taha spinning mill

CONTENTS

Corporate Information 2

Mission/Vision Statement 3

Board of Directors 4

Key Management Personals 5

Notice of Meeting 6

Financial Highlights 8

Directors’ Report 9

Statement of Compliance with The Code of Corporate Governancefor the Year Ended June 30, 2007 15

Review Report to the Members on Statement of Compliance with theBest Practices of the Code of Corporate Governance 17

Auditors’ Report to the Member 18

Balance Sheet 19

Profit & Loss Account 20

Cash Flow Statement 21

Statement of Changes in Equity 23

Notes to the Accounts 24

Pattern of Shareholding 45

From of Proxy

Annual Report 2008

CORPORATE INFORMATIONBoard of Directors Mr. Feroze Sayeed-Ud-Deane Chairman (Nominee of GM)

Miss Tara Uzra Dawood Chief Executive OfficerMr. Iftikhar Hussain Director (Nominee of FDIB)Mr. Nazimuddin Feroz Director (Nominee of BRRI)Mr. Gul Nawaz Director (Nominee of NIT)Mr. Anwar A. Sheikh DirectorMr. AVM (Retd.) Zulfiquar Ahmed Shah Director (Nominee of FDIB)

Group Financial Director Mr. Muhammad Shoaib

Chief Financial Officer Mr. Muhammad Shahid Usman

Company Secretary Mr. Tahir Mehmood

Audit Committee Mr. AVM (Retd.) Zulfiquar Ahmed Shah ChairmanMr. Iftikhar Hussain MemberMr. Anwer A.Shaikh Member

Auditors Ford Rhodes Sidat Hyder & Co.Chartered Accountants

Legal Adviser Rauf & Ghaffar Law Associates Advocates404, 4th Floor, Beaumont Plaza 6-cl-10Beaumont Road, Karachi

Banker Dawood Islamic Bank LimitedBank AL Habib LimitedHabib Metripolitan Bank LimitedOman International Bank S.A.O.G.

Registered Office 1500-A Saima Trade Towers,I. I. Chundrigar Road, Karachi 74000UAN: 111-DAWOOD (111-329-663)PABX: (92-21) 227-1874/887Fax: (92-21) 227-1912E-mail: [email protected]: www.firstdawood.com/dcm

Registrars F.D. Registrar Services (SMC-Pvt.)1700-A Saima Trade Towers,I. I. Chundrigar Road,Karachi 74000

Rating PACRA: AM3

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Mission/Vision Statement

To Be The Prominant Funds Manager That

Adds Value For Stakeholders Through

Innovative And Responsible Management

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Mr. Feroze Sayeed-Ud-Deane

Mr. Deane is a Bachelor of Science from Dacca University. He has over43 years of working experience. He is currently working with CastleOverseas Company, a company involved in Export of Textile productsto 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 LatinAmerica, 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 HarvardLaw School, Massachusetts, USA, and Bachelor of Arts Honors (A.B.) from CornellUniversity, New York, USA, Oxford University. She has worked for law firms in NewYork, Toronto, Amsterdam and California and is a specialist in mergers and acquisitionsand 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 directorfor Efroze Chemical Industries and Maple Pharmaceutical (Pvt.) Ltd., since inception andalso working as a registered partner for other firms as well.

Mr. Gul NawazMr. Nawaz is an Asset Manager with extensive experience of equitytrading, equity research and as Non-executive Director on the Board ofDirectors of leading listed public limited companies. Mr. Nawaz did hisMasters in Commerce from University of Punjab. He is working withNational Investment Trust Limited; a state owned Asset ManagementCompany since 1996.

Mr. Anwar A. Sheikh

Mr. Sheikh is the Master in Business Administration from the Institute of BusinessAdministration (IBA). Mr. Sheikh has over 14 years of strategic expertise in FinancialConsulting/Restructuring, Mergers and Acquisition, Privatization, Resource Mobilizationand Structured Finance.

Mr. AVM (Retd.) Zulfiqar Ahmed Shah

Mr. Shah has the honour of serving Pakistan Air Force (PAF) with over34 years of Commissioned Service. He has extensive knowledge andexperience of operation at PAF. He is a graduate of Air Command andStaff College of Air University, USAF and National Defence College. Hehas also managed a large public sector corporation when he was sent ondeputation to the Civil Aviation Authority.

Mr. Iftikhar Hussain

Mr. Iftikhar is the Master in Business Administration in Finance fromNewYork University. He was also did his BSE in Computer Science fromUniversity of Pennsylvania. Mr. Hussain has over 23 years of experience in Finance andsince last 15 years he was working as CEO of private limited company.

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Annual Report 2008

Mr. Muhammad Shahid Usman Ojha (Chief Financial Officer)

Mr. Shahid Usman is an associate member of Institute of Cost & Management Accountantof Pakistan and Pakistan Institute of Public Finance Accountants. He was also completedhis Master in Economics from University of Karachi. He has experience of over 13 yearsin Mutual Fund industry and Financial Institutions. His core responsibilities includeFinancial 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 inTreasury and over 4 years in Asset Management. He is Master of Business Administrationand Master of Commerce from University of Karachi. He has also completed four yearsas audit trainee with M/s. Ford Rhodes Sidat Hyder registered with Institute of CharteredAccountants 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 responsiblefor managing the equity portfolio. His expertise includes hedging/arbitrage of shares,communications with various brokers, coordination with treasury department for pledgingand releasing of shares, managing settlement and payment of shares on NCSS, T+3, T=1and future counters, continuous funding system, assessing and analyzing of the annualreports of companies

Mr. Tahir Mehmood (Company Secretary)

Mr. Mehmood is an Associate Member of the Institute of Corporate Secretaries of Pakistanand Associate Member of the Institute of Chartered Secretaries and Managers (CharteredSecretary Stream). Before joining First Dawood Group (FDG) he was working as AssistantManager in Deloitte M. Yousuf Adil Saleem & Company, Chartered Accountants for oversix 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 in1997. He has an experience of over 12 years of managing of shares portfolio in variouscompanies. As well his expertise include hedging/arbitrage of shares, communicationswith various brokers, coordination with treasury department for pledging and releasingof shares, managing settlement and payment of shares on NCSS, T+3, T=1 and futurecounters, continuous funding system, assessing and analyzing of the annual reports ofcompanies 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 andanalysis of annual and quarterly reports as well as survey reports of various brokeragehouses.

NOTICE OF ANNUAL GENERAL MEETING (AGM XVII)

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Notice is hereby given that the AGM XVII of the shareholders of the company will beheld at the registered office at 1500-A, Saima Trade Towers, I.I. Chundrigar Road, Karachion October 28, 2008 at 03:30 p.m. to transact the following business:

Ordinary Business

1. To confirm the Minutes of the AGM XVI held on October 17, 2007.

2. To receive, consider and adopt the Audited Financial Statements of the Company for the year ended June 30, 2008 together with Directors’ andAuditors’ Reports thereon.

3. To appoint auditors and fix their remuneration.

Special Business

4. To consider and if thought fit, approve the following resolution as an ordinaryresolution in respect of issue of Bonus Shareh in the ratio of 10%, as recommendedby the directors in their meeting.

Proposed Resolution

“RESOLVED that a sum of Rs.13,612,500/- out of the company’s unappropriatedprofit 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 bonusshares to those members of the Company whose names appear in the register ofmembers of the Company on October 22, 2008 in the ratio of = 100 = shares forevery =1,000= shares held and that such bonus shares shall rank pari passu in allrespect with the existing ordinary shares of the Company.”

“FURTHER RESOLVED that the Chief Executive and Company Secretary beand are hereby severally authorized to consolidate all fractions of bonus sharesand sell in the stock market and pay the proceeds to charity.”

