Annual Report 2 0 0 4

CONTENTS

Company Information......................................................................................................... 4 Notice of Meeting .................................................................................................................. 5 Performance Table ................................................................................................................. 7 Directors Report ................................................................................................................... 9 Statement of Compliance with Code of Corporate Governance..........................................13 Auditors Report .................................................................................................................. 15 Balance Sheet....................................................................................................................... 16 Profit & Loss Account ......................................................................................................... 17 Statement of Changes in Equity...........................................................................................18 Cash Flow Statement ........................................................................................................... 19 Distribution Statement ......................................................................................................... 20 Notes to the Financial Statements........................................................................................21 Pattern of Shareholding ....................................................................................................... 32 Form of Proxy..........................................................................................................................

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Our Our Vision Vision Our Mission Our Mission

To set standards of best practices and performance for the industry through efficient asset allocation and security selection

To be the leading mutual fund in the industry, outperforming the benchmark on a consistent basis, and providing shareholders with the best combination of current income and future growth on a risk adjusted basis.

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COMPANY INFORMATION
BOARD OF DIRECTORS Mr. Irfan Siddiqui Mr. Mohammad Shoaib Mr. Ariful Islam Ms. Hina Akhlaq Mr. Manzoor Ahmed Mr. Mazhar Sharif Ms. Naz Afreen AUDIT COMMITTEE Mr. Ariful Islam Ms. Hina Akhlaq Mr. Manzoor Ahmed Ms. Naz Afreen CFO & COMPANY SECRETARY Mr. Mazhar Sharif INVESTMENT ADVISER Al Meezan Investment Management Limited AUDITORS Ford Rhodes Sidat Hyder & Co. Chartered Accountants CUSTODIAN Central Depository Company of Pakistan Limited BANKERS Bank AL Habib Limited Faysal Bank Limited Meezan Bank Limited Muslim Commercial Bank Limited NDLC-IFIC Bank Limited National Bank of Pakistan REGISTERED OFFICE 4th Floor, Block C, Finance & Trade Centre, Shahrah-e-Faisal, Karachi 74400, Pakistan Phone: (9221) 565 5031-32 Fax: (9221) 567 6143 Web site: www.almeezangroup.com E-mail: Info@almeezangroup.com SHARES REGISTRAR THK Associates (Pvt.) Limited Ground Floor, Modern Motors House, Beaumont Road, Karachi 75530 Phone: (9221) 568 9021, 568 5681 Fax: (9221) 565 5595 Chairman Chairman Chief Executive

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NOTICE OF MEETING
Notice is hereby given that the 9 Annual General Meeting of AlthMeezan Mutual Fund Limited will be held on, Thursday, September 16, 2004 at 9:15 a.m., at 4 Floor, Block C, Finance & Trade Centre, Shahrah-e-Faisal, Karachi to transact the following business: ORDINARY BUSINESS: 1. 2. 3. 4. To receive, consider, and adopt Audited Accounts of the Company together with the Directors and Auditors Report thereon for the year ended June 30, 2004. To consider and approve Final Cash Dividend of 10% for the year ended June 30, 2004, as recommended by the directors. To consider and approve Stock Dividend at the rate of 15 shares for every 100 shares held, for the year ended June 30, 2004, as recommended by the Directors. To appoint Auditors of the Company and fix their remuneration for the year ending June 30, 2005. The present Auditors M/s Ford Rhodes Sidat Hyder & Co., Chartered Accountants, retire and being eligible, offer themselves for re-appointment.
th

SPECIAL BUSINESS: 5. 6. To approve increase in authorized capital of the company. To approve changes in Memorandum and Articles of Association consequent to an increase in the authorized capital.

GENERAL BUSINESS: 7. Any other business with the permission of the Chair.

By order of the Board. Mazhar Sharif Company Secretary Karachi August 02, 2004

Notes: 1. The Share Transfer Books of the Company will remain closed from September 13, 2004 to September 16, 2004 (both days inclusive). Transfers received in order at the office of our Share Registrar M/s. THK Associates (Private) Limited, Ground Floor, Modern Motors House, Beaumont Road, Karachi 75530 by the close of business on September 10, 2004 will be in time for the purpose of payment of final dividend and entitlement for stock dividend to the transferees. No person shall be appointed as proxy who is not a member of the Company and qualified to vote, save that a Corporation or a Company being a member of the Company may appoint as proxy or as its representative under Section 162 of the Ordinance any person though not a member of the Company, and the person so appointed shall be entitled to exercise the same powers on behalf of the Corporation which he represents, as that Corporation could exercise if it was an individual member of the Company. Any such appointment shall be authorized by a resolution of Directors of that Company or Corporation. Proxies in order to be effective must be received at the registered office of the Company not later than 48 hours before the meeting.

2.

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3.

Every proxy shall be appointed in writing under the hand of the appointer or by an agent duly authorized under a Power of Attorney or if such appointer is a Company or Corporation under the common seal of the Company or Corporation or the hand of its Attorney who may be appointer. Shareholders whose shares are deposited with Central Depository Company (CDC), or their Proxies are requested to bring their original National Identity Card (NIC) or Passport along with the Participants I.D. number and their account number at the time of attending the Annual General Meeting for verification. Shareholders are requested to promptly notify any change in the mailing address to our Share Registrar M/s. THK Associates (Private) Limited.

4.

5.

Statement under section 160 (1) (b) of the Companies Ordinance, 1984. The statement sets out material facts pertaining to the special business to be transacted at the Ninth Annual General Meeting of the Company. 5. Increase in authorized capital of the company At present the authorized capital of the company is Rs.1,000,000,000 (Rupees One Billion) and the paid-up capital stands at Rs.775,000,000 (Rupees Seven Hundred and Seventy Five Million). The company has declared a stock dividend at the rate of 15 shares for every 100 ordinary shares held which will increase the paid-up capital to Rs.891,250,000. It is recommended that in order to facilitate further expansion of paid-up capital in future, authorized capital of the Company be increased to Rs.1,500,000,000 (Rupees One and a Half Billion). Therefore, the following resolution may be approved: Resolved that the authorized capital of the Company be increased from Rs.1000,000,000 divided into 100,000,000 shares of Rs.10 each to Rs.1,500,000,000 divided into 150,000,000 shares of Rs.10 each. 6. Alteration in the Memorandum and Articles of Association As per Agenda Item 5, consequent to the increase in authorized capital of the company, clause V of the Memorandum of Association and Clause 3 of the Articles of Association will have to be altered. Resolved that consequent upon the said increase in Authorized Capital of the Company, Clause V of the Memorandum of Association of the Company be and is hereby amended to read as follows: CLAUSE V OF THE MEMORANDUM OF ASSOCIATION The capital of the Company is Rs. 1,500,000,000 (Rupees One and a Half Billion Only) divided into 150,000,000 (One Hundred and Fifty Million) shares of Rs. 10/- each with powers to the Company from time to time to increase and reduce its capital. Further resolved that clause 3 of the Articles of Association of the Company be and is hereby amended to read as follows: CLAUSE 3 OF THE ARTICLES OF ASSOCIATION The authorized capital of the Company is Rs.1,500,000,000 (Rupees One and a Half Billion Only) divided into 150,000,000 (One Hundred and Fifty Million) zshares of Rs. 10/- each with power to the Company from time to time to increase or reduce its capital and to divide the shares in the Capital for the time being into several classes subject to any permission required by law.

