Taha Spinning Mill

Annual Report 2008
CONTENTS
Corporate Information Mission/Vision Statement Board of Directors Key Management Personals Notice of Meeting Financial Highlights Directors Report Statement of Compliance with The Code of Corporate Governance for the Year Ended June 30, 2007 Review Report to the Members on Statement of Compliance with the Best Practices of the Code of Corporate Governance Auditors Report to the Member Balance Sheet Profit & Loss Account Cash Flow Statement Statement of Changes in Equity Notes to the Accounts Pattern of Shareholding From of Proxy
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Annual Report 2008
CORPORATE INFORMATION
Board of Directors Mr. Feroze Sayeed-Ud-Deane Miss Tara Uzra Dawood Mr. Iftikhar Hussain Mr. Nazimuddin Feroz Mr. Gul Nawaz Mr. Anwar A. Sheikh Mr. AVM (Retd.) Zulfiquar Ahmed Shah Mr. Muhammad Shoaib Mr. Muhammad Shahid Usman Mr. Tahir Mehmood Mr. AVM (Retd.) Zulfiquar Ahmed Shah Mr. Iftikhar Hussain Mr. Anwer A.Shaikh Ford Rhodes Sidat Hyder & Co. Chartered Accountants Rauf & Ghaffar Law Associates Advocates 404, 4th Floor, Beaumont Plaza 6-cl-10 Beaumont Road, Karachi Dawood Islamic Bank Limited Bank AL Habib Limited Habib Metripolitan Bank Limited Oman International Bank S.A.O.G. 1500-A Saima Trade Towers, I. I. Chundrigar Road, Karachi 74000 UAN: 111-DAWOOD (111-329-663) PABX: (92-21) 227-1874/887 Fax: (92-21) 227-1912 E-mail: dcm@firstdawood.com Website: www.firstdawood.com/dcm F.D. Registrar Services (SMC-Pvt.) 1700-A Saima Trade Towers, I. I. Chundrigar Road, Karachi 74000 PACRA: AM3 Chairman Member Member Chairman Chief Executive Officer Director Director Director Director Director (Nominee of GM) (Nominee of FDIB) (Nominee of BRRI) (Nominee of NIT) (Nominee of FDIB)
Group Financial Director Chief Financial Officer Company Secretary Audit Committee
Auditors Legal Adviser
Banker
Registered Office
Registrars
Rating
Annual Report 2008
Mission/Vision Statement
To Be The Prominant Funds Manager That Adds Value For Stakeholders Through Innovative And Responsible Management
Annual Report 2008
Mr. Feroze Sayeed-Ud-Deane Mr. Deane is a Bachelor of Science from Dacca University. He has over 43 years of working experience. He is currently working with Castle Overseas Company, a company involved in Export of Textile products to the US. Before this he has worked in National & Grindlays Bank Ltd, Habib Bank Ltd, and BCCI International in various capacities. He was also with in Banco De Descuento, Madrid, Spain as General Manager, and BCCI London as Executive Incharge in Latin America, Vice Chairman and Managing Director BCC Spain. Miss Tara Uzra Dawood Miss Tara Uzra Dawood has done her Doctorate of Juridical Science (J.D.) from Harvard Law School, Massachusetts, USA, and Bachelor of Arts Honors (A.B.) from Cornell University, New York, USA, Oxford University. She has worked for law firms in New York, Toronto, Amsterdam and California and is a specialist in mergers and acquisitions and corporate law. She is Chief Executive Officer of Dawood Capital Management Ltd. Mr. Nazimuddin Feroz He is a graduate and a very experienced industrialist. He has been working as a director for Efroze Chemical Industries and Maple Pharmaceutical (Pvt.) Ltd., since inception and also working as a registered partner for other firms as well. Mr. Gul Nawaz Mr. Nawaz is an Asset Manager with extensive experience of equity trading, equity research and as Non-executive Director on the Board of Directors of leading listed public limited companies. Mr. Nawaz did his Masters in Commerce from University of Punjab. He is working with National Investment Trust Limited; a state owned Asset Management Company since 1996. Mr. Anwar A. Sheikh Mr. Sheikh is the Master in Business Administration from the Institute of Business Administration (IBA). Mr. Sheikh has over 14 years of strategic expertise in Financial Consulting/Restructuring, Mergers and Acquisition, Privatization, Resource Mobilization and Structured Finance. Mr. AVM (Retd.) Zulfiqar Ahmed Shah Mr. Shah has the honour of serving Pakistan Air Force (PAF) with over 34 years of Commissioned Service. He has extensive knowledge and experience of operation at PAF. He is a graduate of Air Command and Staff College of Air University, USAF and National Defence College. He has also managed a large public sector corporation when he was sent on deputation to the Civil Aviation Authority. Mr. Iftikhar Hussain Mr. Iftikhar is the Master in Business Administration in Finance from NewYork University. He was also did his BSE in Computer Science from University of Pennsylvania. Mr. Hussain has over 23 years of experience in Finance and since last 15 years he was working as CEO of private limited company.
Annual Report 2008
Mr. Muhammad Shahid Usman Ojha (Chief Financial Officer) Mr. Shahid Usman is an associate member of Institute of Cost & Management Accountant of Pakistan and Pakistan Institute of Public Finance Accountants. He was also completed his Master in Economics from University of Karachi. He has experience of over 13 years in Mutual Fund industry and Financial Institutions. His core responsibilities include Financial Management & Reporting, Taxation, Finalization of Accounts and Budgeting. Mr. Tauqir Shamshad (SVP & Fund Manager. Dawood Money Market) Mr. Tauqir has over 16 years of working experience out of which 11 years experience in Treasury and over 4 years in Asset Management. He is Master of Business Administration and Master of Commerce from University of Karachi. He has also completed four years as audit trainee with M/s. Ford Rhodes Sidat Hyder registered with Institute of Chartered Accountants of Pakistan. Mr. Muhammad Ahmed (Equity Fund Manager - First Dawood Mutual Fund) Mr. Ahmed has over 15 years of experience with the financial markets. He is responsible for managing the equity portfolio. His expertise includes hedging/arbitrage of shares, communications with various brokers, coordination with treasury department for pledging and releasing of shares, managing settlement and payment of shares on NCSS, T+3, T=1 and future counters, continuous funding system, assessing and analyzing of the annual reports of companies Mr. Tahir Mehmood (Company Secretary) Mr. Mehmood is an Associate Member of the Institute of Corporate Secretaries of Pakistan and Associate Member of the Institute of Chartered Secretaries and Managers (Chartered Secretary Stream). Before joining First Dawood Group (FDG) he was working as Assistant Manager in Deloitte M. Yousuf Adil Saleem & Company, Chartered Accountants for over six years. His areas of expertise include Corporate Affairs, Financial Advisory Services, merger & acquisitions. Mr. Yousuf Ismail Turk (AVP - Capital Market & Debt Market) Mr. Yousuf has completed his Bachelors of Commerce from University of Karachi in 1997. He has an experience of over 12 years of managing of shares portfolio in various companies. As well his expertise include hedging/arbitrage of shares, communications with various brokers, coordination with treasury department for pledging and releasing of shares, managing settlement and payment of shares on NCSS, T+3, T=1 and future counters, continuous funding system, assessing and analyzing of the annual reports of companies etc. Mr. Kamran Sheikh (Researcher - Equity and Investment portfolio) Mr. Kamran has completed his MBA - Finance & Accounting in 2005 and B.Com in 1998. He has a working experience of 7 years in diversified sectors like textile, venture capital, indenting house and asset management. His core responsibilities include review and analysis of annual and quarterly reports as well as survey reports of various brokerage houses.
Annual Report 2008
NOTICE OF ANNUAL GENERAL MEETING (AGM XVII)

