CONTENTS Corporate Information 1 s Report 2 Statement of Assets & Liabilities 4 Income Statement 5 Statement of Comprehensive Income 6 Distribution Statement 7 Statement of Movement in Unitholders Fund 8 Cash Flow Statement 9 Notes to the Financial Statements 10 Management Company CORPORATE INFORMATION Dawood Capital Management Limited 1500-A Saima Trade Towers I. I. Chundrigar Road, Karachi 74000 UAN: 111-DAWOOD (111-329-663) PABX: (92-21) 3227-1874-88 Fax: (92-21) 3227-1912 E-mail: dcm@firstdawood.com URL: www.firstdawood.com/dcm Board of s Mr. Feroze Sayeed-Ud-Deane Chairman (Nominee of BRRGM) Miss Tara Uzra Dawood Chief Executive Officer Mr. Masood A.S. Wahedna (Nominee of Bok) Mr. Nazimuddin Feroz (Nominee of BRRGM) AVM (Retd.) Zulfiqar Ahmed Shah (Nominee of FDIBL) Syed Shabahat Hussain (Nominee of NIT) Mr. Gul Nawaz Chief Financial Officer Company Secretary Mr. Muhammad Saleem Munshi Mr. Tahir Mehmood Audit Committee AVM (Retd.) Zulfiqar Ahmed Shah Chairman Mr. Masood A.S. Wahedna Member Mr. Gul Nawaz Member Trustee Auditors Tax Advisor Legal Advisor Registrars Distributors Banker: Rating AMC Rating Central Depository Company of Pakistan Limited CDC House, 99-B, Block-B, S.M.C.H.S., Main Shahra-e-Faisal, Karachi-74400 Ph : (92-21) 111-111-500 Fax : (92-21) 34326020-23 M. Yousuf Adil Saleem & Co., Chartered Accountants Mazhar Associates A-1/E-3, Faiza Avenue Karachi. Bawaney & Partners 404, 4th Floor, Beaumont Plaza 6-cl-10 Beaumont Road, Karachi 75530 Telephone: (021) 3565-7658/9, 3565-7674 Fax: (021) 3565-7673 E-mail: bawaney@cyber.net.pk Gangjees Registrar Services (Pvt.) Limited Room # 516, 5th. Floor, Clifton Centre Kehkashan Clifton, Karachi IGI Bank Ltd. Alfalah Securities (Pvt.) Ltd. Atlas Capital Market (Pvt.) Ltd. BMA Financial Services (Pvt.) Ltd. Dawood Islamic Bank Limied Al Baraka Islamic Bank Limited Habib Metropolitan Bank Limited Standard Chartered Bank (Pakistan) Limited PACRA: 4-Star PACRA : AM4+ 1
DIRECTORS REPORT It gives me immense pleasure to present on behalf of the Board of s of Dawood Capital Management Limited ("DCM"/"the Company"), the Management Company of Dawood Islamic Fund (""/"the Fund"), the un-audited financial statements for the first quarter ended September 30,. Fund Performance The Fund's total income during the period stands Rs. 10.79 million as compared to Rs. 21.13 Million in the same period last year. During the quarter total expenses stand at Rs. (29.50) million as opposed to Rs. 2.25 million in the same period last year. Total expenses reduced by Rs. 31.75 million mainly due to reversal of impairment loss in respect of Maple Leaf Cement Limited by Rs. 31.90 million. Due to the above reasons Net Income for the quarter increased significantly to Rs. 40.27 million as compared to Rs. 18.48 million in the same quarter last year. The Net Assets Value (NAV) of per unit increased from Rs. 98.95 to Rs. 116.61 The graphical illustration of portfolio allocation as at September 30, as follows: Equity Market/Economic Review During first quarter of the fiscal year i.e. (July-September ), KSE-100 index posted a return of 3%. The index gained 291 points to close at 10,013 points. The volumes remained patchy (averaged daily volume of 62mn), as macroeconomic and political fragility continued to cloud investment outlook. Factors that limited investor participation include, anticipation of Discount Rate hike due to increasing inflationary pressure, flood related economic uncertainties along with lack of a concrete framework from GoP s end to deal with the situation at hand and MoF meetings with IMF officials. Acknowledgement The s wish to express their gratitude to the Securities & Exchange Commission of Pakistan and other regulatory bodies for their valuable support, assistance and guidance during these times of recovery. The Board also thanks the employees of the Asset Management Company, the Trustee and Shariah Advisors for their dedication and hard work and the unit holders for their confidence in the Management. Debt Market Review As per market expectations, the Government in its monetary policy on September 29, increased the Discount Rate