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| Annual
Report 1996 |
|
| Al
- Meezan Mutual Fund Limited |
|
|
| A
JOINT VENTURE OF |
|
| PAK-KUWAIT
INVESTMENT CO. (PVT.) LTD. |
|
| NATIONAL
INVESTMENT TRUST LTD. |
|
| JARDINE
FLEMING GROUP LTD. |
|
|
| COMPANY
INFORMATION |
|
|
| BOARD
OF DIRECTORS |
|
| Mr.
A. K. M. Sayeed |
|
Chairman |
|
| Mr.
Mohammed Shoaib |
|
Chief Executive |
|
| Mr.
Irfan Siddiqui |
|
| Mr.
Julian M. I. Reid |
|
| Mr.
Shahid Ghaffar |
|
| Mr.
Jonathan Boyer |
|
| Mr.
Tasnimul Haq Farooqui |
|
Company Secretary |
|
|
| INVESTMENT
ADVISER |
|
| A1-Meezan
Investment & Financial Services (Private) Limited |
|
|
| AUDITORS |
|
| A.
F. Ferguson & Co., Chartered Accountants |
|
|
| Taseer
Hadi Khalid & Co., Chartered Accountants |
|
|
| CUSTODIAN |
|
| Muslim
Commercial Bank Limited |
|
|
| BANKERS |
|
| Muslim
Commercial Bank Limited |
|
| National
Bank of Pakistan |
|
|
| REGISTERED
OFFICE & SHARES DEPARTMENT |
|
| 4th
Floor, Block "C" |
|
| Finance
& Trade Centre |
|
| Shahrah-e-Faisal |
|
| Karachi-74400 |
|
|
| Annual
Report 1996 |
|
|
| NOTICE
OF 1ST ANNUAL GENERAL MEETING |
|
| Notice
is hereby given that the First Annual General Meeting of the Members of
Al-Meezan Mutual Fund Limited |
|
| will
be held on Monday 30th December 1996 at 9:00 a.m. at 4th Floor, Block
"C", Finance & Trade Centre, |
|
| Shahrah-e-Faisal,
Karachi-74400 to transact the following business: |
|
|
| 1.
To elect 7 (seven) Directors for three years to be on the Board of the
Company. The retiring Directors are |
|
| Mr.
A.K.M. Sayeed, Mr. Mohammad Shoaib, Mr. Irfan Siddiqui, Mr. Julian M. I.
Reid, Mr. Shahid |
|
| Ghaffar,
Mr. Jonathan Boyer and Mr. Tasnimul Haq Farooqui. In pursuance of Section
178(1) of the |
|
| Companies
Ordinance 1984, the Board of Directors has fixed the number of Directors to
be elected at |
|
| seven. |
|
|
| 2.
To receive, consider, and adopt Audited Accounts of the Company together with
Directors' and Auditors' |
|
| Report
thereon for the year ended 30th June 1996. |
|
|
| 3.
To appoint Auditors and fix their remuneration for the year ending 30th June
1997. |
|
|
| 4.
To transact any other business with the permission of the Chair. |
|
|
| By
order of the Board |
|
|
| TASNIMUL
HAQ FAROOQUI |
|
| Company
Secretary |
|
|
| Notes: |
|
| 1.
The share transfer books of the Company will remain closed from 23rd December
1996 to 30th December |
|
| 1996
(both days inclusive). |
|
|
| 2.
In terms of Section 178(3) of the Companies Ordinance, 1984, any candidate
who seeks to contest the |
|
| election
shall file with the Company at the Registered Office, not later than 14 days
before the .date of |
|
| meeting,
a notice of his / her intention to offer himself/herself for election as a
director. |
|
|
| 3.
As per Article 66 of the Articles of Association of the Company the
qualification of a Director shall be the |
|
| holding
o~' 500 shares of the Company of the nominal value of Rs. 5,000/- in his name
or in the name of |
|
| interest
represented by him. |
|
|
| 4.
A Member entitled to attend and vote at the meeting may appoint a proxy to
attend and vote instead of |
|
| him/her
at the meeting. Proxies duly stamped must be deposited at the Company's
Registered Office not |
|
| less
than 48 hours before the time for holding the meeting. A proxy must be a
Member. |
|
|
| 5.
