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| First
Habib Bank Modaraba |
|
| ANNUAL
REPORT 1996 |
|
|
| CONTENTS |
|
Page No. |
|
| Board of Directors |
|
2 |
|
| Directors
Report |
|
3 |
|
| Auditors
Report |
|
5 |
|
| Balance
Sheet |
|
6 |
|
| Profit
and Loss Account |
|
8 |
|
| Statement
of Changes in Financial Position |
9 |
|
| Notes
to the Accounts |
|
10 |
|
| Pattern
of Certificate Holding |
|
16 |
|
|
| Modaraba
Information |
|
|
| Directors
of Modaraba Company |
|
|
| SHUJA-UL-HASAN |
|
| Chairman |
|
|
| YASIN
DOST MUHAMMAD |
|
| Director |
|
|
| ANWAR SAMAD |
|
| Director |
|
|
| MIAN
ABDUS SALAM |
|
| Chief
Executive |
|
|
| AUDITORS
OF MODARABA |
|
| M/S.
FORD, RHODES, ROBSON, MORROW |
|
| Chartered
Accountants |
|
|
| BANKERS |
|
| Habib
Bank Limited |
|
|
| LEGAL
ADVISORS |
|
| Orr
Dignam & Co. |
|
|
| REGISTERED
OFFICE |
|
| 18-Habib
Bank Plaza, |
|
| I.I.
Chundrigar Road, |
|
| Karachi-75650 |
|
|
| SHARES
REGISTRARS |
|
| M/s.
T.H.K. Associates (Pvt.) Limited |
|
| Ground
Floor, |
|
| Shaikh
Sultan Trust Building No. 2. |
|
| Beaumont
Road, |
|
| Karachi-75530. |
|
|
| 5th
Annual Report of the Directors |
|
|
| CHAIRMAN'S
REVIEW |
|
| On
behalf of the Board of Directors of Habib Bank Financial Services (Pvt.)
Limited (HBFSL), I take |
|
| pleasure
in presenting 5th Annual Report of First Habib Bank Modaraba (FHBM) together
with the Audited |
| Accounts
for the period ended June 1996. Pursuant to an amendment in the Income Tax
Ordinance 1979, |
|
| all
the business entities are required to adopt financial year as their
accounting year. Corporate Law |
| Authority,
Islamabad, has very kindly acceded to our request to change the accounting
year of FHBM from |
| January
- December to July - June and to prepare current accounts of FHBM for
18-months period from |
|
| 01-01-1995
to 30-06-96. |
|
|
| Accordingly,
the accounts under review have been prepared in the light of the above
permission. FHBM's |
| next
accounting year shall now start from July 01-1996 and end on 30th 'June 1997,
and so on so forth. |
|
| 1.
FINANCIAL RESULTS |
|
| Financial
results of your Modaraba for the period ended June 30,1996 are summarized as
under:- |
|
|
|
Period ended |
Year ended |
|
|
June 30,1996 |
Dec. 31,1994 |
|
|
(18-Months) |
(12-Months) |
|
|
Rupees |
Rupees |
|
|
| Profit
for the period. |
|
126,736,206 |
4,389,251 |
|
| Modaraba
Company's Management Fee |
|
11,521,473 |
835,537 |
|
|
------------ |
------------ |
|
| Profit
before taxation |
|
115,214,733 |
83,553,714 |
|
| Provision
for taxation - Current |
|
12,601,243 |
11,260,245 |
|
|
------------ |
------------ |
|
| Profit
after taxation |
|
102,613,490 |
72,293,469 |
|
| Unappropriated
profit B/F |
|
65,429 |
1,791,454 |
|
|
------------ |
------------ |
|
| Available
for appropriation |
|
102,678,919 |
74,084,923 |
|
|
============ |
============ |
|
|
| Appropriations |
|
| Transfer
to statutory reserve |
|
20,522,698 |
14,458,694 |
|
| Proposed
dividend @ 20% (1994:15%) |
|
79,414,400 |
59,560,800 |
|
|
------------ |
------------ |
|
|
99,937,098 |
74,019,494 |
|
|
|
|
|
------------ |
------------ |
|
| Balance
carried forward |
|
2,741,821 |
65,429 |
|
|
============ |
============ |
|
|
|
|
| 2.
