UTP-Islamic Fund - JS Investmentsjsil.com/downloads/reports/2006/annual_islamic_funds.pdf · 3 UTP-Islamic Fund DIRECTORS REPORT TO THE UNIT HOLDERS 1. Market Outlook The KSE 100

ANNUAL REPORT 2006

UTP-Islamic Fund

CONTENTSVision and Mission Statement

Organization

Directors' Report

Performance Table / Key Financial Data

Statement of Compliance with the Code ofCorporate Governance

Review Report to the Unit Holders on Statement of Compliancewith Best Practices of Code of Corporate Governance

Report of the Shariah Advisory Council

Shariah Compliance Auditors' Report to the Unit Holders

Report of the Trustee

Auditor's Report

Financial Statements

Statement of Assets and Liabilities

Income Statement

Statement of Movement in Unit Holders’ Funds

Distribution Statement

Cash Flow Statement

Statement of Financial Highlights

Notes to the Financial Statements

Branch Network

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UTP-Islamic Fund1

To be Industry Leaders in Financial Services

mission

vision

core values

Pursuit of Professional Excellence

Shareholder Value Integrity Commitment

Annual Report 2006 2

ORGANIZATIONManagement Company

JS ABAMCO Limited(Formery ABAMCO Limited)7th Floor, The Forum, G-20Khayaban-e-Jami, Block-9, CliftonKarachi-75600Tel: (92-21) 111-222-626 Fax: (92-21) 5361724E-mail: [email protected]: www.abamco.com

Board of Directors

Munawar Alam Siddiqui ChairmanMuhammad Najam Ali Chief Executive OfficerAli Raza Siddiqui Executive DirectorMunaf IbrahimNazar Mohammad ShaikhLt.General (R) Masood ParwaizWilliam H.Kleh

Audit Committee

Nazar Mohammad Shaikh ChairmanMunawar Alam Siddiqui MemberMunaf Ibrahim Member

Chief Financial Officer & Company Secretary

Suleman Lalani

Trustee

Central Depository Company of Pakistan LimitedCDC House, 99-B, Block, 'B' S.M.C.H.S.,Main Shahra-e-Faisal, Karachi-74400, Pakistan.Tel : (92-21) 111-111-500 Fax: (92-21) 4326005

Auditors

M.Yousuf Adil Saleem & Co.Chartered AccountantsCavish Court, A-35,Block 7 & 8KCHSU, Shahra-e-Faisal, Karachi.

Legal Adviser

Bawaney & PartnersRoom No.404, 4th floor,Beaumont Plaza,Beaumont Road, Civil Lines Karachi-75530.

Bankers

Meezan Bank LimitedMCB Bank LimitedSoneri Bank LimitedThe Bank of PunjabDubai Islamic BankHabib Bank A.G. ZurichBank Islami Pakistan Limited Metropolitan Bank LimitedBank Alfalah Limited

Transfer Agent

Technology Trade (Private) Limited241-C, Block 2, P.E.C.H.S, KarachiTel: (92-21) 4391316-7Fax: (92-21) 4391318

Shariah Advisory Council

Mustafa Fazil AnsariAnwarullah KhanMuhammad Ali Nasir

UTP-Islamic Fund3

DIRECTORS REPORT TO THE UNIT HOLDERS

1. Market Outlook

The KSE 100 Index closed at 9989 compared to 7450 on June 30, 2005 - an increase of 34% duringthe year. The KSE 100 Index reached the highest ever level of 12,273.77 on April 17, 2006. Marketcapitalization increased to Rs. 2,801.182 billion as on June 30, 2006 as against Rs. 2,068.187 billionon June 30, 2005 showing an impressive increase of 35% during the year.

The market remained highly volatile between March and June 2006. The Budget 2006-07doubled the Capital Value Tax on share purchases to 0.02% and Withholding Tax on sale ofshares to 0.01% from 0.005%. These measures led to a negative market sentiment in the shortterm; however its long term impact will become clear in the following months. At the sametime, tax exemption for mutual funds on income from CFS financing was proposed to bewithdrawn in the Finance Bill 2006; however this clause has been subsequently removed in theFinance Act 2006. While the deadline for the demutualization of bourses was extended toDecember 2006.

Significant progress was made on the privatization front as the much awaited privatization ofPakistan Telecommunication Corporation Limited (PTCL) and Karachi Electric SupplyCorporation (KESC) were completed. On the flip side, the Supreme Court (SC) cancelledPakistan Steel Mills (PSM) sell-off citing certain irregularities in the privatization process. Weare optimistic that the apex Court's ruling will not alter the privatization plans of thegovernment.

2. Fund Performance & Distribution

The net assets of the Fund as on June 30, 2006 were Rs. 863.984 million compared to Rs. 947.203million on June 30, 2005. Market value of investment in listed equity securities was Rs. 794.648million which is 92% of the net assets as on June 30, 2006. Bank deposits in Shariah compliantprofit and loss sharing accounts were Rs. 62.096 million or 7% of the net assets. Sector wiseallocation of significant investments at market value as on June 30, 2006 in equity securities ispresented below:

Realized income for the year ended June 30, 2006 was Rs. 344.708 million comprising of capitalgains on sale of investment of Rs. 297.049 million, dividend income of Rs. 29.728 million returnon bank deposits of Rs. 8.396 million and element of income & capital gains in prices of unitssold less those in units redeemed of Rs. 9.535 million. Total operating expenses for the year wereRs. 33.736 million. Net income for the year ended June 30, 2006 including unrealized loss oninvestments was Rs. 215.858 million, which works out to earning of Rs. 195.38 per unit of thepar value of Rs. 500 (2005: earnings of Rs. 25.90 per unit). This translates into an effective returnof 34.4% on the beginning net asset value per unit of Rs. 581.60 on June 30, 2005.

The Board of Directors of JS ABAMCO Limited (formerly ABAMCO Limited), the ManagementCompany of UTP-Islamic Fund (“UTP-ISF”), is pleased to present the Fourth Annual Report forthe year ended June 30, 2006.

Sector Amount - Rs. in millions % of net assetsOil & gas exploration 249.214 28.84%Fertilizer 138.845 16.07%Cement 116.669 13.50%Technology & communication 85.260 9.87%


Stock dividend of 37.5% (Rs. 187.50 per unit of par value of Rs. 500) has been declared,which entitles unit holders 0.3153 additional units for each existing units held on June 30,2006. Unit Holders who have opted to receive cash dividend will be paid accordingly. Afterthe distribution of stock dividend, the net asset value per unit will be Rs. 594.53 on June 30,2006.

As the above distribution is more than 90% of the income for the year, the income of UTP -ISF will not be subject to tax under Clause 99 of the Part I of the Second Schedule of IncomeTax Ordinance, 2001.

3. Investment Strategy

The main objective of the UTP - Islamic Fund is to provide an avenue of investment to thosewho want to invest their savings in such schemes, which are Shariah compliant. In additionthe aim is to provide to the investors an optimum rate of return, reasonable safety of capitaland to provide to the investors liquidity to join or leave the Fund at their convenience. Themain focus of the UTP - Islamic Fund is to provide an outlet to investors who want 'Riba-free' rate of returns.

4. Fund and Asset Manager Rating

The Pakistan Credit Rating Agency (PACRA) has assigned a 3-Star fund rating to UTP-Islamic Fund (Category: Islamic Fund), which reflects an average performance relative to itspeers. The rating is a composite measure of two factors namely a) returns, and b) riskassociated with the returns measured by Sharpe Ratio.