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PERFORMANCE TABLE
Year ended 2004 2003 2002 2001 2000 1999 1998 1997 1996*

(Rupees in thousands)
1 Investment Income 2 Operating Expenses 3 Surplus / (Deficit) on revaluation of trading investments 4 Reversal/(provision) for diminution in the value of marketable securities 5 Profit / (loss) 6 Earnings per share (Rs.) 7 Cash Dividend 8 Rate of cash dividend (%) 9 Rate of stock dividend (%) 10 Net Assets Value per Share (Rs.) 11 Appreciation / (depreciation) in NAV (%) 12 Total return (%) 13 KSE 100 Index 14 Appreciation/(depreciation) in KSE 100 Index (%) 15 Outperformance / (underperformance) in comparison to KSE 100 Index (%) 16 Total Net Assets Value 274,149 151,930 23,646 9,127 51,049 6,683 36,104 6,454 64,203 8,359 (9,389) 5,632 28,427 4,953 32,322 6,851 10,663 5,130

10,701

52,180

(518)

261,204 3.50 77,500 10.00 15.00 14.55 51.03 61.42

194,982 7.80 50,000 20.00 10.00 18.63 74.44 93.16

43,746 1.75 40,000 16.00 10.68 8.54 24.80

(11,376) 18,273 0.73 16,500 6.60 9.84 (6.73) (0.47)

33,228 89,072 3.65 52,500 21.00 10.55 28.35 53.90

57,730 42,709 1.62 16,000 6.40 8.22 13.54 22.38 1,054.67

(90,518) (67,043) (2.76) 7.24 (27.60) (27.60) 879.62

4,766 30,237 1.23 29,500 11.80 10.00 0.50 12.36

(5,207) 326 (0.10) 9.9 -

5,279.18 3,402.48

1,770.12 1,366.44 1,520.74

1,565.73 1,703.28

55.16

92.22

29.54

(10.15)

44.19

19.90

(43.82)

(8.08)

6.26

0.95

(4.74)

9.68

9.71 244,204

2.48 205,511

16.22 180,923

20.44

1,127,312 465,777

267,087 245,978

250,021 248,757

* First year of operations from July 13, 1995 to June 30, 1996.

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8
50 100 150 200 250 300 350 0 -100 -50

Jun-96 Sep-96 Dec-96 Mar-97 Jun 97 Sep-97 Dec-97 Mar-98 Jun-98 Sep-98 Dec-98 Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04
KSE-100 Return (%)

NAV vs KSE-100 Index (Cumulative Return from June 1996)

Fund's Return (%)

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DIRECTORS REPORT
The Board of Directors of Al Meezan Mutual Fund Limited is pleased to present the accounts for the year ended June 30, 2004. The Economy A continuation of the governments positive economic and international political policies have resulted in macro-economic stability for the country. Acceleration in growth accompanied by a sharp pick up in industrial production, a strong upsurge in investment, achievement of export targets and strengthening of the external balance of payments have been the hallmarks of this year's performance. The pre-payment of high cost external debt and GDP growth rate of 6.4% have been other stellar occurrences of the fiscal year 2003-04. The country's recent 500 million dollar Euro bond issue which was over subscribed over four times has earned the country and its Finance Minister, who is also the Prime Minister designate, great accolades and admiration. The country has been declared as the Best Sovereign Borrower of Asia by Euromoney of UK, which portrays the international market's confidence in Pakistan. The budget for the next fiscal year was announced on June 12, 2004. The budget was widely welcomed by the trade and industry as it was incentive-laden both for corporate and industrial sectors aiming at boosting production and exports. Overall it was a pro-growth and investment friendly budget although the market completely ignored these positive aspects due to the imposition of the Capital Value Tax (CVT) on shares trading. In any case, structural changes introduced in the Finance Bill 2004-05 will facilitate long-term growth for industry and agriculture. The expansionary nature of the reforms introduced will provide major thrust for economic growth in the future. The Politics The fiscal year's third quarter saw the resolution of the long-standing Legal Framework Order (LFO) issue. Relationship between India and Pakistan has improved substantially as a result of sincere efforts from both sides. Talks between the two nations have been planned on all subjects ranging from distribution of water resources to the contentious Kashmir issue. There were a few apprehensions regarding the peace process due to change in government in India as a result of general elections. However the fears were dispelled by the ruling Congress Party when it pledged to continue the process started by BJP. The Stock Market The economic, corporate and capital market reforms undertaken by the Ministry of Finance, State Bank of Pakistan and the Securities and Exchange Commission of Pakistan have resulted in stability and growth of the stock markets in the country. Recent measures taken to strengthen risk management, attract new listings, introduce internet trading and promote investors' education as well as fair trade practices and market transparency have resulted in renewed interest in the stock market. The market capitalization of the Karachi Stock Exchange has increased by 300 percent in the last four years, to the current level of around US$ 25 billion. This fiscal year saw two large offers for sale by the Privatization Commission, namely Oil & Gas Development Company Limited (OGDCL) and Sui Southern Gas Company Limited (SSGC), besides sale of strategic stake of Habib Bank Limited. The success of these three big issues has paved the way for other issues, with the public offering of Pakistan Petroleum Limited (PPL) already scheduled

Annual Report 2 0 0 4

right after the end of the fiscal year. The individual investors have shown immense interest in both the earlier public offerings, resulting in oversubscription of 4 times for OGDCL and 15 times for SSGC. Similar response is expected in case of PPL. The stock market closed the year at 5279.18, up 55% from June 30, 2003. During the year the index touched its highest ever level at 5620.66 on April 19, 2004 after which the market has been in a corrective mode mainly due to worsening law and order situation and hike in interest rates. OPERATING RESULTS The company posted a growth of 34% in net profit to Rs.261 million for the year from Rs.195 million for the previous year. The operating results for the year are as follows: (Rupees) Investment Income Operating Expenses Surplus on revaluation of 'held for trading' investments Profit Before Taxation Provision for Taxation Net Profit for the Year Proposed Cash Dividend @ 10% Proposed Issue of Bonus shares @ 15% 274,148,774 (23,645,786) 10,700,613 261,203,601 Nil 261,203,601 77,500,000 116,250,000

During the year, the company realized capital gains of Rs.208.6 million, dividend income of Rs.62.4 million and other income of Rs.3.2 million. Composition of Net Assets On June 30, 2004 the composition of net assets of your company at market value (before appropriation) was as under: Cash & Net Receivables 30.76% Marketable Securities 69.24%

COMPOSITION OF NET ASSETS AS ON JUNE 30, 2004 The top five holdings of the Company as on June 30, 2004 based on market value were as follows: Company Market Value (Rs. in million) 112.8 106.4 70.2 60.9 50.4 Percentage of Net Assets 10.00% 9.40% 6.20% 5.40% 4.50%

Fauji Fertilizer Company Limited Pakistan Telecommunication Co. Ltd "A" Pakistan State Oil Co. Limited Pakistan Oil Fields Packages Limited

10

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FUTURE OUTLOOK We maintain our positive outlook and optimism about the market in the medium to long term. Major propelling forces for the stock market would be strengthening corporate earnings in most sectors especially the large capitalization sectors, launch of new mutual funds and better political conditions. Nomination of Shaukat Aziz as the incoming Prime Minister will go a long way in ensuring continuity of the economic reforms, which will continue to drive the market upwards. COMPLIANCE WITH CODE OF CORPORATE GOVERNANCE The Company always strives to maintain the highest standards of corporate governance. In this regard the Board of Directors welcomes the Code of Corporate Governance and declares that: These financial statements present fairly the state of affairs of the company, the result of its operations, cash flow and changes in equity. The company has maintained proper books of accounts. Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgement. International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements. The system of internal control is sound in design and has been effectively implemented and monitored. There are no significant doubts upon the companys ability to continue as a going concern. There has been no material departure from the best practices of corporate governance, as detailed in the listing regulations. The Board of Directors of the company have signed Statement of Ethics and Business Practices. The transactions carried out by the Directors, CEO, CFO, Company Secretary of the Management Company including their spouse and minor children are as under: Transaction By: Bonus Allotment Right Subscription

(No. of shares) Mr. Irfan Siddiqui, Chairman Mr. Mohammad Shoaib, CFA, Chief Executive Ms. Shabana Siddiq 50 50 150 Nil 1,000 3,000

Pattern of shareholding along with name wise details for NIT, ICP, Directors, CEO and their spouses and minor children are given on page 33 of the annual report. Financial highlights for the last six years are given on page 7 of the annual report.