CASH DIVIDEND |
|
| After
accounting for provision for income tax @ 12.5% on pretax profit and 20%
Statutory Reserve on after |
| tax
profit, the Board of Directors is pleased to declare Cash Dividend @ 20% to
the Certificate Holders for |
| the
period ended on 30-06-1996 |
|
|
| 3.
CREATION OF STATUTORY RESERVE |
|
| Under
the mandatory requirement of SBP, your modaraba has this year transferred to
Statutory Reserve an |
| amount
equal to 20% of after tax profit amounting to Rs. 20,522,698/- thereby
increasing the total Reserve |
| to
Rs. 34,981,392/-. This has given further stability to your modaraba, as there
is no change in the paid-up |
| capital
during the period under review. |
|
|
| 4.
MODARABA MANAGEMENT COMPANY FEE |
|
| Due
to satisfactory results of the Modaraba, the managers of FHBM have decided to
revert back to 10% |
|
| management
fee for the current period as compared to 1% for the period ended on
31-12-1994. Accordingly, |
| a
management fee amounting to Rs. 11,521,473/- has been paid to HBFSL as
against Rs. 835,537/-i.e. 1% |
| in 1994. |
|
|
| 5.
OPERATING RESULTS |
|
| The
operating income of FHBM (which is totally derived through Islamic Modes of
Financing), has increased |
| from
Rs. 104.453 Million to Rs. 187.479 Million, recording an increase of Rs.
83.026 million or 79.49%. Net |
| profit
for the period has increased from Rs. 83.554 million to Rs. 115.215 million
rec6rding a net increase |
| of
Rs. 31.661 million or 37.89%. The profit has been earned on the original
paid-up fund and the capitalized |
| profit
of previous years. |
|
|
| Your
Modaraba's Strategy has been to gradually switch over from Morabahas to Lease
Financing thereby |
|
| ensuring
better rate of return to certificate holders. Accordingly, you will notice
that Leasing Assets have |
| increased
from Rs. 132.499 million in 1994 to Rs. 311.661 million by the end of June
1996. This means a |
| net
increase of Rs. 179.162 million or 135.22%. |
|
|
| 6.
BOARD OF DIRECTORS |
|
| During
the period under review Mr. Muhammad Younus Dalia ceased to be the Director
of Modaraba. Mr. |
|
| Kamal
Khan has retired from the services of Habib Bank Limited. The Board likes to
place on record its |
| appreciation
for the services rendered by these directors during the tenure of Modaraba
Directorship. |
|
| Subsequently,
the Board of Directors has been reconstituted as under:- |
|
|
| Mr.
Shuja-uI-Hassan. |
|
Chairman |
|
| Mr.
Yasin Dost Muhammad |
|
Director |
|
| Mr.
Anwar Samad |
|
Director |
|
| Mr.
Mian Abdus Salam |
|
Director/Chief Executive |
|
|
| 7.
FUTURE PROSPECTS |
|
| Likewise
previous years, your Modaraba's operations during the year under review
remained restricted to |
| the
extent of its equity. However, our intensified efforts to develope our
Leasing Portfolio resulted in an |
| increase
of 111% in the Net Investment in Leases during the period Linder review. The
emphasis being on |
| sectoral
risk diversification, the major portion of increase in Leasing Portfolio
during the period accounted |
| for
the power sector. |
|
|
| Your
Modaraba's program to float Musharika Certificates was delayed owing to
Market conditions and |
|
| certain
other uncontrollable factors. We are, however, confident that this year Insha
Allah we will float the |
| scheme
and your Modaraba will enter a new phase of growth and expansion. |
|
|
| The
overall state of economy and over regulation of newly emergent Modaraba
Sector are undisputed |
|
| reasons
to have caused the downslide of Modarabas. The levy of Corporate tax has
attracted tremendous |
| criticism
from Modaraba Managers in the recent years. Any scaling-down of the pressure
resulting from |
| fiscal
measures, however, does not seem to be in the offing. Nevertheless the
expectation of a turnaround |
| can
never be ruled out. It is the prudence of Modaraba managers that is going to
play a vital role in |
| sustaining
Modarabas through these difficult times. |
|
|
| The
management of your Modaraba assures you that it recognises its responsibility
towards the investors |
| and
fully complies with Prudential and other Regulations set for NBFIs by the
controlling authorities. |
|
| 8.