by 50 basis points to 13.50% due to prevailing inflationary pressures. Medium-term impact of floods is still not very clear on the economy and will be further clear in the up-coming months; however, the trend is still showing the inclination towards further increase in the interest rates in near future. This coupled with persistent Government borrowings indicates that T-Bills rates may remain high or creep up further. As a result of prevailing economic conditions the overall debt market remained on the depressed side with substantial downward revaluation of debt security prices during the first quarter of FY 10~11. However the successful restructuring of previously defaulting debt securities in cement sector, showed a positive development towards market recovery. October 26, Karachi. For and on behalf of the Board of s, Chairman 2 3
CONDENSED INTERIM STATEMENT OF ASSETS AND LIABILITIES AS AT SEPTEMBER 30, Assets (Un-Audited) (Audited) September 30, June 30, Note s 5 225,802,231 202,927,494 Bank Balances 100,359,518 81,502,715 Dividend and Profit Receivable 12,050,814 11,774,825 Deposit, Prepayments and Other Receivable 2,530,000 2,500,000 Preliminary Expenses and Floatation Cost 875,000 1,000,000 Total Assets 341,617,563 299,705,034 Liabilities Remuneration Payable to Management Company 1,313,269 1,269,448 Remuneration Payable to Trustee 57,535 57,534 Annual Fee Payable to Securities and Exchange Commission of Pakistan 56,483 326,159 Payable to Unitholders Against Redemption 65,220,342 65,244,775 Accrued and Other Liabilities 2,318,759 1,315,656 Total Liabilities 68,966,388 68,213,572 NET ASSETS 272,651,175 231,491,462 UNIT HOLDERS FUND (as per statement attached) 272,651,175 231,491,462 Number of Units in Issue 2,338,188 2,339,554 Net Asset Value per Unit (Face Value per Unit Rs. 100/-) 116.61 98.95 CONDENSED INTERIM INCOME STATEMENT (UN-AUDITED) FOR THE QUARTER ENDED SEPTEMBER 30, 2009 Note Income Profit/Return on - Sukuks/Term Finance Certificates 9,588,402 6,218,169 - Musharika Placements 1,818,575 3,171,301 - Bank Balances 1,235,469 517,230 Capital (Loss)/Gain on Sale of Securities (91,278) 4,363,465 Dividend Income 466,893 942,400 (Diminution)/Appreciation on Remeasurement of s- 'At Fair Value through Profit or Loss' (2,229,233) 5,919,227 Total Income 10,788,828 21,131,792 Expenses Reversal of Impairment Loss 5.4 (31,792,014) - Remuneration to Management Company 891,816 1,456,745 Remuneration to Trustee 176,439 194,233 Annual Fee to Securities and Exchange Commission of Pakistan 56,483 92,261 Securities Transaction Cost 11,600 255,600 Auditors' Remuneration 97,500 90,000 Amortization of Preliminary Expenses and Floatation Cost 125,000 125,000 Fee and Subscription 98,659 21,339 Printing Charges 9,600 10,000 Bank Charges 2,100 5,723 Worker's Welfare Fund 821,811 - Total Expenses (29,501,006) 2,250,901 NET INCOME FROM OPERATING ACTIVITIES 40,289,834 18,880,891 Element of Loss and Capital Losses in Prices of Units Sold Less Those in Units Redeemed - Net (21,085) (394,960) NET INCOME FOR THE PERIOD CARRIED TO DISTRIBUTION STATEMENT 40,268,749 18,485,931 EARNINGS PER UNIT 6 4 As required U/S 241(2) of the Companies Ordinance, 1984, these accounts have been signed by two s 5 As required U/S 241(2) of the Companies Ordinance, 1984, these accounts have been signed by two s
CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED) FOR THE QUARTER ENDED SEPTEMBER 30, CONDENSED INTERIM DISTRIBUTION STATEMENT (UN-AUDITED) FOR THE QUARTER ENDED SEPTEMBER 30, 2009 Net Income for the Period 40,268,749 18,485,931 Other Comprehensive Income Unrealized Appreciation on Remeasurement of s Classified as 'Available For Sale s' 1,027,505 546,628 Total Comprehensive Income for the Period 41,296,254 19,032,559 2009 Undistributed Income Brought Forward - Realised 8,568,339 28,287,365 - Unrealised (10,453,094) (6,842,271) (1,884,755) 21,445,094 Net Income for the Period 40,268,749 18,485,931 38,383,994 39,931,025 Final Distribution At the Rate of Rs. Nil Per Unit for the Year Ended June 30, (June 30, 2009: At the Rate of Rs. 5.2 Per Unit) - (19,692,439) Undistributed Income Carried Forward 38,383,994 20,238,586 Represented By: - Realised 51,066,324 21,161,630 - Unrealised (12,682,330) (923,044) 38,383,994 20,238,586 6 As required U/S 241(2) of the Companies Ordinance, 1984, these accounts have been signed by two s 7 As required U/S 241(2) of the Companies Ordinance, 1984, these accounts have been signed by two s
