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ARIF HABIB SECURITIES LIMITED.
Annual Reports 2002
Contents
1. Company information
2. Mission/Vision
3. Seven years at a glance
4. Notice ofAGM
5. Directors' report
6. Statement of purchase & sale of shares by directors
7. Board meetings attendance statement
8. Pattern of shareholding
9. Brief on AHSL's contribution for Capital Markets
10. Auditors' report on Corporate Governance
I I. Auditors' report to the members
12. Balance sheet
13. Profit and loss account
14. Cash flow statement
15. Statement of changes in equity
16. Notes to the accounts
COMPANY INFORMATION
Board of directors
Mr. Arif Habib                  Chairman and Chief Executive
Mr. Sirajuddin A. Cassim
Mr. Muhammad Yousuf
Mr. Abdul Majid M. Siddique
Mr. Muhammad Rafiq Jangda
Mr. Samad A. Habib
Mr. KashifA. Habib
Company secretary
Mr. Samad A. Habib
Auditors
Khalid Majid Rahman Sarfaraz
Rahim Iqbal Rafiq
Chartered Accountants
Legal advisors
Bawaney & Partners
Bankers
Bank Al Habib Ltd.
Habib Bank A. G Zurich.
Habib Bank Ltd.
Metropolitan Bank Ltd.
Muslim Commercial Bank Ltd.
Registered office
60-63, Karachi Stock Exchange Building,
Stock Exchange Road, Karachi - 74000
Phones: 2415213-15
Fax No; 2416072-2429653
Audit Committee
Mr. Anf Habib
Mr. Sirajuddin A. Cassim
Mr. Abdul Majid M. Siddique
Mr. KashifA. Habib
Chief Financial Officer
Mr. Muhammad Rafiq Jangda
MISSION
To be a significant participant
in developing Pakistan's capital
market for it to become the
engine of industrial and
economic growth and in
integrating it into the
world markets.
VISSION
To be a leading financial
services Company excelling in
every aspect of its business and
in delivering its obligations as
a good corporate citizen to all
the stakeholders.
SEVEN YEARS AT A GLANCE
Rs. in millions
Income statement	FY96	FY97	FY98	FY99	FYOO	FYOI	FY02
Revenues	11.19	15.84	31.56	61.82	268.48	180.1 1	296.00
Expenses	1.11	2.18	6.22	15.22	41.09	38.80	35.79
Profit before tax	6.63	15.18	15.93	54.65	230.69	140.87	265.40
Profit after tax	6.63	14.93	14.89	53.08	228.47	132.56	253.59
Balance sheet	FY96	FY97	FY98	FY99	FYOO	FYOI	FY02
Paid up capital	20.00	40.00	40.00	50.00	50.00	50.00	50.00
Shareholders' equity	24.63	58.35	72.04	163.63	387.09	494.65	723.24
Liabilities	0.56	0.84	1.49	105.32	1 13.97	596.47	79.^5
Total assets	25.18	59.20	73.54	268.94	501.06	1,091.12	803.20
Investment value at cost	18.37	50.21	78.74	62.45	293.63	386.90	508.62
Investment value at mkt price	22.04	48.28	67.40	59.16	304.42	386.48	513.38
Ratios	FY96	FY97	FY98	FY99	FYOO	FYOI	FY02
Earning per share (Rs.)	3.31	3.73	3.72	10.62	45.69	26.51	50.72
Break-up value (Rs.)	12.31	14.59	18.01	32.73	77.42	98.93	144.65
Return on Equity (%)	44.88	60.62	25.52	73.68	139.63	34.25	51.27
Payout (%)
Cash	10.00	3.00	3.00	3.00	10.00	50.00	50.00
Bonus	-	-	-	-	-	-	20.00
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the Eight Annual General Meeting ofArif Habib Securities Limited will
be held at I 1:30 a.m on 28th September, 2002 at Regent Plaza Hotel, Shahrah-e-Faisal, Karachi to
transact the following business:
A. Ordinary Business
1. To confirm the minutes of the Seventh Annual General Meeting held on 29th September,
2001
2. To receive and adopt the audited accounts of the Company for the year ended 30th June
2002 together with the Directors' and Auditors' Reports thereon.
3. To consider and approve dividend as recommended by the Directors of the Company as
follows:
a. Cash dividend at Rs. 5.00 per share i.e. 50% for the year ended 30 June 2002.
b. One bonus share for every five shares i.e. 20%.
4. To appoint auditors for the year ending 30 June 2003 and to fix their remuneration, Khalid
Majid Rahman Sarfaraz Rahim Iqbal Rafiq & Company, Chartered Accountants, being eligible
to offer themselves for reappointment.