ACKNOWLEDGEMENTS |
|
| The
Board wishes to place on record its appreciation for having enjoyed the
support and confidence of |
| Modaraba
Certificate Holders. We extend our gratitude to the Corporate Law Authority,
Registrar of Modaraba |
| &
State Bank of Pakistan, NBFIs Supervision & Control Department for the
guidance provided by them |
|
| from
time to time. Finally a word of appreciation for the efforts and hard work of
Modaraba Staff for |
| achieving
satisfactory results. |
|
|
| AUDITORS |
|
| The
present auditors M/s. Ford, Rhodes, Robson, Morrow, Chartered Accountants are
due for retirement |
|
| and
being eligible have offered themselves for re-appointment. |
|
|
| The
Board has approved their re-appointment for the period July 1996 to June
1997. |
|
|
| On
behalf of the Board |
|
| Shuja
ul Hasan |
|
| Chairman |
|
|
| Auditors' Report to the
Certificate Holders |
|
|
| We
have audited the annexed balance sheet as at June 30, 1996 and the related
profit and loss account |
| and
statement of changes in financial position together with the notes to the
accounts for the period ended |
| June
30, 1996 of First Habib Bank Modaraba which are modaraba company's (Habib
Bank Financial |
|
| Services
(Private) Limited) representation and we state that we have obtained all the
information and |
| explanations
which we required and, after due verification thereof, we report that: |
|
|
| (a)
in our opinion proper books of account have been kept by the Modaraba Company
in respect of First |
| Habib Bank Modaraba as required by the
Modaraba Companies and Modarabas (Floatation and Control) |
|
| Ordinance, 1980, and Modaraba Companies and
Modaraba Rules, 1981; |
|
|
| (b)
in our opinion, the balance sheet and the profit and loss account have been
drawn up in conformity |
| with the Modaraba companies and Modarabas
(floatation and Control) Ordinance, 1980, and Modaraba |
|
| Companies and Modarabas Rules, 1981 and are
further in accordance with accounting policies |
|
| consistently applied; |
|
|
| (c)
in our opinion and to the best of our information and according to the
explanations given to us; |
|
|
| (
i ) the balance sheet and the related profit and loss account and statement
of changes in financial |
| position,
which are in agreement with the books of account, exhibit respectively a true
and fair |
|
| view
of the state of the Modaraba's affairs as at June 30, 1996 and the profit and
the changes |
|
| in
the financial position for the period ended on that date; |
|
|
| (
ii ) zakat deductible at source, if any, under the Zakat and Ushr Ordinance,
1980, has been deducted |
| by the Modaraba and deposited in the
Central Zakat Fund established under section 7 of that |
|
| Ordinance; and |
|
|
| (
iii ) the business conducted, investments made and expenditure incurred by
the Modaraba are in |
|
| accordance with the objects, terms and
conditions of the Modaraba. |
|
|
| Ford,
Rhodes, Robson, Morrow |
|
| Chartered
Accountants. |
|
|
| Karachi
Dated: Oct. 29, 1996 |
|
|
| Balance
Sheet as at June 30, 1996 |
|
|
|
June 30, |
Dec. 31, |
|
|
|
1996 |
1994 |
|
|
Note |
Rupees |
Rupees |
|
|
| CAPITAL
AND RESERVES |
|
|
| Certificate
capital |
|
|
| Authorised |
|
| 50,000,000
(1994: 50,000,000) Modaraba |
|
| Certificates
of Rs.10/- each |
|
500,000,000 |
500,000,000 |
|
|
=========== |
=========== |
|
|
| Issued,
subscribed and paid-up |
3 |
397,072,000 |
397,072,000 |
|
|
|
|
|
| Reserves |