CONDENSED INTERIM STATEMENT OF MOVEMENTS IN UNIT HOLDERS FUND (UN-AUDITED) FOR THE QUARTER ENDED SEPTEMBER 30, 2009 Net Asset at Beginning of the Year 231,491,462 386,739,260 Amount Received on Issue of NIL Units - 1,574,500 (Sep 30, 2009 : 15,937) Amount Paid on Redemption of 1,366 Units (157,626) (15,655,751) (Sep 30, 2009 : 159,052) (157,626) (14,081,251) 231,333,836 372,658,009 Element of Income and Capital Gains in Prices 21,085 394,960 of Units Sold Less Those in Units Redeemed - Net Total Comprehensive Income for the Period 41,296,254 19,032,559 Net Assets at End of the Period 272,651,175 392,085,528 Net Assets Value per Unit 116.61 101.92 8 As required U/S 241(2) of the Companies Ordinance, 1984, these accounts have been signed by two s
CONDENSED INTERIM CASH FLOW STATEMENT (UN-AUDITED) FOR THE QUARTER ENDED SEPTEMBER 30, A. CASH FLOWS FROM OPERATING ACTIVITIES 9 2009 Net Income for the Peiord 40,268,749 18,485,931 Adjustments for: Appreciation/(Diminution) on Remeasurement of - Held for Trading 2,229,233 (6,465,855) Capital Loss on Sale of Securities 91,278 - Element of Loss and Capital Losses in Prices of Units Sold Less those in Units Redeemed - net 21,085 394,960 Reversal of Impairment Loss (31,792,014) - Amortization of Preliminary Expenses and Floatation Cost 125,000 125,000 10,943,331 12,540,036 Increase/(Decrease) in Assets s 7,624,271 (8,225,251) Dividend and Profit Receivables (275,989) 1,873,228 Deposit and Other Receivable (30,000) 363,264 7,318,282 (5,988,759) Increase/(Decrease) in Liabilities Remuneration Payable to Management Company 43,821 35,532 Remuneration Payable to Trustee 1 4,738 Annual fee Payable to Securities and Exchange Commission of Pakistan (269,676) 92,261 Payable to Unitholders Against Redemption (24,433) - Accrued and Other Liabilities 1,003,103 177,410 752,816 309,941 Net Cash Generated from Operating Activities 19,014,429 6,861,218 B. CASH FLOWS FROM FINANCING ACTIVITIES Net (Payments)/Receipts against Units (Redeemed)/Sold (157,626) (14,081,251) Net Cash Used in Financing Activities (157,626) (14,081,251) Net Increase in Bank Balances During the Period A+B 18,856,803 (7,220,033) Bank Balances at Beginning of the Year 81,502,715 49,577,351 Bank Balances at End of the Period 100,359,518 42,357,318 As required U/S 241(2) of the Companies Ordinance, 1984, these accounts have been signed by two s NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (UN-AUDITED) FOR THE QUARTER ENDED SEPTEMBER 30, 1. LEGAL STATUS AND NATURE OF BUSINESS 1.1 Dawood Islamic Fund () was established under a Trust Deed executed on September 13, 2006 between Dawood Capital Management Limited (DCML) as Management Company and Central Depositary Company of Pakistan (CDC) as Trustee. The Securities and Exchange Commission of Pakistan (SECP) approved the appointment of Trustee and granted license to the Management Company of the Fund to act as an Asset Management Company. Registered office of the Management Company is situated at 1500-A, Saima Trade Towers, I.I.Chundrigar Road, Karachi, Pakistan. 1.2 is an open-ended mutual fund and is listed on Karachi Stock Exchange. Units are offered for public subscription on a continuous basis. The units are transferable and can be redeemed by surrendering them to the Fund. 1.3 The principal activities of is to make investment in equity and debts securities which are Shariah Compliant and approved by the Shariah Advisors. 1.4 Title to the assets of the Fund are held in the name of Central Depository Company of Pakistan Limited as a Trustee of the Fund. 1.5 Asset Manager Rating (AMR) of 'AM4+' (2009: 'AM4+') has been assigned to the Management Company and 4 star (2009: 4 star) rating has been assigned to the Fund by Pakistan Credit Rating Agency (PACRA). 