Notice is hereby given that the AGM XVII of the shareholders of the company will be held at the registered office at 1500-A, Saima Trade Towers, I.I. Chundrigar Road, Karachi on October 28, 2008 at 03:30 p.m. to transact the following business: Ordinary Business 1. 2. To confirm the Minutes of the AGM XVI held on October 17, 2007. To receive, consider and adopt the Audited Financial Statements of the Company for the year ended June 30, 2008 together with Directors and Auditors Reports thereon. To appoint auditors and fix their remuneration.
3.
Special Business 4. To consider and if thought fit, approve the following resolution as an ordinary resolution in respect of issue of Bonus Shareh in the ratio of 10%, as recommended by the directors in their meeting. Proposed Resolution RESOLVED that a sum of Rs.13,612,500/- out of the companys unappropriated profit for the issue of bonus shares be capitalized and applied for the issue of =1,361,250= ordinary shares of Rs.10/- each and allotted as fully paid bonus shares to those members of the Company whose names appear in the register of members of the Company on October 22, 2008 in the ratio of = 100 = shares for every =1,000= shares held and that such bonus shares shall rank pari passu in all respect with the existing ordinary shares of the Company. FURTHER RESOLVED that the Chief Executive and Company Secretary be and are hereby severally authorized to consolidate all fractions of bonus shares and sell in the stock market and pay the proceeds to charity. 6. Any other Business with the permission of the Chair
September 25, 2008 Karachi
By Order of the Board Tahir Mehmood Company Secretary
Annual Report 2008
Notes: 1.
The share transfer books of the Company shall remain closed from October 22, 2008 to October 28, 2008 (both days inclusive). Shareholders are requested to notify to our Share
Registrar FD Registrar Services (SMC-Pvt.) Ltd at 1700-A, Saima Trade Towers, I.I.Chundrigar Road, Karachi, if any change of address immediately.
2.
A member entitled to attend and vote at this meeting may appoint a proxy to attend and vote on his/her behalf. No person other than a member shall act as proxy. Proxy forms, in order to be effective, must be received at the Registered Office, duly stamped and signed not less than 48 hours before the meeting. The CDC account/sub-account holders are requested to bring with them their Computerized National ID Cards (CNIC) along with Participant(s) ID number and their account numbers at the time of attending this meeting in order to facilitate identification of the respective shareholder(s). In respect of corporate entity, the Board of Directors Resolution/Power of Attorney with specimen signatures be produced at the time of meeting.
3.
Statement under Section 160 (1) (b) of the Companies Ordinance, 1984 This statement sets out the material facts concerning the special business to be transacted at the Annual General Meeting of the Company to be held on October 28, 2008. Agenda item No.4
The Directors are of the view that the Companys financial position and its reserves justify the capitalization of free reserves amounting to Rs.13,612,500/- for the issue of bonus shares in the ratio of =100= bonus shares for every 1,000 ordinary shares held. The Directors directly or indirectly, are not personally interested in this issue except to the extent of their shareholding in the Company. Pursuant to rule 6 (iii) of the Companies (issue of capital) Rules 1996, the auditors have certified that the free reserves and surpluses retained after the issue of the bonus shares will not be less than 25% of the increased capital.
Annual Report 2008
FINANCIAL HIGHLIGHTS
2008 2007 2006 2005 2004 Rupees in Million 200.00 100.00 157.80 259.40 223.46 15.00 21.43 14.93 6.85 21.11 4.52 16.59 15.78 1.51 200.00 100.00 142.40 187.06 164.86 16.58 6.06 1.53 6.85 1.95 4.90 14.24 0.49 2003 2002 2001
Authorized Capital Paid-up Capital Shareholders' Equity Total Assets
200.00 136.13 392.69 512.90
200.00 121.00 259.06 347.45 131.56 12.25 38.48 0.54 42.67 (1.27) 43.94 21.41 3.63
200.00 110.00 199.07 259.11 105.01 15.28 29.90 0.40 42.65 4.56 38.09 16.45 3.15
200.00 200.00 100.00 100.00 135.69 130.78 174.75 135.50 154.79 103.18 16.75 0.63 0.70 7.90 1.64 6.25 13.57 0.63 18.56 1.01 9.60 2.55 7.05 13.08 0.71
200.00 100.00 123.20 127.38 84.07 33.04 11.83 1.83 6.25 1.17 4.54 12.30 0.45
Short-Term Investment in Securities 267.78 Short-Term Investment in Deposits Income From Investments Management Fee Other Income Profit Before Taxation Taxation Profit After Taxation Book Value Per Share Earnings Per Share 15.00 16.49 67.70 0.45 23.86 3.53 20.33 28.87 1.49
Annual Report 2008
DIRECTORS REPORT
On behalf of the Board of Directors of Dawood Capital Management Limited ("DCM" or the "Company"), it gives me immense pleasure to present the Sixteenth Annual Report along with the audited financial statements for the year ended June 30, 2008. Operations and Performance June 30, 2008 June 30, 2007 .Rupees 16,485,502 12,251,239 67,701,271 38,475,489 452,948 543,585 84,639,721 51,270,313 52,497,190 25,536,607 13,669,384 6,814,118 66,166,574 32,350,725 5,381,927 23,754,567 23,855,074 42,674,154 20,329,345 43,948,825
Profit Earned On Investments Management Fees Other Operating Income Gross Revenue Administration and Operating Expenses Financial Charges Total Expenses Share of Profit of Associate Profit Before Taxation Profit After Taxation
The Financial Year under review proved profitable with the net profits after tax of Rs. 20.33 Million. The total gross revenue also increased by 65% to Rs. 84.64 Million as compared to Rs. 51.27 Million last year. This gross revenue was derived mainly from the Management Fee of Rs. 67.70 Million (Rs. 38.48 Million last year) for managing the affairs of Dawood Money Market Fund (DMMF), Dawood Islamic Fund (DIF) and First Dawood Mutual Fund (FDMF). Profit earned on investments of Rs. 16.49 Million (Rs. 12.25 Million last year) and share of profit of Rs. 5.38 Million (Rs. 23.75 Million last year). Other positive increases include net assets by 51.74% to Rs. 392.69 Million and break-up value of shares from Rs. 19.03 to Rs. 28.85 per share. Increase in business augmented expenses as well with Administration and Operating Expenses to Rs. 52.50 Million. Financial Charges from Rs. 6.81 Million to Rs. 13.67 Million because the interest rates have shown an upward increase during the period under discussion and level of borrowing to facilitate growing business requirement. Under our management, Dawood Money Market Fund (DMMF), an open-end Income Fund, performed well and declared a dividend of 10.25%, underscoring its position as a smart investment choice for investors. Under our management, Dawood Islamic Fund (DIF), an open-end Shariah Compliant Islamic Asset Allocation Fund, successfully completed its first year of operation and declared a dividend of 10.00%, underscoring its position as a smart investment choice for investors. Another successful year of operation of our closed-end FDMF showed Rs. 0.61 earning per certificate after facing all the crises of KSE in the last two months of this financial year. Dividend Keeping in view the strong performance of the Company, the Directors have proposed the issuance of Bonus Shares in proportion of 100 share for every 1000 shares held i.e 10 % for the year ended June 30, 2008, subject to the approval of the shareholders at the Annual General Meeting. Investment The total portfolio of available for sale investment stands at Rs. 267.78 Million, carrying an unrealized revaluation gain of Rs. 140.59 Million and long term investment stands at 172.73 Million.
Annual Report 2008
DIRECTORS REPORT
Compliance with the Best Practices of the Code of Corporate Governance This statement is being presented to comply with the "Code of Corporate Governance" (the "Code") contained in the listing regulations of the Karachi Stock Exchange for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of the Code. The Directors hereby confirm the following as required by clause (xix) of the Code: The financial statements prepared by the management present fairly the Company's State of affairs, the result of operations, cash flows and changes in equity. Your Company has maintained proper books of accounts. Appropriate accounting policies have been consistently applied in the preparation of financial statements. Relevant International Accounting Standards, as applicable in Pakistan, provision of the Non-Banking Finance Companies and Notified Entities Regulations, 2007 (the Regulation), the NBFC Rules 2003 and directives of the Securities and Exchange Commission of Pakistan, have been followed in the preparation of the financial statements. The system of internal controls is sound in design and has been effectively implemented and monitored. There are no significant doubts over the ability to continue as a going concern. There has been no trading during the year in the shares of the Company carried out by the Directors, Chief Executive Officer, Company Secretary and their spouses and their minor children. There has been no material departure from the best practices of corporate governance, as detailed in the listing regulations. There are no statutory payments on account of taxes, duties, levies and charges outstanding. There has been no departure from the best practices of transfer pricing. Trading in shares of the Company During the year, no trading in the shares of the Company was carried out by the Directors, CEO, CFO, Company Secretary and their spouses of minor children except as stated here under: CEO/Director Miss. Tara Uzra Dawood Mr. Anwar A. Sheikh Capital Market During the FY2008, the KSE index was down by 10.77%. Most of this loss has come in the last quarter of the fiscal year 2008. Banking sector were the most down ward performer, contributing almost 47% of the total decline in the index. During April KSE-100 index touch its ever high at 15,739.25 level and at the end of the quarter index closed at 12,289.03 at that time market was traded at the discount of 22%. Top three contributing sectors are banking 47%, cement 43.9% and insurance sector by 38.9% and other sectors according to their percentages are refineries, fertilizer, OMC's & oil & gas exploration companies are 36.2%, 32.2%, 30.3% & 25.1% respectively in respect to their market capitalization. Credit Rating The Pakistan Credit Rating Agency Limited (PACRA) has maintained the asset manager rating of your company at AM3. According to PACRA, AM3 rating reflects the company's strong capacity to manage the risks inherent in asset management and the asset manager meets high investment management industry standards and benchmarks. Purchased 919,600 Bonus 115,327 378 Sale -
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Annual Report 2008
DIRECTORS REPORT
Overall Economic Scenario Global Economic Situation In the last 5 years Pakistan's economy strong performance was underpinned by the macro economic policies pursued by the government and a buoyant global economic environment with rapid economic expansion in China and India fuelling global economic growth. In this period the global economy due to continued strong expansion, has become geographically more broad-based. However, since the mid of 2007 the health of the global economy has taken a hit from the subprime crisis in the US and in some parts of Europe and distress and high turbulence in international financial markets. The IMF and other international financial bodies have already downward revised their global growth projections for the next 3 years. Pakistan's economy has experienced the negative fallouts of a reduction in international capital liquidity which has drained away foreign investment inflows. However growth in emerging economies is though slightly diminished is likely to remain solid and stable in the medium to long term despite external shocks coming from record high international oil prices to $147 per barrel and other commodity prices, which are fuelling global inflationary pressures, and a downturn in global demand. Performance of the Pakistan economy Pakistan's real GDP grew by 5.8% in FY08, lower than the 6.8% growth achieved in FY07. The slowdown in economic growth was a direct result of lower than targeted performance by the manufacturing and agriculture sectors. Second monetary policy of FY2007 was negative for banking sector in which SBP to curb from inflationary pressure increase discount rate by 150 bps and minimum rate of 5% has been imposed on PLS savings accounts. Pakistan economy had also hit by the cost push inflation through the hike of international oil & other commodity prices which fuelling the inflationary pressure in our economy. Agricultural production increased by 1.5% in FY08 versus 3.7% growth previous year. Similarly, manufacturing growth decreased to 5.4% in FY08 against 8.2% attained in the previous year. Large Scale Manufacturing (LSM) grew by just 4.8% as compared to 8.6% in FY07. During the current fiscal year, the main growth driver remained the services sector which grew at a high rate of 8.2% versus 7.6% growth attained in FY07. Current foreign reserves are $10.73 billion, trade and current A/c deficits are $20.74 & $14.01 billion respectively. Despite an economic growth slowdown during the current fiscal year, high average real GDP growth in the last 6 years has resulted in the real per capita GDP to increase from US$586 in FY03 to US$1085 in FY08. Prospects The goal of your company is to focus on three strategies: building deeper, more profitable customer relationships; optimizing the use of shareholder and human capital & building on our core strengths. Change in Directors Since the last report, there have been changes in the composition of the Board of the management company. Mr. Hasib Ahmed, Nominee Director of ADB, has resigned and Mr. Iftikhar Hussain has been appointed as a new director. The Board would like to place on record its appreciation of the sincere efforts made by the retiring director and wish to welcome on Board the new elected director. Currently, the Company has Seven Directors on its Board.
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Annual Report 2008
Board Meetings During the year 2007-08 five (5) meetings of the Board of Directors of the management company were held, the requisite details are as under: S.No. 1. 2. 3. 4. 5. 6. 7. 8. Name Mr. Feroze Sayeed-ud-Deane Miss Tara Uzra Dawood Mr. Gul Nawaz Mr. Anwar A. Sheikh Mr. Hasib Ahmed Mr. AVM (Retd.) Zulfiqar Shah Mr. Nazimuddin Feroz Mr. Iftikhar Hussain Designation Chairman Chief Executive Director Director Director Director Director Director Entitlement to Attend Meeting 5 5 5 5 4 5 5 1 Leave of absence 1 1 3 4 1 2 -
Transaction with Connected Persons/Related Parties All transactions between DCM and its connected persons/related parties are carried out on an arm's length basis and the relevant terms of the transactions are determined in accordance with the "comparable uncontrolled price method" (CUP). Human Resource Training and Development Employees are an investment for the company. Hence, several significant initiatives have been taken during the year to improve upon the hiring including retention and work environment related issues, grooming of skills to match with the changing business needs, induction of qualified and experienced professionals. Training and Human Resource Development continues to be of prime importance in 2008-09. In 2007-08, there has been a concerted effort to improve the quality and skills of our human resource through arrange a participation of employees in various seminar, workshops and training session organized by various professional bodies. Information Technology The IT department has been an integral department of the organization. A cutting-edge computerized environment and efficient utilization of information technology has been the hallmark of your company's policy. The company continuously invests in technology to improve internal decision-making operational efficiencies and the quality of service to customers. The IT function besides creating an efficient IT environment in the organization also keeps abreast with the latest trends in information technology. In addition, the company continues to implement initiatives to reduce the usage of paper through the utilization of information technology as part of the company's long tenure objective to strive towards a paperless environment. Staff Retirement Benefits DCM operates a provident fund scheme for all permanent employees. The value of investment to date is Rs. 4,139,217/in the provident fund scheme.
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Annual Report 2008
Auditors The present auditors M/s. Ford Rhodes Sidat Hyder & Co, Chartered Accountants, retire and being eligible offers themselves for re-appointment. As required under the Code of Corporate Governance the Audit Committee has recommended the re appointment of M/s. Ford Rhodes Sidat Hyder & Co, Chartered Accountants, as auditors for the year ending June 30, 2009. Risk Management Risk taking is an integral part of any business and is rooted in the philosophy of risk versus reward, that is, the higher the risk the greater the reward. Our fundamental objective is to maximize certificate holder's value, but this must be carried out in a clearly articulated risk tolerance framework. DCM and its Funds are exposed to a variety of risks including credit, liquidity, interest rate, market risk and operational risk. Our risk management policies and procedures ensure that risks are effectively identified, evaluated, monitored and managed. Risk management is a dynamic function and management must continuously monitor its internal risk procedures and practices in order to reduce earnings variability The Board has formed the following committees to manage the various types of risks the Bank is exposed to: " " " Board's Audit Committee Investment Committee Asset Liability Committee
Statement of Ethics and Business Practices The Board of Directors of DCM has adopted a statement of ethics and business practices. All employees are informed of this statement and are requested to observe these rules of conduct in relation to business and regulations. Audit Committee The Board of Directors of the Management Company in compliance with the Code of Corporate Governance has constituted an Audit Committee with specific terms of reference comprising the following three members including the Chairman, who is an independent non-executive director. Mr. AVM (Retd.) Zulfiqar Ahmed Shah Mr. Anwar A. Sheikh Mr. Iftikhar Hussain Chairman Member Member
The Audit Committee reviewed the quarterly, half-yearly and annual financial statements before submission to the Board and their publication. The Audit Committee had detailed discussions with the external auditors. The Audit Committee also reviewed internal audit findings and held separate meetings with internal and external auditor as required under the Code of Corporate Governance.
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Annual Report 2008
Key Financial Highlights Key financial highlights are summarized and annexed to these financial statements. Pattern of Shareholding The pattern of shareholding as on June 30, 2008 along with disclosure as required under the Code is annexed. Events after the Balance Sheet Date There have not been any material events that occurred subsequent to the date of the Balance Sheet that require adjustments to the enclosed financial statements. Acknowledgement We take the opportunity to thank our customers, business associates, leading banks and financial institutions for putting their trust with us and allowing us to cater to their financial needs. We also appreciate the guidance provided to the company by the Securities and Exchange Commission of Pakistan. We truly appreciate and value the contribution of our staff who have worked tirelessly to bring quality and growth to the Company and to grow our customer base. In closing, we reaffirm our commitment to our shareholders to further enhance the value of their investment in the Company.
For and on behalf of the Board, Karachi Date: September 25, 2008 Chairman
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Annual Report 2008
STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE FOR THE YEAR ENDED JUNE 30, 2008
Statement of Compliance with the Code of Governance This Statement is being presented to comply with the Code of Corporate Governance (the "Code") contained in Regulation No. 37 of listing regulations of Karachi Stock Exchange for the purpose of establishing a framework of good governance, whereby a listed Company is managed in compliance with the best practices of corporate governance. The Company has applied the principles contained in the Code in the following manner: 1. The Company encourages representation of independent non-executive directors on its Board of Directors. At present, the Board includes six (6) non-executive directors. Accordingly, the majority of the directors of the Board are nonexecutive directors. The directors have confirmed that none of them is serving as a director in more then ten listed companies, including this Company. All the resident directors of the Company are registered as tax payers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member of a stock exchange, has been declared as defaulter by that stock exchange. A casual vacancy occurred in the Board and was filled up by the directors within 30 days thereof. The Company has prepared a "Statement of Ethics and Business Practices", which has been signed by all the directors and employees of the Company. The Board of Directors has adopted a vision/mission statement and all the overall corporate strategy of the Company and had also formulated significant policies as mentioned in the Code. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. All the powers of the Board have been duly exercised and decisions on material transactions, including determination of remuneration and terms and conditions of the Chief Executive Officer have been taken by the Board. The meetings of the Board were preside over by the Chairman. The Board met at least once in every quarter. Written notices of the Board meetings, along with the agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. The Directors of the Company have been provided with copies of the Listing Regulations, Code of Corporate Governance, NBFCs Rules, Company's Memorandum and Articles of Association and all other relevant rules and regulations and hence are conversant of the relevant laws applicable to the Company, its policies and procedures and provisions of memorandum and article of Associations and of their duties and responsibilities. Directors have also attended talks and seminars on the subject of Corporate Governance. The Board of Directors of the Company has approved the appointment of the Company Secretary including his remuneration and terms and conditions of employment as determined by the Chief Executive Officer. Appointment of Chief Financial Officer did not take place during the year. The directors' report for this year has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed. The financial statements of the Company were duly endorsed by the Chief Executive Officer and Chief Financial Officer before approval of the board. The directors, Chief Executive Officer and executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding. The Company has complied with all the corporate and financial reporting requirements of the Code.
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Annual Report 2008
15. 16.
The Board has formed an Audit Committee. It comprises 3 members, of whom 2 are Non-Executive Directors including the chairman of the committee. The meetings of the Audit Committee (AC) were held at least once every quarter prior to approval of the interim and final results of the Company and as required by the code. The terms of reference of the (AC) have been formed and advised to the (AC) for compliance. The Board has outsourced the internal audit function to M/s Anjum Asim Shahid Rehman & Co. Chartered Accountants, and has also approved their remuneration & terms and conditions. They are considered suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the Company and their representatives are involved in the internal audit function on a full time basis. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the quality control review program of the Institute of Chartered Accountants of Pakistan (ICAP), that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by ICAP. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance to the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard. We confirm that all other material principles contained in the Code have been complied.
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Karachi Date: September 25, 2008
On Behalf of the Board of Directors Dawood Capital Management Limited Tara Uzra Dawood Chief Executive Officer
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Annual Report 2008
REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE WITH BEST PRACTICIES OF CODE OF CORPORATE GOVERNANCE
ERNST & YOUNG
Ford Rhodes Sidat Hyder & Co.