5. To consider any other business of the Company with the permission of the Chair.
B. Special Business
To pass with or without modification, the following resolution:
Resolved
That the article 90 of Article of Association of the Company be replaced with the following:
"The remuneration of Directors for attending meetings of the Board or any Committee of the
Board shall from time to time be determined by the Directors provided that neither the Chief
Executive nor any other Director in whole time remunerated service with the Company shall
be entitled to any payment for attending meeting of the Board. A Director may also be paid all
traveling, hotel and other expenses properly incurring by him in attending and returning from
meetings of Directors or any Committee of Directors or General meetings of the Company
or in connection with business of the Company." The remuneration for extra services performed
by Directors shall be determine by the Board of Directors.
Statement under section 160 of The Companies Ordinance, 1984 regarding the special
business
Article 90 of Article of Association is proposed to be ammended to give the Directors the power
to determine from time to time the remuneration of directors for attending meeting of the board
or any committee and also to reimburse incidental expenses properly incurred. Accordingly, the
above special resolution is placed before the meeting.
g_ The Directors of the Company have no interest in the special resolution except to the extent,
81' of their respective shareholdings and remuneration in the Company,                      j
By the order of the Board
Samad A. Habib
Company Secretary
Karachi
20 August 2002
Notes:
persons his/her proxy to attend, speak and vote instead of him /her, and a proxy so appointed
shall have such rights, as respects attending, speaking and voting at the meeting as are available
to a member. Proxy, in order to be effective must be received by the Company at the
Registered Office located at 60-63 Karachi Stock Exchange Building, Stock Exchange Road,
Karachi duly stamped and signed not less than 48 hours before the meeting. A proxy need
to be a member of the Company.
2. The share transfer books of the Company will remain closed from Wednesday 25 September,
2002 to Saturday 28 September, 2002 (both days inclusive). The Shares Department of the
Company is located at 60-63 Karachi Stock Exchange Building, Stock Exchange Road, Karachi.
CDC Account Holders will further have to follow the under mentioned guidelines as
laid down in Circular No I-Reference No 3(5-A) Misc/ARO/LES/96 dated 26 January
2000 issued by Securities & Exchange Commission of Pakistan.
A.    For attending the meeting:
1. In case of individuals, the account holder or sub account holder and or the person whose
securities are in group account and their registration details are uploaded as per the Regulations,
shall authenticate his/ her identity by showing his/ her original National Identity Card (NIC)
or original passport at the time of attending the meeting.
2. In case of corporate entity, the Board of Directors' resolution/ power of attorney with
specimen signature of the nominee shall be produced (unless it has been provided earlier)
at the time of the meeting.
B.     For appointing of proxies:
1. In case of individuals, the account holders or sub-account holders and or the person whose
securities are in group account and their registration detail are uploaded as per the Regulations,
shall submit the proxy form as per the above requirement.
2. The proxy form shall be witnessed by two persons whose names, addresses and NIC
numbers shall be mentioned on the form.
3. Attested copies of NIC or Passport of the beneficial owners and the proxy shall be furnished
with the proxy form.
4. The proxy shall produce his/ her origina NIC or original passport at the time of the meeting.
5. In case of corporate entity, the Board of Directors' resolution/ power of attorney with
specimen signature shall be submitted (unless it has been provided earlier) alongwith proxy
form of the Company.
Members who desire to stop deduction of Zakat from their dividends may submit a declaration
on non-judicial stamp paper duly signed as required under the law.
Members are requested to notify any change in address immediately
DIRECTORS' REPORT
Dear Shareholders,
It gives me great pleasure to present, on behalf of the Board of Directors, the 8th annual report of
the Company for the year ended on 30th June 2002 together with audited accounts of the Company
and auditors report thereon.
Consistent with the standard set last year, the Company has announced its annual audited financial
results within one month of close of the financial year and proposes to hold the Annual General
Meeting of its shareholders within three months of the financial year-end.
Market review
The stock market performed well during the year under review. The KSE- 100 Index recorded, an
appreciation of 32% on year-on-year basis from 1336 to 1770. However, there was volatility in the
market with KSE-100 Index hitting a low of 1069 and a high of 1936. The average daily turnover
at KSE remained at almost the last year level of I 18 million shares. Dividends payout by the listed
companies collectively increased from Rs 32.22 billion to Rs 39.39 billion. However brokerage rates
and CoT charges declined further during the year under review. Listings of new companies were
insignificant but there was an increase in the listings of TFCs (Debt instruments).
During the period under review, the situation on Pakistan's North-Western and North-Eastern
borders remained tense due to events of I Ith September, 6th October, I 3th December and 8th
May putting pressure on shares prices. At the same time, prudent handling of these situations by the
Government of Pakistan not only saved the country from any major loss but in fact created some
opportunities for the nation. Due to grants in aid, rescheduling of loans and financial assistance from
the IMF, World Bank and ADB foreign currency reserves improved, the value of rupee increased
and stabilized, encouraging more inflow of foreign exchange remittance from expatriates and residents.
The CBR's tax revenue collection was short of target mainly because of lower dutiable imports but
due to an increase in non tax revenue the total revenue target of the Government was achieved.