Pakistan Credit Rating Agency (PACRA) has awarded an AM2 asset management rating toJS ABAMCO Ltd on February 15th 2006, which reflects our strong capacity to manage therisks inherent in asset management and to meet very high standards and benchmarks.

5. Compliance

The Board of Directors of the Management Company states that:

a. The financial statements, prepared by the management company, present fairly thestate of affairs of the Fund, the results of its operations, cash flows and movement innet assets of the Fund.

b. Proper books of accounts of the Fund have been maintained.c. Appropriate accounting policies have been consistently applied in preparation of

financial statements, and financial estimates are based on reasonable and prudentjudgment.

d. International Accounting Standards, as applicable in Pakistan, provisions of the Non-Banking Finance Companies (Establishment & Regulation) Rules, 2003, requirementsof the Trust Deed and directives of the Securities and Exchange Commission ofPakistan have been followed in preparation of the financial statements (except asexplained above for valuation of TFCs).

e. The system of internal control is sound in design and has been effectivelyimplemented and monitored.

f. There are no significant doubts upon the Fund's ability to continue as a going concern.g. There has been no material departure from the best practices of the Code of Corporate

Governance, as detailed in the listing regulations.h. A performance table / key financial data is given on page 7 of this annual report.i. The Directors have signed the "Statement of Ethics and Business Practices."j. Particulars of all investments and redemptions by the Chief Executive, directors and

executives, their spouses and minor children during the year ended June 30, 2006:

k. The value of investments of the staff provident fund of ABAMCO Limited, as per theaudited accounts for the year ended June 30, 2006 was Rs. 10.127 million.

6. Meetings of the Directors

During the year 11 meetings of the Board of Directors were held. The attendance of eachdirector for these meetings is as follows:

7. External Auditors

The Fund's external auditors, Messrs. M. Yousuf Adil Saleem & Co., Chartered Accountants,have expressed their willingness to continue as the Fund's auditors for the ensuing year endingJune 30, 2007. The Audit Committee of the Board has recommended reappointment of M.Yousuf Adil Saleem & Co., Chartered Accountants as auditors of the Fund for the year endingJune 30, 2007.

UTP-Islamic Fund5

Name Number of units acquired Number of units redeemed

Mr. Wasim Butt 750 978.19

Mr. Iftikhar Ahmed 122.76 Nil

Mr. Nabil Daud ur Rahman 881.04 881.04

Mr. Shafiq ur Rahman 139.46 Nil

Mr. Shafqat Ali 134.95 134.95

Name Eligible to attend Meetings attendedMr. Munawar Alam Siddiqui 11 11Mr. Muhammad Najam Ali 11 11Mr. Ali Raza Siddiqui 11 11Mr. Munaf Ibrahim 11 10Mr. William H. Kleh 11 01Mr. Muhammad Arshad 09 0Mr. Nazar Mohammad Shaikh 05 02Lt. General (Retired) Masood Parwaiz 01 01

8. Acknowledgment

The Directors expresses their gratitude to the Securities and Exchange Commission of Pakistan forits valuable support, assistance and guidance. The Board also thanks the employees of theManagement Company and the Trustee for their dedication and hard work and the unit holders fortheir confidence in the Management.

Muhammad Najam AliChief Executive Officer

Karachi: July 15, 2006


PERFORMANCE TABLE /KEY FINANCIAL DATAYear ended June 30 2006 2005 2004 2003

Net assets (Rupees in million) 863.984 947.203 641.912 455.281Total realized income (Rupees in million) 344.708 201.367 77.853 47.560Total expenses (Rupees in million) 33.737 36.547 26.686 8.100 Net income (Rupees in million) 215.858 38.849 134.532 70.146Total expense to net assets ratio (%) 3.90% 3.86% 4.16% 1.78%Total dividend distribution (Rupees in million) 207.148 74.984 78.783 33.244

Outstanding Units

Number of units in issue - June 30th 1,104,791 1,499,682 926,861 831,113 Highest outstanding units during the year 1,184,723 1,667,823 1,338,586 899,449Lowest outstanding units during the year 912,389 917,294 777,715 517,932

Data Per Unit

Net assets value - Rupees 782 632 693 548Net assets value appreciation during the year - % 24% -9% 26% 10%Net income - Rupees 195 26 145 84Cash / stock dividend - Rupees 187.5 50 85 40Dividend as % of par value 37.5% 10% 17% 8%Dividend as % of NAV at the beginning of the year 32.24% 8.22% 16.73% 8%Highest issue price during the year - Rupees 998.24 754.25 751.50 595.75Lowest redemption price during the year - Rupees 572.00 525.25 552.25 504.50

Notes- UTP-Islamic Fund was launched on December 2002- Units have par value of Rs. 500 each.

UTP-Islamic Fund7


UTP-Islamic Fund9


FOR THE YEAR ENDED JUNE 30, 2006

This Statement is being presented in compliance with the Code of Corporate Governance ('the Code') containedin Regulation 43 of the Listing Regulations of the Lahore Stock Exchange. The purpose of the Code is to establisha framework of good governance, whereby a listed company is managed in compliance with the best practicesof corporate governance.

JS ABAMCO Limited (Formerly ABAMCO Limited), the Management Company of UTP - Islamic Fund ('theFund') although an unlisted company, complies with the Code as the Fund is listed on the Lahore StockExchange. The Board of Directors of the Management Company manages the affairs of the Fund and hasappointed the Chief Executive Officer, Chief Financial Officer, Company Secretary and other necessarypersonnel to manage its affairs.

The Management Company has applied the principles contained in the Code in the following manner:

1. The Management Company encourages representation of independent non-executive directors. Presently,the Board includes five non-executive directors. The Management Company, being an unlisted company,does not have minority interest.

2. The directors have confirmed that none of them is serving as a director in more than ten listed companies,including the Management Company.

3. All the resident directors of the Management Company are registered as taxpayers and none of them hasdefaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member of a stockexchange, has been declared as a defaulter by that stock exchange.

4. During the year under review two casual vacancies occurred in the Board which were duly filled in byother directors.

5. The Management Company has prepared a "Statement of Ethics and Business Practices", which has beensigned by all the directors and employees of the Management Company.

6. The Management Company has developed a vision / mission statement, overall corporate strategy andsignificant policies of the Fund which have been approved by the Board. A complete record of particularsof significant policies 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, includingappointment and determination of remuneration and terms and conditions of employment of the CEO andother Executive Directors, have been taken by the Board.

8. The meetings of the Board were presided over by the Chairman, and in his absence, by a director electedby the Board for this purpose and the Board met at least once in every quarter during the year. Writtennotices of the meetings of the Board of Directors, along with agenda and working papers, were circulatedat least seven days before the meetings. The minutes of the meetings were appropriately recorded andcirculated.

UTP-Islamic Fund11

STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE


9. During the year, directors were apprised of their roles and Asset Manager's Code of Professional Conduct.

10. During the year, there was no change in the Chief Financial Officer / Company Secretary and Head ofInternal Audit. Their remuneration and terms and conditions of employment have been approved by theboard.

11. The directors' report 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 Fund were duly endorsed by the CEO and CFO before approval of theBoard.