Chartered Accountants Progressive Plaza, Beaumont Road P.O. Box 15541 Karachi 75530, Pakistan
Phone: (92-21) 565 0007-11 Fax: (92-21) 568 1965 frsh.khi@pk.ey.com Offices at Lahore & Islamabad www.ey.com/pk
We have reviewed the Statement of Compliance with the best practices (the Statement) contained in the code of Corporate Governance (the Code) prepared by the Board of Directors of Dawood Capital Management Limited (The Company) to comply with Listing Regulations No. 37 of the Karachi Stock Exchange (Guarantee) Limited, where the Company is listed. The responsibility for compliance with the Code is that of the Board of Directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement reflects the status of the Company's compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the Company's personnel and review of various documents prepared by the Company to comply with the code. As part of or audit of the financial statements, we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We have not carried out any special review of the internal control system to enable us to express an opinion as to whether the Board's statement on internal control covers all controls and the effectiveness of such internal controls. Based on our review, nothing has come to our attention, which causes us to believe that the Statement of Compliance does not appropriately reflect the Company's compliance, in all material respects, with the best practices contained in the Code for the year ended June 30, 2008.
Karachi Date: September 25, 2008
Chartered Accountants
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Annual Report 2008
AUDITORS REPORT TO THE MEMBERS
ERNST & YOUNG
Ford Rhodes Sidat Hyder & Co.