6. Any other Business with the permission of the Chair

By Order of the BoardSeptember 25, 2008 Tahir MehmoodKarachi Company Secretary

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Notes:

1. The share transfer books of the Company shall remain closed from October 22, 2008 toOctober 28, 2008 (both days inclusive). Shareholders are requested to notify to our ShareRegistrar FD Registrar Services (SMC-Pvt.) Ltd at 1700-A, Saima Trade Towers, I.I.ChundrigarRoad, Karachi, if any change of address immediately.

2. A member entitled to attend and vote at this meeting may appoint a proxy to attend andvote 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 andsigned not less than 48 hours before the meeting.

3. The CDC account/sub-account holders are requested to bring with them their ComputerizedNational ID Cards (CNIC) along with Participant(s) ID number and their account numbersat the time of attending this meeting in order to facilitate identification of the respectiveshareholder(s). In respect of corporate entity, the Board of Directors Resolution/Powerof Attorney with specimen signatures be produced at the time of meeting.

Statement under Section 160 (1) (b) of the Companies Ordinance, 1984

This statement sets out the material facts concerning the special business to be transactedat 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 Company’s financial position and its reserves justify thecapitalization of free reserves amounting to Rs.13,612,500/- for the issue of bonus shares in theratio of =100= bonus shares for every 1,000 ordinary shares held. The Directors directly orindirectly, are not personally interested in this issue except to the extent of their shareholding inthe Company.

Pursuant to rule 6 (iii) of the Companies (issue of capital) Rules 1996, the auditors have certifiedthat the free reserves and surpluses retained after the issue of the bonus shares will not be lessthan 25% of the increased capital.

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2008 2007 2006 2005 2004 2003 2002 2001 Rupees in Million

Authorized Capital 200.00 200.00 200.00 200.00 200.00 200.00 200.00 200.00

Paid-up Capital 136.13 121.00 110.00 100.00 100.00 100.00 100.00 100.00

Shareholders' Equity 392.69 259.06 199.07 157.80 142.40 135.69 130.78 123.20

Total Assets 512.90 347.45 259.11 259.40 187.06 174.75 135.50 127.38

Short-Term Investment in Securities 267.78 131.56 105.01 223.46 164.86 154.79 103.18 84.07

Short-Term Investment in Deposits 15.00 - - 15.00 - - - 33.04

Income From Investments 16.49 12.25 15.28 21.43 16.58 16.75 18.56 11.83

Management Fee 67.70 38.48 29.90 14.93 6.06 0.63 - -

Other Income 0.45 0.54 0.40 6.85 1.53 0.70 1.01 1.83

Profit Before Taxation 23.86 42.67 42.65 21.11 6.85 7.90 9.60 6.25

Taxation 3.53 (1.27) 4.56 4.52 1.95 1.64 2.55 1.17

Profit After Taxation 20.33 43.94 38.09 16.59 4.90 6.25 7.05 4.54

Book Value Per Share 28.87 21.41 16.45 15.78 14.24 13.57 13.08 12.30

Earnings Per Share 1.49 3.63 3.15 1.51 0.49 0.63 0.71 0.45

FINANCIAL HIGHLIGHTS

Annual Report 2008

DIRECTORS’ REPORT

On behalf of the Board of Directors of Dawood Capital Management Limited ("DCM" or the "Company"), it givesme immense pleasure to present the Sixteenth Annual Report along with the audited financial statements for the yearended June 30, 2008.

Operations and PerformanceJune 30, 2008 June 30, 2007

……….Rupees…………Profit Earned On Investments 16,485,502 12,251,239Management Fees 67,701,271 38,475,489Other Operating Income 452,948 543,585Gross Revenue 84,639,721 51,270,313Administration and Operating Expenses 52,497,190 25,536,607Financial Charges 13,669,384 6,814,118Total Expenses 66,166,574 32,350,725Share of Profit of Associate 5,381,927 23,754,567Profit Before Taxation 23,855,074 42,674,154Profit After Taxation 20,329,345 43,948,825

The Financial Year under review proved profitable with the net profits after tax of Rs. 20.33 Million. The total grossrevenue also increased by 65% to Rs. 84.64 Million as compared to Rs. 51.27 Million last year. This gross revenuewas derived mainly from the Management Fee of Rs. 67.70 Million (Rs. 38.48 Million last year) for managing theaffairs 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 upwardincrease 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 anddeclared 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 asmart investment choice for investors.

Another successful year of operation of our closed-end FDMF showed Rs. 0.61 earning per certificate after facingall 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 Sharesin proportion of 100 share for every 1000 shares held i.e 10 % for the year ended June 30, 2008, subject to theapproval 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 revaluationgain of Rs. 140.59 Million and long term investment stands at 172.73 Million.

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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 inthe 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 herebyconfirm 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 resultof 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 FinanceCompanies and Notified Entities Regulations, 2007 (the Regulation), the NBFC Rules 2003 and directives ofthe 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, ChiefExecutive 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 listingregulations.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 Secretaryand their spouses of minor children except as stated here under:

CEO/Director Purchased Bonus Sale

Miss. Tara Uzra Dawood 919,600 115,327 -Mr. Anwar A. Sheikh - 378 -

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 year2008. 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 12,289.03at that time market was traded at the discount of 22%. Top three contributing sectors are banking 47%, cement 43.9% andinsurance sector by 38.9% and other sectors according to their percentages are refineries, fertilizer, OMC's & oil & gasexploration 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 managementand the asset manager meets high investment management industry standards and benchmarks.

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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 bythe government and a buoyant global economic environment with rapid economic expansion in China and India fuellingglobal economic growth. In this period the global economy due to continued strong expansion, has become geographicallymore broad-based. However, since the mid of 2007 the health of the global economy has taken a hit from the subprimecrisis in the US and in some parts of Europe and distress and high turbulence in international financial markets. The IMFand other international financial bodies have already downward revised their global growth projections for the next 3years. Pakistan's economy has experienced the negative fallouts of a reduction in international capital liquidity which hasdrained away foreign investment inflows. However growth in emerging economies is though slightly diminished is likelyto remain solid and stable in the medium to long term despite external shocks coming from record high international oilprices to $147 per barrel and other commodity prices, which are fuelling global inflationary pressures, and a downturnin 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 economicgrowth was a direct result of lower than targeted performance by the manufacturing and agriculture sectors. Secondmonetary policy of FY2007 was negative for banking sector in which SBP to curb from inflationary pressure increasediscount rate by 150 bps and minimum rate of 5% has been imposed on PLS savings accounts. Pakistan economy hadalso hit by the cost push inflation through the hike of international oil & other commodity prices which fuelling theinflationary pressure in our economy. Agricultural production increased by 1.5% in FY08 versus 3.7% growth previousyear. Similarly, manufacturing growth decreased to 5.4% in FY08 against 8.2% attained in the previous year. Large ScaleManufacturing (LSM) grew by just 4.8% as compared to 8.6% in FY07. During the current fiscal year, the main growthdriver remained the services sector which grew at a high rate of 8.2% versus 7.6% growth attained in FY07. Currentforeign reserves are $10.73 billion, trade and current A/c deficits are $20.74 & $14.01 billion respectively. Despite aneconomic growth slowdown during the current fiscal year, high average real GDP growth in the last 6 years has resultedin 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; optimizingthe 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. HasibAhmed, 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 towelcome on Board the new elected director.

Currently, the Company has Seven Directors on its Board.