INVESTMENT POLICY The Companys Investment Policy is broadly stated in its Memorandum of Association. It is intended to be best able to reflect the objectives of growth as well as stability in the companys return to shareholders. In line with the investment policy stated in the Memorandum, the Company has the following specific guidelines for its investments. The Company will maintain at least 60%-80% of its net assets in equities. The rest of the 20%40%, depending upon market conditions and interest rate scenario in the economy, will be utilized for investment in equities or debt and money markets. The Company will endeavour to ensure Shariah Compliance while selecting investments.

11

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Besides the above stated criteria, the following rules for diversification will be followed: - Exposure to a single security will not exceed 10% of companys net assets. - The Companys portfolio of equities at any point in time will comprise of stocks in different sectors with relatively low correlation among each other. Our aim will be to provide the Fund investors with current income as well as long term growth potential. BOARD OF DIRECTORS & BOARD MEETINGS During the year, 4 board meetings were held. The details of the attendance by each director in the board meetings is as given below: Name Mr. Irfan Siddiqui - Chairman Mr. Mohammad Shoaib - Chief Executive Mr. Mazhar Sharif - Company Secretary Mr. Ariful Islam Ms. Hina Akhlaq Mr. Shafiq Ahmed Khan Mr. Manzoor Ahmed Ms. Naz Afreen RE-APPOINTMENT OF AUDITORS The Audit Committee in its meeting held on August 02, 2004 recommended the reappointment of M/s For Rhodes Sidat Hyder & Co., Chartered Accountants, as auditors of the Fund for the Financial Year 2004-2005. The Board approved the appointment. FUTURE OUTLOOK We maintain our positive outlook and optimism about the market in the medium to long term. Major propelling forces for the stock market would be strengthening corporate earnings in most sectors especially the large capitalization sectors, launch of new mutual funds and better political conditions. Nomination of Shaukat Aziz as the incoming Prime Minister will go a long way in ensuring continuity of the economic reforms, which will continue to drive the market upwards. ACKNOWLEDGEMENT We offer our sincere gratitude to the Board of directors for their continued guidance and support. We also wish to place on record our appreciation for the auditors, shareholders, Securities and Exchange Commission of Pakistan and Investment Adviser of the Company. No. of Meetings attended 3 4 4 3 4 0 3 3

12

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Statement of Compliance with the Code of Corporate Governance

This statement is being presented to comply with the Code of Corporate Governance as contained in Regulation No. 37 of 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 corporate governance. The company has applied the principles contained in the Code in the following manner: 1 2 3 The company encourages representation of independent non-executive directors. At present the Board has six independent non-executive directors. The directors have confirmed that none of them is serving as a director in more than ten listed companies, including this company. All the resident directors of the company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFC. None of them is a member of a stock exchange. No casual vacancy occurred during the year ended June 30, 2004. Statement of Ethics and Business Practices has been approved and signed by the directors and has been communicated to the employees of the Investment advisor. The Board has developed a vision and mission statement and an overall corporate strategy, and significant policies of the company. A complete record of particulars of significant policies along with the date 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 appointment and terms and conditions of employment of the Chief Executive Officer (CEO) and an executive director have been taken by the Board. The CEO and the executive director are remunerated for their services by Al-Meezan Investment Management Limited (AMIML), the investment advisor. The Chief Financial Officer (CFO) / Company secretary and the Head of Internal Audit were appointed by board of directors during the year ended June 30, 2003 with the approval of the Board. The meetings of the Board were presided over by the Chairman and, in his absence, by a director elected by the Board for this purpose. The Board met once in every quarter during the year ended June 30, 2004. Written notices of the Board meetings, alongwith agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. The company has arranged an orientation course in the previous year, to apprise them of their duties and responsibilities. The Directors Report for the year ended June 30, 2004 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 CEO and CFO before approval of the Board. The directors and CEO do not hold any interest in the shares of the company, other than that disclosed in the pattern of shareholding.

4 5 6

10 11

12 13

13

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14 15 16

The company has complied with all the corporate and financial reporting requirements of the Code. The Board has formed an Audit Committee. It comprises of four members, all of whom are non-executive directors. The meetings of the Audit Committee were held at least once every quarter prior to approval of interim and final results of the company and as required by the Code. The terms of reference of the committee have been framed, approved by the Board and advised to the committee for compliance. The Investment Advisor has set-up an effective internal audit function for the company. The statutory auditors of the company have confirmed that they have been given a satisfactory rating under the quality control review programme of the Institute of Chartered Accountants of Pakistan, 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 the Institute of Chartered Accountants of Pakistan. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with 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 with. Mazhar Sharif CFO & Company Secretary

17 18

19

20

Mohammad Shoaib - CFA Chief Executive Karachi: August 2, 2004 Review Report to the Members on Statement of Compliance with Best Practices of Code of Corporate Governance

We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate Governance prepared by the Board of Directors of Al Meezan Mutual Fund Limited to comply with the Listing Regulation No. 37 of the Karachi Stock Exchange where the Company is listed. The responsibility for compliance with the Code of Corporate Governance 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 of Compliance reflects the status of the companys 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 personnel and review of various documents prepared by the company to comply with the Code. As part of our audit of 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 are not carried out any special review of the internal control system to enable us to express an opinion as to whether the Boards 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 companys status of compliance, in all material respects, with the best practices contained in the Code of Corporate Governance as applicable to the Company for the year ended June 30, 2004. Karachi August 03, 2004 Ford Rhodes Sidat Hyder & Co. Chartered Accountants

14

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AUDITORS REPORT TO THE MEMBERS

We have audited the annexed balance sheet of AL MEEZAN MUTUAL FUND LIMITED (the fund) as at June 30, 2004 and the related profit and loss account, statement of changes in equity, cash flow statement and distribution statement 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 funds 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, the requirements of the Companies Ordinance, 1984 and Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003. Our responsibility is to express an opinion on these statements based on our audit. The financial statements of the fund as at June 30, 2003, were audited by another firm of auditors whose report dated August 19, 2003 expressed an unqualified opinion on those statements. 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 includes 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 accounts have been kept by the fund as required by Sthe Companies Ordinance, 1984 and Rule 57 of the Non-Banking FZinance Companies (Establishment and Regulation) Rules, 2003; 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 in accordance with the provisions of schedule - I to the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 and are in agreement with the books of accounts and are further in accordance with accounting policies consistently applied; the expenditure incurred during the year was for the purpose of the funds business; and the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the fund;

(b)