Shareholders are advised to notify Shares Department, AI-Meezan Mutual Fund
Limited, 4th Floor, Block |
|
| "C",
Finance & Trade Centre, Shahrah-e-Faisal, Karachi-74400 of any change in
their addresses to ensure |
|
| prompt
delivery of mail. |
|
|
| DIRECTORS'
REPORT |
|
| The
Directors of Al-Meezan Mutual Fund Limited are pleased to present the First
Annual Report together with the |
|
| audited
accounts for the period from July 13, 1995 to June 30, 1996 to the
shareholders. |
|
|
| AI-Meezan
Mutual Fund Limited was incorporated as a public limited company on July 13,
1995. The Fund |
|
| obtained
Certificate for Commencement of Business on January I, 1996 and business
operations were started in |
|
| February.
The public offering of the shares of the Fund was made on May 22, 1996. The
total size of public |
|
| offering
was 12.5 million shares amounting to Rs. 125 million of which 7.5 million
shares amounting to Rs. 75 |
|
| million
were offered to the general public in the domestic market and 5 million
shares amounting to Rs. 50 million |
|
| were
offered to the overseas investors through Islamic Investment Company of the
Gulf, Bahrain E.C. The total |
|
| subscription
amount received was Rs. 64.4 million and the balance amount was contributed
by the underwriters |
|
| against
their respective underwriting commitments. The Fund was listed on Karachi
Stock Exchange on September |
|
| 16, 1996. |
|
|
| The
period under review has not been favorable for the market. Except for few
short term rallies, the market has |
|
| generally
continued its declining trend which commenced in March 1994. The main factors
responsible for the |
|
| declining
trend are deteriorating economic and political conditions in the country
which have resulted in significant |
|
| reaction in funds inflow from foreign institutional
investors. The liquidity crunch being faced by domestic |
|
| institutions
has prevented them from actively participating in equity markets to take
benefit of attractive valuations. |
|
| It
is about time to develop a strong domestic mutual fund industry in order to
provide the required liquidity, depth |
|
| and
stability to our equity markets. |
|
|
| With
this objective the Fund was floated and the Directors are hopeful that, Insha
Allah, the long term performance |
|
| of
the Fund will be reflective of the experience of the sponsors in 'the area of
investment management. |
|
|
| OPERATIONS
REVIEW |
|
|
| FINANCIAL
RESULTS: |
|
(Rupees) |
|
|
| Investment
Income |
|
10,662,612 |
|
| Operating
Expenses |
|
10,336,743 |
|
| Profit
Before Taxation |
|
325,869 |
|
| Less:
Provision for Taxation |
|
1,569,172 |
|
| Loss
After Taxation |
|
(1,243,303) |
|
|
| During
the period under review, your Company earned Rs. 3.22 million as capital
gains, Rs. 1.02 million as |
|
| dividend
income and Rs. 6.41 million as profit on deposits. After providing for
administrative expenses of Rs. 5.13 |
|
| million
(including amortization of deferred expenditure amounting to Rs. 4.69
million) and diminution in value of |
|
| marketable
securities of Rs. 5.20 million, the pretax profit of the Company was Rs.
325,869. After providing for |
|
| taxes
for the period, loss after tax was Rs. 1.24 million. |
|
|
| Because
of loss for the period, no dividend has been declared. |
|
|
| It
must be emphasized here that since the Fund could not earn profit during the
period, the investment adviser to the |
|
| Fund,
Al-Meezan investments: Financial Services (Private) Limited (AM1FS) has fully
waived its remuneration of |
|
| Rs.