13. The directors, CEO and Executives do not hold any interest in the units of the Fund other than thosedisclosed in the directors' report.

14. The Management Company has complied with all the corporate and financial reporting requirements ofthe Code with respect to the Fund.

15. The Board has formed an Audit Committee comprising of three non-executive directors including thechairman of the Committee.

16. The meetings of the Audit Committee are held every quarter prior to approval of interim and annualresults of the Fund as required by the Code. The Board has approved terms of reference of the AuditCommittee.

17. The Board of the Management Company has setup an effective internal audit function.

18. The statutory auditors of the Fund have confirmed that they have been given a satisfactory rating underthe quality control review program of the Institute of Chartered Accountants of Pakistan, that they or anyof the partners of the firm, their spouses and minor children do not hold Units of the Fund and that thefirm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelineson Code of Ethics as adopted by the Institute of Chartered Accountants of Pakistan.

19. The statutory auditors or the persons associated with them have not been appointed to provide otherservices except in accordance with the listing regulations and the auditors have confirmed that they haveobserved IFAC guidelines in this regard.

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

Muhammad Najam AliChief Executive Officer


UTP-Islamic Fund13

We have reviewed the Statement of Compliance with the best practices contained in the Code of CorporateGovernance prepared by the Board of Directors of the JS ABAMCO Limited (Formerly ABAMCO Limited),Management Company of UTP-Islamic Fund (the Fund) to comply with the Listing Regulation No.43, ChapterXIII of the Lahore Stock Exchange, where the Fund is listed.

The responsibility for compliance with the Code of Corporate governance is that of the Board of Directors of theManagement Company of the Fund. Our responsibility is to review, to the extent where such compliance can beobjectively verified, whether the Statement of Compliance reflects the status of the Fund's compliance with theprovisions of the Code of Corporate Governance and report if it does not. A review is limited primarily toinquiries of the personnel of the Management Company and review of various documents prepared by theManagement Company to comply with the Code.

As part of our audit of the financial statements we are required to obtain an understanding of the accounting andinternal control systems sufficient to plan the audit and develop an effective audit approach. We have not carriedout any special review of the internal control system to enable us to express an opinion as to whether the Board'sstatement on internal control covers all controls and the effectiveness of such internal controls.

Based on our review, nothing has come to our attention, which causes us to believe that the Statement ofCompliance does not appropriately reflect the Fund's compliance, in all material respects, with the best practicescontained in the Code of Corporate Governance as applicable to the Fund for the year ended June 30, 2006.

M. Yousuf Adil Saleem & Co.Chartered Accountants


REVIEW REPORT TO THE UNIT HOLDERSON STATEMENT OF COMPLIANCE WITH BEST PRACTICES OFCODE OF CORPORATE GOVERNANCE


The Shariah Advisory Council (SAC) of UTP- Islamic Fund (UTP-ISF) has performed the following tasks duringthe year ended June 30, 2006.

1. The SAC reviewed and approved the modes of investments referred to it by UTP-Islamic Fund in the lightof the Shariah requirements, the SAC also laid down the guidelines for managing investments by the UTP-ISF.

2. The SAC noted the possibility that UTP-ISF may receive on its investment as a dividend income that isHaram, i.e. income which is derived from interest. The SAC had laid down the guidelines to determineand set aside such income which is to be distributed as Charity, either by the unit holders themselves orby the management company, if authorized.

3. The SAC has advised proper disclosure to be made in the financial statements of such Haram income andhas approved the Charities to which such income is to be donated, on behalf of the unit holders who haveauthorized the management company to do so.

4. The SAC noted with satisfaction that M/s. M. Yousuf Adil Saleem & Co., auditors for the UTP-ISF haveduly conducted their Shariah Compliance Audit whose scope, inter-alla, included.

a) approvals as deemed necessary by the management have been obtained from the SAC in respect oftransactions involving Shariah related matters.

b) Documentation being used by the Fund have been approved by the SAC to be Shariah Compliant.c) Funds appear to have been used in accordance with the approvals of the SAC and that based on

these no misuse of trust funds appears to have been committed.d) Trust funds have been placed for investment under Shariah Compliant avenues as approved by the

council.e) Disclosure has been made in the notes to the financial statements, of earnings prohibited by Shariah,

if any, and any disposal of such amounts in accordance with the advice of the SAC.

The SAC would like to bring on record the receptiveness of the Management Company to the advice of the SACand it's willingness to improve its performance in accordance with the principles of Shariah.

Mustafa Fazil Ansari Maulana Anwarullah Khan Muhammad Ali NasirActing Chairman and Member MemberSecretary

Karachi: August 9, 2006

REPORT OF THE SHARIAH ADVISORY COUNCIL

UTP-Islamic Fund15

We have audited UTP-Islamic Fund (the Fund) compliance for the year ended June 30, 2006 with the principlesof Shariah stated in clause 3.5 (b) of the Trust Deed dated December 16, 2002 of the Fund.

It is the responsibility of the management company of the Fund to appoint a Shariah Adviser and establish andmaintain a system of internal control to ensure compliance with the Shariah guidelines and prepare and presentthe financial statements in accordance with the requirements of the Accounting, Auditing and GovernanceStandard for Islamic Financial Institutions (AAGSIFI) issued by the Accounting and Auditing Organisation forIslamic Financial Institution (AAOIFI). Our responsibility is to carry out procedures to enable us to report on thecompliance with the Shariah guidelines.

We conducted our audit in accordance with the International Standards on Auditing applicable to complianceauditing. Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the Fund has complied with clause 3.5 (b) of the Trust Deed in all material respects. An audit includesexamining appropriate evidence on a test basis. We believe that our audit provides a reasonable basis for ouropinion and, after due verification, we report that to the best of our knowledge and in all material respects:

(a) Necessary approvals, where required, have been obtained by the Fund from the Shariah Advisory Council(the Council) in respect of transactions involving Shariah related matters;

(b) Documentation being used by the Fund has been approved by the Council to be Shariah compliant;

(c) Funds have been used in accordance with the approvals of the Council. Based on this, no misuse of trustfunds appears to have been committed;

(d) Trust funds were placed for investment under Shariah compliant avenues;

(e) Costs charged to the trust funds were in accordance with the Council's permissions and the terms of theTrust Deed;

(f) Fees paid to the trustee and the management company is in accordance with the agreed rates and therewas no transaction involving a modharib;

(g) Distributions to the unit holders are in accordance with the terms agreed upon;

(h) Disclosure has been made in the notes to the attached financial statements, of earnings prohibited byShariah, and how those amounts are disposed off in accordance with the advice of the Council.

(i) Disclosure has been made in notes to the aforementioned financial statements that zakat is deducted atsource by the Fund from the dividend amount or from the redemption payment, if units are redeemedduring the zakat year before payment of dividend and after the zakat becomes leviable, and the Fund hasdisclosed in note 11 to the aforementioned financial statements the amount of zakat due as at June 30, 2006;and

(j) The enclosed statement of Assets and Liabilities and Income statement together with the notes formingpart thereon have been drawn up in conformity with the requirements of Accounting Standard for IslamicFinancial Institutions as applicable to Investment Funds, issued by AAOIFI.



SHARIAH COMPLIANCEAUDITORS’ REPORT TO THE UNIT HOLDERS


Report of the Trustee Pursuant to Rule 76(h) of the Non-Banking Finance Companies (Establishment andRegulation) Rules, 2003.