(ii) (iii) (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, statement of changes in equity, cash flow statement and distribution statement 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, and the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 in the manner so required and respectively give a true and fair view of the state of the funds affairs as at June 30, 2004 and of the profit, changes in equity and its cash flows for the year then ended; and in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the fund and deposited in the Central Zakat Fund established under section 7 of that Ordinance. Ford Rhodes Sidat Hyder & Co. Chartered Accountants

(d)

Karachi August 03, 2004

15

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BALANCE SHEET AS AT JUNE 30, 2004

Note ASSETS NON-CURRENT ASSETS Long term deposit CURRENT ASSETS Short term investments Accounts receivable Prepayments and other receivables Advance income tax Bank balances TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Remeneration payable to investment adviser - an associated undertaking Creditors, accrued and other liabilities Proposed dividend TOTAL LIABILITIES NET ASSETS SHAREHOLDERS' EQUITY Authorised capital 100,000,000 (2003: 25,000,000) ordinary shares of Rs. 10/- each Issued, subscribed and paid up capital Reserves 12 13 2004 (Rupees) 2003 (Rupees)

75,000

150,000

5 6 7 8 9

834,140,043 82,878,144 6,168,597 5,084,730 302,610,412 1,230,881,926 1,230,956,926

490,730,880 23,785,055 2,658,265 5,084,484 3,026,897 525,285,581 525,435,581

10 11

17,913,726 8,231,142 77,500,000 103,644,868 1,127,312,058

7,734,457 1,924,516 50,000,000 59,658,973 465,776,608

1,000,000,000 775,000,000 303,410,251 1,078,410,251

250,000,000 250,000,000 144,706,650 394,706,650 71,069,958 465,776,608

Surplus on revaluation of 'available-for-sale' investments

48,901,807 1,127,312,058

The annexed notes form an integral part of these financial statements.

Mohammad Shoaib Chief Executive

Ariful Islam Director

16

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PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2004
Note INVESTMENT INCOME Capital gains on disposal of investments - net Dividend income Other income 14 15 208,584,414 62,398,689 3,165,671 274,148,774 96,545,589 52,370,049 3,013,934 151,929,572 2004 (Rupees) 2003 (Rupees)

OPERATING EXPENSES Administrative expenses Remuneration to the investment adviser 16 10 5,732,060 17,913,726 23,645,786 250,502,988 1,393,076 7,734,457 9,127,533 142,802,039

Unrealised gain on 'held for trading' investments - net - for the year - as at June 30, 2002 on adoption of IAS 39 NET PROFIT FOR THE YEAR Unappropriated profit / (accumulated loss) brought forward

10,700,613 261,203,601 119,706,650 380,910,251

45,370,668 6,809,390 194,982,097 (275,447) 194,706,650

Available for appropriation Proposed dividend - Rs.1 (2003: Rs. 2) per share Proposed issue of bonus shares - 15% (2003: 10%) Unappropriated profit carried forward Basic earnings per share 17

77,500,000 116,250,000 193,750,000 187,160,251 3.50

50,000,000 25,000,000 75,000,000 119,706,650 4.21

The annexed notes form an integral part of these financial statements.

Mohammad Shoaib Chief Executive

Ariful Islam Director

17

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STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2004
Issued, subscribed and fully paid-up share capital Surplus on revaluation of investments Capital Reserve for issue of bonus shares Reserves Revenue Unappropriated profit/ (accumulated loss)

Total

Total

(Rupees)
Balance as at June 30, 2002 250,000,000 250,000,000 500,000,000 25,000,000 775,000,000 17,362,553 (2,726,337) (6,809,390) 63,243,132 71,069,958 (36,759,887) 14,591,736 48,901,807 25,000,000 25,000,000 (25,000,000) (275,447) 194,982,097 (25,000,000) (50,000,000) 119,706,650 261,203,601 (275,447) 194,982,097 (50,000,000) 144,706,650 261,203,601 (25,000,000) (77,500,000) 303,410,251 267,087,106 (2,726,337) 194,982,097 (6,809,390) 63,243,132 (50,000,000) 465,776,608 (36,759,887) 261,203,601 500,000,000 14,591,736 (77,500,000) 1,127,312,058 Surplus realised on revaluation of 'available-for-sale' investments taken to capital gains on disposal of investments Profit for the year ended June 30, 2003 Surplus on revaluation of 'held for trading' investments credited to profit and loss account on adoption of IAS 39 Surplus on revaluation of 'available-for-sale' investments Transfer to reserve for issue of bonus shares Proposed dividend (Rs. 2 per share) Balance as at June 30, 2003 Surplus realised on revaluation of 'available-for-sale' investments taken to capital gains on disposal of investments Profit for the year ended June 30, 2004 Right issue Bonus issue Surplus on revaluation of 'available-for-sale' investments Transfer to reserve for issue of bonus shares Proposed dividend (Rs.1 per share) Balance as at June 30, 2004

116,250,000 (116,250,000) 116,250,000 (77,500,000) 187,160,251

The annexed notes form an integral part of these financial statements.

Mohammad Shoaib Chief Executive

Ariful Islam Director

18

Annual Report 2 0 0 4

CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2004
Note CASH FLOWS FROM OPERATING ACTIVITIES Net profit for the year Adjustments for: Unrealised gain on held for trading investment - net Dividend income Other income Dividends received Other income received Long term deposit Working capital changes (Increase) / decrease in current assets Short term investments Accounts receivable - unsecured and considered good Other receivables Increase in current liabilities Remuneration payable to investment adviser - an associated undertaking Creditors, acrued and other liabilities Cash (used in) / generated from operations Taxation paid Net cash (outflow) / inflow from operating activities CASH FLOWS FROM FINANCING ACTIVITIES Dividend paid Right issue NET INCREASE / (DECREASE) IN BANK BALANCES BANK BALANCES AT THE BEGINNING OF THE YEAR BANK BALANCES AT THE END OF THE YEAR 9 (50,014,796) 500,000,000 449,985,204 3,026,897 302,610,412 (39,994,960) (39,994,960) 37,709,930 3,026,897 261,203,601 (10,700,613) (62,398,689) (3,165,671) 59,000,594 3,025,942 75,000 247,040,164 194,982,097 (52,180,058) (52,370,049) (3,013,934) 52,237,512 2,994,139 150,000 142,799,707 2004 (Rupees) 2003 (Rupees)

(354,876,701) (59,093,089) 27,492 (413,942,298)

(133,203,886) (14,027,414) 5,622,508 (141,608,792)

10,179,269 6,321,422 16,500,691 (150,401,443) (246) (150,401,689)

2,392,715 1,731,497 4,124,212 5,315,127 (3,200) 5,311,927

The annexed notes form an integral part of these financial statements.

Mohammad Shoaib Chief Executive

Ariful Islam Director

19

Annual Report 2 0 0 4

DISTRIBUTION STATEMENT FOR THE YEAR ENDED JUNE 30, 2004

Note 2004 (Rupees) 119,706,650 261,203,601 (77,500,000) (116,250,000) 187,160,251 2003 (Rupees) (275,447) 194,982,097 (50,000,000) (25,000,000) 119,706,650

Unappropriated profit / (accumulated loss) brought forward Net income for the year Proposed dividend - Rs.1 (2003: Rs. 2) per share Bonus shares - 15% (2003: 10%) Uuappropriatde profit

The annexed notes form an integral part of these financial statements.