2,487,564 for the year. The investment adviser is entitled to markup at
prevailing rates on amount receivable |
|
| from
the Fund, which in our case was Rs. 4,696,502 as on dune 30, 1996. AMIFS has
also waived the full amount of |
|
| markup
for the year. We would like to place on record the appreciation for waiver of
remuneration and markup for |
|
| the
year by AMIFS. |
|
|
| ISSUES
& CHALLENGES FACING THE MUTUAL FUND INDUSTRY |
|
| Mutual
fund industry in Pakistan is still in its infancy and therefore a number of
issues and problems are being faced |
|
| by
the industry. |
|
|
| One
of the foremost issues being faced by the industry is of taxation policies
which put an individual investor at a |
|
| comparative
disadvantage when he invests in the market through mutual funds instead of
investing directly. In |
|
| particular
this issue relates to turnover tax and taxation of income on fixed income
securities at corporate tax rate of |
|
| 36%.
In .order to make investment in mutual funds attractive for small investors,
it is essential to give the same tax |
|
| treatment
to the investments made by an individual investor whether he invests directly
or through a mutual fund. |
|
|
| One
of the key challenges being faced by the mutual fund industry is to educate
the small investor on benefits of |
|
| diversification
and professional management which are achieved only when investing through
mutual funds. In this |
|
| respect,
an active campaign needs to be launched to educate the general public on
mutual funds through various |
|
| media
including print, radio and television besides conducting seminars on the
subject. |
|
|
| FUTURE
PROSPECTS |
|
| During
the current year the performance of the market has deteriorated further as
the KSE-100 index has declined |
|
| from
1703 as on June 30, 1996 to 1492 as on November 30, 1996 a decline of 12%.
However. by the grace of |
|
| Allah,
the Net Asset l/value (NA F) of your Fund has declined by on[? 0.3% as NA
I/as on November 30, 1996 was Rs. |
|
| 9.92
per share. The main reasons for the decline in the market appear to be the
deteriorating economic conditions, |
|
| the
weakness in Pakistani currency (which has been devalued approximately 13%
during the period) and lack of |
|
| foreign
interest in emerging markets in general and Pakistani markets in particular. |
|
|
| It
is felt that the recent steps taken by the Government providing relief to the
textile and synthetic sectors, |
|
| announcement
of a relief package for stock market which contains various measures being
taken or planned to be |
|
| taken
for its revival including exemption of taxes on income from mutual funds will
be taken positively by the |
|
| investors.
As your Fund is allowed to invest only in listed securities, any improvement
in the stock market will |
|
| contribute
directly to the performance of the Fund. |
|
|
| AUDITORS |
|
| We
wish to place on record our appreciation for the services rendered by the
auditors, M/s. A. F. Ferguson & |
|
| Company,
Chartered Accountants and M/s. Taseer Hadi Khalid & Company, Chartered
Accountants. |
|
|
| ACKNOWLEDGMENT |
|
| We
offer our sincere gratitude to the Board of Directors for their continued
guidance and support. We wish to |
|
| thank
the Corporate Law Authority and other regulatory authorities for their
cooperation, guidance and support. We |
|
| also
wish to place on record our appreciation of all the shareholders of the Fund. |
|
|
| For
and on behalf of the Board |
|
|
|
|
| Mohammad
Shoaib |
|
A.K.M. Sayeed |
|
| Chief
Executive |
|
Chairman |
|
|
| Karachi:
December 8, 1996. |
|
|
| A.
F. FERGUSON & CO. |
|
TASEER HADI KHALID &
CO. |
|
| Chartered
Accountants |
|
Chartered Accountants |
|
| Karachi |
|
Karachi |
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
| We
have audited the annexed balance sheet of AI-Meezan Mutual Fund Limited as at
June 30, 1996 and the related |
|
| profit
and loss account and cash flow statement for the period July 13, 1995 to June
30, 1996 together with the notes |
|
| forming
part thereof, 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, after
due verification thereof, we report |
|
| that: |
|
|
| a)
in our opinion, proper books of account have been kept by the company as
required by the Companies |
|
| Ordinance,
1984; |
|
|
| 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 are in agreement with the
books of |
|
| account
and are further in accordance with the accounting policies consistently
applied; |
|
|
| (ii)
the expenditure incurred during the period was for the purpose of the
company's business; and |
|
|
| (iii)
the business conducted, investments made and the expenditure incurred during
the period 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 and the cash flow statement together with the notes
forming part thereof, give |
|
| the
information required by the Companies Ordinance, 1984 in the manner so
required and respectively |
|
| give
a true and fair view of the state of the company's affairs as at June 30,
1996 and of the loss and the |
|
| cash
flow for the period July 13, 1995 to June 30, 1996; and |
|
|
| d)
in our opinion no zakat was deductible at source under the Zakat and Ushr
Ordinance, 1980. |
|
|
| A.