The UTP-Islamic Fund, an open-end fund established under a trust deed executed between JS ABAMCOLimited (Formerly ABAMCO Limited) as the Asset Management Company and Muslim Commercial FinancialServices (Private) Limited as the Trustee on December 16, 2002. The scheme was authorized by Securities andExchange Commission of Pakistan (SECP) on November 18, 2002.

As per the Deed of change of Trustee and amendment of Trust Deed dated May 28, 2005, Muslim CommercialFinancial Services (Private) Limited retired as the Trustee and Central Depository Company of Pakistan Limitedwas appointed as the Trustee of UTP-Islamic Fund.

In our opinion, JS ABAMCO Limited (Formerly ABAMCO Limited), the Management Company of UTP-IslamicFund has in all material respects managed UTP-Islamic Fund during the year ended June 30, 2006 in accordancewith the provisions of the Trust Deed (and the modifications authorized by the SECP from time to time) and theNon-Banking Finance Companies (Establishment and Regulation) Rules, 2003.

Mohammad Hanif JakhuraChief Executive Officer

Karachi: July 15, 2006 Central Depository Company of Pakistan Limited

REPORT OF THE TRUSTEE

UTP-Islamic Fund17

We have audited the annexed statement of assets and liabilities of the UTP-Islamic Fund (the Fund) as at June30, 2006 and the related income statement, statement of movement in unit holders' funds, distribution statementand cash flow statement together with the notes forming part thereof, for the year ended June 30, 2006 and westate that we have obtained all the information and explanations which, to the best of our knowledge and belief,were necessary for the purposes of our audit.

It is the responsibility of the management company to establish and maintain a system of internal control andprepare and present the above said statements in conformity with the requirements of the Trust Deed, the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 and approved accounting standards asapplicable in Pakistan. 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 standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the above saidstatements are free of any material misstatements. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the above said statements. An audit also includes assessing theaccounting policies and significant estimates made by the management, as well as, evaluating the overallpresentation of the above said statements. We believe that our audit provides a reasonable basis for our opinionand after due verification, we report that:

(a) in our opinion, proper books of account have been kept by the Fund's Management Company in respectof UTP-Islamic Fund as required by the Trust Deed and Non-Banking Finance Companies (Establishmentand Regulation) Rules, 2003;

(b) in our opinion, the statement of assets and liabilities, income statement, distribution statement andstatement of movement in unit holders' funds together with the notes forming part thereof have beendrawn up in conformity with the Non-Banking Finance Companies (Establishment and Regulation) Rules,2003 and are in agreement with the books of account and are further in accordance with the accountingpolicies consistently applied except for changes as stated in notes 2.1.1 and 2.1.2 with which we concur;

(c) in our opinion and to the best of our information and according to the explanations given to us, thestatement of assets and liabilities, income statement, distribution statement, statement of movement in unitholders' funds and cash flow statement together with the notes forming part thereof, give the informationrequired by the Trust Deed, the Non-Banking Finance Companies (Establishment and Regulation) Rules,2003 and approved accounting standards as applicable in Pakistan in the manner so required andrespectively give a true and fair view of the state of the Fund's affairs as at June 30, 2006 and of thetransactions of the Fund for the year then ended; and

(d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVlll of 1980), wasdeducted by the Fund and deposited in the Central Zakat Fund established under section 7 of thatOrdinance.

The financial statements of the Fund for the year ended June 30, 2005 were audited by another firm of CharteredAccountants, whose report dated July 09, 2005 expressed an unqualified opinion.



AUDITORS’ REPORT TO THE UNIT HOLDERS

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIESAs at June 30, 2006

Note 2006 2005 Rupees Rupees

Assets

Bank balances 5 65,461,093 364,320,290 Investments 6 794,648,057 504,998,921 Receivables and deposit - considered good 7 8,667,923 84,056,508

Total assets 868,777,073 953,375,719

Liabilities

Remuneration payable to management company 8 2,007,543 2,219,493 Remuneration payable to trustee 9 133,852 145,118 Remuneration payable to shariah advisory council 10 155,000 25,000 Accrued and other liabilities 11 2,484,998 2,039,430 Amount payable on redemption of units - 1,724,144 Distribution payable 11,533 19,441

Total liabilities 4,792,926 6,172,626

Net assets 863,984,147 947,203,093

Unit holders' funds (as per statement attached) 863,984,147 947,203,093

No. of units

Number of units in issue 1,104,791 1,499,682

Rupees

Net assets value per unit (face value per unit is Rs. 500/-) 782 632

The annexed notes from 1 to 22 form an integral part of these financial statements.

For JS ABAMCO Limited (Formerly ABAMCO Limited)(Management Company)

UTP-Islamic Fund19

Muhammad Najam Ali Munawar Alam Siddiqui Munaf IbrahimChief Executive Officer Chairman Director

INCOME STATEMENTFor the year ended June 30, 2006


(Restated)Income

Net gain from transactions in held for trading securities 297,049,396 174,114,313 Dividend income 29,728,287 46,629,477 Return on bank balances 8,396,148 3,875,947 Element of income and capital gains in prices of units sold

less those in units redeemed 9,534,299 (23,252,203)344,708,130 201,367,534

Unrealised diminution in value of investmentsin held for trading securities - net (95,112,862) (125,970,890)

249,595,268 75,396,644

Expenses

Remuneration of management company 8 22,942,659 24,644,774 Remuneration of trustee 9 1,529,697 3,853,661 Remuneration of shariah advisory council 10 380,000 338,000 SECP annual fee 11.2 765,001 818,338 Bank and settlement charges 235,577 816,726 Auditors' remuneration 12 426,741 356,050 Legal fee 85,488 - Mutual fund rating fee 100,000 - Listing fee 16,666 25,000 MUFAP subscription fee 11,727 9,151 Securities transaction cost 7,243,247 5,685,730

33,736,803 36,547,430

Net income 215,858,465 38,849,214

Earnings per unit 195.38 25.90





STATEMENT OF MOVEMENT IN UNIT HOLDERS' FUNDSFor the year ended June 30, 2006

2006 2005 Rupees Rupees

Net assets at the beginning of the year 947,203,093 641,912,325

Amounts received / receivable on issue of 631,277.05*(2005: 1,587,182) units 401,448,066 911,315,575

Amounts paid / payable on redemption of 1,026,167.97(2005: 1,014,361) units (690,991,178) (668,126,224)

(289,543,112) 243,189,351

Element of income and capital gains in prices of unitssold less those in units redeemed (9,534,299) 23,252,203

Net income for the year 215,858,465 38,849,214

Net assets at the end of the year 863,984,147 947,203,093

* This includes 128,842 units issued as bonus units during the year.



