| First Habib Modaraba |
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| Annual Report 2002 |
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| CONTENTS |
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| CORPORATE
INFORMATION |
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| DIRECTORS' REPORT |
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| STATEMENT
OF COMPLIANCE |
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| AUDITORS' REPORT |
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| BALANCE SHEET |
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| PROFIT
AND LOSS ACCOUNT |
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| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
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| STATEMENT
OF CHANGES IN EQUITY |
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| NOTES
TO THE ACCOUNTS |
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| PATTERN
OF CERTIFICATE HOLDINGS |
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| CORPORATE
INFORMATION |
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| BOARD
OF DIRECTORS |
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| Mr.
Wazir Husain Jafree - Chairman & Chief Executive |
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| Mr.
Muhammad Shoaib |
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| Mr. Abbas Ali Muhammad |
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| Mr. Sheikh Ehsanuddin |
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| Mr. Dara F. Mirza |
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| AUDITORS |
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| Ford, Rhodes, Robson, Morrow |
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| Chartered Accountants |
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| LEGAL ADVISOR |
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| Mohsin
Tayebaly & Company |
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| AUDIT COMMITTEE |
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| Mr. Sheikh Ehsanuddin - Chairman |
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| Mr. Abbas Ali Muhammad - Member |
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| Mr.
Dara F. Mirza - Member |
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| BANKERS |
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| Askari Commercial Bank Limited |
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| Bank AL Habib Limited |
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| Faysal
Bank Limited |
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| Habib
Bank AG Zurich |
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| Habib
Bank Limited |
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| Metropolitan Bank Limited |
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| Muslim Commercial Bank Limited |
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| PICIC Commercial Bank Limited |
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| Soneri
Bank Limited |
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| Union Bank Limited |
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| REGISTERED OFFICE |
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| 5th Floor, Hirani Centre, |
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| 1. I. Chundrigar Road, |
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| Karachi. |
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| REGISTRAR |
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| Noble Computer Services (Pvt)
Limited |
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| 14-Banglore Town Housing
Society, |
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| Shahrah-e-Faisal, |
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| Karachi. |
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| REPORT OF THE DIRECTORS FOR
THE YEAR |
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| ENDED JUNE 30, 2002 |
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| The
Board of Directors of the Management Company are pleased to present audited
accounts for the year ended |
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| 30th June,2002. |
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| FINANCIAL RESULTS |
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(Rupees in '000) |
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Year ended |
Year ended |
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June 30, |
June 30, |
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2002 |
2001 |
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| Total Operating Income |
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567,045 |
413,608 |
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| Total
Operating Expenses |
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494,760 |
337,490 |
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72,285 |
76,118 |
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| Less:
Modaraba Co.'s Management Fee |
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7,228 |
7,612 |
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| Profit for the year |
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65,057 |
68,506 |
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| Add:
Unappropriated profit B/F |
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3,458 |
8,502 |
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| Profit
available for appropriation |
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68,515 |
77,008 |
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| APPROPRIATIONS |
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| Cash
dividend @ 20% (Rs. 1.00 per Certificate of Rs. 5/- each) |
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50,400 |
56,700 |
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| (2001
cash dividend @ 22.50% i.e. Rs. 1.125 per Certificate of Rs. 5/-each) |
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| Transfer
to statutory reserve @ 20% of the profit (2001 @ 10%) |
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13,011 |
6,850 |
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| Transfer
to General Reserve |
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10,000 |
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| Un-appropriated
profit C/F |
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5,104 |
3,458 |
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68,515 |
77,008 |
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| PROFIT
DISTRIBUTION |
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| The
Directors are pleased to declare 20% cash dividend i.e. Rs.1.00 per |
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| certificate of Rs. 5/-each. |
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| ECONOMIC REVIEW |
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| The
Fiscal year 2001-2002 has been most difficult and challenging year |
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| for
the world economy in general and Pakistan economy in particular. The |
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| event
of 11th September jolted economies around the world including |
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| Pakistan. |
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| The
first half of the year was extraordinarily difficult one for Pakistan.