Chartered Accountants Progressive Plaza, Beaumont Road P.O. Box 15541 Karachi 75530, Pakistan
Phone: (92-21) 565 0007-11 Fax: (92-21) 568 1965 frsh.khi@pk.ey.com Offices at Lahore & Islamabad www.ey.com/pk
We have audited the annexed balance sheet of Dawood Capital Management Limited as at June 30, 2008 and the related Profit and Loss account, Cash Flow Statement and Statement of Changes in Equity together with the notes forming part 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. It is the responsibility of the Company's management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also include assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said 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;
(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 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; (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, cash flow statement and the statement of changes in equity, 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, 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, 2008 and of the profit, its cash flows and changes in equity for the year then ended; and
(d) in our opinion, no zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.
Chartered Accountants Karachi Date: September 25, 2008
18
Annual Report 2008
BALANCE SHEET
AS AT JUNE 30, 2008

Notes ASSETS Non-Current Assets Operating Fixed Assets Long-Term Investments Long-Term Receivables from Related Parties Long-Term Loan Long-Term Deposits Current Assets Investments - Available for Sale Loans and Advances Fund Placement - Unsecured Prepayments, Interest Accrued and Other Receivables Remuneration Due from Funds Under Management Advance Tax - Net of Provision Bank Balances 9 10 11 12 13 14 267,778,622 30,165,933 15,000,000 619,834 5,562,286 6,243,090 1,333,322 326,703,087 512,903,953 131,564,250 27,189,019 763,291 21,709,356 1,465,900 272,426 182,964,242 347,453,820 5 6 7 8 7,204,068 172,729,058 2,615,000 3,621,740 31,000 186,200,866 3,786,710 156,471,655 4,024,388 175,825 31,000 164,489,578 2008 Rupees 2007 Rupees
EQUITY AND LIABILITIES Share Capital and Reserves Authorised Capital 20,000,000 Ordinary Shares of Rs.10/- Each Issued, Subscribed and Paid-Up Capital Unrealised Surplus on Revaluation of Available for Sale Investments to Fair Value - Net Reserves Non-Current Liabilities Deferred Tax Liability - Net Current Liabilities Short-Term Borrowings Running Finance Under Mark-Up Arrangement - Secured Accrued and Other Liabilities Accrued Mark-Up on Borrowings Contingencies and Commitments 18 19 20 21 22 100,000,000 7,088,289 11,169,957 1,726,157 119,984,403 512,903,953 75,996,784 5,077,772 6,409,535 602,781 88,086,872 347,453,820 17 227,000 308,000 15 9 16 200,000,000 136,125,000 140,588,092 115,979,458 392,692,550 200,000,000 121,000,000 27,283,835 110,775,113 259,058,948
The annexed notes from 1 to 41 form an integral part of these financial statements.
Chief Executive Officer
Director
19
Annual Report 2008
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2008
Notes INCOME Investment Income Management Fee EXPENSES Administrative and Operating Expenses Financial Charges 25 26 52,497,190 13,669,384 66,166,574 18,020,199 452,948 18,473,147 5,381,927 23,855,074 3,740,731 (134,002) (81,000) 3,525,729 20,329,345 29 1.49 25,536,608 6,814,118 32,350,726 18,376,002 543,585 18,919,587 23,754,567 42,674,154 3,388,840 (4,911,511) 248,000 (1,274,671) 43,948,825 3.23 23 24 16,485,502 67,701,271 84,186,773 12,251,239 38,475,489 50,726,728 2008 Rupees 2007 Rupees
Other Operating Income
27
Share of Associate's Profit PROFIT BEFORE TAXATION Taxation - Current - Prior - Deferred 28 NET PROFIT FOR THE YEAR EARNINGS PER SHARE - Basic and Diluted
Director
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Annual Report 2008
CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2008
2008 Rupees CASH FLOWS FROM OPERATING ACTIVITIES Profit Before Taxation 23,855,074 Adjustments for: Depreciation Loss/(Gain) on Disposal of Operating Fixed Assets Financial Charges Dividend Income Return on TFCs/Fund Placement Share of Associate's Profit Long-Term Deposits Written of Operating Cash Flows Before Working Capital Changes (Increase)/Decrease In Current Assets Loans and Advances Funds Placement Prepayments and Other Receivables Remuneration Due from Funds Under Management Increase In Current Liabilities Accrued and Other Liabilities Long-Term Receivables from Related Parties Cash Flows (Used In)/From Operations Income Taxes Paid Financial Charges Paid Net Cash Flow From/(Used In) Operating Activities Cash Flows from Investing Activities Long-Term Investments - Net Proceeds from Disposal of Operating Fixed Assets Investments - Available for Sale Dividends Received Return on TFCs/Fund Placement Received Long-Term Loans Purchase of Fixed Assets Net Cash Flow Used in Investing Activities (10,875,476) 12,001 (22,910,115) 5,409,694 3,501,065 (3,445,915) (4,857,070) (33,165,816) (13,792,052) 175,000 (10,507,844) 3,174,790 3,354,119 89,851 (3,006,090) (20,512,226) 1,421,247 6,464 13,669,384 (5,409,694) (3,454,864) (5,381,927) 850,610 24,705,684 42,674,154 838,574 (92,645) 6,814,118 (3,174,790) (2,795,999) (23,754,567) 34,800 (22,130,509) 20,543,645 2007 Rupees
(2,976,914) (15,000,000) 97,256 16,147,070 (1,732,588) 4,760,422 `1,409,388 29,142,906 (8,383,919) (12,546,008) 8,212,979
(19,802,128) 1,415,831 (2,029,748) (20,416,045) 4,076,530 (1,024,388) 3,179,742 (4,005,420) (6,835,219) (7,660,897)
Director
21
Annual Report 2008
CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2007
Notes CASH FLOWS FROM FINANCING ACTIVITIES Repayment of Obligations Under Finance Lease Short-Term Borrowings Net Cash Flow from Financing Activities Net (Decrease) In Cash and Cash Equivalents Cash and Cash Equivalents at the Beginning of the Year Cash and Cash Equivalents at the End of the Year Components of Cash and Cash Equivalents Bank Balances Running Finance Under Mark-Up Arrangement - Secured 30 1,333,322 (7,088,289) (5,754,967) 272,426 (5,077,772) (4,805,346) 24,003,216 24,003,216 (949,621) (4,805,346) (5,754,967) (32,911) 26,996,784 26,963,873 (1,209,250) (3,596,096) (4,805,346) 2008 Rupees 2007 Rupees
Director
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Annual Report 2008
STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2008
Issued, Subscribed & Paid-Up Capital Statutory Reserve General Surplus Unappropriated Reserve on Revaluation Profit of Available for Sale Investment Rupees 15,000,000 11,239,659 8,000,000 16,044,176 Total
Balance as at July 01, 2006 Profit for the Year Transfer to General Reserve Issue of Bonus Shares Surplus on Revaluation of Securities - Net Balance as at June 30, 2007 Balance as at July 01, 2007 Profit for the Year Transfer to General Reserve Issue of Bonus Shares Surplus on Revaluation of Securities - Net Balance as at June 30, 2008
110,000,000 10,630,264 11,000,000 -
52,196,024 199,065,947 43,948,825 (8,000,000) (11,000,000) 43,948,825 16,044,176
121,000,000 10,630,264 121,000,000 10,630,264 15,125,000 136,125,000 -
23,000,000 27,283,835 23,000,000 27,283,835 113,304,257
77,144,849 259,058,948 77,144,849 259,058,948 20,329,345 (15,125,000) 20,329,345 113,304,257
(10,630,264) 10,630,264 -
33,630,264 140,588,092
82,349,194 392,692,550
Director
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Annual Report 2008
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008
1. COMPANY AND ITS OPERATIONS Dawood Capital Management Limited (the Company) was incorporated on September 18, 1990 as a public limited company in Pakistan, with its registered office at 1500-A, Saima Trade Tower, I.I.Chundrigar Road, Karachi. The company is listed on the Karachi Stock Exchange. The Company is re-registered as a Non Banking Finance Company under the Non Banking Finance Companies (Establishment and Regulation) Rules, 2003. The Company has obtained the licenses to carry out investment advisory services and asset management services under the Non Banking Finance Companies (Establishment and Regulation) Rules, 2003 (the NBFC Rules) and the Non Banking Finance Companies and Notified Entities Regulations, 2007 (the NBFC Regulations). The Company has floated the following open end funds; - Dawood Money Market Fund - Dawood Islamic Fund The company has also floated a closed end fund, "First Dawood Mutual Fund". 2. STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with the requirements of the Companies Ordinance, 1984, the NBFC Rules, the NBFC Regulations and the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Accounting Standards/International Financial Reporting Standards as notified under the provisions of the Companies Ordinance, 1984. Wherever, the requirements of the Companies Ordinance, 1984, the NBFC Rules, the NBFC Regulations or the directives issued by the Securities and Exchange Commission of Pakistan differ with the requirement of these standards, the requirements of the Companies Ordinance, 1984 or the requirement of the said directives take precedence. Accounting Standards Not Yet Effective The following revised standards and interpretations with respect to approved accounting standards as applicable in Pakistan would be effective from the dates mentioned below against the respective standard or interpretations. Standard or Interpretation Effective Date (Accounting Periods Beginning on or After) January 01, 2009 January 01, 2009 January 01, 2009 July 01, 2009 January 01, 2009 January 01, 2008 July 01, 2008 January 01, 2008 January 01, 2009 October 01, 2008
IAS 1 - Presentation of Financial Statements (Revised) IAS 23 - Borrowings Costs (Revised) IAS 27 - Consolidated and Separate Financial Statements (Revised) IFRS 7 - Financial Instruments: Disclosures IFRS 8 - Operating Segments IFRIC 12 - Service Concession Arrangements IFRIC 13 - Customer Loyalty Programmes IFRIC 14 - IAS 19 - The Limit on Defined Benefit Assets, Minimum Funding Requirements and their Interaction IFRIC 15 - Agreements for the construction of Real Estate IFRIC 16 - Hedges of a Net Investment in a Foreign Operation
These standards are not expected to have a material impact on the Companys financial statements other than an increase in disclosures is certain cases.
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Annual Report 2008
3. BASIS OF MEASUREMENT These financial statements have been prepared under historical cost convention except certain investments which are carried at their fair values. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 4.1 Critical Accounting Estimates and Judgments The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Companys accounting policies. Estimates and judgments are continually evaluated and are based on historic experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the process of applying the Company's accounting policies, management has made the following estimates and judgements which are significant to the financial statements: a) b) c) d) 4.2 Operating Fixed Assets Owned These are stated at cost less accumulated depreciation and any impairment, if any. Such costs include the cost of replacing parts of fixed assets when that cost is incurred. Maintenance and normal repairs are charged to income as and when incurred. Depreciation is charged to income over the useful life of the asset on a systematic basis applying the straight line method at the rates specified in note 5 to the financial statements. Depreciation on additions is charged from the month in which the assets are put to use while no depreciation is charged in the month in which the assets are disposed off. The carrying amounts are reviewed at each balance sheet date to assess whether they are recorded in excess of their recoverable amounts, and where carrying values exceed estimated recoverable amount, assets are written down to their estimated recoverable amount. An item of fixed asset is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The assets residual values, useful lives and methods are reviewed and adjusted, if appropriate, at each financial year end. Gains and losses on disposals, if any, of assets are included in income currently. Leased Asset subject to finance lease is accounted for by recording the asset at the lower of present value of minimum lease payments under the lease agreements and the fair value of asset acquired. The related obligation under the lease is accounted for as liability. Financial charges are allocated to accounting period in a manner so as to provide a constant periodic rate of charge on the outstanding liability. recognition of taxation and deferred tax (Note 4.20, 17 and 28); determining the useful lives of operating fixed assets (Note 4.2 and 5); classification of investments (Note 4.4, 6 and 9); and impairment of financial assets (Note 4.3)
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Annual Report 2008
4.3 Impairment The carrying amounts of the Companys assets, for which policy is given separately, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indication exists the assets recoverable amount is estimated. An impairment loss is recognised wherever the carrying amount of the asset exceeds its recoverable amount. Impairment losses are charged to income currently. 4.4 Investments All investments are initially recognised at fair value plus in the case of investments not at fair value through profit and loss, directly attributable transaction costs. The management of the Company determines the appropriate classification of its investments for the purpose of subsequent measurement in accordance with the requirements of International Accounting Standard (IAS) 39, 'Financial Instruments: Recognition and Measurement', at the time of purchase. As at June 30, 2008, investments of the company are categorised as follows: Investments at Fair Value Through Profit or Loss These include held for trading investments and such other investments that, upon initial recognition, are designated under this category. Investments are classified as held for trading if they are acquired for the purpose of selling in the near term. After initial measurement, such investments are carried at fair value and the gains or losses on revaluation are recognised in the income statement in the period in which they arise. Held to Maturity Investment with fixed maturities and fixed or determinable payments are classified as held to maturity investments when management has both the intent and ability to hold to maturity. After initial measurement, such investment are carried at amortised cost less any provision for impairment except for in case of debt securities (listed but not regularly traded on a stock exchange) and government securities, which are carried at fair value in accordance with the requirements of the NBFC Regulations. Available for Sale These are non-derivative financial assets that are not classified as (a) loans and receivables (b) held to maturity investments or (c) financial assets at fair value through profit or loss. After initial measurement, such investments are measured at fair value with unrealised gains or losses recognised directly in the equity until the investment is derecognised or determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is taken to the income statement. However, unquoted equity investments are carried at the lower of investment price or break up value in accordance with the requirements of the NBFC Regulations. Fair values of investments are determined as follows: Listed Shares These are valued on the basis of closing market prices quoted on the respective stock exchange. Mutual Funds Units These are valued by reference to the net asset values declared by the respective fund. Debt Securities Debt securities, listed but not traded regularly on a stock exchange, are valued at the average rate notified by the Mutual Funds Association of Pakistan (MUFAP). Fair value of unlisted debt securities, other than government securities, is also determined by reference to the average rates notified by MUFAP and where such rates are not so notified, with reference to quotations obtained from brokerage houses. Government Securities Fair value of government securities is determined by reference to the quotations obtained from the PKRV rate sheet on the Reuters page.