F. FERGUSON & CO. |
|
TASEER HADI KHALID &
CO. |
|
| Chartered
Accountants |
|
Chartered Accountants |
|
|
| Karachi:
December 9, 1996 |
|
Karachi: December 9, 1996 |
|
|
| BALANCE
SHEET AS AT JUNE 30, 1996 |
|
|
Note |
(Rupees) |
|
| SHARE
CAPITAL AND RESERVES |
|
| Authorised
share capital |
|
| 25,000,000
ordinary shares of Rs. 10 each |
|
250,000,000 |
|
|
============ |
|
|
| Issued,
subscribed and paid up share capital |
|
| 12,500,000
ordinary shares of Rs.10 each fully paid in cash |
|
125,000,000 |
|
| Share
deposit money |
|
3 |
125,000,000 |
|
|
------------ |
|
|
250,000,000 |
|
|
| Loss
for the period July 13, 1995 to June 30, 1996 |
|
(1,243,303) |
|
|
------------ |
|
|
248,756,697 |
|
|
| LONG
TERM LIABILITY |
|
4 |
3,757,202 |
|
|
|
| CURRENT
LIABILITIES |
|
| Current
maturity of a long term liability |
|
4 |
939,300 |
|
| Due
to the Investment Adviser - an associated undertaking |
5 |
|
| Creditors,
accrued expenses and other liabilities |
|
6 |
14,685,364 |
|
| Taxation |
|
1,506,981 |
|
|
------------ |
|
|
17,131,645 |
|
|
|
------------ |
|
|
269,645,544 |
|
|
============ |
|
|
| CURRENT
ASSETS |
|
| Accounts
receivable - unsecured and considered good |
|
9,789,950 |
|
| Marketable
securities |
|
7 |
98,877,142 |
|
| Other
receivables |
|
8 |
5,818,049 |
|
| Bank
balances |
|
9 |
155,160,403 |
|
|
|
|
------------ |
|
|
269,645,544 |
|
|
============ |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| For
the Period July 13, 1995 to June 30, 1996 |
|
|
Note |
(Rupees) |
|
|
| INVESTMENT
INCOME |
|
| Capital
gain |
|
10 |
32,220,851 |
|
| Dividend
income |
|
1,025,450 |
|
| Profit
on amounts held in PLS bank accounts |
|
6,415,077 |
|
|
------------ |
|
|
10,662,612 |
|
|
| OPERATING
EXPENSES |
|
| Administrative
expenses |
|
11 |
5,129,563 |
|
| Provision for diminution in
the value of |
|
|
|
|
| marketable
securities (investments) |
|
5,207,180 |
|
|
------------ |
|
|
10,336,743 |
|
|
|
|
|
------------ |
|
| PROFIT
BEFORE TAXATION |
|
325,869 |
|
|
| PROVISION
FOR TAXATION |
|
1,569,172 |
|
|
------------ |
|
| LOSS
AFTER TAXATION |
|
(1,243303) |
|
|
============ |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
| CASH
FLOW STATEMENT |
|
| For
the Period July 13, 1995 to June 30, 1996 |
|
|
Note |
(Rupees) |
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
| Profit
before taxation |
|
325,869 |
|
| Adjustment
for: |
|
| Provision for diminution in
the value of |
|
| marketable
securities (investments) |
|
5,207,180 |
|
| Dividend
income |
|
(1,025,450) |
|
| Financial
income |
|
(6,415,077) |
|
| Dividend
received |
|
798,250 |
|
| Financial
income received |
|
824,228 |
|
|
------------ |
|
| Profit
before changes in working capital |
|
(285,000) |
|
|
|
|
| (Increase)
in current assets |
|
| Accounts
receivable |
|
(9,789,950) |
|
| Marketable
securities |
|
(104,084,322) |
|
|
------------ |
|
|
(113,874,272) |
|
|
| Increase
in current liabilities |
|
| Creditors,
accrued expenses and other liabilities |
|
14,685,364 |
|
|
------------ |
|
| Cash
used for operations |
|
(99,473,908} |
|
| Income
tax paid |
|
(62,191} |
|
|
------------ |
|
| Net
cash used for operations |
|
(99,536,090) |
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
| Proceeds
from the issue of shares |
|
125,000,000 |
|
| Share
deposit money |
|
125,000,000 |
|
|
------------ |
|
|
250,000,000 |
|
| Long
term liability |
|
4,696,502 |
|
|
------------ |
|
| Net
cash inflow from financing activities |
|
254,696,502 |
|
|
|
------------ |
|
| Bank
balances at the end of the period |
|
9 |
155,160,403 |
|
|
============ |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
| NOTES
TO AND FORMING PART OF THE ACCOUNTS |
|
| For
the Period July 13, 1995 to June 30, 1996 |
|
|
| 1.