Similarly inflow of grants in aid compensated increase in defence expenditure. However absorption
of KESC losses by the Government increased the deficit above the target of 4.9 per cent.
Financial results
By the grace of Allah your Company benefited from favorable market conditions and has earned an
after tax profit of Rs 253,59 I, I 83 as compared to Rs I 32,560,07 I last year, recording an earning
per share of Rs 50.72 as compared to Rs 26.51. There was an improvement in all areas of business
namely brokerage, corporate finance, dividends and capital gains. As required by the SECP, the
Company has adopted IAS 39 for valuation of marketable securities which has resulted in a positive
impact on our profitability of Rs 5,1 87,253 as compared to previous method of valuation of " cost
or market value whichever is lower". There has been another change in the accounting policy in
the cash flow statement. Cash flow from dividend income has been included in operating activities
as against previous policy of treating it as a cash flow from investing activities.
ArifHabib Investment Management Limited, an associated undertaking of the Company, successfully
launched two open-end funds, namely, Pakistan Stock Market Fund and Pakistan Income Fund in the
month of March this year resulting in the beginning of a revenue stream for the management company.
Efforts are being made to make the management company profitable that may take couple ofye?rs.
The Board of Directors is pleased to recommend a cash dividend of 50% i.e., Ps.5/- per share and
also an issue of bonus shares out of share premium reserve at the rate of 20% i.e., one share for
every five shares held by the shareholders of the Company.
The summary of financial results and the appropriation are as follow:
				Rupees
				2002	2001
Profit before taxation				265,395,582	140,870,004
Provision for taxation				(11,804,399)	(8,309,933)
Profit after taxation				253,591,183	132,560,071
Un-appropriated profit brought forward				14,651,488	307,091,417
				268,242,671	439,651,488
Appropriations
Transferred to general reserve				200,000,000	400,000,000
Cash dividend @ 50% (2001 @ 50%)				25,000,000	25,000,000
Unappropriated profit carried forward				43,242,671	14,651,488
Earning Per Share-.Basic				50.72	26.51
Future Outlook
The financial year 2002-03 has started with very low average daily turnover and low CoT charges.
However KSE-100 Index is stable around the 1800 level due to the announcement of an investment
friendly budget for the year 2002-03 exempting tax on bonus shares, reducing corporate tax on the
banking sector and announcing further tax incentives for mutual funds; and expectations of better
corporate announcements by listed companies for the accounting period ended on June 30 2002
particularly from fertilizer, fuel & energy, banks, paper and auto & allied sectors. At the same time,
the market is under pressure due to fear of border clashes, terrorism incidents and uncertainties of
forthcoming October elections.
The management is of the view that the market has potential to rise from the current level, which
is already 30 percent up from pervious year with a limited downside risk due to prospects of better
performance of the listed sector in a low interest rate environment, with stable rupee and rising
foreign exchange reserves of the country, along with investment friendly government policies,
increased pace of privatization and a better regulatory environment.
In view of the above, the Company is expected to remain profitable during the current year. However
the Company is unlikely to achieve last year's level of exceptional profitability. The management will
continue to seek opportunities to expand into additional areas of activity within the financial services
sector. The management seeks Allah's blessings for yet another fruitful year of business.
Corporate Governance
Arif Habib Securities Limited is listed on Karachi, Lahore and Islamabad stock exchanges and the
management is committed to observe code of corporate governance prescribed for listed companies.
Appropriate accounting policies have been consistently applied in preparation of accounts and
accounting estimates are based on reasonable and prudent judgment. International Accounting
Standards are followed. The system of internal control is sound in design and has been effectively
implemented. There is no doubt upon the Company's ability to continue as going concern. There
has been no material departure from the best practices of corporate governance, as detailed in the
listing regulations.
There has been no material payment outstanding on account of taxes, duties, levies and charges.
The Company has no obligations under gratuity, provident or pension funds.
The statement showing the Company's shares bought and sold by directors, CEO, CFO, Company
Secretary and minor family members is annexed as Annexure I, Statement showing attendance of
Board meetings is annexed as Annexure II, the pattern of Shareholding as required by the Companies
Ordinance, 1984 is enclosed as Annexure III.
Change of director
During the year Mrs. Zetun Arif resigned from the directorship of the Company and Mr. KashifA.
Habib was co-opted as director in her place. The Board records its appreciation for Mrs. Zetun
Arif's contribution for the Company
Auditors
The retiring auditors Khalid Majid Rahman Sarfaraz Rahim Iqbal Rafiq & Company, Chartered
Accountants, have offered themselves for reappointment. The Board recommends their reappointment.
A resolution proposing the re-appointment of Khalid Majid Rahman Sarfaraz Rahim Iqba Rafiq &
Company as auditors of the Company will be submitted to the forthcoming Annual General Meeting...
Acknowledgment
We thank our clients for their continuing confidence and patronage. We record our gratitude to the
Ministry of Financ