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Board Meetings

During the year 2007-08 five (5) meetings of the Board of Directors of the management company were held, the requisitedetails are as under:

S.No. Name Designation Entitlement to Leave of absenceAttend Meeting

1. Mr. Feroze Sayeed-ud-Deane Chairman 5 -2. Miss Tara Uzra Dawood Chief Executive 5 13. Mr. Gul Nawaz Director 5 14. Mr. Anwar A. Sheikh Director 5 35. Mr. Hasib Ahmed Director 4 46. Mr. AVM (Retd.) Zulfiqar Shah Director 5 17. Mr. Nazimuddin Feroz Director 5 28. Mr. Iftikhar Hussain Director 1 -

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 therelevant 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 toimprove upon the hiring including retention and work environment related issues, grooming of skills to match with thechanging business needs, induction of qualified and experienced professionals. Training and Human Resource Developmentcontinues 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 aparticipation 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 andefficient 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 thequality of service to customers.

The IT function besides creating an efficient IT environment in the organization also keeps abreast with the latest trendsin information technology. In addition, the company continues to implement initiatives to reduce the usage of paper throughthe utilization of information technology as part of the company's long tenure objective to strive towards a paperlessenvironment.

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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Auditors

The present auditors M/s. Ford Rhodes Sidat Hyder & Co, Chartered Accountants, retire and being eligible offers themselvesfor re-appointment. As required under the Code of Corporate Governance the Audit Committee has recommended the reappointment 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 higherthe risk the greater the reward. Our fundamental objective is to maximize certificate holder's value, but this must be carriedout 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 operationalrisk.

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 andpractices 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 ofthis 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 constitutedan 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 ChairmanMr. Anwar A. Sheikh MemberMr. Iftikhar Hussain Member

The Audit Committee reviewed the quarterly, half-yearly and annual financial statements before submission to the Boardand their publication. The Audit Committee had detailed discussions with the external auditors. The Audit Committee alsoreviewed internal audit findings and held separate meetings with internal and external auditor as required under the Codeof Corporate Governance.

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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 adjustmentsto the enclosed financial statements.

Acknowledgement

We take the opportunity to thank our customers, business associates, leading banks and financial institutions for puttingtheir trust with us and allowing us to cater to their financial needs. We also appreciate the guidance provided to the companyby the Securities and Exchange Commission of Pakistan. We truly appreciate and value the contribution of our staff whohave 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,

KarachiDate: September 25, 2008

Chairman

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STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCEFOR 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 RegulationNo. 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 hasapplied 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 non-executive directors.

2. The directors have confirmed that none of them is serving as a director in more then ten listed companies, includingthis Company.

3. All the resident directors of the Company are registered as tax payers and none of them has defaulted in paymentof any loan to a banking company, a DFI or an NBFI or, being a member of a stock exchange, has been declared asdefaulter by that stock exchange.

4. A casual vacancy occurred in the Board and was filled up by the directors within 30 days thereof.

5. The Company has prepared a "Statement of Ethics and Business Practices", which has been signed by all the directorsand employees of the Company.

6. The Board of Directors has adopted a vision/mission statement and all the overall corporate strategy of the Companyand had also formulated significant policies as mentioned in the Code. A complete record of particulars of significantpolicies along with the dates on which they were approved or amended has been maintained.

7. All the powers of the Board have been duly exercised and decisions on material transactions, including determinationof remuneration and terms and conditions of the Chief Executive Officer have been taken by the Board.

8. The meetings of the Board were preside over by the Chairman. The Board met at least once in every quarter. Writtennotices of the Board meetings, along with the agenda and working papers, were circulated at least seven days beforethe meetings. The minutes of the meetings were appropriately recorded and circulated.

9. The Directors of the Company have been provided with copies of the Listing Regulations, Code of CorporateGovernance, NBFCs Rules, Company's Memorandum and Articles of Association and all other relevant rules andregulations and hence are conversant of the relevant laws applicable to the Company, its policies and proceduresand provisions of memorandum and article of Associations and of their duties and responsibilities. Directors havealso attended talks and seminars on the subject of Corporate Governance.

10. The Board of Directors of the Company has approved the appointment of the Company Secretary including hisremuneration and terms and conditions of employment as determined by the Chief Executive Officer. Appointmentof Chief Financial Officer did not take place during the year.

11. The directors' report for this year has been prepared in compliance with the requirements of the Code and fullydescribes the salient matters required to be disclosed.

12. The financial statements of the Company were duly endorsed by the Chief Executive Officer and Chief FinancialOfficer before approval of the board.

13. The directors, Chief Executive Officer and executives do not hold any interest in the shares of the Company otherthan that disclosed in the pattern of shareholding.

14. The Company has complied with all the corporate and financial reporting requirements of the Code.

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15. The Board has formed an Audit Committee. It comprises 3 members, of whom 2 are Non-Executive Directorsincluding the chairman of the committee.

16. The meetings of the Audit Committee (AC) were held at least once every quarter prior to approval of the interimand final results of the Company and as required by the code. The terms of reference of the (AC) have been formedand advised to the (AC) for compliance.

17. 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 andexperienced for the purpose and are conversant with the policies and procedures of the Company and their representativesare involved in the internal audit function on a full time basis.

18. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under thequality control review program of the Institute of Chartered Accountants of Pakistan (ICAP), that they or any of thepartners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and allits partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics asadopted by ICAP.

19. The statutory auditors or the persons associated with them have not been appointed to provide other services exceptin accordance to the listing regulations and the auditors have confirmed that they have observed IFAC guidelinesin this regard.

20. We confirm that all other material principles contained in the Code have been complied.

Karachi On Behalf of the Board of DirectorsDate: September 25, 2008 Dawood Capital Management Limited

Tara Uzra DawoodChief Executive Officer

Annual Report 2008

REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCEWITH BEST PRACTICIES OF CODE OF CORPORATE GOVERNANCE

We have reviewed the Statement of Compliance with the best practices (the Statement) contained in the code of CorporateGovernance (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 islisted.

The responsibility for compliance with the Code is that of the Board of Directors of the Company. Our responsibility isto review, to the extent where such compliance can be objectively verified, whether the Statement reflects the status ofthe Company's compliance with the provisions of the Code of Corporate Governance and report if it does not. A reviewis limited primarily to inquiries of the Company's personnel and review of various documents prepared by the Companyto comply with the code.

As part of or audit of the financial statements, we are required to obtain an understanding of the accounting and internalcontrol systems sufficient to plan the audit and develop an effective audit approach. We have not carried out any specialreview of the internal control system to enable us to express an opinion as to whether the Board's statement on internalcontrol 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 doesnot appropriately reflect the Company's compliance, in all material respects, with the best practices contained in the Codefor the year ended June 30, 2008.

Karachi Chartered AccountantsDate: September 25, 2008

17

Phone: (92-21) 565 0007-11Fax: (92-21) 568 [email protected] at Lahore & Islamabadwww.ey.com/pk

ERNST & YOUNG Ford Rhodes Sidat Hyder & Co.Chartered AccountantsProgressive Plaza, Beaumont RoadP.O. Box 15541Karachi 75530, Pakistan

Annual Report 2008

We have audited the annexed balance sheet of Dawood Capital Management Limited as at June 30, 2008 and the relatedProfit and Loss account, Cash Flow Statement and Statement of Changes in Equity together with the notes forming partthereof, for the year then ended and we state that we have obtained all the information and explanations which, to the bestof 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 prepareand present the above said statements in conformity with the approved accounting standards and the requirements of theCompanies 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 thatwe plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of anymaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures inthe above said statements. An audit also include assessing the accounting policies and significant estimates made bymanagement, as well as, evaluating the overall presentation of the above said statements. We believe that our audit providesa 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 conformitywith the Companies Ordinance, 1984, and are in agreement with the books of account and are further inaccordance 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 accordancewith 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 balancesheet, profit and loss account, cash flow statement and the statement of changes in equity, together with thenotes forming part thereof, conform with approved accounting standards as applicable in Pakistan, and, givethe information required by the Companies Ordinance, 1984, in the manner so required and respectively givea true and fair view of the state of the company's affairs as at June 30, 2008 and of the profit, its cash flowsand 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 AccountantsKarachiDate: September 25, 2008