Mohammad Shoaib Chief Executive

Ariful Islam Director

20

Annual Report 2 0 0 4

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2004
1. LEGAL STATUS AND NATURE OF BUSINESS Al Meezan Mutual Fund Limited (the fund) was incorporated in Pakistan on July 13, 1995 as a public limited company under the Companies Ordinance, 1984 and is listed on the Karachi Stock Exchange. The fund was registered as an 'Investment Company' under the Investment Companies and Investment Advisers Rules, 1971. The Investment Companies and Investment Advisers Rules, 1971 have been repealed by the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 (NBFC Rules). However, the said repeal does not affect the existing incorporation or registration or licence of an NBFC registered or licensed under any rules or notifications now repealed. The fund's registered office is on 4th Floor, Block C, Finance and Trade Centre, Shahrah-e-Faisal, Karachi. The object of the fund is to carry on the business of a closed-end mutual fund and to invest its assets in securities, which are listed or proposed to be listed on the stock exchanges. The fund has an agreement with Al Meezan Investment Management Limited, an associated undertaking, to provide investment advisory services. 2. BASIS OF PRESENTATION These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan and the requirements of Companies Ordinance, 1984. Approved accounting standards comprise of such International Accounting Standards as notified under the provisions of Companies Ordinance, 1984. Wherever, the requirements of the Companies Ordinance, 1984 or NBFC Rules, 2003 or directives issued by the Securities and Exchange Commission of Pakistan (SEC) differ with the requirements of these standards, the requirements of Companies Ordinance, 1984 or NBFC Rules, 2003 or the requirements of the said directives take precedence. 3. BASIS OF MEASUREMENT These financial statements have been prepared under the historical cost convention, except for investments which are stated at fair value. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 4.1 Investments - Held-to-maturity Investments with fixed maturity where management has both the intent and ability to hold to maturity, are classified as held-to-maturity. - Available-for-sale Investments which are intended to be held for an indefinite period but may be sold in response to the need for liquidity or changes in interest rates are classified as availablefor-sale. - Held for trading Investments which are acquired principally for the purpose of generating a profit from short term fluctuations in price or dealer's margin are classified as held for trading.

21

Annual Report 2 0 0 4

All investments are initially recognised at cost, being the fair value of the consideration given including acquisition charges associated with the investment. After initial recognition, investment which are classified as held for trading and available -for-sale are remeasured at fair value. Unrealised gains and losses on investments held for trading are recognised in income. Unrealised gains and losses on available-for-sale investments are recognised in equity until the investment is sold, collected or otherwise disposed off, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in income. Investment classified as held-to-maturity are stated at amortised cost. Fair value of listed shares and listed term finance certificates is determined by reference to stock exchange quoted market prices at the close of business on balance sheet date. - Change in accounting estimate Commencing from the current year, the fund is valuing its term finance certificates by reference to stock exchange quoted market prices at the close of business on the balance sheet date, in accordance with section 2 (xxxiv) of NBFC Rules dated April 1, 2003. Previously, term finance certificates were valued using average bid prices received from different intermediaries. Had the fund not made this change, investments of the fund as at June 30, 2004 and net profit for the year ended June 30, 2004 would have been higher by Rs.374,000. 4.2 Taxation Current: The charge for current taxation, if any, in the financial statements is based on taxable income at the current rates of taxation after taking into account tax credits and tax rebates available, if any. No charge for current taxation is made in the financial statements if the company intends to distribute 90 percent or more of its current profit amongst its shareholders in accordance with the exemption available under clause 99 of part I of the Second Schedule to the Income Tax Ordinance, 2001. Deferred: The company accounts for deferred taxation arising on major timing differences, if any, by using the liability method. However, no provision was required as at June 30, 2004 and no assets existed as at that date. 4.3 Transactions with connected persons / related parties / associated undertakings The fund enters into transactions in the normal course of business with connected persons / related parties / associated undertaking. These transactions are priced on arm's length basis using comparable uncontrolled price method. 4.4 Revenue recognition Dividend income is stated net of zakat deduction thereon at source where leviable and is recorded at the time of closure of share transfer book of the company declaring the dividend.

22

Annual Report 2 0 0 4

4.5

Trade date accounting All regular way purchases / sales of investments are recognised on the trade date i.e., the date the fund commits to purchase / sale the investments. Regular way purchase / sale of investments require delivery of securities within three days after the transaction date as required by the stock exchange regulations.

4.6

Offsetting of financial assets and liabilities Financial assets and financial liabilities are only offset and the net amount reported in the balance sheet when the fund has a legally enforceable right to set off the recognised amount and intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously.

4.7

Cash and cash equivalent Bank balances are carried at cost. For the purpose of cash flow statement, cash and cash equivalents comprise of bank balances.

5.

SHORT TERM INVESTMENTS Available-for-sale Listed shares Held for trading Listed shares Listed term finance certificates

Note

2004 (Rupees)

2003 (Rupees)

5.1

81,754,680

137,744,592

5.2 5.3

745,207,363 7,178,000 752,385,363 834,140,043

348,014,288 4,972,000 352,986,288 490,730,880

23

Annual Report 2 0 0 4
5.1 Listed shares - available-for-sale Ordinary shares have a face value of Rs.10/- each unless stated otherwise. Number of shares / certificates Bonus / right shares Acquired acquired during the during the year year Disposed off during the year Market value as at June 30, 2004 (Rupees) Percentage in relation to total investments

As at July 1, 2003

As at June 30, 2004

Name of the company Sector / companies Mutual fund I.C.P. (State Enterprise Mutual Fund) Refinery National Refinery Limited Power generation and distribution The Hub Power Company Limited Oil and gas marketing companies Pakistan State Oil Company Limited Sui Northern Gas Pipelines Company Limited Sui Southern Gas Company Limited Technology and communication Pakistan Telecommunication Company Limited "A" Fertilizer Engro Chemical (Pakistan) Limited Fauji Fertilizer Company Limited Market value as at June 30, 2003 Cost of 'available-for-sale' investments as at June 30, 2004 Rs. 32,852,873 (2003 : Rs.66,674,634). 5.2 Listed shares - held for trading Ordinary shares have a face value of Rs.10/- each unless stated otherwise. Sector / companies Mutual fund * I.C.P. Mutual Fund V * I.C.P. Mutual Fund XVII * PICIC Investment Fund (formerly I.C.P. Mutual Fund V and I.C.P. Mutual Fund XVII I.C.P. (State Enterprise Mutual Fund) Textile spinning Saif Textile Mills Limited Textile composite Azgard Nine Limited Kohinoor Textile Mills Limited Nishat (Chunian) Limited Nishat Mills Limited Suraj Cotton Mills Limited Synthetic and rayon Dewan Salman Fibre Limited Ibrahim Fibres Limited Cement Cherat Cement Company Limited D G Khan Cement Company Limited Fauji Cement Company Limited Lucky Cement Limited Maple Leaf Cement Factory Limited Pakland Cement Limited Saadi Cement Limited Refinery Attock Refinery Limited Bosicor Pakistan Limited National Refinery Limited Power generation and distribution The Hub Power Company Limited Total carried forward 424,500 440,000 795,937 825,000 1,220,437 1,265,000 175,000 20,000 672,000 141,043 400,799 419,450 87,500 262,500 140,000 400,000 394,000 20,000 672,000 1,043 799 25,450 3,697,000 21,705,600 267,790 51,695 834,760 0.44% 2.60% 0.03% 0.01% 0.10% 0.14% 3.16% 3.46%