UTP-Islamic Fund21


DISTRIBUTION STATEMENTFor the year ended June 30, 2006


Undistributed income brought forward as previously reported 56,515,670 92,650,554

Effect of change in accounting policy (Note 2.1.1)Final distribution - reversal of transfer to reserve for issue of bonus units

at the rate of Rs. 50 per unit (2004: Rs. 85 per unit) 74,984,098 78,783,185

Unappropriated profit brought forward - Restated 131,499,768 171,433,739

Net income for the year 215,858,465 38,849,214

Final distribution - issue of bonus units at the rate of Rs. 50 per unit (2004: Rs. 85 per unit ) distributedon July 09, 2005 (74,984,098) (78,783,185)

Undistributed income carried forward 272,374,135 131,499,768





CASH FLOW STATEMENTFor the year ended June 30, 2006

UTP-Islamic Fund23


(Restated)Cash flows from operating activitiesNet income 215,858,465 38,849,214

Adjustments for:

Net gain from transactions in held for trading securities (297,049,396) (174,114,313)Element of income and capital gains in prices of units sold

less those of units redeemed (9,534,299) 23,252,203 Unrealised diminution in value of investment in held for trading securities - net 95,112,862 125,970,890

Operating income before working capital changes 4,387,632 13,957,994

Working capital changes

Decrease/(Increase) in assetsReceivables and deposit 75,388,585 (83,718,388)

Increase/(decrease) in liabilities

Remuneration payable to management company (211,950) (2,759,476)Remuneration payable to trustee (11,266) (113,593)Remuneration payable to shariah advisory council 130,000 15,000 Accrued and other liabilities 445,568 (1,374,317)Amount payable on redemption of units (1,724,144) - Distribution payable (7,908) (47,484)

(1,379,700) (4,279,870)78,396,517 (74,040,264)

Sale of held for trading investments 9,989,335,193 7,327,095,686 Purchase of held for trading investments (10,077,047,795) (7,250,396,378)Net cash (used in)/generated from operating activities (9,316,085) 2,659,044

Cash flows from financing activities

Amounts received on issue of units 401,448,066 911,315,575 Amounts paid on redemption of units (690,991,178) (667,285,464)Net cash (used in )/generated from financing activities (289,543,112) 244,030,111 Net (decrease)/increase in cash and cash equivalent during the year (298,859,197) 246,689,155 Cash and cash equivalents at beginning of the year 364,320,290 117,631,135

Cash and cash equivalents at end of the year 4.11 65,461,093 364,320,290




STATEMENT OF FINANCIAL HIGHLIGHTSFor the year ended June 30, 2006


Note 2006 2005 Rupees Rupeesper unit per unit

Net asset value at the beginning of the year 632 693

Net income or loss from investments, sale and financing 27 33

Net realised and unrealised gains or losses from investments 200 32

Net income before remuneration of management company 227 65

Remuneration of management company (23) (19)

Effect of capital transactions (286) 184

Computational adjustment for opening, closing and average number of units 232 (291)

Net asset value at the end of the year 782 632

Total net assets at the end of the year (Rupees) 863,984,147 947,203,093

Weighted average net assets (Rupees) 764,838,893 822,820,617

Ratio of expenses to weighted average net assets 1 4.41% 3.75%

Portfolio investments, receivables and financing turnover rate 2 17.92 13.12

Annual rate of return 3 28.22% 4.72%

NOTES1. Ratio of expenses to weighted average net assets

This represents total expenses for the year divided by weighted average net assets during the year

2. Portfolio of investments receivables and financing turnover rateThis represents the number of times, investments, receivables and financing have been replaced during theyear. This has been derived by dividing the total purchases of investments during the year with averageinvestment balance for the year

3. Annual rate of returnThis has been derived by dividing net income during the year by the average net assets during the year

For the year ended June 30, 2006

UTP-Islamic Fund25

NOTES TO THE FINANCIAL STATEMENTS

1. LEGAL STATUS AND NATURE OF BUSINESS

UTP-Islamic Fund (the Fund) was established under a Trust Deed executed between JSABAMCO Limited (Formerly ABAMCO Limited) as the Management Company, acompany incorporated under the Companies Ordinance, 1984 and the MuslimCommercial Financial Services (Private) Limited (MCFSL) as a Trustee, also incorporatedunder the Companies Ordinance, 1984 and a wholly owned subsidiary of MuslimCommercial Bank Limited. The Trust Deed was executed on December 16, 2002 and wasapproved by the Securities and Exchange Commission of Pakistan (SECP) on November18, 2002 under the Asset Management Companies Rules, 1995 [replaced by the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 (the NBFCRules)]. During the year ended June 30, 2005 MCFSL voluntarily retired as a trustee of theFund and Central Depository Company of Pakistan Limited (CDC) was appointed as anew trustee under an amended Trust Deed dated May 28, 2005. Accordingly the TrustDeed was approved by the SECP on January 27, 2005 under the NBFC Rules. Theregistered office of the Management Company is situated at 7th Floor, The Forum, G-20,Khayaban-e-Jami, Block 9, Clifton, Karachi.

All the activities of the Fund are undertaken in accordance with the Islamic Shariah rulesand principles. The management company has appointed a Shariah Advisory Councilwhose advice is followed to ensure that activities of the Fund are in compliance withShariah.

The Fund is an open ended mutual fund and its units are listed on Lahore Stock Exchange.Units are offered for public subscription on a continuous basis. The units are transferableand can be redeemed by surrendering them to the Fund.

The principal activity of the Fund is to make Shariah compliant investments in securitieslisted on the stock exchanges registered in Pakistan.

The financial statements are presented in Pak Rupees, which is the Fund's functional andpresentation currency.

2. STATEMENT OF COMPLIANCE

These financial statements have been prepared in accordance with the requirements of theTrust Deed, the Non-Banking Finance Companies (Establishment & Regulation) Rules,2003 and approved accounting standards as applicable in Pakistan and relevant standardsissued by the Accounting and Auditing Organisation for Islamic Financial Institutions(AAOIFI). Wherever, the requirements of the Non-Banking Finance Companies(Establishment & Regulation) Rules, 2003, differ with the requirements of the thesestandards, the requirements of the Non-Banking Finance Companies (Establishment &Regulations) Rules, 2003 take precedence.


2.1 Adoption of revised International Accounting Standards

In the current year, the Fund has adopted all of the revised standards and theInterpretations issued by the International Accounting Standards Board (the IASB)and the International Financial Reporting Interpretation Committee (IFRIC) of theIASB that are relevant to its operation and effective for accounting period beginningon or after January 01, 2005. The adoption of these revised Standards and theInterpretation has resulted in changes to the Fund's accounting policies in thefollowing areas that have affected the amounts reported for the current or prioryears:

• Dividend declared subsequent to the balance sheet date are considered as nonadjusting event (IAS 10 ‘Events after the Balance Sheet Date’)

• Securities transaction costs on held for trading investments are not to be included inthe carrying amount of investments and are charged as expense (IAS 39 'FinancialInstruments Recognition and Measurement' (Revised)).

The impact of changes in accounting policies is discussed in detail as follows:

2.1.1 Proposed distribution of bonus units

During the current year, the Fund has changed its accounting policy pertainingto recognition of dividends declared subsequent to year-end. The change hasbeen consequent to clarification issued by the Institute of CharteredAccountants of Pakistan through their circular No. 06/2006 dated June 19, 2006in respect of treatment of proposed dividend and bonus issue and inaccordance with the requirements of IAS 10 'Events after the Balance SheetDate'. As per the new policy, dividends declared subsequent to the balancesheet date are considered as non-adjusting events and are not recognized in thefinancial statements. Previously, such dividend declaration was being treatedas adjusting event in the financial statements of the Fund.

The change in accounting policy has been applied retrospectively and thecomparative information has been restated in accordance with the treatmentspecified in IAS 8 'Accounting Policies, Changes in Accounting Estimates andErrors'. Had there been no change in the accounting policy, the undistributedincome as at June 30, 2005 and June 30, 2006 would have been lower by Rs.74,984,098 and Rs. 207,148,312 and the reserve for issue of bonus units wouldhave been higher by Rs. 74,984,098 and Rs. 207,148,312 respectively.