|
| Capital
reserves |
|
4 |
34,981,392 |
14,458,694 |
|
| Revenue
reserves |
|
| Unappropriated
profit |
|
2,741,821 |
65,429 |
|
|
----------- |
----------- |
|
|
434,795,213 |
411,596,123 |
|
| DEFERRED
LIABILITIES |
|
| Customers'
security deposit |
|
26,382,027 |
8,052,823 |
|
|
|
|
| CURRENT
LIABILITIES |
|
| Musharika
finance |
|
- |
9,955,181 |
|
| Sundry
creditors' accrued and |
|
| other
liabilities |
|
5 |
92,573,826 |
69,498,411 |
|
|
| Taxation |
|
8,205,789 |
11,260,245 |
|
|
----------- |
----------- |
|
|
100,779,615 |
90,713,837 |
|
|
|
----------- |
----------- |
|
|
561,956,855 |
510,362,783 |
|
|
=========== |
=========== |
|
|
|
|
June 30, |
Dec. 31, |
|
|
|
1996 |
1994 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| TANGIBLE
FIXED ASSETS |
|
6 |
|
|
| Assets
given on lease - net cost |
6.1 |
311,661,073 |
132,498,551 |
|
| Less:
Accumulated amortization |
|
79,468,928 |
24,725,955 |
|
|
----------- |
----------- |
|
|
232,192,145 |
107,772,596 |
|
|
| Assets
in own use - cost |
|
1,592,829 |
1,539,029 |
|
| Less:
Accumulated depreciation |
|
1,536,157 |
1,167,846 |
|
|
----------- |
----------- |
|
|
56,672 |
371,183 |
|
|
|
|
| DEFERRED
COSTS |
|
7 |
456,752 |
1,973,022 |
|
| LONG
TERM MORABAHA |
|
8 |
13,333,333 |
- |
|
| LONG
TERM INVESTMENTS |
|
9 |
387,334 |
382,054 |
|
| CURRENT
ASSETS |
|
| Current portion of long term |
|
| Morabaha |
|
8 |
6,666,667 |
- |
|
| Lease
rentals receivable |
|
14,575,615 |
16,934,251 |
|
| Morabaha
finances - Secured |
10 |
201,027,478 |
349,045,426 |
|
| Prepayment
and other receivables |
11 |
10,344,248 |
22,015,870 |
|
| Cash
and bank balances |
|
12 |
82,916,611 |
11,868,381 |
|
|
----------- |
----------- |
|
|
315,530,619- |
399,863,928 |
|
|
|
----------- |
----------- |
|
|
561,956,855 |
510,362,783 |
|
|
=========== |
=========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
| The
auditors' report is annexed hereto. |
|
|
| Profit
and Loss Account |
|
| for
the Period Ended June 30, 1996 |
|
|
|
Period ended |
Year ended |
|
|
June 30, 1996 |
Dec. 31,1994 |
|
|
(18-Months) |
(12-Months) |
|
|
Note |
Rupees |
Rupees |
|
|
| Operating
income |
|
13 |
187,479,382 |
104,453,465 |
|
|
| Operating
cost |
|
14 |
69,027,101 |
22,150,803 |
|
| Financial
charges |
|
15 |
1,799,997 |
1,280,71 8 |
|
|
----------- |
----------- |
|
|
70,827,098 |
23,431,521 |
|
|
|
|
|
----------- |
----------- |
|
|
116,652,284 |
81,021,944 |
|
| Other income |
|
16 |
10,083,922 |
3,367,307 |
|
|
----------- |
----------- |
|
|
126,736,206 |
84,389,251 |
|
| Modaraba
company's management fee |
|
19.1 |
11,521,473 |
835,537 |
|
|
----------- |
----------- |
|
| Profit
before taxation |
|
115,214,733 |
83,553,714 |
|
| Provision
for taxation - Current |
|
12,601,243 |
11,260,245 |
|
|
----------- |
----------- |
|
| Profit
after taxation |
|
102,613,490 |
72,293,469 |
|
| Unappropriated
profit brought forward |
|
65,429 |
1,791,454 |
|
|
----------- |
----------- |
|
| Available
for appropriation |
|
102,678,919 |
74,084,923 |
|
|
|
|
| APPROPRIATIONS |
|
| Transfer
to statutory reserve |
|
20,522,698 |
14,458,694 |
|
| Proposed
dividend @ 20% (1994: 15%) |
|
79,414,400 |
59,560,800 |
|
|
----------- |
----------- |
|
|
99,937,098 |
74,019,494 |
|
|
|
|
|
----------- |
----------- |
|
| Balance
carried forward |
|
2,741,821 |
65,429 |
|
|
======================== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| Statement