625,500 104,867 242,600

104,867 -

625,500 242,600

26,364,825 28,833,010 81,754,680 137,744,592

643,500 330,000 80,500 163,900 160,500 8,000 639,000

2,445,393 6,282,000 65,000 226,000 450,000 116,500 4,292,000 84,000 4,781,000 64,000 127,500 2,300,000 3,000,000 3,503,000 2,300,000 50,000 250,000 35,000 100,000 80,500 17,902,500

621,750 -

6,922,000 406,000 325,000 35,000 4,255,900 15,000 4,781,000 77,500 1,975,000 3,000,000 3,463,500 2,300,000 50,000 250,000 35,000 100,000 15,000 18,294,000

2,445,393 625,250 65,000 150,000 125,000 162,000 200,000 69,000 64,000 50,000 325,000 200,000 73,500 247,500

44,017,074 29,543,063 1,917,500 3,375,000 6,693,750 9,558,000 10,560,000 3,174,000 2,656,000 3,587,500 18,687,500 7,820,000 13,586,475 7,994,250 163,170,112

5.28% 3.54% 8.82% 0.23% 0.40% 0.80% 1.15% 1.27% 0.38% 4.00% 0.32% 0.43% 2.24% 0.94% 3.61% 1.63% 0.96%

* Under a scheme of amalgamation, the certificates of I.C.P. Mutual Fund V and I.C.P. Mutual Fund XVII were swapped against the shares of PICIC Investment Fund.

24

Annual Report 2 0 0 4

Number of shares / certificates Bonus / right shares Acquired acquired during the during the year year Disposed off during the year Market value as at June 30, 2004 (Rupees) Percentage in relation to total investments

As at July 1, 2003

As at June 30, 2004

Name of the company Total brought forward Oil and gas marketing companies Pakistan State Oil Company Limited Shell Pakistan Limited Sui Northern Gas Pipelines Limited Sui Southern Gas Company Limited Oil and gas exploration companies Oil & Gas Development Company Limited Pakistan Oilfields Limited Engineering Crescent Steel & Allied Products Limited Automobile assembler Dewan Farooque Motors Limited Indus Motor Company Limited

163,170,112 122,400 71,000 660,000 84,000 50,000 115,000 4,654,500 205,200 12,742,000 6,950,000 4,481,797 1,446,600 99,600 150,000 58,900 545,000 5,200 5,150,000 250,000 14,624,000 2,424,500 600,000 644,500 5,483,000 2,050,000 2,048,200 56,000 2,353,000 100,000 80,100 67,900 158,600 66,000 5,000 4,504,500 203,600 13,402,000 6,259,000 4,042,000 1,270,300 150,000 109,800 6,025,000 250,000 272,400 72,600 775,000 439,797 292,300 104,600 64,100 545,000 5,200 69,938,700 25,348,290 25,420,000 28,366,907 60,944,550 8,252,940 5,845,920 23,162,500 712,400 80,085,000 7,230,000 4,217,400 40,878,533 83,991,295 10,608,000 15,373,750 6,968,700 5,975,200 50,414,166 8.38% 3.04% 3.05% 14.47% 3.40% 7.31% 10.71% 0.99% 0.70% 2.78% 0.09% 9.60% 0.87% 0.51% 10.98% 4.90% 10.07% 14.97% 1.27% 1.84% 0.84% 2.68% 0.72% 6.04% 6.76% 3.39%

Automobile parts and accessories Agriautos Industries Limited (Rs.5/- each) Cables and electrical goods Pakistan Cables Limited Transport Pakistan International Airlines Corporation (A) 875,000 Pakistan International Container Terminal Limited Technology and communication Pakistan Telecommunication Company Limited "A" 900,000 Telecard Limited 400,000 Worldcall Broadband Limited Worldcall Communications Limited Fertilizer Engro Chemical (Pakistan) Limited Fauji Fertilizer Bin Qasim Company Limited Fauji Fertilizer Company Limited Pharmaceutical GlaxoSmithKline (Pakistan) Limited Chemical ICI Pakistan Limited Pakistan PTA Limited Sitara Chemicals Industries Limited Paper and board Cherat Papersack Limited Packages Limited Food and personal care products Unilever Pakistan Limited (Rs.50/- each) Market value as at June 30, 2003 290,500 528,500 250,000 200,000 96,017

13,624,000 1,900,000 2,824,500 600,000 347,500 297,000 5,354,233 2,578,500 1,591,500 5,000 2,378,000 100,000 419,267 706,700 51,000 175,000 80,100 67,900 254,617

30,280

4,980

17,000

18,260

28,303,000 745,207,363 348,014,288

Cost of 'held for trading' listed shares as at June 30, 2004 Rs.734,704,750 (2003: Rs.303,215,620).

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Annual Report 2 0 0 4

5.3

Listed term finance certificates - held for trading Term finance certificates have a face value of Rs.5,000/- each.
Profit 2003 2004 No. of certificates 880 516 880 Name of the company Al Zamin Leasing Modaraba Sitara Chemical Industries Limited Repayment frequency Semi-annually Semi-annually Expected rate per annum 8% 12% Amortised cost (Rupees) 2,580,000 4,400,000 6,980,000 Amortised cost / market value as at June 30, 2003 4,400,000 Market value as at June 30, 2004 (Rupees) 2,580,000 4,598,000 7,178,000 4,972,000

Maturity date December 23, 2008 June 30, 2007

Note 6. ACCOUNTS RECEIVABLE - unsecured and considered good Against sale of investment from - associated undertaking - others 6.1

2004 (Rupees)

2003 (Rupees)

82,878,144 82,878,144

23,785,055 23,785,055

6.1 7.

Maximum amount due from associated undertakings at the end of any month during the year was Rs.5,197,272 (2003: Nil).

PREPAYMENTS AND OTHER RECEIVABLES Dividend receivable Profit on bank deposits Profit on term finance certificates Prepaid expense 5,756,224 144,415 267,958 6,168,597 8.1 5,084,730 2,358,129 8,644 264,000 27,492 2,658,265 5,084,484

8.

ADVANCE INCOME TAX RECOVERABLE 8.1

This represents advance income tax recoverable from the tax department.

9.

BANK BALANCES - local currency Deposit accounts Current accounts 9.1 302,570,910 39,502 302,610,412 9.1 This carries mark-up ranging from 1.8% to 2.3% (2003: 1.9% to 2.5%) per annum. 2,983,664 43,233 3,026,897

26

Annual Report 2 0 0 4

Note 10. REMUNERATION PAYABLE TO INVESTMENT ADVISER - AN ASSOCIATED UNDERTAKING Remuneration for the years 10.1

2004 (Rupees)

2003 (Rupees)

17,913,726

7,734,457

10.1 In accordance with the rule 53 of the NBFC Rules, the investment adviser is entitled to an annual remuneration at the rate of 2% of the average annual net assets of the company calculated on the monthly basis during the year. The remuneration of the investment adviser has been determined as follows: Average annual net asset after charging remuneration of investment adviser and annual fee to SEC Remuneration at 2% of average annual net assets after charging remuneration of investment adviser and annual fee to SEC 11. CREDITORS, ACCRUED AND OTHER LIABILITIES - unsecured Payable against purchase of investments - associated undertaking - others 6,556,340 6,556,340 Annual fee payable to SEC Accrued expenses Unclaimed dividend 12. ISSUED, SUBSCRIBED AND PAID-UP CAPITAL 2003 2004 992,367 664,212 18,223 8,231,142 1,589,806 1,589,806 96,681 205,010 33,019 1,924,516 895,686,310 386,722,860

17,913,726

7,734,457

Number of shares Shares issued against cash consideration 25,000,000 25,000,000 25,000,000 50,000,000 75,000,000 Shares issued against consideration other than cash 25,000,000 2,500,000 77,500,000 Issued bonus shares of Rs. 10/- each fully paid on November 6, 2003 25,000,000 775,000,000 250,000,000 Ordinary shares of Rs. 10/- each fully paid in cash at the beginning of the year Issued right shares of Rs. 10/- each fully paid in cash on December 8, 2003 250,000,000 250,000,000

500,000,000 750,000,000

250,000,000

27

Annual Report 2 0 0 4

13.