The effect of change in accounting policy has been reflected in the statement ofdistribution.

UTP-Islamic Fund27

2.1.2 Securities transaction costs on held for trading investments

Previously, investments classified as “held for trading” were measured at costwhich includes transaction costs such as brokerage fee, commission, levies,costs directly attributable to the acquisition of investments. InternationalAccounting Standard – 39 (IAS-39) “Financial Instruments: Recognition andMeasurement” has been revised and made effective on the financial statementsbeginning on or after January 01, 2005. As per revised IAS-39, held for tradinginvestments are initially measured at fair value hence transaction costs are notto be included in the carrying amount of the investments but charged asexpense. During the period, Management has changed the accounting policyfor initial measurement of held for trading investments to bring it in line withthe IAS 39. This change in accounting policy has been applied retrospectivelyand comparative information has been restated in accordance with thetreatment specified in International Accounting Standard – 8 (IAS-8)“Accounting Policies, Changes in accounting estimates and errors”. Thischange has no impact on the income or unit holders' fund for the currentperiod and prior periods.

3. BASIS OF MEASUREMENT

These financial statements have been prepared under the historical cost convention,except for the measurement at fair value of held for trading securities.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

4.1 Investments

The management of the Fund determines the appropriate classification of itsinvestments at the time of purchase and classifies these investments as held tomaturity, available for sale or held for trading.

Held to maturityThese are securities with fixed or determinable payments and fixed maturity that theFund has the positive intent and ability to hold to maturity and are subsequentlymeasured at amortized cost, less any impairment loss recognized to reflectirrecoverable amounts.

Held for tradingThese are securities which are either acquired for generating profit from short-termfluctuations in prices or dealer's margin or are securities included in a portfolio inwhich a pattern of short-term profit taking exists these are initially measured at fairvalue and changes on re-measurement are taken to profit and loss account.

Available for saleInvestment securities held by the Fund which may be sold in response to needs forliquidity or changes in interest rates or equity prices are classified as available forsale. These investment are initially recognised at fair value plus transaction cost and


subsequently re-measured at fair value. The investments for which quoted marketprice is not available, are measured at costs as it is not possible to apply any othervaluation methodology. Gains and losses arising from re-measurement at fair valueis recognised directly in the equity under fair value reserve until sold, collected, orotherwise disposed off at which time, the cumulative gain or loss previouslyrecognised in equity is included in profit and loss account.

4.2 Derivatives

Derivative instruments held by the Fund primarily comprise of futures contracts inthe capital market. These are initially recognised at cost and are subsequentlyremeasured at their fair value. The fair value of futures contracts is calculated as thenet difference between the contract price and the closing price reported on theprimary exchange of the futures contract. Derivatives with positive market values(unrealised gains) are included in other assets and derivatives with negative marketvalues (unrealised losses) are included in other liabilities in the balance sheet. Theresultant gains and losses are included in the income currently.

Derivative financial instruments entered into by the Fund do not meet the hedgingcriteria as defined by International Accounting Standard - 39, Recognition andMeasurement of Financial Instruments (IAS - 39), consequently hedge accounting isnot used by the Fund.

4.3 Issue and redemption of units

Units are issued at the offer price prevalent during the day in which the units areissued. The offer price represents the net asset value of units at the close of businessday plus the allowable sales load. The sales load is payable to the distributioncompany and the Management Company as processing fee. Issue of units isrecorded on acceptance of application for sale.

Units redeemed are recorded at the redemption price prevalent during the day inwhich the units are redeemed. The redemption price represents the net assets valueat the end of the business day. Redemption of units is recorded on acceptance ofapplication for redemption.

4.4 Revenue recognition

Gain or loss on sale of marketable securities is accounted for in the year in which itarises.

Dividend income is recorded at the time of the closure of share transfer book of thecompany declaring the dividend. Dividend received on marketable securitiesacquired after the announcement of dividend till the book closure date is not takento income but reflected as reduction in the cost of investment.

Return on bank balances is recognised on a time proportion basis.

UTP-Islamic Fund29

4.5 Element of income and capital gains in prices of units sold less those in units redeemed

To prevent the dilution of per unit income and distribution of income already paidout on redemption, as dividend, an equalization account called “element of incomeand capital gains in prices of units sold less those in units redeemed” is created.

The "element of income and capital gains in prices of units sold less those in unitsredeemed" account is credited with the amount representing net income and capitalgains accounted for in the last announced net asset value and included in the saleproceeds of units. Upon redemption of units, the "element of income and capitalgains in prices of units sold less those in units redeemed" account is debited with theamount representing net income and capital gains accounted for in the lastannounced net asset value and included in the redemption price.

The net "element of income and capital gains in prices of units sold less those in unitsredeemed" during an accounting period is transferred to the income statement.

4.6 Taxation

The Fund is exempt from taxation under clause 99 of the Part I of the 2nd Scheduleof the Income Tax Ordinance, 2001, subject to the condition that not less than 90% ofits income excluding realised and unrealised capital gains for the period isdistributed amongst the unit holders.

4.7 Financial instruments

All the financial assets and financial liabilities are recognised at the time when theFund becomes a party to the contractual provisions of the instrument. Any gain orloss on derecognition of the financial assets and financial liabilities is taken toincome currently.

4.8 Trade date accounting

All regular way purchases/sales of investments are recognised on the trade date,i.e., the date that the Fund commits to purchase/sell the investments. Regular waypurchases or sales of investments require delivery of securities within three daysafter the transaction date as required by stock exchange regulations.

4.9 Offsetting of financial assets and liabilities

Financial assets and financial liabilities are only offset and the net amount reportedin the statement of assets and liabilities when there is a legally enforceable right toset off the recognised amount and the Fund intends to either settle on a net basis, orto realise the asset and settle the liability simultaneously.


4.10 Zakat

Units held by resident Pakistani unit holders shall be subject to Zakat at 2.5% of thepar value of units under Zakat and Ushr Ordinance, 1980, (XVII of 1980), exceptthose exempted under the said Ordinance. Zakat is deducted at source from thedividend amount or from the redemption payment, if units are redeemed during theZakat year before payment of dividend.

4.11 Cash and cash equivalents

Cash and cash equivalents comprise of bank balances.


5. BANK BALANCES

On savings accounts - approved by Shariah Advisory Council 5.1 62,096,568 357,085,351 On current accounts 3,364,525 7,234,939

65,461,093 364,320,290

5.1 Savings accounts carry mark-up rates ranging from 1.75% to 7% (2005: 1.90% to3%) per annum.


6. INVESTMENTS

Held for tradingQuoted equity securities 6.1 794,648,057 504,998,921

No. of shares / certificates holdings Bonus / rights holdings

at the Acquired received Disposed at the Market % ofbeginning during the during the during the end of the Value net assets of the year year year year year (Rupees)

6.1 Quoted equity securities *

* Fully paid ordinary shares / certificates have a face value of Rs. 10/- each unless stated otherwise.