Our |
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| country
faced number of unforeseen shocks. The terrorist attack of |
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| September
11 and its aftermath, massive deployment of armed forces by |
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| Indian
Government on Pakistan borders and continuation of drought |
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| conditions
adversely effected the pace of economic recovery of the country. |
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| The
economy has been experiencing imbalances. |
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| Pakistan's
stance to side with world coalition in the war against terrorism |
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| Mas
indeed the right choice and thereafter world began respecting Pakistan. |
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| The
Government of Pakistan (GOP) has successfully rescheduled its |
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| foreign
debt at much lesser rate of interest. Foreign Exchange Reserves |
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| nave
remarkably risen and reached its highest ever recorded in the country's |
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| -listory.
Inward foreign remittances have increased and value of Pak Rupee |
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| nas
also appreciated. Due to successful monetary and fiscal policies of |
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| sresent
Government, the economic creditability of the country has been |
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| snhanced in the world. |
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| REVIEW
OF OPERATIONS |
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| Even
under this continuing mixture of financial constraints and opportunities |
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| 3n
macro level, the performance of your Modaraba has remained reasonably |
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| food
during the year. Your Modaraba has been able to maintain its growth |
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| nomentum.
The new leases amounting to Rs. 651.0 million were written |
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| is
compared to last year of Rs. 595.0 million. Business of Modaraba |
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| Mhamdolillah,
has been maintained inspite of intense competition with other |
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| narket
players. The gross lease rentals have increased to Rs. 562.0 million |
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| rom
Rs. 409.0 million and consistency in profitability has also been |
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| naintained. |
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| |
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| rour
Modaraba has always followed the strategy of careful and rational |
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| ending
approach. By applying prudent and judicious credit policies, the |
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| ecovery
ratio of your Modaraba has always remained excellent with no |
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| iefault since inception. |
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| |
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| ^s
we stated in our last report that continuous shrinkage of margin and |
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| ;ut-throat
competition in reducing lease rates remained main problem for |
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| |
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| leasing
sector. It is further intensifying with increasing number of |
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| commercial
and investment banks coming in leasing business. |
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| |
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| However,
as our corporate strategy, the selective marketing approach |
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| always
remained focal point of our growth plans. Our assets portfolio |
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| remained
well diversified in carefully selected Sectors. We have |
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| successfully
penetrated in key markets through prudent lending approach. |
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| Considerable
importance is also given to improve the ability to identify, |
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| measure
and monitor the risk being undertaken by Modaraba. |
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| Despite
continued tough competition and recessionary economic |
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| condition,
our efforts are always to go an extra mile in providing excellent |
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| services
to our customers and better return to our stakeholders. |
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| By
the grace of Allah, for the last three consecutive years we have been |
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| honoured
with "Excellence Award" by Modaraba Association on good profit |
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| distribution.
This achievement undoubtedly is the result of our effective |
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| Management
and sincere efforts. This acknowledgement serves as great |
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| source
of encouragement and appreciation at one hand and inspires us |
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| to
perform even better, on the other. |
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| FUTURE OUTLOOK |
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| The
emerging global trends and developments in the Services Sector will |
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| create
new opportunities and challenges in overall corporate business. Key |
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| determinant
of economic directions of the Government is expected to |
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| remain
on restoration of investor's confidence, poverty reduction, increase |
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| in
long-term growth and debt sustainability. |
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| Any
uncertainty from the forth-coming political events may subdue |
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| economic
activity. The political risk remains the single largest unmitigated |
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| risk
factor. Any political unrest could serve to divert attention from the |
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| reform
agenda and undermine the government's efforts to restore investors' |
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| confidence.
At the same time, intense competition for the available |
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| business
is going to put more pressure on business growth, margin and |
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| profits. |
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| Deregulation
and Privatization are key issues of the present government. |
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| Lot
of work has been done on it. The process of privatization in power |
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| sector
utilities, oil & gas and state owned banks are high on the agenda. |
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| Furthermore,
the reform agenda pursued by Securities & Exchange |
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| Commission
of Pakistan, (SECP) since last two years, have led to |
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| significant
up-gradation and image building in the management of the Stock |
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| Exchanges
of the country. The improvement in the management of listed |
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| companies
with a view to make them conscious of their obligation is |
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| necessary
to build investors' confidence. The steps being taken by SECP |
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| would
encourage both domestic and overseas investors and help economy |
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| to
move ahead in the line with global trends and will evolve better culture |
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| of
corporate governance. |
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| We
are fully abreast with forthcoming changes. We will strive to undertake |
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| all
efforts to tap new business opportunities and avenues to move towards |
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| introducing
innovative method of financing and resource mobilization within |
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| the
concept of Modaraba operation. The Modaraba Association of Pakistan |
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| is
actively engaged in development of Musharaka Term Finance Certificate |
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| (MTFC).