RESERVES Capital reserves Reserves for issue of bonus shares Revenue reserves Unappropriated profit

Note

2004 (Rupees) 116,250,000 187,160,251 303,410,251

2003 (Rupees) 25,000,000 119,706,650 144,706,650

14.

CAPITAL GAINS ON DISPOSAL OF INVESTMENTS - net On available-for-sale Listed shares On held for trading Listed shares Listed term finance certificates 147,475,562 147,475,562 208,584,414 82,353,625 418,414 82,772,039 96,545,589 1,200,609 1,813,325 3,013,934 61,108,852 13,773,550

15.

OTHER INCOME Profit on bank deposits Profit on term finance certificates 15.1 2,326,265 839,406 3,165,671

15.1 Profit on bank deposits is stated inclusive of withholding tax deducted aggregating Rs. 246 (2003: Rs.537). 16. ADMINISTRATIVE EXPENSES CDC charges CDC eligibility charges Annual listing fee Registration and listing charges on rights issue Annual fee to SEC Professional tax Professional services Tax consultancy charges Auditors' remuneration Bank charges Miscellaneous expenses 1,184,926 67,500 100,000 2,625,000 895,686 100,000 25,000 10,000 357,875 341,097 24,976 5,732,060 16.1 Auditors' remuneration Audit fee Tax consultancy services Other services Out of pocket expenses 160,000 177,500 20,375 357,875 160,000 139,847 180,000 46,876 526,723 265,495 75,000 100,000 96,681 300,000 10,000 526,723 18,177 1,000 1,393,076

16.1

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Note 17. BASIC EARNINGS PER SHARE Net profit for the year (Rupees) Weighted average number of ordinary shares outstanding during the year Basic earnings per share (Rupees) 17.1

2004 (Rupees) 261,203,601 74,557,705 3.50

2003 (Rupees) 194,982,097 46,338,527 4.21

17.1 The comparative figure for weighted average number of shares has been readjusted for bonus issue and bonus element in the rights issue during the year. 17.2 No figure for diluted earnings per share has been presented as the fund has not issued any instruments which would have an impact on earnings per share when exercised. 2004 (Rupees) 18. STATEMENT OF NET ASSETS VALUE PER SHARE Net assets value per share at the beginning of the year Surplus on revaluation of held for trading investments Capital gains Net profit for the year excluding capital gains and unrealised surplus on revaluation of held for trading investments Net profit for the year (based on weighted average number of shares outstanding) Adjustment to per share income for change of weighted average number of shares to number of shares outstanding at year end Net changes in surplus on revaluation of available-for-sale investments Proceeds from right issue Dividend Net assets value per share at the end of the year 6.01 0.14 2.80 0.56 3.50 (0.13) (0.29) 6.45 (1.00) 14.54 2003 (Rupees) (Restated) 3.45 1.13 2.08 1.00 4.21 (1.69) 0.69 (0.65) 6.01

18.1 The comparative figure for net assets value per share has been readjusted for bonus issue and bonus element in the rights issue during the year. 19. TRANSACTIONS WITH CONNECTED PERSONS / RELATED PARTIES / ASSOCIATED UNDERTAKINGS The key connected persons / related party relationships maintained by the fund are those with Al Meezan Investment Management Limited, Meezan Bank Limited, Meezan Islamic Fund and Pakistan Kuwait Investment Company (Private) Limited.

29

Annual Report 2 0 0 4

The volume of transactions with connected persons / related parties / associated undertaking, outstanding balances at the year end, related income and expense are as follows: 2004 2003 (Rupees) (Rupees) Purchase of listed shares through Aqeel Karim Dhedhi Securities (Private) Limited - an associated undertaking 618,278,023 78,067,202 Sale of listed shares through Aqeel Karim Dhedhi Securities (Private) Limited - an associated undertaking Brokerage commission to Aqeel Karim Dhedhi Securities (Private) Limited - an associated undertaking Profit earned on bank accounts with Meezan Bank Limited Remuneration to investment adviser - Al Meezan Investment Management Limited Balance of bank accounts with Meezan Bank Limited as at June 30, 2004 20. FINANCIAL RISK MANAGEMENT POLICIES 20.1 Market risk Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices. The value of investment may fluctuate due to changes in business cycles affecting the business of the company in which the investment is made, changes in business circumstances of the company, its business sector, industry and / or the economy in general. The investment adviser manages market risk by monitoring exposure on marketable securities by following the regulations laid down in the NBFC Rules, 2003. 20.2 Yield / interest rate risk Yield risk is the risk of decline in earnings due to adverse movement of the yield curve. Interest rate risk is the risk that the value of the financial instrument will fluctuate due to changes in the market interest rates. Sensitivity to interest rate risk arises from mismatches of financial assets and liabilities and offbalance sheet financial instruments that mature or reprice in a given period. The fund is not materially exposed to yield / interest rate risk as there are no interest bearing financial liabilities giving rise to mismatches of financial assets and financial liabilities. 20.3 Liquidity risk Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet commitments associated with financial instruments. The investment adviser manages liquidity risk by investing a major portion of the fund's assets in highly liquid shares. The fund is not materially exposed to liquidity risk. 535,606,109 1,615,821 2,057,536 17,913,726 184,121,327 57,477,188 156,338 477,876 7,734,457 1,360,683

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Annual Report 2 0 0 4

20.4 Credit risk and concentration of credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The fund manages its exposure to credit risk through settlement of its transactions through CDC and making payments on settlement date. Concentration of credit risk exists when changes in economic or industry factors similarly affect groups of counterparties whose aggregate credit exposure is significant in relation to the fund's total credit exposure. The fund's portfolio of financial instruments is broadly diversified and transactions are entered into with diverse creditworthy counterparties thereby mitigating any significant concentrations of credit risk. Sectorwise exposure of investments is given in notes 5.1 and 5.2. Maximum exposure to an individual scrip and industrial sector is restricted by the NBFC Rules, 2003, hence the fund is not exposed to major concentration of credit risk. 21. FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm's length transactions. Consequently differences can arise between carrying values and their fair value estimates. Underlying the definition of fair value is the presumption that the fund is a going concern without any intention or requirement to curtail materially the scale of its operations or to undertake a transaction on adverse terms. Financial assets which are tradable in an open market are revalued at the market prices prevailing on the balance sheet date. The estimated fair value of all other financial assets and liabilities is considered not significantly different from book value as the items are short term in nature. 22. DATE OF AUTHORISATION FOR ISSUE These financial statements were authorised for issue by the board of directors of the fund on August 2, 2004. 23. NUMBERS OF EMPLOYEES The fund has no employees. 24. GENERAL Figures have been rounded off to the nearest rupee.