AUDITORS’ REPORT TO THE MEMBERS

18

Phone: (92-21) 565 0007-11Fax: (92-21) 568 [email protected] at Lahore & Islamabadwww.ey.com/pk

ERNST & YOUNG Ford Rhodes Sidat Hyder & Co.Chartered AccountantsProgressive Plaza, Beaumont RoadP.O. Box 15541Karachi 75530, Pakistan

Annual Report 2008

2008 2007Notes Rupees Rupees

ASSETS

Non-Current Assets

Operating Fixed Assets 5 7,204,068 3,786,710 Long-Term Investments 6 172,729,058 156,471,655 Long-Term Receivables from Related Parties 7 2,615,000 4,024,388 Long-Term Loan 8 3,621,740 175,825 Long-Term Deposits 31,000 31,000

186,200,866 164,489,578

Current Assets

Investments - Available for Sale 9 267,778,622 131,564,250 Loans and Advances 10 30,165,933 27,189,019 Fund Placement - Unsecured 11 15,000,000 - Prepayments, Interest Accrued and Other Receivables 12 619,834 763,291 Remuneration Due from Funds Under Management 13 5,562,286 21,709,356 Advance Tax - Net of Provision 6,243,090 1,465,900 Bank Balances 14 1,333,322 272,426

326,703,087 182,964,242 512,903,953 347,453,820

EQUITY AND LIABILITIES

Share Capital and Reserves

Authorised Capital 20,000,000 Ordinary Shares of Rs.10/- Each 200,000,000 200,000,000

Issued, Subscribed and Paid-Up Capital 15 136,125,000 121,000,000 Unrealised Surplus on Revaluation of Available for Sale Investments to Fair Value - Net 9 140,588,092 27,283,835 Reserves 16 115,979,458 110,775,113

392,692,550 259,058,948Non-Current Liabilities

Deferred Tax Liability - Net 17 227,000 308,000

Current Liabilities

Short-Term Borrowings 18 100,000,000 75,996,784 Running Finance Under Mark-Up Arrangement - Secured 19 7,088,289 5,077,772 Accrued and Other Liabilities 20 11,169,957 6,409,535 Accrued Mark-Up on Borrowings 21 1,726,157 602,781

119,984,403 88,086,872 Contingencies and Commitments 22 512,903,953 347,453,820

The annexed notes from 1 to 41 form an integral part of these financial statements.

19

BALANCE SHEETAS AT JUNE 30, 2008

Chief Executive Officer Director

Annual Report 2008

20

PROFIT & LOSS ACCOUNTFOR THE YEAR ENDED JUNE 30, 2008


2008 2007NotesRupees Rupees

INCOME

Investment Income 23 16,485,502 12,251,239Management Fee 24 67,701,271 38,475,489

84,186,773 50,726,728EXPENSES

Administrative and Operating Expenses 25 52,497,190 25,536,608 Financial Charges 26 13,669,384 6,814,118

66,166,574 32,350,726 18,020,199 18,376,002

Other Operating Income 27 452,948 543,585 18,473,147 18,919,587

Share of Associate's Profit 5,381,927 23,754,567

PROFIT BEFORE TAXATION 23,855,074 42,674,154Taxation - Current 3,740,731 3,388,840 - Prior (134,002) (4,911,511) - Deferred (81,000) 248,000

28 3,525,729 (1,274,671)

NET PROFIT FOR THE YEAR 20,329,345 43,948,825

EARNINGS PER SHARE - Basic and Diluted 29 1.49 3.23


Annual Report 2008

2008 2007Rupees Rupees

CASH FLOWS FROM OPERATING ACTIVITIESProfit Before Taxation

23,855,074 42,674,154Adjustments for:Depreciation 1,421,247 838,574Loss/(Gain) on Disposal of Operating Fixed Assets 6,464 (92,645)Financial Charges 13,669,384 6,814,118Dividend Income (5,409,694) (3,174,790)Return on TFCs/Fund Placement (3,454,864) (2,795,999)Share of Associate's Profit (5,381,927) (23,754,567)Long-Term Deposits Written of - 34,800

850,610 (22,130,509)Operating Cash Flows Before Working Capital Changes 24,705,684 20,543,645

(Increase)/Decrease In Current AssetsLoans and Advances (2,976,914) (19,802,128)

Funds Placement (15,000,000) -Prepayments and Other Receivables 97,256 1,415,831Remuneration Due from Funds Under Management 16,147,070 (2,029,748)

(1,732,588) (20,416,045)Increase In Current LiabilitiesAccrued and Other Liabilities 4,760,422 4,076,530

Long-Term Receivables from Related Parties `1,409,388 (1,024,388)

Cash Flows (Used In)/From Operations 29,142,906 3,179,742Income Taxes Paid (8,383,919) (4,005,420)Financial Charges Paid (12,546,008) (6,835,219)Net Cash Flow From/(Used In) Operating Activities 8,212,979 (7,660,897)

Cash Flows from Investing Activities

Long-Term Investments - Net (10,875,476) (13,792,052)Proceeds from Disposal of Operating Fixed Assets 12,001 175,000Investments - Available for Sale (22,910,115) (10,507,844)Dividends Received 5,409,694 3,174,790Return on TFCs/Fund Placement Received 3,501,065 3,354,119Long-Term Loans (3,445,915) 89,851Purchase of Fixed Assets (4,857,070) (3,006,090)

Net Cash Flow Used in Investing Activities (33,165,816) (20,512,226)

21

CASH FLOW STATEMENTFOR THE YEAR ENDED JUNE 30, 2008


Annual Report 2008

2008 2007Notes

Rupees Rupees

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of Obligations Under Finance Lease - (32,911)

Short-Term Borrowings 24,003,216 26,996,784

Net Cash Flow from Financing Activities 24,003,216 26,963,873

Net (Decrease) In Cash and Cash Equivalents (949,621) (1,209,250)

Cash and Cash Equivalents at the Beginning of the Year (4,805,346) (3,596,096)

Cash and Cash Equivalents at the End of the Year (5,754,967) (4,805,346)

Components of Cash and Cash Equivalents

Bank Balances 1,333,322 272,426

Running Finance Under Mark-Up Arrangement - Secured (7,088,289) (5,077,772)

30 (5,754,967) (4,805,346)


22

CASH FLOW STATEMENTFOR THE YEAR ENDED JUNE 30, 2007


Annual Report 2008

Issued, Statutory General Surplus Unappropriated TotalSubscribed Reserve Reserve on Revaluation Profit& Paid-Up of Available for

Capital Sale InvestmentRupees

Balance as at July 01, 2006 110,000,000 10,630,264 15,000,000 11,239,659 52,196,024 199,065,947

Profit for the Year - - - - 43,948,825 43,948,825

Transfer to General Reserve - - 8,000,000 - (8,000,000) -

Issue of Bonus Shares 11,000,000 - - - (11,000,000) -

Surplus on Revaluation of Securities - Net - - - 16,044,176 - 16,044,176

Balance as at June 30, 2007 121,000,000 10,630,264 23,000,000 27,283,835 77,144,849 259,058,948

Balance as at July 01, 2007 121,000,000 10,630,264 23,000,000 27,283,835 77,144,849 259,058,948

Profit for the Year - - - - 20,329,345 20,329,345

Transfer to General Reserve - (10,630,264) 10,630,264 - - -

Issue of Bonus Shares 15,125,000 - - - (15,125,000) -

Surplus on Revaluation of Securities - Net - - - 113,304,257 - 113,304,257

Balance as at June 30, 2008 136,125,000 - 33,630,264 140,588,092 82,349,194 392,692,550


23

STATEMENTS OF CHANGES IN EQUITYFOR THE YEAR ENDED JUNE 30, 2008


Annual Report 2008

24

1. COMPANY AND ITS OPERATIONS

Dawood Capital Management Limited (the Company) was incorporated on September 18, 1990 as a public limitedcompany in Pakistan, with its registered office at 1500-A, Saima Trade Tower, I.I.Chundrigar Road, Karachi. Thecompany 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 advisoryservices 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 ReportingStandards as notified under the provisions of the Companies Ordinance, 1984. Wherever, the requirements of theCompanies Ordinance, 1984, the NBFC Rules, the NBFC Regulations or the directives issued by the Securities andExchange Commission of Pakistan differ with the requirement of these standards, the requirements of the CompaniesOrdinance, 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 inPakistan would be effective from the dates mentioned below against the respective standard or interpretations.