Once it is approved this will give support for resource mobilization |
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| on
long-term basis and would also attract investment from overseas |
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| Pakistanis
and other Islamic countries. We hope that SECP would give |
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| their
due consideration for early approval of the above instrument. |
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| Your
management is confident to maintain growth tempo in coming years |
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| and
give best return to our certificate-holders through operational
efficiency, |
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| innovating
new financial products based on Sharia, enhancing marketing |
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| skills
and motivating workforce of the Modaraba. We are committed to |
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| create
value for our certificate holders, provide efficent and quality service |
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| to
our clients and promote sound business practices. |
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| CREDIT RATING |
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| As
you are aware that your Modaraba is well positioned in financial sector. |
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| Due
to its sound and strong financial position M/s. Pakistan Credit Rating |
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| Agency
(Pvt.) Limited, (PACRA) has again maintained rating of A3 of First |
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| Habib
Modaraba (FHM). The rating denotes an outstanding financial |
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| condition
with consistent record of above average performance. As per |
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| PACRA's
assessment FHM is one of only two Modarabas that has been |
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| placed
in "A" category rating. This is the highest rating band in
PACRA's |
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| rating
scale for Modarabas. |
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| While
assigning the rating PACRA has recognized the consistent |
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| performance
trends and continued outstanding asset quality, which is an |
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| outcome
of prudent credit policies and effective post disbursement ' |
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| monitoring.
Going forward, the asset quality and sound financial health of , |
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Modaraba is expected to be sustained considering the highly j |
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| competent
Management team of FHM. l |
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| HUMAN
RESOURCES POLICIES |
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| Human
Resources development and training is an ongoing and essential |
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| ingredient
of corporate policy. We follow future oriented strategy focusing |
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| on
employees personal and professional growth. From time to time all |
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| senior
and junior staff members are attending different seminars and |
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| i/vorkshops
so that they can be groomed for great responsibility with |
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| analytical,
interpersonal, specialized skills to enable them to understand |
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| the
cause-and-effect relationship and to think logically. |
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| We
lay greater emphasis on employee honesty, integrity besides |
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| professional
competency and we believe that intellectual team member |
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| leads
to 'Good Governance". |
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| CODE
OF CORPORATE GOVERNANCE |
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| We
are pleased to report that our Modaraba being managed by Habib |
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| Modaraba
Management (Private) Limited as a private limited company has |
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| taken
necessary steps to comply with provision of Code of Corporate |
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| Governance
in its material respect as incorporated in the Listing Rules of |
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| the Stock Exchanges. |
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| In
conformity with the requirement under the code of corporate governance, |
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| the
Board of Directors states that: |
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| • The financial statement prepared by the
management present fairly |
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| the
state of affairs of the Modaraba including the results of its |
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| operations,
Cash Flow and Changes in Equity. |
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| • Proper books of accounts have been
maintained. |
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| • Appropriate Accounting policies have been
consistently applied in |
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| preparation
of financial statements and accounting estimates are |
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| based
on reasonable and prudent judgement. |
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| • International Accounting Standards, (IAS)
as applicable in Pakistan |
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| have
been followed in its letter and spirit while preparing financial |
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| statements
and any departure therefrom has been adequately |
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| disclosed. |
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| |
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| • The system of internal control is sound in
design and has been |
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| effectively
implemented and monitored. |
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| • The Modaraba is financially sound and has
the ability to continue as |
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| a going concern. |
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| • There is no material departure from the
best practices of corporate |
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| governance. |
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| • The directors do not hold any interest in
the certificates of Modaraba |
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| other
than that has already been disclosed in the pattern of certificate |
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| holding. |
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| PROVIDENT FUND |
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| The
value of investment of provident fund based on audited accounts as |
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| at
December 31, 2001 is Rs. 2.827 million. |
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| ATTENDENCE
OF BOARD MEETINGS |
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| Five
Meetings of Board of Directors were held during the year. Attendance |
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| by
each director is appended hereunder: |
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| Name of Directors |
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Number of meetings |
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attended |
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| Mr. Wazir Husain Jafree |
5 |
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| Mr. Muhammad Shoaib |
5 |
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| Mr. Shahanshah H. Rizvi |
1 |
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| Mr. Sheikh Ehsanuddin |
5 |
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| Mr. F.H. Mukhi |
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2 |
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| Mr. Dara F. Mirza |
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4 |
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| Mr. Abbas Ali Muhammad |
5 |
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| CHANGE
IN BOARD OF DIRECTORS |
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| Since
the last report, there has been change in the Board. Mr. F.H. Mukhi |
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| and
Mr. Shahanshah S. Rizvi have retired. The Board takes this |
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| opportunity
to thank the outgoing directors and wishes to record its |
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| appreciation
for the valuable services rendered by them. |
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| MJDIT COMMITTEE |
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| |
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| fhe
Board of Directors has established an audit committee comprising |
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| ollowing; |
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| Mr. Sheikh Ehsanuddin Chairman |
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| Mr. Abbas Ali Muhammad Member |
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| Mr.