26
Annual Report 2008
4.5 Trade Date Accounting All regular way purchases/sales of investment are recognised on the trade date, i.e. the date the Company commits to purchase/sell the investments. Regular way purchases or sales of investment require delivery of securities within two days after the transaction date as required by stock exchange regulations. 4.6 Investment in Associate The Company's investment in associate is accounted for under the equity method. 4.7 Securities Under Repurchase/Resale Agreements Securities purchased under a corresponding commitment to resell at a specified future date (reverse-repo) are recorded s receivables against carry-over transactions at fair value of the consideration given. Securities sold under a simultaneous commitment to repurchase at a specified future date (repo) are recognised in the balance sheet as investments and he counterpart liability is shown as payable against carry-over transactions. All carry-over transactions are accounted for on settlement date basis. 4.8 Financial Instruments All the financial assets and financial liabilities are recognised at the time when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the Company loses control of the contractual rights that comprise the financial assets. Financial liabilities are derecognised when they are extinguished, that is, when the obligation specified in the contract is discharged, cancelled, or expires. Any gain or loss on derecognition of the financial assets and financial liabilities is taken to income currently. 4.9 Offsetting of Financial Assets and Financial Liabilities Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to set off the recognised amounts and the Company intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously. Corresponding income on the asset and charge on the liability is also off-set. 4.10 Employee Retirement Benefits-Defined Contribution Plan The Company operates recognised provident fund scheme for all its eligible employees. Equal monthly contributions are made, both by the Company and its employees, to the fund at the rate of 10 percent of basic salary. 4.11 Cash and Cash Equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement, cash and cash equivalent consist of bank balances and running finances under mark-up arrangements. 4.12 Trade Debts and Other Receivables These are stated at original invoice amount less an estimate for doubtful balance. Provision is made against impaired debts based on managements assessment regarding their recoverability. 4.13 Borrowing/Debt Borrowings/debt is recognized initially at fair value, net of transaction costs incurred. These are subsequently measured at amortized cost and any difference between the proceeds (net transaction costs) and the redemption value is recognized in the income statement over the period of borrowings/debt under the effective interest method. Markup/ profit on borrowings/ debt is calculated using the effective interest method and is recognized in the profit and loss account.
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Annual Report 2008
4.14 Trade and Other Payables Short term liabilities for trade and other amounts payables are recognized initially at fair value and subsequently carried at amortized cost. 4.15 Proposed Dividend and the Transfer Between Reserves Dividends declared and transfer between reserves, except appropriations which are required by the law, made subsequent to the balance sheet date are considered as non adjusting events and are recognized in the financial statements in the year in which such dividends are declared or transfers between reserves are made. 4.16 Foreign Currency Transactions Transactions denominated in foreign currencies are accounted for in rupees at the foreign exchange rates prevailing on the date of the transaction. Monetary assets and liabilities in foreign currencies are translated into rupees at the foreign exchange rates approximating those prevailing at the balance sheet date. Exchange differences are taken to the profit and loss account. 4.17 Revenue Recognition a) b) c) d) Dividend income is recognized at the time when right to receive dividend is established. Capital gain or loss on sale of investments is taken into income in the period in which they arise. Management fees is recognized on accrual basis. Profit/return from PLS deposits, placements and TFCs are recognized on an accrual basis.
4.18 Related Parties All transactions with related parties are carried out by the Company at arm's length basis. 4.19 Provision Provisions are recognised when the Company has present legal or constructive obligation as a result of past events, if it is probable that outflow of resources embodying economic benefits will be required to settle the obligations and a reliable estimate of the obligations can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. 4.20 Taxation Current The charge for current taxation is based on taxable income at current rates of taxation after taking into consideration available tax credits, rebates and tax losses, if any, or at the rate of one-half percent of turnover, whichever is higher. However, for income covered under final tax regime, taxation is based on applicable tax rules under such regime. The charge for current tax also includes adjustments where necessary, relating to prior years which arise from assessments framed/finalised during the year. Deferred Deferred tax is recognised using the balance sheet liability method on all significant temporary differences at the balance sheet date between the amounts attributed to assets and liabilities for financial reporting purposes and amounts used for taxation purposes. Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax losses and unused tax credits to the extent that it is probable that the taxable profits will be available against which these can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit can be realized. 4.21 Functional and Presentation Currency Items included in the financial statements are measured using the currency of the primary economic environment in which the Company operates. The financial statements are presented in Pakistani Rupees, which is the Companys functional and presentation currency.
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Annual Report 2008
Addition/ *Transfers/ (Deletion) OWNED Furniture and Fittings Vehicles Office Equipment Computer Equipment
Addition/ *Transfers/ (Deletion) OWNED Furniture and Fittings Vehicles
*Transfers/ (Deletion)
Office Equipment Computer Equipment
Mr. Tauqir Shamshad - Employee Mr. Kamran Rafique - Employee
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Annual Report 2008
Note 6. LONG TERM INVESTMENTS Investment in associates Quoted First Dawood Mutual Fund (Closed-End Fund) - An Associate (Using Equity Method) 8,792,925 (2007: 8,792,925) fully paid Ordinary Certificates of Rs.10/- Each Representing 15.14% (2007: 15.14%) holding 6.1 Dawood Money Market Fund (Open-End Fund) - An Associate (Using Equity Method) 300,722 (2007:180,087) units of Rs.100/- each representing 0.94% (2006: 0.60%) holding 6.2 Other - Investment in Unlisted Companies (Available for Sale) Sapphire Power Generation Limited 50,000 (2007: 50,000) Fully Paid Ordinary Shares of Rs.10/- each Dawood Islamic Bank Limited - a Related Party 2,345,034 (2007: 1,700,000) Fully Paid Ordinary Shares of Rs.10/- each 6.4 23,450,340 172,729,058 17,000,000 156,471,655 6.3 1,750,000 1,750,000 33,290,804 20,072,743 114,237,914 117,648,912 2008 Rupees 2007 Rupees
6.1
The fair value of investment in First Dawood Mutual Fund (the Fund) as at June 30, 2008 amounts to Rs. 62,781,485 (2007: Rs. 79,136,325). NBFC Rules requires an investment advisor to hold 10 - 20 % of the paid-up value of its closed-end funds under management. This investment has been made to comply with the said rule. The abridged financial information of the Fund based on audited financial statements as at June 30, 2008 is as follows:
Associate's statement of assets and liabilities Total Assets Total Liabilities Net Assets Associate's Income Statement Total Income Net Income 759,056,835 6,589,553 752,467,282 67,386,441 35,547,736 799,702,319 24,707,773 774,994,546 182,407,288 156,892,791
The Fund has been classified as an associate inspite of the fact that the Company holds less than 20 percent in the Fund for the reason that the Company is also an investment advisor of such mutual fund by virtue of which it participates in the financial and operating policies of the Fund and hence has significant influence over its investee.
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Annual Report 2008
6.2 The fair value of investment in Dawood Money Market Fund (the Fund) as at June 30, 2008 amounts to Rs. 33,290,804 (2007: Rs. 20,072,743). The abridged financial information of the Fund based on audited financial statements as at June 30, 2008 is as follows:
Note Associate's statement of assets and liabilities Total Assets Total Liabilities Net Assets Associate's Income Statement Total Income Net Income
2008 Rupees
2007 Rupees
3,651,171,169 111,178,153 3,539,993,016
3,385,007,135 59,459,889 3,325,547,246
387,665,460 329,232,464
366,741,963 323,979,233
The Fund has been classified as an associate inspite of the fact that the Company holds less than 20 percent in the Fund for the reason that the Company is also the management company of such mutual fund by virtue of which it participates in the financial and operating policies of the Fund and hence has significant influence over its investee. 6.3 The net assets of Sapphire Power Generation Limited based on audited financial statements as at June 30, 2007 amounts to Rs.528.554 million (2006: Restated Rs.524.391 million). The Chief Executive of the company is Mr. Shahid Abdullah. The net assets of Dawood Islamic Bank Limited based on audited financial statements as at December 31, 2007 amounts to Rs.3,665.89 million (2006: Rs.2,686.45 million). The Chief Executive of the bank is Mr. Nikolaus Schwarz. This investment represents sponsor equity in the bank and shall not be sold without the prior consent of the State Bank of Pakistan. LONG TERM RECEIVABLES FROM RELATED PARTIES - UNSECURED-CONSIDERED GOOD From Associates: First Dawood Mutual Fund Dawood Islamic Fund Less: Receivable Within One Year First Dawood Mutual Fund Dawood Islamic Fund Others: Dawood Equities Fund
6.4
7.
2,000,000 2,000,000 4,000,000 (1,000,000) (500,000) (1,500,000) 115,000 2,615,000
3,000,000 2,449,388 5,449,388 (1,000,000) (500,000) (1,500,000) 75,000 4,024,388
7.1
These represent formation costs incurred by the Company in connection with the floatation of open and close end funds which are recoverable in equal installments from the respective funds over a period of five years. LONG-TERM LOAN Related Party - Unsecured, Considered Good Less: Receivable Within One Year 8.1 4,045,947 (424,207) 3,621,740 265,676 (89,851) 175,825
8.
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Annual Report 2008
8.1 Represents loan to an executive as per details below: 2008 Rupees 265,676 4,000,000 (219,729) 4,045,947 2007 Rupees 345,400 (79,724) 265,676
Note Opening Balance Disbursement Repayments Closing Balance
These loans have been provided to facilitate construction / renovation of residential accommodation as per Company policy and is repayable over a period ranging between 5 years and 10 years with the mark up rate ranging between 5% and 12% per annum. The maximum aggregate amount outstanding at the end of any month during the year was Rs.4,214,574 (2007: Rs. 345,400). 9. INVESTMENTS - AVAILABLE FOR SALE Cost 2008 Fair Value Cost 2007 Fair Value
Note -------------------------------Rupees-----------------------------Units of Open-End Mutual Funds Listed Shares and Close-End Funds Unlisted Shares Term Finance Certificates - Listed Application Money for Subscription of Term Finance Certificates Surplus on Revaluation of Investments 9.1 Available for Sale Investments Related Parties Others 9.2 Units of Open-End Mutual Funds No. of Units 2008 2007 Name of Mutual Funds 9.2.1 Pakistan Stock Market Fund Pakistan Capital Market Fund Alfalah GHP Income Multiplier Fund 1,000,000 5,000 200,000 1,205,000 7,174,370 8,606 220,297 7,403,273 1,000,000 5,000 1,005,000 7,402,372 9,206 7,411,578 29,663,908 151,514,358 31,716,408 56,065,172 97,526,622 116,264,264 72,564,007 75,499,078 127,190,530 267,778,622 104,280,415 131,564,250 9.2 9.3 9.4 9.5 9.6 1,205,000 7,403,273 97,698,197 232,087,872 3,287,333 3,287,477 1,005,000 71,210,863 15,000,000 17,064,552 7,411,578 92,017,530 15,000,000 17,135,142
25,000,000 25,000,000 127,190,530 267,778,622 104,280,415 131,564,250 140,588,092 27,283,835 267,778,622 267,778,622 131,564,250 131,564,250
87,975 67,812 793 630 4,286 9.2.1
77,840 units are pledged with a commercial bank against running finance under markup arrangement.
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Annual Report 2008
9.3 Listed Shares and Close-End Funds All shares/certificates represent fully paid ordinary shares/certificates of Rs.10/- each, unless otherwise stated. 2008 Fair value 2007 Fair value
No. of Shares/ Certificates 2008 2007
Cost
Name of Companies/Mutual Funds
Cost
Note -------------------------------Rupees------------------------------
Mutual Funds 1,020,525 1,020,525 Atlas Fund of Funds 1,000,000 1,000,000 NAMCO Balanced Fund 53,000 94,500 Pakistan Strategic Allocation Fund 970,000 970,000 WE Balanced Fund Investment Bank
First Dawood Investment Bank Limited -
9,524,214 10,000,000 530,000 9,700,000
9,092,878 9,310,000 488,130 9,506,000
9,524,214 10,000,000 945,000 9,700,000
9,388,830 9,750,000 992,250 9,603,000
2,166,038 1,633,512 related party 1,500,000 Dawood Equities Limited Commercial Bank Arif Habib Bank Limited Habib Bank Limited
9.3.1 29,663,908 151,514,358 15,000,000 26,625,000
22,941,408 -
47,290,172 -
500 110
10,500 23,500
9,590 22,949
128,153
Insurance 76,500 American Life Insurance Company Limited
3,769,683
6,279,497
2,986,778
3,534,300
Textile Composite 1,500,000 1,500,000 Chenab Limited (Preference shares) 9.3.2 15,000,000 Cement 7,593 Pioneer Cement Limited Chemicals Engro Polymer Chemical Ltd. - PRO
12,255,000
15,000,000
11,175,000
209
2,942
5,888
113,463
283,978
248,525
4,473,450
6,978,582
92,017,530
97,698,197 232,087,872 71,210,863 9.3.1
As per SECP Circular 09 of 2006, 1,361,613 (2007: 1,361,613) shares of First Dawood Investment Bank Limited are held in a blocked account with CDC. The Company can only dispose these shares with the prior approval from the SECP. These shares are pledged with a commercial bank against running finance under markup arrangement. Unlisted Shares
9.3.2 9.4
No. of Shares 2008 2007
Name of Companies
Cost
2008 Fair value
Cost
2007 Fair value
Note -------------------------------Rupees-----------------------------1,500,000 Dawood Equities Limited 15,000,000 15,000,000 15,000,000 15,000,000
33
Annual Report 2008
9.5 Term Finance Certificates - Listed
All certificates represent face value of Rs.5,000/- each. * These TFCs are pledged with commercial bank against short-term borrowing facility and finance obtained under mark-up arrangements.
34
Annual Report 2008
9.6
Note Application Money for Subscription of Term Finance Certificates Trust Investment Bank Limited 9.6.1 9.6.1
2008 Rupees
2007 Rupees
25,000,000