Standard or Interpretation Effective Date (AccountingPeriods Beginning on or After)

IAS 1 - Presentation of Financial Statements (Revised) January 01, 2009 IAS 23 - Borrowings Costs (Revised) January 01, 2009 IAS 27 - Consolidated and Separate Financial Statements (Revised) January 01, 2009 IFRS 7 - Financial Instruments: Disclosures July 01, 2009 IFRS 8 - Operating Segments January 01, 2009 IFRIC 12 - Service Concession Arrangements January 01, 2008 IFRIC 13 - Customer Loyalty Programmes July 01, 2008 IFRIC 14 - IAS 19 - The Limit on Defined Benefit Assets, January 01, 2008

Minimum Funding Requirements and their Interaction IFRIC 15 - Agreements for the construction of Real Estate January 01, 2009 IFRIC 16 - Hedges of a Net Investment in a Foreign Operation October 01, 2008

These standards are not expected to have a material impact on the Company’s financial statements other than anincrease in disclosures is certain cases.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED JUNE 30, 2008

Annual Report 2008

3. BASIS OF MEASUREMENT

These financial statements have been prepared under historical cost convention except certain investments whichare 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 ofcertain critical accounting estimates. It also requires management to exercise its judgement in the process ofapplying the Company’s accounting policies. Estimates and judgments are continually evaluated and are basedon historic experience and other factors, including expectations of future events that are believed to be reasonableunder the circumstances.

In the process of applying the Company's accounting policies, management has made the following estimatesand judgements which are significant to the financial statements:

a) recognition of taxation and deferred tax (Note 4.20, 17 and 28);b) determining the useful lives of operating fixed assets (Note 4.2 and 5);c) classification of investments (Note 4.4, 6 and 9); andd) impairment of financial assets (Note 4.3)

4.2 Operating Fixed Assets

Owned

These are stated at cost less accumulated depreciation and any impairment, if any. Such costs include the cost ofreplacing parts of fixed assets when that cost is incurred. Maintenance and normal repairs are charged to income asand when incurred. Depreciation is charged to income over the useful life of the asset on a systematic basis applyingthe 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 ischarged 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 theirrecoverable amounts, and where carrying values exceed estimated recoverable amount, assets are written down totheir estimated recoverable amount.

An item of fixed asset is derecognised upon disposal or when no future economic benefits are expected from its useor disposal.

The assets residual values, useful lives and methods are reviewed and adjusted, if appropriate, at each financial yearend.

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 leasepayments under the lease agreements and the fair value of asset acquired. The related obligation under the lease isaccounted for as liability. Financial charges are allocated to accounting period in a manner so as to provide a constantperiodic rate of charge on the outstanding liability.

25


Annual Report 2008

4.3 Impairment

The carrying amounts of the Company’s assets, for which policy is given separately, are reviewed at eachbalance sheet date to determine whether there is any indication of impairment. If such indication exists theassets’ recoverable amount is estimated. An impairment loss is recognised wherever the carrying amount of theasset 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 throughprofit and loss, directly attributable transaction costs.

The management of the Company determines the appropriate classification of its investments for the purposeof 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, aredesignated under this category. Investments are classified as held for trading if they are acquired for the purposeof selling in the near term. After initial measurement, such investments are carried at fair value and the gainsor 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 investmentswhen management has both the intent and ability to hold to maturity. After initial measurement, such investmentare carried at amortised cost less any provision for impairment except for in case of debt securities (listed butnot regularly traded on a stock exchange) and government securities, which are carried at fair value in accordancewith 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 maturityinvestments or (c) financial assets at fair value through profit or loss. After initial measurement, such investmentsare measured at fair value with unrealised gains or losses recognised directly in the equity until the investmentis derecognised or determined to be impaired, at which time the cumulative gain or loss previously recognisedin equity is taken to the income statement. However, unquoted equity investments are carried at the lower ofinvestment price or break up value in accordance with the requirements of the NBFC Regulations.

Fair values of investments are determined as follows:

Listed SharesThese are valued on the basis of closing market prices quoted on the respective stock exchange.

Mutual Funds’ UnitsThese are valued by reference to the net asset values declared by the respective fund.

Debt SecuritiesDebt securities, listed but not traded regularly on a stock exchange, are valued at the average rate notified bythe Mutual Funds Association of Pakistan (MUFAP).

Fair value of unlisted debt securities, other than government securities, is also determined by reference to theaverage rates notified by MUFAP and where such rates are not so notified, with reference to quotations obtainedfrom brokerage houses.

Government SecuritiesFair value of government securities is determined by reference to the quotations obtained from the PKRV ratesheet 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 commitsto purchase/sell the investments. Regular way purchases or sales of investment require delivery of securities withintwo 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 recordeds 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 andhe counterpart liability is shown as payable against carry-over transactions. All carry-over transactions are accountedfor 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 thecontractual provisions of the instrument. Financial assets are derecognised when the Company loses control of thecontractual 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 onderecognition 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 isa 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 theliability 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 contributionsare 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 andcash 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 impaireddebts based on management’s assessment regarding their recoverability.

4.13 Borrowing/Debt

Borrowings/debt is recognized initially at fair value, net of transaction costs incurred. These are subsequently measuredat amortized cost and any difference between the proceeds (net transaction costs) and the redemption value isrecognized 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 lossaccount.

27


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 subsequentlycarried 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, madesubsequent to the balance sheet date are considered as non adjusting events and are recognized in the financialstatements 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 prevailingon the date of the transaction. Monetary assets and liabilities in foreign currencies are translated into rupees at theforeign exchange rates approximating those prevailing at the balance sheet date. Exchange differences are taken tothe profit and loss account.

4.17 Revenue Recognition

a) Dividend income is recognized at the time when right to receive dividend is established.b) Capital gain or loss on sale of investments is taken into income in the period in which they arise.c) Management fees is recognized on accrual basis.d) 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 anda reliable estimate of the obligations can be made. Provisions are reviewed at each balance sheet date and adjustedto 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 considerationavailable 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 fromassessments framed/finalised during the year.

Deferred

Deferred tax is recognised using the balance sheet liability method on all significant temporary differences at thebalance sheet date between the amounts attributed to assets and liabilities for financial reporting purposes and amountsused for taxation purposes. Deferred tax assets are recognized for all deductible temporary differences, carry forwardof unused tax losses and unused tax credits to the extent that it is probable that the taxable profits will be availableagainst which these can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable thatthe 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 environmentin which the Company operates. The financial statements are presented in Pakistani Rupees, which is the Company’sfunctional and presentation currency.

