auditors' reports thereon for the year ended June 30, 1999.

3. To appoint auditors of the Company for the year ending June 30, 2000 and to fix their remuneration.

The present auditors, Messrs Taseer Hadi Khalid & Co., Chartered Accountants, retire and being

eligible, offer themselves for reappointment.

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

By order of the Board

Karachi:

ZULFIQAR HYDER KHAN

October 21, 1999

Company Secretary

Notes:

1. The share transfer books of the Company will remain closed from November 24, 1999 to

December 08, 1999 (both days inclusive) to determine the names of the members entitled to attend the

meeting.

2. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend, speak and

vote for him/her. A proxy must be a member of the Company.

3. In order to. be valid, an instrument of proxy and the power of attorney or other authority, if any, under

which it is signed, or a notarially certified copy of such power of attorney, must be deposited at the

registered office of the Company, 6th Floor, Trade Centre, I.I. Chundrigar Road, Karachi not less than

48 hours before the time of the meeting.

4. Members are requested to notify any change in their registered addresses immediately.

DIRECTORS' REPORT TO THE SHAREHOLDERS

Economic Scenario

For the Financial year 1998-99, the overall economic condition continued to remain under pressure. Further

aggravating the overall scenario was the flare up in regional tension with India, narrowly avoiding a war in the

process. Though the period under review was witness to one of the most turbulent times, the government

managed to post a relatively better picture as envisaged by all. Fiscal deficit improved to 3.4% of GDP, down

from 5.4% in FY 98. This was primarily due to a sharp slowdown in spending, as revenues fell short of even

revised targets. The domestic economy also slowed down considerably with inflation dropping to 5.7% from

7.8% a year ago. GDP growth came in below forecast at 3.1% and trade volume shrank dramatically. Sales tax

revenues increased partly due to the increase in rates to 15% midway through the fiscal year. Performance of

the agriculture sector remained poor, witnessing growth at 0.4% only, i.e. well below last year's impressive

4.5% growth. Cotton and wheat have been the prime culprits this year.

Operating Results

The improvement in the operational results as evident from the financial statements can largely be attributed

to an upward movement in the KSE 100 Share Index. Taking advantage of the turnaround in the capital

markets, the management of the Fund was able to post an impressive profit of Rs. 33.46 mn through effective

employment of a coherent strategy.

The aggregate value of the Fund's assets have gone up from Rs 217.33 mn to Rs 254.97 mn and the

shareholders' equity from Rs 209.14 mn to Rs 242.59 mn resulting into an upward revision of the net asset

value to Rs 6.07 per share.

The Board regards the generation of enhanced liquidity as the key to the Fund's maneuverability in the existing

volatile stock market conditions. With this objective in view there has been an effort to liquidate the Fund's

long-term portfolio assets whenever it seemed opportune to do so and divert the funds to portfolio assets

promising shorter term gains. Looking at the impressive growth witnessed by the Fund, it seems that the

exercise has been quite fruitful.

Future Outlook

Stepping out of the economic chaos witnessed after the nuclear blast, contrary to expectation, Pakistan has so

far been able to stay afloat despite a very difficult economic environment. With business confidence still at a

low ebb, any recovery in economic activity is likely to be drawn out rather than being rapid. The year 1998-

99 was witness to an upward swing in the KSE 100 Shares Index, which saw it move up by 22.19% over the

course of the year. Though certain sectors of the economy have been able to instill limited economic activity,

overall performance of the economy will largely depend upon government efforts at providing an atmosphere

which is conducive for business activity.

The government has indicated its clear shift towards encouraging capital market development in the financial

year 1999-2000. Satisfying a major demand, income from Term Finance Certificates was declared exempt from

withholding tax for institutional investors, encouraging fresh issues, which would augur well for a domestic

fixed income market. In another major move, the concept of treasury stock has also been allowed. However

the most significant development by far is the introduction of income tax on companies having reserves greater

than 50% of the paid up capital. This will prove to be a stimulant for all companies to start paying dividends

to the investors, thus encouraging small investors to step back in the rings. With the government still in the

process of implementing these regulations, structural changes need to be undertaken which would provide solid

footing for any future economic activity.