This represents application money for subscription of 5,000 units of term finance certificates (Pre-IPO) and carry mark-up equal to the base rate of 6 months Karachi Interbank Offer Rate (KIBOR) plus 1.85% per annum, receivable emi-annually in arrears with no floor or cap and will mature in 5 years after the issue.
10.
LOANS AND ADVANCES - UNSECURED Considered Good Current Portion of Long-Term Receivables from Related Parties 7 Current Portion of Long-Term Loan 8 Advance to Employees Advance Against Subscription for Units/Shares 10.1 Considered Doubtful Advances Against Ventures Provision for Doubtful Debts 1,500,000 424,207 1,241,726 27,000,000 30,165,933 100,000 (100,000) 30,165,933 10.1 1,500,000 89,851 399,168 25,200,000 27,189,019 100,000 (100,000) 27,189,019
Includes advance against subscription of shares of Dawood Takaful Limited of Rs. 27,000,000 (2007:NIL), units of Dawood Islamic Fund, an open ended mutual fund floated by the Company, of Rs. NIL (2007: 25,000,000) and shares of Alfalah GHP Investment Management Limited of Rs. NIL (2007: 200,000).
11. FUND PLACEMENT - UNSECURED The amount represent an investment made in a private company at a mark-up rate of 17 percent per annum. The faciltiy matured on July 3, 2008. 12. PREPAYMENTS, INTEREST ACCRUED AND OTHER RECEIVABLES - CONSIDERED GOOD, UNSECURED Prepayments Accrued Markup on Investments Others 13. REMUNERATION DUE FROM FUNDS UNDER MANAGEMENT Open-End Fund Dawood Money Market Fund Dawood Islamic Fund Closed-End fund First Dawood Mutual Fund 24.1 24.1 3,148,187 584,444 3,732,631 1,829,655 5,562,286 2,351,797 2,351,797 19,357,559 21,709,356 546,034 73,800 619,834 70,556 592,235 100,500 763,291
24.1
35
Annual Report 2008
14.
BANK BALANCES 2008 Rupees 2007 Rupees
Note Cash at Bank: Current Accounts Saving Accounts
14.1
131,303 1,202,019 1,333,322
131,303 141,123 272,426
14.1 These carry mark-up ranging between 4% and 4.5% (2007: 2% and 4.5%) per annum. 15. ISSUED, SUBSCRIBED AND PAID UP CAPITAL
No. of Units 2008 2007
Name of Mutual funds
Ordinary Shares of Rs.10/- Each Issued as Fully Paid 10,000,000 10,000,000 in cash 3,612,500 2,100,000 Ordinary Shares of Rs. 10/- Each Issued as Fully Paid Bonus Shares 13,612,500 12,100,000 15.1 Reconciliation of Number of Ordinary Shares of Rs. 10/ Each:
100,000,000 36,125,000 136,125,000
100,000,000 21,000,000 121,000,000
At the Beginning of the Year Add: Issued as Bonus Shares During the Year At the End of the Year 15.2 The Shares Held by Related Parties are as Follows:
2007 No. of Shares 12,100,000 11,000,000 1,512,500 1,100,000 13,612,500 12,100,000
2008
First Dawood Investment Bank Limited BRR Guardian Modaraba
4,083,750 1,756,149 5,839,899 2008 Rupees
3,630,000 1,561,021 5,191,021 2007 Rupees
16.
RESERVES Capital Reserves Statutory Reserve Revenue Reserves General Reserve Unappropriated Profit
16.1
10,630,264
33,630,264 82,349,194 115,979,458 115,979,458
23,000,000 77,144,849 100,144,849 110,775,113
36
Annual Report 2008
16.1
The above reserve was created by transferring 20 percent after tax profits, as required under Rule-3 of the repealed Rules of Business for Non-Banking Financial Institutions. Consequent to the Company's registration under the Non Banking Finance Companies (Establishment & Regulation) Rules 2003, no further transfer has been made to the reserve subsequent to December 31, 2002. DEFERRED TAX LIABILITY - NET Note 2008 Rupees 2007 Rupees
17.
Taxable Temporary Differences on: Accelerated Tax Depreciation
227,000 227,000
308,000 308,000
18.
SHORT TERM BORROWINGS From: Banking Company - Secured Other Financial Institution - Unsecured Related Party - Unsecured Others - Unsecured
18.1 18.2
50,000,000 50,000,000 100,000,000
15,000,000 50,000,000 10,000,000 996,784 75,996,784
18.1
This represents short term borrowing at the rate of 11.30 (2007: 11.65) percent per annum. The facility matured on July 30, 2008.
18.2
This represents short term borrowing from a related party which carries markup at the rate of 11 percent to 17 percent (2007: 11.50) percent per annum. The facility matured on July 3, 2008, July 18, 2008 & Septemeber 10, 2008.
19.
RUNNING FINANCE UNDER MARKUP ARRANGEMENT - SECURED This represents approved running finance facility of Rs.8 million (2007: Rs.8 million) obtained from a commercial bank and is repayable on demand. The facility is secured by pledge of preference shares and units of mutual fund. The facility is subject to mark-up at the rate of 12.70 (2007: 11.84) percent per annum.
20.
ACCRUED AND OTHER LIABILITIES Accrued Expenses Unclaimed Dividend Bonus to Employees Other Liabilities 20.1 6,701,989 1,029,504 1,588,000 1,850,464 11,169,957 1,969,327 1,034,546 1,032,625 2,373,037 6,409,535
20.1
The above includes payable to related parties Rs. 1,175,000 (2007: Rs. 1,532,625).
37
Annual Report 2008
21.
ACCRUED MARKUP ON BORROWINGS Note 2008 Rupees 2007 Rupees
Accrued Markup on: Short-Term Borrowings Running Finance Under Mark-Up Arrangement
1,511,534 214,623 1,726,157
434,188 168,593 602,781
22.
CONTINGENCIES AND COMMITMENTS Contingencies
While finalizing the assessment for 1998-99 to 2002-2003, the Deputy Commissioner of Income Tax (DCIT) made certain disallowances of expenses that have an aggregating tax impact of Rs.3.832 million. The Company had filed appeals with the Commissioner of Income Tax (CIT) and subsequently the CIT cancelled the orders under section 122(5A) of the Income tax Ordinance, 2001. An appeal against the said decision was filed by the department before the Income Tax Appellate Tribunal. During the current year ITAT has given its decision in favour of the Company.
23.
INVESTMENT INCOME Equity Investments Gain on Sale of Investments Dividend Income Other Investments Return on Fund Placement Return on Term Finance Certificates
7,620,944 5,409,694 13,030,638 6,986 3,447,878 3,454,864 16,485,502
6,280,450 3,174,790 9,455,240 130,820 2,665,179 2,795,999 12,251,239
24.
MANAGEMENT FEE Open-End Funds Dawood Money Market Fund - An associate Dawood Islamic Fund - An Associate Closed-End Funds First Dawood Mutual Fund - An Associate
24.1 24.1
37,128,728 6,459,972 43,588,700 24,112,571 67,701,271
19,357,469 19,357,469 19,118,020 38,475,489
24.1
38
Annual Report 2008
24.1
Under the provisions of the Non-Banking Finance Companies and Notified Entities Regulations, 2007 and NonBanking Finance Companies (Establishment and Regulation) Rules, 2003, the management company/investment advisor of the fund is entitled to a remuneration during the first five years of the fund, of an amount not exceeding the three percent of the average net assets of the fund and thereafter of an amount equal to two percent of such assets of the fund. During the year ended June 30, 2008 the company has charged the management fee at the rates ranging from 1 to 3 percent (2007: 1 to 3 percent). The rates charged to each fund during the year ended June 30, 2007 and 2008 are as under:
2008 2007 Remuneration for services rendered as an asset management company --------- Percentage -------Open-End Funds Dawood Money Market Fund - An Associate Dawood Islamic Fund - An Associate Closed-End Funds First Dawood Mutual Fund - An Associate
1 1.5
1 -
3 2008 Rupees
3 2007 Rupees
Note 25. ADMINISTRATIVE AND OPERATING EXPENSES Salaries and Allowances Rent, Rates and Taxes Postage and Telephones Legal and Professional Charges Printing and Stationery Travelling and Conveyance Vehicles Running Advertisement Electricity Repairs and Maintenance Auditors Remuneration Entertainment Insurance Depreciation Newspapers, Magazines and Subscriptions Directors' Fee Brokerage and Commission Donation Others
25.1 & 25.2 19,595,427 1,044,744 270,609 10,694,017 1,599,701 807,489 1,405,694 5,541,463 1,422,429 877,092 25.3 285,000 212,760 230,831 1,421,247 1,649,381 37,000 4,556,925 25.4 350,786 494,595 52,497,190
10,524,715 887,283 240,872 4,510,869 983,600 799,957 936,516 1,626,143 780,758 470,259 185,000 197,496 205,627 838,574 1,231,930 21,500 604,500 300,786 190,223 25,536,608
39
Annual Report 2008
25.1 This includes Rs. 817,818 (2007: Rs. 438,082/-) representing contributions to staff retirement benefits. 25.2 Remuneration of Chief Executive, Director and Executives - --------------2008-----------------------------2007--------------Chief Directors Executives Chief Directors Executives Executive Executive ----------------------------------------Rupees----------------------------------------Managerial Remuneration House Rent Bonus Medical Utilities Provident Fund E.O.B.I Meeting Fee Number of persons 3,200,000 1,280,000 800,000 2,673 320,000 320,004 5,922,677 1 37,000 37,000 6 4,984,932 1,993,973 512,500 48,000 498,493 343,561 8,694 8,390,153 4 2,000,000 800,000 1,000,000 2,738 200,000 200,003 4,202,741 1 21,500 21,500 6 1,160,000 464,000 580,000 22,000 116,000 116,004 3,360 2,461,364 2
The Chief Executive and Executives have been provided with company maintained cars. Executive means an employee other than director and chief executive, whose basic salary exceeds Rs.500,000/- in a financial year.
25.3
Auditors' Remuneration Audit Fee Certification Fee Fee for Half-Yearly Review Out of Pocket Expenses
Note
2008 Rupees 150,000 45,000 60,000 30,000 285,000
2007 Rupees 100,000 25,000 40,000 20,000 185,000
25.4 26.
No director or his/her spouse had any interest in the donee. FINANCIAL CHARGES Mark-Up on Lease Obligations Mark-Up on Short-Term Running Finance Mark-Up on Short-Term Borrowings Bank Charges 518,284 13,136,986 14,114 13,669,384 689 677,564 6,118,844 17,021 6,814,118
19 26.1
26.1 27.
Include mark up to related parties of Rs. 4,008,356 (2007: Rs. 3,567,033). OTHER OPERATING INCOME Underwriting Commission (Loss)/Gain on Disposal of Operating Fixed Assets Mark-Up Earned on Savings Account Mark-Up earned on Long Term Loan Others 266,265 (6,464) 72,425 109,341 11,381 452,948 213,850 92,645 81,538 37,217 118,335 543,585
40
Annual Report 2008
28.
RELATIONSHIP BETWEEN TAX EXPENSE AND ACCOUNTING PROFIT Profit Before Taxation Tax Charge at Enacted Rate of 35 Percent Effect of Taxable/(Deductible) Expenses 23,855,074 42,674,154 14,935,954 (7,574) (11,539,540) (4,911,511) 248,000 (1,274,671)
8,349,275 9,027 Tax Effect of Exempt Income and Income Subject to Reduced Rate of Tax (4,617,571) Prior Year Effect 28.1 (134,002) Tax Effect of Temporary Taxable Differences (81,000) Tax (Income)/Expense 28.1 29. 3,525,729
Represents Prior Years' Difference in Provision for Taxation and Related Tax Liabilities. EARNINGS PER SHARE - Basic and Diluted Profit for the Year 20,329,345 43,948,825
------- No of Shares ------Weighted Average Number of Ordinary Shares 13,612,500 13,612,500
---------- Rupees ---------Earnings Per Share - Basic and Diluted 1.49 3.23
30.
CASH AND CASH EQUIVALENT Cash and Bank Balances Running Finance Under Mark-Up Arrangement - Secured 1,333,322 (7,088,289) (5,754,967) 272,426 (5,077,772) (4,805,346)
41
Annual Report 2008
31.
TRANSACTIONS WITH RELATED PARTIES The related parties comprise of related group companies, directors and their close family members, senior executives, retirement benefit plans, major shareholders of the Company and funds under management. Transactions with the related parties during the year were as follows: 2008 2007 Rupees Rupees Relationship with the Company Mutual Funds Managed by the Company Nature of Transactions Investment in Funds Management Fee Redemption of Units Bonus Units Investment in Units Recovery of Formation Costs Payment of Formation Costs 67,701,271 307,257,498 1,964,910 314,128,981 1,000,000 90,612 453,180 38,475,489 42,902,988 2,729,395 62,938,054 1,200,000 2,524,388 1,909,998 32,911 1,074,938 66,000,000 81,000,000 3,567,033 4,356,566 17,000,000
Major Shareholders
Share of Common Expenses 1,719,228 Payment of Lease Rentals Interest on Term Finance Certificates 537,469 Redemption of TFC's 8,775,000 Funds Borrowed 82,000,000 Repayment of Borrowings 42,000,000 Payment of Financial Charges on Borrowings 2,101,370 Share of Common Expenses Purchase of Shares 6,702,439 6,450,340
Others
The Company has not entered into any transaction with director and senior executives other than those provided under the Company's policies and terms of employment. 32. CAPITAL RISK MANAGEMENT The primary objective of the companys capital management is to maintain healthy capital ratios, strong credit rating and optimal capital structures in order to ensure ample availability of finance for its existing and potential investment projects, to maximize shareholder value and reduce the cost of capital. The company manages its capital structure and makes adjustment to it, in light of changes in economic conditions. In order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares. 33. CREDIT RISK Credit risk represents the accounting loss that would be recognised at the reporting date if counter parties failed completely to perform as contracted. The Company attempts to control credit risk associated with the carrying amount of its receivables by monitoring credit exposures, limiting transactions with specific customers and continuing assessment of credit worthiness of such customers. 34. FOREIGN EXCHANGE RISK MANAGEMENT Foreign currency risk arises mainly where receivables and payables exist due to transactions entered into in foreign currencies. The Company is not exposed to foreign currency risk. 35. MARKET RISK Market risk is the risk that the value of the financial instrument may fluctuate as a result of changes in market prices. The company has made investments in listed equity securities. The company manages its market risk exposure by diversifying its investment portfolio.
42
Annual Report 2008
Financial Assets Long-Term Investments Long-Term Receivables from Related Parties Long-Term Loan Long-Term Deposits Investments - Available for Sale Loans and Advances Fund Placement Interest Accrued and Other Receivables Remuneration Due from Funds Under Management Bank Balances
Financial Liabilities Short-Term Borrowings Running Finance Under Mark-Up Arrangement Accrued and Other Liabilities Accrued Mark-Up on Borrowings
Financial assets Long-Term Investments Long-Term Receivables from Related Parties Long-Term Loan Long-Term Deposits Investments - Available for Sale Loans and Advances Fund Placement Interest Accrued and other Receivables Remuneration Due from Funds Under Management Bank balances Financial Liabilities Short-Term Borrowings Running Finance Under Mark-Up Arrangement Accrued and other Liabilities Accrued Mark-Up on Borrowings
43
Annual Report 2008
38.
APPROPRIATIONS In the meeting held on September 25, 2008, the Board of Directors of the Company, recommended the issue of bonus shares @10% i.e. in the proportion of 1 new ordinary shares for every 10 ordinary share held for the approval of the members at the Annual General Meeting.
39.
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledge willing parties in an arms length transaction. Financial assets which are tradable in an open market are revalued at the market prices prevailing on the balance sheet date except for investment in associates that are held for long term and accounted for under equity method. The estimated fair value of all other financial assets and liabilities is considered not significantly different from book value.
40.
AUTHORIZATION These financial statements were authorised for issue in Board of Directors meeting held on September 25, 2008
41.
CORRESPONDING FIGURES Corresponding figures have been reclassified, wherever necessary, for the purpose of comparison. Statement Nature of item Prepayments Reclassification from Prepayments to
Presentation, interest
Reason
Rupees 72,556
Balance Sheet
For better accrued are other Presentation recivabies
Balance Sheet on borrowing Balance Sheet
Accrued mark-up on investments Others
Accrued markup on investments Other Receivables
592,235
100,500
Director
44
Annual Report 2008
PATTERN OF SHARE HOLDING AS AT JUNE 30, 2008