2. STATEMENT OF COMPLIANCE 2.1 These condensed interim financial statements have been prepared in accordance with requirements of approved accounting standards as applicable in Pakistan, the requirements of the Companies Ordinance, 1984 (the Ordinance), the Non Banking Finance Companies and Notified Entities Regulations, 2008 (the Regulations), The Non Banking Finance Companies (establishment and Regulation) Rules, 2003 (the Rules), the Trust deed and directives issued by the SECP. Approved Accounting Standards comprise of such International Financial Reporting Standards (IFRS) as are notified under the provisions of the Ordinance. Wherever, the requirements of the Rules, the Regulations, the Ordinance or directives issued by SECP differ with the requirements of these standards, the requirements of the Regulations, the Rules, the Ordinance and the said directives take precedence. The disclosures made in these condensed interim financial statements have, however, been limited based on the requirements of the International Accounting Standard 34 "Interim Financial Reporting". These condensed interim financial statements are unaudited and are being circulated to the unit holders as required under the Regulations. 10
3. BASIS OF MEASUREMENT 3.1 Accounting Convention These condensed interim financial Statements have been prepared under the historical cost convention except for certain financial instruments which have been carried at fair value. 3.2 Functional Currency These condensed interim financial statements are presented in Pak, which is the functional and presentation currency of the Fund. 3.3 Critical Accounting Estimates and Judgments The preparation of condensed interim financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires the management to exercise its judgment in the process of applying the Fund's accounting policies. Estimates and judgments are continually evaluated and are based on historical experience, including expectations of future events that are believed to be reasonable under the circumstances. 4. SIGNIFICANT ACCOUNTING POLICIES The accounting policies adopted for the preparation of these condensed interim financial statements are the same as those applied in the preparing of the annual published financial statements of the Fund for the year ended June 30,. 5. INVESTMENTS % Held for Trading in Listed Equity Securities 5.1 17% 39,224,628 40,145,600 Available-for-Sale Percentage September 30, June 30, of Total Note s in Debt Securities 5.2 Un-Quoted Debt Securities 60% 135,793,957 111,886,298 Placements Certificates of Musharika 5.3 22% 50,783,646 50,895,596 100% 225,802,231 202,927,494 5.1 s in Marketable Securities at Fair Value Through Profit and Loss - Held for Trading The holding are in the fully paid ordinary shares/certificates of Rs. 10/- each Number of Shares/Certificates Value of Shares/Certificates Percentage of Total Unrealised Appreciations/ (Diminution) Cost Market Value Closing as at Sept., 30, Bonus/ Right Issue Purchases Sales Opening as at July 01, Name of Investee Number of Shares Oil & Gas Pakistan Petroleum Limited - 7,500 2,500-5,000 875,999 862,050 (13,949) 0.38 Shell Pakistan Limited 71,692 - - - 71,692 19,981,634 13,797,125 (6,184,509) 6.11 Pakistan Oilfields Limited - 5,000 5,000 - - - - - National Refinery Pakistan Limited 75,530 - - - 75,530 16,693,301 15,261,592 (1,431,709) 6.76 37,550,934 29,920,767 (7,630,167) Fixed Line Telecommunication Pakistan Telecommunication Company Limited - 70,000 70,000 - - - - - - Chemicals ICI Pakistan Limited 27,750 10,000 5,000-32,750 5,051,106 3,835,025 (1,216,081) 1.70 5,051,106 3,835,025 (1,216,081) Pharma and Bio Tech GlaxoSmithKline Pakistan Limited 81,140 - - - 81,140 9,304,918 5,468,836 (3,836,082) 2.42 September 30, 51,906,958 39,224,628 (12,682,330) 17.37% 11 12