The change in the Fund's investment policy, as envisaged above coupled with untiring efforts to retrieve the

Fund's resources has as already apparent, helped the management in wiping out a reasonable portion of the

Fund's accumulated losses. Over and above this likely relief, the possibility of a further reversal of provision

for diminution in value of marketable securities may also not be ruled out. The future of the Fund can therefore

be looked upon with better hope and confidence.

Auditors

The members are requested to appoint auditors for 1999-2000 and fix their remuneration. The present auditors

Taseer Hadi Khalid and Co. retire and offer themselves for re-appointment.

The Board wishes to record its appreciation for the services rendered by the outgoing Directors, Mr. Rana

Ahmed Humayun and Mr. Naveed Hussain Shah and extends its warm welcome to the new members viz. Mr.

Liaquat Ali and Syed Abid Raza. It also places on record its recognition of the valuable contribution made by

the Executive Committee headed by Mr. Ahmed Kamran.

Pattern of Shareholding

The pattern of shareholding as required by section 236 of the Companies Ordinance, 1984 is enclosed.

On behalf of the Board of Directors

Karachi

QAZI MAZHARUL HAQUE

October 21, 1999

Chief Executive

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 KASB Premier Fund Limited as at 30 June 1999

and the related Profit and Loss Account and Cash Flow Statement, 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; and

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 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 30 June 1999 and of the profit and cash flows for the year ended on that date; and

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

Taseer Hadi Khalid & Co.

Karachi: 21 October 1999

Chartered Accountants

BALANCE SHEET AS AT JUNE 30, 1999

Note

1999

1998

(Rupees in thousand)

ASSETS

Marketable Securities - net

162,904

199,229

Deferred Expenditure

1,487

2,975

Other Assets

Trade debts-unsecured-considered good

5,850

Deposit and other receivables

3,914

5,056

Taxation

1,560

1,157

Bank balances - on deposit account

85,109

3,060

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

90,583

15,123

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

Total Assets

254,974

217,327

LIABILITIES

Current Liabilities

Current maturity of deferred expenditure payable

3,060

Due to the Investment Adviser

2,623

1,357

Creditors and accrued expenses

6,696

716

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

12,379

5,133

Other Liabilities

Deferred expenditure payable

3.06

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

Total Liabilities

12,379

8,193

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

NET ASSETS

242,595

209,134

==========

SHAREHOLDERS' EQUITY

Authorised capital

80,000,000 ordinary shares of Rs. 10 each

800,000

==========

Issued, subscribed and paid-up capital

40,000,000 ordinary shares of Rs. 10 each

400,000

issued as fully paid in cash

Accumulated loss

(157,405)

(190,866)

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

242,595

209,134

==========

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

QAZI MAZHARUL HAQUE

AHMED KAMRAN

Chief Executive

Director

PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED JUNE 30, 1999

Note

1999

1998

(Rupees in thousand)

Income

Capital loss on marketable securities

(13,924)

(22,998)

Dividend income

11,892

8,414

Profit on term finance certificates

1,741

3,993

Profit on bank deposits

1,322

1,311

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

1,031

(9,280)

Operating Expenses

Administrative

(3,282)

(3,179)

Financial

(271)

(590)

Remuneration to the Investment Adviser

(2,356)

(772)

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

(5,909)

(4,541)

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

(4,878)

(13,821)

Reversal of/(provision for) diminution in value of

marketable securities

38,934

(90, 887)

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

Profit / (loss) before taxation

34,056

(104,708)

Taxation - Current

(595)

(421)

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

Profit / (loss) for the year

33,461

(105,129)

==========

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

QAZI MAZHARUL HAQUE

AHMED KAMRAN

Chief Executive

Director

DISTRIBUTION STATEMENT

FOR THE YEAR ENDED JUNE 30, 1999

1999

1998

(Rupees in thousand)

Accumulated loss brought forward

(190,866)

(85,737)

Profit / (loss) for the year

33,461

(105,129)

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

Accumulated loss carried forward

(157,405)

(190,866)