Mohammad Shoaib Chief Executive

Ariful Islam Director

31

Annual Report 2 0 0 4

PATTERN OF SHAREHOLDING AS OF JUNE 30, 2004

No. Of Shareholders 53 89 166 501 192 61 60 34 24 8 14 7 16 2 4 4 5 1 3 1 3 4 1 2 1 1 2 2 3 1 1 1 1 2 1 3 1 1 1 1 1 1 2 1 1 1 1 1 2 1 1 1 1 1 1 1 1296 Having Shares From 1 101 501 1001 5001 10001 15001 20001 25001 30001 35001 40001 45001 50001 55001 60001 65001 70001 75001 80001 90001 95001 105001 110001 125001 130001 140001 145001 150001 160001 175001 210001 240001 275001 295001 305001 325001 435001 505001 555001 605001 615001 625001 675001 1550001 2000001 2050001 2305001 2745001 3045001 3395001 3585001 5495001 7745001 9210001 11975001 To 100 500 1000 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 55000 60000 65000 70000 75000 80000 85000 95000 100000 110000 115000 130000 135000 145000 150000 155000 165000 180000 215000 245000 280000 300000 310000 330000 440000 510000 560000 610000 620000 630000 680000 1555000 2005000 2055000 2310000 2750000 3050000 3400000 3590000 5500000 7750000 9215000 11980000 4116 36191 153550 1467394 1582350 751300 1072050 782550 673350 255000 538700 300950 789650 106850 236300 250000 335600 72910 235000 83700 275510 398950 106080 229000 128000 135000 284050 300000 462350 164300 175500 215000 243000 553400 300000 920650 327100 440000 507500 557000 609150 620000 1252400 676200 1552000 2000450 2054500 2309900 5499996 3050000 3400000 3585500 5500000 7750000 9215000 11975003 77500000 0.0053 0.0467 0.1981 1.8934 2.0417 0.9694 1.3833 1.0097 0.8688 0.3290 0.6951 0.3883 1.0189 0.1379 0.3049 0.3226 0.4330 0.0941 0.3032 0.1080 0.3555 0.5148 0.1369 0.2955 0.1652 0.1742 0.3665 0.3871 0.5966 0.2120 0.2265 0.2774 0.3135 0.7141 0.3871 1.1879 0.4221 0.5677 0.6548 0.7187 0.7860 0.8000 1.6160 0.8725 2.0026 2.5812 2.6510 2.9805 7.0968 3.9355 4.3871 4.6265 7.0968 10.0000 11.8903 15.4516 100.0000 Share Held Percentage

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CATEGORIES OF SHAREHOLDERS AS OF JUNE 30, 2004

Particulars Shareholders Shareholding Percentage

DIRECTORS, CEO & CHILDREN ASSOCIATED COMPANIES NIT & ICP BANKS, DFI & NBFI INSURANCE COMPANIES GENERAL PUBLIC (LOCAL) GENERAL PUBLIC (FOREIGN) OTHERS COMPANY TOTAL

3 4 1 9 1 1214 4 60 1296

3750 22102500 2750000 22825749 2054500 16040351 109050 11614100 77500000

0.0048 28.5194 3.5484 29.4526 2.6510 20.6972 0.1407 14.9859 100.0000

Details of Shareholding
PARTICULARS SHARE HOLDING PERCENTAGE %

CEO, DIRECTORS & THEIR SPOUSES & MINOR CHILDREN MR. IRFAN SIDDIQUI MR. MOHAMMAD SHOAIB MRS. SHABANA SIDDIQ ASSOCIATED COMPANIES AL-MEEZAN INVESTMENT MANAGEMENT LIMITED CDC TRUSTEE MEEZAN ISLAMIC FUND MEEZAN BANK LIMITED NIT & ICP NATIONAL BANK OF PAKISTAN - TUSTEE DEPARTMENT BANKS, DFI & NBFI PAKISTAN KUWAIT INVESTMENT COMPANY (PVT.) LTD. UNION BANK LIMITED FAYSAL BANK LIMITED MUSLIM COMMERCIAL BANK LIMITED, TREASURY PRIME COMMERCIAL BANK LIMITED PICIC COMMERCIAL BANK LIMITED DAWOOD LEASING COMPANY LIMITED INSURANCE COMPANIES STATE LIFE INSURANCE CORP. OF PAKISTAN 2,054,500 2,054,500 2.6510 2.6510 14,724,999 3,400,000 2,309,900 2,000,450 280,400 100,000 10,000 22,825,749 19.0000 4.3871 2.9805 2.5812 0.3618 0.1290 0.0129 29.4526 2,750,000 2,750,000 3.5484 3.5484 11,335,500 9,215,000 1,552,000 22,102,500 14.6265 11.8903 2.0026 28.5194 550 1,550 1,650 3,750 0.0007 0.0020 0.0021 0.0048

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STATEMENT OF INCOME & EXPENDITURE IN RELATION TO THE INVESTMENT COMPANY For the Year Ended June 30, 2004
2004 (Rupees) INCOME Remuneration receivable from Al Meezan Mutual Fund Limited Dividend income 17,913,726 5,680,000 23,593,726 7,734,457 4,032,000 11,766,457 2003 (Rupees)

OPERATING EXPENSES Salaries and other benefits Motor vehicle running expenses Advertising & marketing expense Fees and subscription Audit fee Financial charges Insurance expense Printing and stationery Telephone, fax, postage and stamps Depreciation Traveling and conveyance Entertainment Legal and professional charges Advisory fee Repair and maintenance Service charges Registration fees Other Office Supplies CDC Charges Transfer agency fee Sales tax Stamp duty Others Loss for the year 17,996,791 274,536 4,359,945 308,692 50,000 87,234 295,437 664,338 419,538 1,697,541 224,495 72,191 1,338,826 300,000 30,703 658,966 213,976 1,012,964 27,845 138,510 54,380 30,226,908 (6,633,182) 9,794,734 180,418 73,000 236,651 35,000 237,251 81,833 114,486 186,999 437,669 242,354 35,236 785,981 5,600 1,272,082 187,500 187,888 95,000 22,445 58,790 14,270,917 (2,504,460)

Note: Other revenue not relating to the investment company has not been included in the above statement.

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FORM OF PROXY NINTH ANNUAL GENERAL MEETING

I/We _______________________________ of ________________________________ in the district of ___________________________ being a member(s) of Al Meezan Mutual Fund Limited hereby appoint _______________________ as my/our proxy to vote for me/us and on my/our behalf at the Ninth Annual General Meeting of the Company to be held on the September 16, 2004 and at any adjournment thereof.

As witness my hand this _______________ day of ____________ 2004. Signed by the said ______________________________________ In the presence of ______________________________________ Signed on Rs. 5/Revenue Stamp This signature should agree with the specimen registered with the Company

Important: 1.

This Proxy Form, duly completed and signed, must be received at the Registered Office of the Company, Al Meezan Mutual Fund Limited, 4th Floor, Block C, Finance & Trade Centre, Shahrah-e-Faisal, Karachi-74400, not less than 48 hours before the time of holding the meeting. No person shall act as proxy unless he/she himself/herself is a member of the Company, except that a corporation may appoint a person who is not a member. If a member appoints more than one proxy and more than one instruments of proxy are deposited by a member with the Company, all such instruments of proxy shall be rendered invalid. In case of proxy, member who has shares of the Company in Central Depository System, copies of National Identity Card (N.I.C.) of both the member and proxy, duly attested by their bankers should be enclosed with the form of proxy. The proxy should bring his/her original N.I.C. as well.

2.

3.

4.