STATUS AND NATURE OF BUSINESS |
|
|
| 1.1
The company was incorporated on July 13, 1995 as a public limited company
under the |
|
| Companies
Ordinance, 1984 and has been registered as an 'Investment Company' under the |
|
| Investment
Companies and Investment Advisers Rules, 1971. The 'certificate of
commencement |
|
| of
business' was obtained by the company on January 1, 1996. The main object of
the company is |
|
| to
carry on the business of a closed-end mutual fund and to invest its assets in
securities which are |
|
| listed
or proposed to be listed on the stock exchanges. |
|
|
| 1.2
The company has an agreement with AI-Meezan Investment and Financial Services
(Private) |
|
| Limited,
an associated undertaking, to provide investment advisory services. |
|
|
| 1.3
The company was formally listed on the Karachi Stock Exchange on September
16, 1996 as a |
|
| closed-end
mutual fund. |
|
|
| 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.1
Accounting convention |
|
| These
accounts have been prepared under the historical cost convention. |
|
|
| 2.2
Marketable securities |
|
| Marketable
securities are stated at the lower of cost and market value determined on an
aggregate |
|
| portfolio
basis. Cost is determined on a moving average basis. The market value refers
to the |
|
| Karachi
Stock Exchange closing quotations on the last working day of the financial
year. |
|
|
| 2.3
Revenue recognition |
|
| (i)
Dividend income is stated net of zakat deduction thereon at source and is
recognised at |
|
| the
time of closure of the share transfer books of the investee company. |
|
|
| (ii)
Sale and purchase of marketable securities and the resultant gains or losses
are recorded |
|
| on
the date of contract. |
|
|
| (iii)
Profit on bank deposits is recognized on accrual basis. |
|
|
| 2.4
Taxation |
|
|
| Current: |
|
| The
charge for current taxation in the accounts is based on taxable income at the
current rates |
|
| of
taxation after taking into account tax credits and tax rebates available, if
any, or minimum tax |
|
| at
0.5 percent of turnover, whichever is higher. |
|
|
| Deferred: |
|
| The
company accounts for deferred taxation arising on major timing differences,
if any, by using |
|
| the
liability method. |
|
|
| 3.
SHARE DEPOSIT MONEY |
|
| The
account represents amounts received towards initial public offering of
share's. Subsequent to the |
|
| balance
sheet date 12,500,000 ordinary shares of Rs 10 each have been allotted
against this amount. |
|
|
| 4.
LONG TERM LIABILITY |
|
|
(Rupees) |
|
| Expenses
incurred on incorporation |
|
| and floatation - notes 4.1, 11.1 and 11.2 |
|
4,696,502 |
|
|
| Less:
Current maturity |
|
939,300 |
|
|
------------ |
|
|
3,757,202 |
|
|
============ |
|
|
|
|
| 4.1
The expenditure incurred on the incorporation and floatation of AI-Meezan
Mutual Fund Limited |
|
| has
been paid by AI-Meezan Investment and Financial Services (Private) Limited
(the Investment |
|
| Adviser),
an associated undertaking. According to rule 7(3) of the Investment Companies
and |
|
| Investment
Advisers Rules, 1971 these expenses are to be repaid by AI-Meezan Mutual Fund |
|
| Limited
over a period of five years in equal annual installments. |
|
|
| 5.