Sectors / Companies

Mutual fundsABAMCO Growth Fund 3,309,996 40,500 - 3,350,496 - - - ABAMCO Capital Fund 12,793,110 - - 12,793,110 - - - UTP-Growth Fund - 3,342,839 - - 3,342,839 43,456,912 5.03

Modarabas Modaraba Al Mali - 105,000 - - 105,000 887,250 0.10

Textile compositeNishat Mills Limited 1,248,900 6,696,800 - 7,554,800 390,900 40,966,320 4.74 Azgard Nine Limited 419,500 987,900 - - 1,407,400 31,033,170 3.59

UTP-Islamic Fund31

No. of shares / certificates holdings Bonus / rights holdings

at the Acquired received Disposed at the Market % ofbeginning during the during the during the end of the Value net assets of the year year year year year (Rupees)

CementLucky Cement Limited - 13,686,500 - 13,286,500 400,000 41,420,000 4.79 D.G.Khan Cement Company Limited 300,000 15,102,900 - 14,566,800 836,100 75,249,000 8.71

RefineryAttock Refinery Limited - 126,800 - 126,800 - - - National Refinery Limited 28,300 3,200 - - 31,500 8,410,500 0.97

Power generation & distributionThe Hub Power Company Limited 3,220,000 - - 3,220,000 - - -

Oil & gas marketing companiesPakistan State Oil Company Limited - 1,908,200 - 1,848,200 60,000 18,540,000 2.15 Attock Petroleum Limited - 516,000 - 401,700 114,300 36,918,900 4.27 Shell Pakistan Limited - 22,500 - 300 22,200 10,687,080 1.24

Oil & gas exploration companiesOil & Gas Development

Company Limited - 12,938,200 - 12,140,700 797,500 109,058,125 12.62 Pakistan Oilfields Limited 175,000 3,064,500 86,000 3,100,500 225,000 75,330,000 8.72 Pakistan Petroleum Limited - 3,295,500 - 2,989,500 306,000 64,826,100 7.50

Technology and communicationPakistan Telecommunication

Company Limited - 14,089,200 - 11,989,200 2,100,000 85,260,000 9.87 Callmate TELIPS Telecom Limited - 324,500 5,100 329,600 - - -

Automobile parts & accessories Agriauto Industries Limited

(face value of Rs. 5 per share) - 200,000 - - 200,000 13,760,000 1.59

FertilizerEngro Chemical Pakistan Limited - 829,700 - 624,700 205,000 34,727,000 4.02 Fauji Fertilizer Company Limited - 814,200 7,500 348,000 473,700 57,317,700 6.63 Fauji Fertilizer Bin Qasim Limited 765,500 8,968,500 - 8,134,000 1,600,000 46,800,000 5.42

ChemicalICI Pakistan Limited 232,700 222,400 - 455,100 - - -

Transport Pakistan International Container

Terminals Limited - 18,500 - 18,500 - - -

Market value of held for trading investments as at June 30, 2006 794,648,057 91.97 Cost of held for trading investments as at June 30, 2006 886,981,958


7. RECEIVABLES AND DEPOSIT- considered good

Receivable against securities in held for trading investments-net- connected person - 39,318,648 - others - 43,555,599

Other receivablesReturn on bank deposits 2,101,126 1,072,174 Dividend 6,460,200 -

Advance tax 6,597 10,087 Security deposit 100,000 100,000

8,667,923 84,056,508


8. REMUNERATION PAYABLE TO MANAGEMENT COMPANY

The Management Company is entitled to a remuneration for services rendered to the Fund underthe provisions of the NBFC Rules, upto a maximum of 3% per annum based on the daily net assetsof the Fund. The Management Company has charged its remuneration at the rate of 3% per annumbased on the daily net assets of the Fund.

9. REMUNERATION PAYABLE TO TRUSTEE

CDC is entitled to a monthly remuneration for services rendered to the Fund under the provisionsof the trust deed as follows:

- up to rupees one billion maximum of 0.2% per annum of the daily net assets of the fund or 0.7 million, whichever is higher.

- exceeding rupees one billion Rs. 2 million plus 0.1% per annum of the daily net assets of the fund.

10. REMUNERATION PAYABLE TO SHARIAH ADVISORY COUNCIL

Shariah Advisory Council is entitled to a remuneration for the services rendered to the Fund underthe agreement between Management Company and the Shariah Advisory Council. The ShariahAdvisory Council comprises of a chairman and two members. Members are entitled to aremuneration of Rs.5,000 per meeting while the chairman is entitled to a remuneration of Rs.10,000per month. Further, the Shariah Advisory Council is also entitled to Rs.15,000 per month foradministrative expenses.


11. ACCRUED AND OTHER LIABILITIES

Sales load 11.1 1,323,873 822,491 SECP annual fee 11.2 765,001 818,338 Listing fee 48,666 62,000 Settlement charges 15,000 20,000 Audit fee 285,000 278,670 Zakat 26,822 24,242 Others 20,636 13,689

2,484,998 2,039,430

11.1 This includes Rs. 333,384 payable to Management Company for acting as distribution company for the Fund.

11.2 This represents annual fee of one tenth of one percent of the average annual netassets of the Fund during the year ended June 30, 2006 payable to the SECP underrule 79 of the NBFC Rules.

UTP-Islamic Fund33


12. AUDITORS' REMUNERATION

Audit fee 175,000 175,000 Other certifications 236,741 166,050 Out of pocket expenses 15,000 15,000

426,741 356,050

13. TAXATION

No provision for taxation has been made in the financial statements in view of theexemption under clause 99 of the Part I of the 2nd Schedule of the Income Tax Ordinance,2001 subject to the condition that not less than 90% of its income excluding realised andunrealised capital gains for the year is distributed among unit holders.

14. TRANSACTIONS WITH RELATED PARTIES

Related parties include JS ABAMCO Limited (Formerly ABAMCO Limited) being theManagement Company, Jahangir Siddiqui & Company Limited being the holdingcompany of the Management Company, Jahangir Siddiqui Capital Markets Limited andJahangir Siddiqui Investment Bank Limited being subsidiaries of the holding company ofthe Management Company and ABAMCO Composite Fund, BSJS Balanced Fund Limited,Unit Trust of Pakistan, UTP - Income Fund, UTP - Aggressive Asset Allocation Fund, UTPFund of Funds, UTP A 30 + Fund and UTP Growth Fund being funds under commonmanagement.

Transactions with related parties are carried out in the normal course of business, atcontracted rates and terms determined in accordance with market rates. The amountdisclosed represents the amount of brokerage paid to related parties and not the purchaseor sale value of securities transacted through them. The purchase or sale value have notbeen treated as transactions with related parties as ultimate counter-parties are notrelated.