No. of Shareholders 101 207 178 104 25 9 3 5 4 1 1 1 4 1 1 1 1 1 2 1 1 1 1 1 1 1 657 From 1 101 501 1,001 5,001 10,001 15,001 20,001 25,001 30,001 70,001 95,001 105,001 160,001 350,001 410,001 515,001 525,001 595,001 600,001 620,001 670,001 805,001 950,001 1,035,001 4,080,001 Share Holding To Total Shares Held 3,237 47,657 128,645 261,875 190,622 113,250 58,500 113,930 110,588 34,780 71,600 99,149 428,210 160,751 353,925 414,092 516,012 528,573 1,198,950 603,484 621,640 673,818 806,676 952,875 1,035,911 4,083,750 13,612,500
100 500 1,000 5,000 10,000 15,000 20,000 25,000 30,000 35,000 75,000 100,000 110,000 165,000 355,000 415,000 520,000 530,000 600,000 605,000 625,000 675,000 810,000 955,000 1,040,000 4,085,000
CATEGORIES OF SHAREHOLDERS AS AT JUNE 30, 2008

Particulars Individuals Joint Stock Companies Govt. Organizations Financial Institution Modaraba Mutual Fund Others Categories of Share holders 622 21 1 7 2 3 1 657 Total Shares Held 4,701,806 1,190,758 500 5,310,935 1,759,551 50,000 598,950 13,612,500 Percentage 34.54 8.75 0.00 39.02 12.93 0.37 4.40 100.00
45
Annual Report 2008
PATTERN OF SHARE HOLDING AS AT JUNE, 30 2008