28


Annual Report 2008

29


OWNED

Furniture and Fittings

Vehicles

Office Equipment

Computer Equipment

OWNED

Furniture and Fittings

Vehicles

Office Equipment

Computer Equipment

Addition/*Transfers/(Deletion)

Addition/*Transfers/(Deletion)

*Transfers/(Deletion)

Mr. Tauqir Shamshad - Employee

Mr. Kamran Rafique - Employee

Annual Report 2008

2008 2007Note Rupees Rupees

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

6.1 114,237,914 117,648,912Dawood 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 33,290,804 20,072,743

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 6.3 1,750,000 1,750,000

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 17,000,000

172,729,058 156,471,655

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 itsclosed-end funds under management. This investment has been made to comply with the said rule. The abridgedfinancial 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 759,056,835 799,702,319Total Liabilities 6,589,553 24,707,773Net Assets 752,467,282 774,994,546Associate's Income Statement

Total Income 67,386,441 182,407,288Net Income 35,547,736 156,892,791

The Fund has been classified as an associate inspite of the fact that the Company holds less than 20 percent in theFund for the reason that the Company is also an investment advisor of such mutual fund by virtue of which itparticipates in the financial and operating policies of the Fund and hence has significant influence over its investee.

30


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 atJune 30, 2008 is as follows:


Associate's statement of assets and liabilitiesTotal Assets 3,651,171,169 3,385,007,135Total Liabilities 111,178,153 59,459,889Net Assets 3,539,993,016 3,325,547,246

Associate's Income Statement

Total Income 387,665,460 366,741,963Net Income 329,232,464 323,979,233

The Fund has been classified as an associate inspite of the fact that the Company holds less than 20 percent in theFund for the reason that the Company is also the management company of such mutual fund by virtue of which itparticipates 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, 2007amounts to Rs.528.554 million (2006: Restated Rs.524.391 million). The Chief Executive of the company is Mr.Shahid Abdullah.

6.4 The net assets of Dawood Islamic Bank Limited based on audited financial statements as at December 31, 2007amounts to Rs.3,665.89 million (2006: Rs.2,686.45 million). The Chief Executive of the bank is Mr. NikolausSchwarz. This investment represents sponsor equity in the bank and shall not be sold without the prior consent ofthe State Bank of Pakistan.

7. LONG TERM RECEIVABLES FROM RELATED PARTIES - UNSECURED-CONSIDERED GOOD

From Associates: First Dawood Mutual Fund 2,000,000 3,000,000 Dawood Islamic Fund 2,000,000 2,449,388

4,000,000 5,449,388Less: Receivable Within One Year

First Dawood Mutual Fund (1,000,000) (1,000,000) Dawood Islamic Fund (500,000) (500,000)

(1,500,000) (1,500,000)Others: Dawood Equities Fund 115,000 75,000

2,615,000 4,024,388

7.1 These represent formation costs incurred by the Company in connection with the floatation of open and close endfunds which are recoverable in equal installments from the respective funds over a period of five years.

8. LONG-TERM LOAN

Related Party - Unsecured, Considered Good 8.1 4,045,947 265,676Less: Receivable Within One Year (424,207) (89,851)

3,621,740 175,825

31


Annual Report 2008

8.1 Represents loan to an executive as per details below:


Opening Balance 265,676 345,400Disbursement 4,000,000 -Repayments (219,729) (79,724)Closing Balance 4,045,947 265,676

These loans have been provided to facilitate construction / renovation of residential accommodation as perCompany policy and is repayable over a period ranging between 5 years and 10 years with the mark up rateranging 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 2008 2007

Cost Fair Value Cost Fair Value

Note -------------------------------Rupees------------------------------

Units of Open-End Mutual Funds 9.2 1,205,000 7,403,273 1,005,000 7,411,578Listed Shares and Close-End Funds 9.3 97,698,197 232,087,872 71,210,863 92,017,530Unlisted Shares 9.4 - - 15,000,000 15,000,000Term Finance Certificates - Listed 9.5 3,287,333 3,287,477 17,064,552 17,135,142Application Money for Subscription of Term Finance Certificates 9.6 25,000,000 25,000,000 - -

127,190,530 267,778,622 104,280,415 131,564,250Surplus on Revaluation of Investments 140,588,092 - 27,283,835 -

267,778,622 267,778,622 131,564,250 131,564,2509.1 Available for Sale Investments

Related Parties 29,663,908 151,514,358 31,716,408 56,065,172Others 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 Units of Open-End Mutual Funds

9.2.1 1,000,000 7,174,370 1,000,000 7,402,372 5,000 8,606 5,000 9,206

200,000 220,297 - - 1,205,000 7,403,273 1,005,000 7,411,578

9.2.1 77,840 units are pledged with a commercial bank against running finance under markup arrangement.

32


No. of Units 2008 2007 Name of Mutual Funds

87,975 67,812 Pakistan Stock Market Fund 793 630 Pakistan Capital Market Fund

4,286 - Alfalah GHP Income Multiplier Fund

Annual Report 2008

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.

33


2008 2007 Cost Fair value Cost Fair value

Note -------------------------------Rupees------------------------------

9,524,214 9,092,878 9,524,214 9,388,830 10,000,000 9,310,000 10,000,000 9,750,000

530,000 488,130 945,000 992,250 9,700,000 9,506,000 9,700,000 9,603,000

9.3.1 29,663,908 151,514,358 22,941,408 47,290,172 15,000,000 26,625,000 - -

10,500 9,590 - - 23,500 22,949

3,769,683 6,279,497 2,986,778 3,534,300

9.3.2 15,000,000 12,255,000 15,000,000 11,175,000

2,942 5,888 113,463 283,978

4,473,450 6,978,582 - -

97,698,197 232,087,872 71,210,863 92,017,530

No. of Shares/ Certificates 2008 2007 Name of Companies/Mutual Funds

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 -

2,166,038 1,633,512 related party 1,500,000 - Dawood Equities Limited

Commercial Bank 500 - Arif Habib Bank Limited 110 - Habib Bank Limited

Insurance 128,153 76,500 American Life Insurance Company Limited

Textile Composite 1,500,000 1,500,000 Chenab Limited (Preference shares)

Cement

209 7,593 Pioneer Cement Limited

Chemicals 248,525 - Engro Polymer Chemical Ltd. - PRO

9.3.1 As per SECP Circular 09 of 2006, 1,361,613 (2007: 1,361,613) shares of First Dawood Investment Bank Limitedare held in a blocked account with CDC. The Company can only dispose these shares with the prior approvalfrom the SECP.

9.3.2 These shares are pledged with a commercial bank against running finance under markup arrangement.

9.4 Unlisted Shares

2008 2007 Cost Fair value Cost Fair value

Note -------------------------------Rupees------------------------------

- - 15,000,000 15,000,000 - - 15,000,000 15,000,000

No. of Shares 2008 2007 Name of Companies

- 1,500,000 Dawood Equities Limited

34


9.5 Term Finance Certificates - Listed

Annual Report 2008

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 undermark-up arrangements.


9.6 Application Money for Subscription of Term Finance Certificates

Trust Investment Bank Limited 9.6.1 25,000,000 -

9.6.1 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 theissue.

10. LOANS AND ADVANCES - UNSECURED

Considered Good Current Portion of Long-Term Receivables from Related Parties 7 1,500,000 1,500,000 Current Portion of Long-Term Loan 8 424,207 89,851 Advance to Employees 1,241,726 399,168 Advance Against Subscription for Units/Shares 10.1 27,000,000 25,200,000

30,165,933 27,189,019Considered Doubtful Advances Against Ventures 100,000 100,000 Provision for Doubtful Debts (100,000) (100,000)

- - 30,165,933 27,189,019

10.1 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. Thefaciltiy matured on July 3, 2008.