DUE TO THE INVESTMENT ADVISER - AN ASSOCIATED UNDERTAKING |
|
|
| 5.1
The Investment Adviser is entitled to a remuneration at the rate of 2% of net
assets of the |
|
| company
as at the end of the investment company's year of accounts in terms of rule 1
l(a) of the |
|
| Investment
Companies and Investment Advisers Rules, 1971 which has been determined as |
|
| follows: |
|
|
| Assets: |
|
(Rupees) |
|
| Accounts
receivable |
|
9,789,950 |
|
| Marketable
securities |
|
98,877,142 |
|
| Other
receivables |
|
5,818,049 |
|
| Bank
balances |
|
155,160,403 |
|
|
------------ |
|
|
269,645,544 |
|
|
|
|
| Liabilities: |
|
| Long
term liability |
|
3,757,502 |
|
| Current
maturity of a long term liability |
|
939,300 |
|
| Creditors,
accrued expenses and other liabilities |
|
14,685,364 |
|
| Taxation |
|
1,506,981 |
|
|
------------ |
|
|
20,889,147 |
|
|
|
------------ |
|
| Net
assets |
|
248,756,397 |
|
|
| Remuneration
at 2% for the six months of operations |
|
2,487,564 |
|
| Less:
Remuneration waived by the Investment Adviser |
|
2,487,564 |
|
|
------------ |
|
|
- |
|
|
=========== |
|
|
|
|
| 5.2
According to rule 7(4) of the Investment Companies and Investment Advisers
Rules, 1971 the |
|
| Investment
Adviser is entitled to mark-up at the prevailing bank rate on expenditure
incurred |
|
| on
behalf of the Fund. The Investment Adviser has waived the mark-up for the
year. |
|
|
| 6.
CREDITORS, ACCRUED EXPENSES AND OTHER LIABILITIES |
|
|
(Rupees) |
|
| Creditors |
|
14,300,540 |
|
| Settlement
charges |
|
226,285 |
|
| Custodian
charges |
|
46,787 |
|
| Others |
|
111,752 |
|
|
------------ |
|
|
14,685,364 |
|
|
=========== |
|
|
| 7.
MARKETABLE SECURITIES |
|
| 7.1
The following is a statement of marketable securities. These securities
represent shares of a |
|
| nominal
value of Rs. l0 each unless stated otherwise. |
|
|
|
NUMBER OF SHARES |
|
BALANCE AS AT |
|
|
|
JUNE 30,1996 |
|
|
|
Purchases |
Bonus(B)/ |
Sales |
Number of |
At cost |
At market |
|
|
|
Right |
|
shares |
|
value |
|
| NAME
OF THE COMPANY |
|
|
issue |
|
|
|
|
(R) |
|
Rs. |
Rs |
|
|
| LEASING
COMPANIES |
|
| First
Leasing Corporation Limited |
112,400 |
- |
- |
112,400 |
1,274,212 |
1,236,400 |
|
| First Leasing Corporation |
|
| Limited
(R) |
|
- |
47,900(R) |
- |
47,900 |
- |
9,580 |
|
|
| INVESTMENT |
|
| COMPANIES
& BANKS |
|
| Bank
AI Habib Limited |
|
40,000
|
- |
40,000 |
- |
- |
- |
|
| Crescent
Investment Bank Limited |
23,000
|
- |
- |
23,000 |
427,290 |
391,000 |
|
| Faysal
Bank Limited |
|
230,500 |
5,750(B) |
20,000 |
216,250 |
7,065,650 |
6,865,937 |
|
| Metropolitan
Bank Limited |
|
75,000 |
- |
- |
75,000 |
2,615,000 |
2,325,000 |
|
| Muslim
Commercial Bank Limited |
|
41,500 |
5,300(B) |
5,000 |
41,800 |
1,496,600 |