Category No. 1. Cetrogies of Shares Holders Number Shares Held 5,843,301 1,759,551 4,083,750 3 1,225,969 1,225,124 500 345 Percentage % 42.93 12.93 30.00 9.01 9.00 0.00 0.00
Associated Companies B.R.R. Guardian Modaraba First Dawood Investment Bank Limited
2.
NIT & ICP National Bank of Pakistan Trustee Deptt. Investment Corporation of Pakistan IDBP (ICP UNIT)
3.
Directors, CEO and their Spouses and Minor Childern Miss Tara Uzra Dawood 1,037,952 28 600,938 7.62 4.41
4.
Banks, DFIs. NBFIs, Insurance Companies, Modarabas and Mutual Funds
5.
Certificate Holders Holding Ten Percent or More in the Company B.R.R. Guardian Modaraba First Dawood Investment Bank Limited
5,843,301
42.93
1,759,551 4,083,750
12.93 30.00
46
Annual Report 2008
FORM OF PROXY XVII ANNUAL GENERAL MEETING

Dawood Capital Management Ltd. Karachi.
I/We
of (full address)
being a member of Dawood Capital Management Limited Folio # Mr./Ms of Mr./Ms of Folio # Folio #
do hereby appoint
(full address) (or failing him)
(full address)
being another member of the Company as my/our proxy to attend and vote for me/us on my/our behalf, at the XVII Annual General Meeting of the Company to be held on October 22, 2008 at 15:30 hours and to every adjournment thereof. And witness my/our hand/seal this day of 2008, signed by the said in the presence of Mr./Ms. of (full address)
REVENUE STAMP Rs. 5/-
Signature of Witness Important Notes :
Signature(s) and or Seal
1. The share transfer books of the Company will remain closed from October 22, 2008 to October 28, 2008 (both days inclusive). 2. A member entitled to attend and vote at the General Meeting is entitled to appoint a proxy to attend and vote instead of him/her. No person other than a member shall act as a proxy. 3. An instrument appointing a proxy and the power of attorney or other Authority (if any) under which it is signed or a notarially certified copy of the Power or Authority, in order to be valid, must be deposited at the Registered office of the Company, 48 hours before the meeting and must be duly stamped, signed and witnessed. 4. If more than one instrument of proxy appointing more than one person is deposited with the Company, all such instruments of proxy shall be rendered invalid. 5. This signature on the Instrument of Proxy must conform to the specimen signature recorded with the Company. 6. CDC account holders will in addition have to follow the guidelines as laid down in Circular No. 1 dated January 26, 2000 of the Securities & Exchange Commission of Pakistan for attending the meeting.

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Auditors Legal Adviser

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NOTICE OF ANNUAL GENERAL MEETING (AGM XVII)

September 25, 2008 Karachi

By Order of the Board Tahir Mehmood Company Secretary

Annual Report 2008

Annual Report 2008

Authorized Capital Paid-up Capital Shareholders' Equity Total Assets

200.00 136.13 392.69 512.90

Annual Report 2008

Annual Report 2008

Annual Report 2008

Annual Report 2008

Annual Report 2008

Annual Report 2008

Annual Report 2008

11. 12. 13. 14.

Annual Report 2008

Karachi Date: September 25, 2008

Annual Report 2008

ERNST & YOUNG

Ford Rhodes Sidat Hyder & Co.

Karachi Date: September 25, 2008

Annual Report 2008

AUDITORS REPORT TO THE MEMBERS

ERNST & YOUNG

Ford Rhodes Sidat Hyder & Co.

Chartered Accountants Karachi Date: September 25, 2008

Annual Report 2008

AS AT JUNE 30, 2008

Chief Executive Officer

Annual Report 2008

Other Operating Income

Chief Executive Officer

Annual Report 2008

Chief Executive Officer

Annual Report 2008

Chief Executive Officer

Annual Report 2008

110,000,000 10,630,264 11,000,000 -

52,196,024 199,065,947 43,948,825 (8,000,000) (11,000,000) 43,948,825 16,044,176

121,000,000 10,630,264 121,000,000 10,630,264 15,125,000 136,125,000 -

23,000,000 27,283,835 23,000,000 27,283,835 113,304,257

77,144,849 259,058,948 77,144,849 259,058,948 20,329,345 (15,125,000) 20,329,345 113,304,257

Chief Executive Officer

Annual Report 2008

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Annual Report 2008

Annual Report 2008

Addition/ *Transfers/ (Deletion) OWNED Furniture and Fittings Vehicles

Office Equipment Computer Equipment

Mr. Tauqir Shamshad - Employee Mr. Kamran Rafique - Employee

Annual Report 2008

Annual Report 2008

3,651,171,169 111,178,153 3,539,993,016

3,385,007,135 59,459,889 3,325,547,246

2,000,000 2,000,000 4,000,000 (1,000,000) (500,000) (1,500,000) 115,000 2,615,000