Opening as at July 01, Purchases (Matured)/ (Sold) Closing as at Sept., 30, Cost as at Sept. 30, Market Value/ Carrying Value as at Sept. 30, Unrealised (Loss)/Gain Sept. 30, Return on Percentage of Total 5.2 in Debt Securities Face Value of Rs. 5,000/- Each Number of Certificates % Unquoted Debt Securities Sukuks Engro Fertilizer Limited 7,000 - - 7,000 35,000,000 34,387,500 (612,500) K6+1.5 15.23 Shahmurad Sugar Mills Limited * 37 - - 37 22,448,109 23,932,561 1,484,452 K6+2.25 10.60 Pak Elektron Limited 8,000 - - 8,000 22,994,392 22,570,788 (423,604) K3+1.75 10.00 Kohat Cement Limited (note 5.2.1) 5,000 - - 5,000 24,150,000 18,112,500 (6,037,500) K3+1.8 8.02 Maple Leaf Cement Factory Limited 9,815 - - 9,815 48,167,561 36,790,608 (11,376,953) K3+1.7 16.29 (note 5.2.2) New Allied Electronics Industries Limited 1,000 - - 1,000 5,027,500 - (5,027,500) K3+2.2-157,787,562 135,793,957 (21,993,605) 60.14 157,787,562 135,793,957 (21,993,605) Impairment loss 22,441,953 448,348 K = KIBOR * Face Value of Rs. 1,000,000/- 5.3 Certificates of Musharika/Musharika Opening as at July 01, Purchased (Matured) Closing as at Sep. 30, Impairment Loss Carrying Value as at Sep. 30, Date of Maturity Return on % Percentage of Net Assets Invest Capital Bank Limited 50,000,000 - - 50,000,000-50,000,000 August 29, 14.43 22.14 B.R.R. Guardian Modaraba 1,119,495 - - 1,119,495 335,849 783,646 March 31, 13.00 0.35 51,119,495 - - 51,119,495 335,849 50,783,646 22.49 Details of Non Compliance s Under SECP Circular No.16 dated July 07, are as follows: Name of Non-Compliant Type Value Before Provision Value After % of Net % of Gross Provision Mode Provision Assets Assets Invest Capital Bank Limited COM 50,000,000-50,000,000 18.34% 14.64% Kohat Cement Company Limited Sukuk 24,150,000 6,037,500 18,112,500 6.64% 5.30% Maple Leaf Cement Factory Lmited Sukuk 48,167,561 11,376,953 36,790,608 13.49% 10.77% New Allied Electronics Industries Limited Sukuk 5,027,500 5,027,500-0.00% 0.00% BRR Guardian Modaraba Musharika 1,119,495 335,849 783,646 0.29% 0.23% Total 128,464,556 22,777,802 105,686,754 38.76% 30.94% 13 14
5.4 Break up and movement of impairment loss on investments classified as non-performing are as follows: Sukuks 6. EARNINGS PER UNIT Earnings per unit (EPU) has not been disclosed as, in the opinion of management, the determination of weighted average units for calculating EPU is not practicable. 7. TAXATION The Fund is exempt from tax under clause 99 of Part 1 of Second Schedule to the Income Tax Ordinance, 2001 (the Ordinance), subject to the condition that not less than 90% of its accounting income for the year, as reduced by the capital gains whether realised or unrealised, is distributed amongst its unit holders. The management intends to avail the tax benefit at the year end if there is profit. Cost <----------------- Impairment -----------------> At July 01, Addition/ At Sept., 30, (Reversal) During the Period <----------------- -----------------> New Allied Electronics Industries Limited 5,027,500 5,027,500-5,027,500 Maple Leaf Cement Limited 48,167,561 43,280,917 (31,903,964) 11,376,953 Kohat Cement Company Limited 24,150,000 6,037,500-6,037,500 77,345,061 54,345,917 (31,903,964) 22,441,953 Placements BRR Guardian Modaraba 1,119,495 223,899 111,950 335,849 Total 78,464,556 54,569,816 (31,792,014) 22,777,802 Amount of Transactions During the Period Dawood Capital Management Limited - Management Company 2009 Remuneration to Management Company 891,816 1,456,745 Central Depository Company of Pakistan Ltd. - Trustee Remuneration for the Period 176,439 194,233 BRR Guardian Modaraba Return on Placements - 1,323,287 9. DATE OF AUTHORIZATION FOR ISSUE These condensed interim financial statements were approved and authorized for issue on October 26, by the Board of s of the Management Company. 10. GENERAL Figures have been rounded off to the nearest Rupee unless otherwise specified. The Fund is also exempt from the provisions of Section 113 (minimum tax) under Clause 11 of Part IV of the Second Schedule to the Income Tax Ordinance, 2001. 8. TRANSACTIONS WITH CONNECTED PERSONS Connected persons comprise of management company, associated undertakings, directors, trustee and key management staff of the management company. Remuneration payable to the management company and trustee is determined in accordance with the provisions of the NBFC Regulations and Trust Deed respectively. As required U/S 241(2) of the Companies Ordinance, 1984, these accounts have been signed by two s 15 16