==========

QAZI MAZHARUL HAQUE

AHMED KAMRAN

Chief Executive

Director

STATEMENT OF MOVEMENT IN EQUITY AND RESERVES

FOR THE YEAR ENDED JUNE 30, 1999

1999

1998

(Rupees)

Net assets per share as at July 01

5.23

7.86

Profit / (loss) for the year - per share

0.84

(2.63)

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

Net assets per share as at June 30

6.07

5.23

==========

QAZI MAZHARUL HAQUE

AHMED KAMRAN

Chief Executive

Director

CASH FLOW STATEMENT

FOR THE YEAR ENDED JUNE 30, 1999

1999

1998

(Rupees in thousand)

CASH FLOW FROM OPERATING ACTIVITIES

Profit / (loss) before taxation

34,056

(104,708)

Adjustments for non-cash charges

Amortisation of deferred expenditure

1,488

(Reversal of) / provision for diminution in value of

marketable securities

(38,934)

90,887

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

(37,446)

92,375

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

Operating 1oss before working capital changes

(3,390)

(12,333)

(Increase) / decrease in current assets:

Marketable securities

75,259

27,429

Trade debts

5,850

(3,274)

Deposit and other receivables

1,142

244

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

82,251

24,399

Increase / (decrease) in current liabilities:

Due to the Investment Adviser

1,266

(5,749)

Creditors and accrued expenses

5,980

259

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

7,246

(5,490)

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

Cash generated from operations

86,107

6,576

Income tax paid

(998)

(1,019)

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

Net cash flows from operating activities

85,109

5,557

CASH FLOW FROM FINANCING ACTIVITIES

Deferred expenditure paid

(3,060)

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

Net cash flows from financing activities

(3,060)

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

Increase in bank balances

82,049

2,497

Bank balance at beginning of the year

3,060

563

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

Bank balances at end of the year

85,109

3.06

==========

QAZI MAZHARUL HAQUE

AHMED KAMRAN

Chief Executive

Director

NOTES TO AND FORMING PART OF THE ACCOUNTS

FOR THE YEAR ENDED JUNE 30, 1999

1. LEGAL STATUS AND NATURE OF BUSINESS

KASB Premier Fund Ltd. is a public limited company incorporated on December 11, 1994 under the

Companies Ordinance, 1984 and has been registered with the Corporate Law Authority as an Investment

Company under the Investment Companies and Investment Adviser's Rules, 1971 to carry on the business

of a closed end investment company. The company has entered into an agreement with Khadim Ali Shah

Bukhari & Co. Ltd. to act as its "Investment Adviser". The company commenced its business on

July 11, 1995 and is listed on all Stock Exchanges in Pakistan.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Accounting convention

These accounts have been prepared under the historical cost convention.

2.2 Basis .for preparation

These accounts have been prepared in accordance with International Accounting Standards as

applicable in Pakistan.

2.3 Deferred expenditure

Expenditure incurred on the incorporation and on the issue of shares of the company to the public,

borne by Investment Adviser, Khadim Ali Shah Bukhari & Co. Ltd., have been deferred and are being

amortised over a period of five years from the date of commencement of business.

2.4 Marketable securities

Investments in quoted securities are valued at lower of cost and middle market price determined on an

aggregate portfolio basis. Cost is determined on moving average basis. Middle market price means the

average of the highest and the lowest quotation on the balance sheet date.

2.5 Revenue recognition

(i) Sales and purchases of securities are recognised on the date of contract. Capital gains and losses

on sale of securities are taken to income in the year in which it arises.

(ii) Dividend income is recorded at the time of the closure of share transfer book of the company

declaring the dividend.

(iii) Income on term finance certificates is recorded on time proportion basis taking into account the

principal outstanding and the yield applicable.

2.6 Taxation

The charge for current taxation is based on taxable income at the current rate of taxation. The company

provides for deferred tax liability under the liability method.

1999

1998

(Rupees in thousand)

3. DEFERRED EXPENDITURE PAYABLE

Balance as on July 01

6,120

9,180

Less: Paid during the year

3,060

Transferred to current maturity

3,060

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

6,120

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

3,060