12. PREPAYMENTS, INTEREST ACCRUED AND OTHER RECEIVABLES - CONSIDERED GOOD,UNSECURED

Prepayments - 70,556 Accrued Markup on Investments 546,034 592,235

Others 73,800 100,500619,834 763,291

13. REMUNERATION DUE FROM FUNDS UNDER MANAGEMENT

Open-End Fund Dawood Money Market Fund 24.1 3,148,187 2,351,797

Dawood Islamic Fund 24.1 584,444 -3,732,631 2,351,797

Closed-End fund First Dawood Mutual Fund 24.1 1,829,655 19,357,559

5,562,286 21,709,356

35

Annual Report 2008

100,000,000 100,000,000 36,125,000 21,000,000

136,125,000 121,000,000

15.1 Reconciliation of Number of Ordinary Shares of Rs. 10/ Each:2008 2007

No. of SharesAt the Beginning of the Year 12,100,000 11,000,000 Add: Issued as Bonus Shares During the Year 1,512,500 1,100,000 At the End of the Year 13,612,500 12,100,000

15.2 The Shares Held by Related Parties are as Follows:

First Dawood Investment Bank Limited 4,083,750 3,630,000 BRR Guardian Modaraba 1,756,149 1,561,021

5,839,899 5,191,021


16. RESERVES

Capital ReservesStatutory Reserve 16.1 - 10,630,264

Revenue ReservesGeneral Reserve 33,630,264 23,000,000Unappropriated Profit 82,349,194 77,144,849

115,979,458 100,144,849

115,979,458 110,775,113

14. BANK BALANCES


Cash at Bank: Current Accounts 131,303 131,303

Saving Accounts 14.1 1,202,019 141,1231,333,322 272,426

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

36

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

Annual Report 2008

100,000,000 100,000,000 36,125,000 21,000,000

136,125,000 121,000,000

15.1 Reconciliation of Number of Ordinary Shares of Rs. 10/ Each:2008 2007

No. of SharesAt the Beginning of the Year 12,100,000 11,000,000 Add: Issued as Bonus Shares During the Year 1,512,500 1,100,000 At the End of the Year 13,612,500 12,100,000

15.2 The Shares Held by Related Parties are as Follows:

First Dawood Investment Bank Limited 4,083,750 3,630,000 BRR Guardian Modaraba 1,756,149 1,561,021

5,839,899 5,191,021


16. RESERVES

Capital ReservesStatutory Reserve 16.1 - 10,630,264

Revenue ReservesGeneral Reserve 33,630,264 23,000,000Unappropriated Profit 82,349,194 77,144,849

115,979,458 100,144,849

115,979,458 110,775,113

16.1 The above reserve was created by transferring 20 percent after tax profits, as required under Rule-3 of the repealedRules of Business for Non-Banking Financial Institutions. Consequent to the Company's registration under theNon Banking Finance Companies (Establishment & Regulation) Rules 2003, no further transfer has been madeto the reserve subsequent to December 31, 2002.

17. DEFERRED TAX LIABILITY - NET

Note 2008 2007Rupees Rupees

Taxable Temporary Differences on: Accelerated Tax Depreciation 227,000 308,000

227,000 308,000

18. SHORT TERM BORROWINGS

From: Banking Company - Secured - 15,000,000

Other Financial Institution - Unsecured 18.1 50,000,000 50,000,000Related Party - Unsecured 18.2 50,000,000 10,000,000Others - Unsecured - 996,784

100,000,000 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 17percent (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 commercialbank 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 6,701,989 1,969,327 Unclaimed Dividend 1,029,504 1,034,546 Bonus to Employees 1,588,000 1,032,625 Other Liabilities 1,850,464 2,373,037

20.1 11,169,957 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 2007Rupees Rupees

Accrued Markup on: Short-Term Borrowings 1,511,534 434,188Running Finance Under Mark-Up Arrangement 214,623 168,593

1,726,157 602,781

22. CONTINGENCIES AND COMMITMENTS

Contingencies

While finalizing the assessment for 1998-99 to 2002-2003, the Deputy Commissioner of Income Tax (DCIT) madecertain disallowances of expenses that have an aggregating tax impact of Rs.3.832 million. The Company had filedappeals 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 beforethe 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 7,620,944 6,280,450

Dividend Income 5,409,694 3,174,79013,030,638 9,455,240

Other Investments Return on Fund Placement 6,986 130,820 Return on Term Finance Certificates 3,447,878 2,665,179

3,454,864 2,795,99916,485,502 12,251,239

24. MANAGEMENT FEE

Open-End Funds Dawood Money Market Fund - An associate 24.1 37,128,728 19,357,469 Dawood Islamic Fund - An Associate 24.1 6,459,972 -

43,588,700 19,357,469Closed-End Funds

First Dawood Mutual Fund - An Associate 24.1 24,112,571 19,118,02067,701,271 38,475,489

38

Annual Report 2008

24.1 Under the provisions of the Non-Banking Finance Companies and Notified Entities Regulations, 2007 and Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003, the management company/investmentadvisor of the fund is entitled to a remuneration during the first five years of the fund, of an amount not exceedingthe three percent of the average net assets of the fund and thereafter of an amount equal to two percent of suchassets of the fund. During the year ended June 30, 2008 the company has charged the management fee at the ratesranging 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 2007Remuneration for services

rendered as an asset management company

--------- Percentage --------

Open-End Funds Dawood Money Market Fund - An Associate 1 1

Dawood Islamic Fund - An Associate 1.5 -

Closed-End FundsFirst Dawood Mutual Fund - An Associate 3 3

2008 2007 Note Rupees Rupees

25. ADMINISTRATIVE AND OPERATING EXPENSES

Salaries and Allowances 25.1 & 25.2 19,595,427 10,524,715Rent, Rates and Taxes 1,044,744 887,283Postage and Telephones 270,609 240,872Legal and Professional Charges 10,694,017 4,510,869Printing and Stationery 1,599,701 983,600Travelling and Conveyance 807,489 799,957Vehicles Running 1,405,694 936,516Advertisement 5,541,463 1,626,143Electricity 1,422,429 780,758Repairs and Maintenance 877,092 470,259Auditors’ Remuneration 25.3 285,000 185,000Entertainment 212,760 197,496Insurance 230,831 205,627Depreciation 1,421,247 838,574Newspapers, Magazines and Subscriptions 1,649,381 1,231,930Directors' Fee 37,000 21,500Brokerage and Commission 4,556,925 604,500Donation 25.4 350,786 300,786Others 494,595 190,223

52,497,190 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 3,200,000 - 4,984,932 2,000,000 - 1,160,000House Rent 1,280,000 - 1,993,973 800,000 - 464,000Bonus 800,000 - 512,500 1,000,000 - 580,000Medical 2,673 - 48,000 2,738 - 22,000Utilities 320,000 - 498,493 200,000 - 116,000Provident Fund 320,004 - 343,561 200,003 - 116,004E.O.B.I - - 8,694 - - 3,360Meeting Fee - 37,000 - - 21,500 -

5,922,677 37,000 8,390,153 4,202,741 21,500 2,461,364

Number of persons 1 6 4 1 6 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.