Dara F. Mirza Member |
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| AUDITORS |
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| 'he
retiring auditors M/s. Ford, Rhodes, Robson, Morrow, Chartered |
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| accountants,
have consented to their reappointment for the year ending |
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| tOth
June 2003. The Directors have confirmed their appointment subject |
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| 3
required official approval. |
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| ACKNOWLEDGMENT |
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| \/e
would like to thank our valued customers for their continued patronage |
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| nd
support, hardworking employees, capable senior management and |
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| ooperation
from banks and financial institutions. |
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| |
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| he
guidance and cooperation of Registrar of Modaraba, Securities & |
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| xchange
Commission of Pakistan (SECP) are acknowledge with thanks. |
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| |
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| For
and on behalf of Board of Directors |
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| Wazir Husain Jafree |
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| arachi:
September 21, 2002 Chairman
& Chief Executive |
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| KEY FINANCIAL AND OPERATING
DATA |
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| SIX
YEARS AT A GLANCE |
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(Rupees in million |
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| |
2002 |
2001 |
2000 |
1999 |
1998 |
1997 |
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| |
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| Total Assets |
1,260 |
1,005 |
687 |
599 |
554 |
477 |
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| Assets Leased Out |
1,116 |
911 |
635 |
565 |
527 |
456 |
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| Gross Lease Disbursement |
651 |
595 |
362 |
303 |
294 |
337 |
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| Current assets |
140 |
89 |
47 |
34 |
26 |
19 |
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| Current Liabilities |
608 |
556 |
274 |
211 |
179 |
141 |
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| Total Liabilities |
786 |
636 |
330 |
254 |
223 |
175 |
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| Paid Up capital |
252 |
252 |
252 |
252 |
252 |
252 |
|
| Reserves |
171 |
117 |
105 |
90 |
77 |
47 |
|
| Certificate Holder's Equity |
423 |
369 |
357 |
345 |
331 |
301 |
|
| Gross Revenue |
567 |
412 |
366 |
352 |
303 |
232 |
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| Profit after tax |
65 |
69 |
68 |
65 |
48 |
43 |
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| Earning per Certificate-Rs. |
1 |
1 |
1 |
1 |
1 |
1 |
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| |
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| REVIEW
REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE |
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| WITH
BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE |
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| |
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| We
have reviewed the Statement of Compliance with the best practices contained
in the Code of Corporate |
|
| Governance
prepared by the Board of Directors of the management company [Habib Modaraba
Management |
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| (Pvt.)
Limited] of First Habib Modaraba to comply with the Listing Regulation No. 37
of the Karachi Stock Exchange |
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| (Guarantee)
Limited, Chapter XIII of the Lahore Stock Exchange (Guarantee) Limited and
Chapter XI of the |
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| Islamabad
Stock Exchange (Guarantee) Limited where the modaraba is listed. |
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| |
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| The
responsibility for compliance with the Code of Corporate Governance is that
of the Board of Directors of |
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| the
management company of the modaraba. Our responsibility is to review, to the
extent where such compliance |
|