JS ABAMCO Limited (Formerly ABAMCO Limited)

Remuneration to management company 22,942,659 24,644,774 Sales load 1,301,378 3,754,775

Jahangir Siddiqui & Company Limited

Issue of units - 182,315 Redemption of units - 1,647,150 Sales load - 663

Jahangir Siddiqui Capital Markets Limited

Brokerage fee 1,071,489 748,676



Jahangir Siddiqui Investment Bank LimitedIssue of units - 700,449,351 Redemption of units 281,547,465 424,228,944 Stock dividend 22,255,145 -

ABAMCO Growth Fund

Dividend - 8,605,990

ABAMCO Capital Fund

Dividend - 20,035,761

ABAMCO Stock Market Fund

Dividend - 3,630,602

UTP Growth Fund

Dividend 11,629,937 -

UTP Fund of Funds

Issue of units 37,000,000 - Redemption of units 17,521,766 -

BSJS Balanced Fund Limited

Issue of units 50,000,000 - Redemption of units 50,125,615 -

UTP-Islamic Fund35


(Restated)15. STATEMENT OF OPERATIONS

(In accordance with AAOIFI Standard 14)

INCOME

Income from investments, sales and financing

Return on bank balances 8,396,148 3,875,947 Dividend income 29,728,287 46,629,477

38,124,435 50,505,424EXPENSES

Remuneration of management company 22,942,659 24,644,774 Remuneration of trustee 1,529,697 3,853,661 Remuneration of shariah advisory council 380,000 338,000 SECP annual fee 765,001 818,338 Bank and settlement charges 235,577 816,726 Auditors' remuneration 426,741 356,050 Listing fee 16,666 25,000 Legal charges 85,488 - Mutual fund rating fee 100,000 - MUFAP subscription fee 11,727 9,151 Securities transaction costs 7,243,247 5,685,730

33,736,803 36,547,430 Net income from investments and sales 4,387,632 13,957,994

Realised and unrealised gains from investments

Net realised gains from investments 297,049,396 174,114,313 Unrealised diminution in value of investments (95,112,862) (125,970,890)Element of income and capital gains in prices of units soldless those in units redeemed 9,534,299 (23,252,203)

211,470,833 24,891,220 Net income from investments and sales / increasein net assets from operations 215,858,465 38,849,214

16. PROHIBITED INCOME IN THE DISTRIBUTED INCOME

16.1 According to the instructions of the Shariah Advisory Council, if any income isearned by the Fund from investments whereby a portion of income of such investeeshas been derived from prohibited sources, such proportion of income of the Fundshould be donated for charitable purposes either:

1. directly by the Fund if the unit holders have permitted the Fund in this respect; or

2. by the unit holders if they have not given such permission to the Fund. In suchcase, the management should intimate the unit holders about the portion ofsuch prohibited income in the income distributed by the Fund.



Earnings prohibited by Shariah included 2,042,694 1,211,469 in the total income of the Fund

Per unit proportion of the income - 1.85 0.811,104,791units (2005: 1,499,682 units)

Amount to be transferred to charity Fund 57,357 units (2005: 58,004 units) where the unit holders have given permission for donation of theprohibited income by the Fund 106,111 46,983

16.2 The Fund has made certain investments in various mutual funds as disclosed in note6.1 to the financial statements. The Shariah Advisory Council of the fund hadapproved investment in such funds subject to the condition that any prohibitedincome arising out of these funds should be purified. Due to the practical constraintsin determination of actual amount of such income arising from these funds withreasonable accuracy, the same has been calculated on estimated basis.

16.3 The portion of prohibited income for which the Management Company wasauthorized to pay into charity for the year ended June 30, 2005 has been paid toSindh Institute of Urology and Transplantation, Al-Shifa Eye Trust Hospital,Shaukat Khanum Memorial Cancer Hospital and Research Centre and KidneyCentre with due approval of Shariah Advisory Council.

17. FINANCIAL RISK MANAGEMENT POLICIES

17.1 Market risk

Market risk is the risk that the value of financial instruments may fluctuate as aresult of changes in market price of securities due to change in market sentiments,speculative activities, supply and demand of securities and liquidity in the market.

The Management Company manages market risk by monitoring exposure onmarketable securities by following the internal guidelines of the InvestmentCommittee and regulations laid down by the Securities and Exchange Commissionof Pakistan.

17.2 Liquidity risk

Liquidity risk is the risk that an enterprise will encounter difficulty in raising fundsto meet commitments associated with financial instruments. The managementcompany manages liquidity risk by following internal guidelines of the InvestmentsCommittee such as monitoring maturities of financial assets and financial liabilitiesand investing in highly liquid financial assets.

The Fund is not materially exposed to liquidity risk as all obligations /commitments of the Fund are short term in nature and all assets of the fund arereadily disposable on the stock exchanges.

UTP-Islamic Fund37

17.3 Credit risk and concentration of credit risk

Credit risk represents the accounting loss relating to financial assets that would berecognised if the counter party failed completely to perform as contracted. The Fundis not exposed to major concentration of credit risk. The Management Companymanages its exposure to credit risk through settlement of its transactions on adelivery versus payment basis.

17.4 Market rate of return (MROR) risk

MROR risk is the risk that the value of a financial instrument will fluctuate due tochanges in the market interest rates. The Fund is not exposed to any major MRORrisk as it makes investments in equity securities except for bank balances maintainedin savings accounts.

18. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the amount for which an asset could be exchanged, or a liability settled,between knowledgeable willing parties in an arm's length transaction. Consequentlydifferences can arise between carrying values and the fair value estimates.

Underlying the definition of fair value is the presumption that the fund is a going concernwithout any intention or requirement to curtail materially the scale of its operations or toundertake a transaction on adverse terms.

Financial assets which are tradable in an open market are revalued at the market pricesprevailing on the balance sheet date. The estimated fair value of all other financial assetsand liabilities is considered not significantly different from book value as the items areshort term in nature.

19. PROPOSED DISTRIBUTION OF BONUS UNITS

The Board of Directors have proposed distribution of bonus units @ Rs. 187.5 per unit,amounting to Rs. 207,148,312 for the year ended June 30, 2006 at their meeting held onJuly 8, 2006.

20. CORRESPONDING FIGURES

Securities transaction cost has been separately shown in Income Statement. Previously itwas included in the cost of investment, both in net gain from transactions in held fortrading securities and unrealised diminution in the value of investments.


21. DATE OF AUTHORIZATION FOR ISSUE

These financial statements were authorized for issue by the Board of Directors ofManagement Company on July 15, 2006.

22. GENERAL

Figures have been rounded off to the nearest rupee.



UTP-Islamic Fund39

BRANCH NETWORK OF THE MANAGEMENT COMPANY

JS ABAMCO Head Office7th Floor, The Forum,G-20Khayaban-e-Jami, Block-9, CliftonKarachi-75600Tel: (92-21) 111-222-626Fax: (92-21) 5361724

JS ABAMCO (Shahra - e -Faisal branch)Shop No. 8, Ground Floor,Plot No 26-A, Block 6,Business Avenue, PECHS, Main Shahra - e -Faisal, Karachi - 75350Ph: 021-4322094-96Fax: 021-4322093

JS ABAMCO LahoreGround Floor, 307-Upper Mall, Lahore - 54000UAN: 042-111-222-626Fax: 042-5789108

JS ABAMCO IslamabadShop No 6&7, Razia Sharif Plaza,Blue Area, Islamabad - 44000Ph: 051-2802095-96Fax: 051-2802094

JS ABAMCO HyderabadProperty No 97, Ground Floor,Saddar, Hydrabad Cantonment, Hyderabad - 71000Ph: 022-2720250, 2720077, 2720010Fax: 022-2720581

JS ABAMCO Gujranwala40, Trust Plaza, GT. Road, Gujranwala - 52250Ph: 055-3252953Fax: 055-3253373

JS ABAMCO Sialkot27th Paris Road,Sialkot - 53100Ph: 052-4298501-02Fax: 052-4298503

Documents

UTP-Islamic Fund - JS Investmentsjsil.com/downloads/reports/2006/annual_islamic_funds.pdf · 3 UTP-Islamic Fund DIRECTORS REPORT TO THE UNIT HOLDERS 1. Market Outlook The KSE 100