2008 200725.3 Auditors' Remuneration Note Rupees Rupees

Audit Fee 150,000 100,000Certification Fee 45,000 25,000Fee for Half-Yearly Review 60,000 40,000Out of Pocket Expenses 30,000 20,000

285,000 185,000

25.4 No director or his/her spouse had any interest in the donee.

26. FINANCIAL CHARGES

Mark-Up on Lease Obligations - 689Mark-Up on Short-Term Running Finance 19 518,284 677,564Mark-Up on Short-Term Borrowings 26.1 13,136,986 6,118,844Bank Charges 14,114 17,021

13,669,384 6,814,118

26.1 Include mark up to related parties of Rs. 4,008,356 (2007: Rs. 3,567,033).

27. OTHER OPERATING INCOME

Underwriting Commission 266,265 213,850(Loss)/Gain on Disposal of Operating Fixed Assets (6,464) 92,645Mark-Up Earned on Savings Account 72,425 81,538Mark-Up earned on Long Term Loan 109,341 37,217Others 11,381 118,335

452,948 543,585

40

Annual Report 2008

28. RELATIONSHIP BETWEEN TAX EXPENSE AND ACCOUNTING PROFIT

Profit Before Taxation 23,855,074 42,674,154

Tax Charge at Enacted Rate of 35 Percent 8,349,275 14,935,954Effect of Taxable/(Deductible) Expenses 9,027 (7,574)Tax Effect of Exempt Income and Income Subject to Reduced Rate of Tax (4,617,571) (11,539,540)Prior Year Effect 28.1 (134,002) (4,911,511)Tax Effect of Temporary Taxable Differences (81,000) 248,000

Tax (Income)/Expense 3,525,729 (1,274,671)

28.1 Represents Prior Years' Difference in Provision for Taxation and Related Tax Liabilities.

29. 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 1,333,322 272,426Running Finance Under Mark-Up Arrangement - Secured (7,088,289) (5,077,772)

(5,754,967) (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 therelated parties during the year were as follows:

2008 2007 Rupees Rupees

Relationship with the Company Nature of Transactions

Mutual Funds Managed by Investment in Funds - 453,180 the Company Management Fee 67,701,271 38,475,489

Redemption of Units 307,257,498 42,902,988Bonus Units 1,964,910 2,729,395Investment in Units 314,128,981 62,938,054Recovery of Formation Costs 1,000,000 1,200,000Payment of Formation Costs 90,612 2,524,388

Major Shareholders Share of Common Expenses 1,719,228 1,909,998Payment of Lease Rentals - 32,911Interest on Term Finance Certificates 537,469 1,074,938Redemption of TFC's 8,775,000 -Funds Borrowed 82,000,000 66,000,000Repayment of Borrowings 42,000,000 81,000,000Payment of Financial Charges on Borrowings 2,101,370 3,567,033

Others Share of Common Expenses 6,702,439 4,356,566Purchase of Shares 6,450,340 17,000,000

The Company has not entered into any transaction with director and senior executives other than those providedunder the Company's policies and terms of employment.

32. CAPITAL RISK MANAGEMENT

The primary objective of the company’s capital management is to maintain healthy capital ratios, strong creditrating and optimal capital structures in order to ensure ample availability of finance for its existing and potentialinvestment 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 toshareholders, 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 failedcompletely to perform as contracted. The Company attempts to control credit risk associated with the carryingamount of its receivables by monitoring credit exposures, limiting transactions with specific customers and continuingassessment 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 foreigncurrencies. 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 marketprices. The company has made investments in listed equity securities. The company manages its market riskexposure by diversifying its investment portfolio.

42

Annual Report 2008

43

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

Annual Report 2008

44

38. APPROPRIATIONS

In the meeting held on September 25, 2008, the Board of Directors of the Company, recommended the issue ofbonus shares @10% i.e. in the proportion of 1 new ordinary shares for every 10 ordinary share held for theapproval 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 willingparties in an arm’s length transaction.

Financial assets which are tradable in an open market are revalued at the market prices prevailing on the balancesheet 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 frombook 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.

ReclassificationStatement Nature of item from to Reason Rupees

Balance Sheet Prepayments Prepayments Presentation, interest For better 72,556accrued are other Presentation

recivabies

Balance Sheet Accrued mark-up Accrued markup Presentation, interest For better 592,235on borrowing on investments on investments accrued are other Presentation

recivabies

Balance Sheet Others Other Receivables Presentation, interest For better 100,500 accrued are other Presentation

recivabies


Annual Report 2008

45

No. ofShareholders

TotalShares Held

101 1 - 100 3,237207 101 - 500 47,657178 501 - 1,000 128,645104 1,001 - 5,000 261,87525 5,001 - 10,000 190,6229 10,001 - 15,000 113,2503 15,001 - 20,000 58,5005 20,001 - 25,000 113,9304 25,001 - 30,000 110,5881 30,001 - 35,000 34,7801 70,001 - 75,000 71,6001 95,001 - 100,000 99,1494 105,001 - 110,000 428,2101 160,001 - 165,000 160,7511 350,001 - 355,000 353,9251 410,001 - 415,000 414,0921 515,001 - 520,000 516,0121 525,001 - 530,000 528,5732 595,001 - 600,000 1,198,9501 600,001 - 605,000 603,4841 620,001 - 625,000 621,6401 670,001 - 675,000 673,8181 805,001 - 810,000 806,6761 950,001 - 955,000 952,8751 1,035,001 - 1,040,000 1,035,9111 4,080,001 - 4,085,000 4,083,750

657 13,612,500

Share HoldingFrom To

PATTERN OF SHARE HOLDING AS AT JUNE 30, 2008

CATEGORIES OF SHAREHOLDERS AS AT JUNE 30, 2008

Particulars Categories of Total PercentageShare holders Shares Held

Individuals 622 4,701,806 34.54 Joint Stock Companies 21 1,190,758 8.75 Govt. Organizations 1 500 0.00 Financial Institution 7 5,310,935 39.02 Modaraba 2 1,759,551 12.93 Mutual Fund 3 50,000 0.37 Others 1 598,950 4.40

657 13,612,500 100.00

Annual Report 2008

Category Cetrogies of Number Shares PercentageNo. Shares Holders Held %

1. Associated Companies 2 5,843,301 42.93

B.R.R. Guardian Modaraba 1,759,551 12.93First Dawood Investment Bank Limited 4,083,750 30.00

2. NIT & ICP 3 1,225,969 9.01

National Bank of Pakistan Trustee Deptt. 1,225,124 9.00Investment Corporation of Pakistan 500 0.00IDBP (ICP UNIT) 345 0.00

3. Directors, CEO and their Spouses and Minor Childern

Miss Tara Uzra Dawood 1,037,952 7.62

4. Banks, DFIs. NBFIs, Insurance Companies, 28 600,938 4.41Modarabas and Mutual Funds

5. Certificate Holders Holding Ten Percent 2 5,843,301 42.93or More in the Company

B.R.R. Guardian Modaraba 1,759,551 12.93First Dawood Investment Bank Limited 4,083,750 30.00

46

PATTERN OF SHARE HOLDINGAS AT JUNE, 30 2008

Annual Report 2008

FORM OF PROXYXVII ANNUAL GENERAL MEETING

Dawood Capital Management Ltd.Karachi.

I/We of

(full address)

being a member of Dawood Capital Management Limited Folio # do hereby appoint

Mr./Ms Folio #

of (full address) (or failing him)

Mr./Ms Folio #

of (full address)

being another member of the Company as my/our proxy to attend and vote for me/us on my/our behalf, at theXVII Annual General Meeting of the Company to be held on October 22, 2008 at 15:30 hours and to every adjournmentthereof.

And witness my/our hand/seal this day of 2008, signed by the said

in the presence of

Mr./Ms.

of (full address)

Signature of Witness Signature(s) and or Seal

Important Notes :

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. Noperson 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 certifiedcopy of the Power or Authority, in order to be valid, must be deposited at the Registered office of the Company, 48 hours before themeeting 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 proxyshall 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.

REVENUESTAMPRs. 5/-

Annual Report 2008

taha spinning mill

Documents

directors report

am32annual report

auditors report

proxyannual report

review report

habib bank

statement of compliance

statement of changes