of Changes in Financial Position |
|
| (Cash
Flow Statement) |
|
| For
the period ended June 30, 1996 |
|
|
Period ended |
Year ended |
|
|
June 30, 1996 |
Dec. 31,1994 |
|
|
(18-Months) |
(12-Months) |
|
|
Rupees |
Rupees |
|
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
| Net
profit before taxation |
|
115,214,732 |
83,553,714 |
|
| Adjustments
for |
|
| Depreciation
- Leased assets |
|
60,507,102 |
19,076,587 |
|
|
- Own assets |
|
368,311 |
376,878 |
|
| Amortization
of deferred costs |
|
1,51 7,944 |
1,197,436 |
|
| Gain
on disposal of fixed assets - Leased |
|
(11,324) |
(195,448) |
|
| Dividend
income |
|
(39,337) |
(37,132) |
|
| Financial
charges |
|
1,799,997 |
1,280,718 |
|
|
----------- |
----------- |
|
| Cash
generated from operations |
|
179,357,425 |
105,252,753 |
|
| (Increase)
/ (decrease) in trade and other receivables |
141,942,569 |
(80,194,309) |
|
| Increase
/ (decrease) in trade payables |
|
10,551,1 37 |
(6,417,443) |
|
|
----------- |
----------- |
|
|
331,851,131 |
18,641,001 |
|
| Financial
charges paid |
|
(1,799,997) |
(1,280,718) |
|
|
----------- |
----------- |
|
| Net
cash from operating activities |
|
330,051,134 |
17,360,283 |
|
|
|
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
----------- |
----------- |
|
| Purchase
of - Leased assets |
|
(185,713,360) |
(72,117,423) |
|
|
- Own assets |
|
(53,799) |
(11,324) |
|
| Investments
on shares/securities |
|
(5,280) |
(182,096) |
|
| Proceeds
from sale of fixed assets - Leased |
|
798,033 |
1,675,755 |
|
| Dividend
received |
|
39,337 |
37,132 |
|
| Customers'
security deposits |
|
18,329,204 |
3,889,972 |
|
|
----------- |
----------- |
|
| Net
cash used in investing activities |
|
(166,605,865) |
(66,707,984) |
|
|
|
----------- |
----------- |
|
|
163,445,269 |
(49,347,701) |
|
| CASH
FLOWS FROM FINANCING ACTIVETIES |
|
|
| Tax paid |
|
(15,550,062) |
- |
|
| (Payment
of)/proceeds from Muisharika finance |
|
(9,955,181) |
2,880,130 |
|
| Dividend
paid |
|
(66,890,121) |
(181,337) |
|
| Deferred
costs incurred |
|
(1,675) |
(361,152) |
|
|
----------- |
----------- |
|
|
(92,397,039) |
2,337,641 |
|
|
|
|
|
|
----------- |
----------- |
|
| NET
INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS |
|
71,048,230 |
(47,010,060) |
|
| CASH
AND CASH EQUIVALENTS |
|
11,868,381 |
58,878,441 |
|
| AT
BEGINING OF THE PERIOD |
|
|
----------- |
----------- |
|
| CASH
AND CASH EQUIVALENTS AT END OF THE PERIOD |
|
82,916,611 |
11,868,381 |
|
|
======================== |
|
|
| Notes
to the Accounts for the Period Ended June 30, 1996 |
|
|
| 1.
LEGAL STATUS AND NATURE OF BUSINESS |
|
| First
Habib Bank Modaraba is a perpetual, multi-purpose and multi-dimensional
Modaraba formed |
|
| under
the Modaraba Companies and Modarabas (Floatation and Control) Ordinance,
1980, and the |
|
| rules
framed thereunder and is managed by Habib Bank Financial Services (Private)
Limited, a wholly |
|
| owned
subsidiary of Habib Bank limited. The Modaraba is currently engaged in
various modes of |
|
| Islamic
funding and other related business. It is listed on the Karachi, Lahore and
Islamabad Stock |
|
| Exchanges. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
| (a)
Overvaluation policy |
|
| These
accounts have been prepared under the historical cost convention. |
|
|
| (b)
Fixed assets |
|
| (i)
Assets given on lease and amodization |
|
|
| All
lease agreements are accounted for as operating leases. |
|
|
| Leased
assets are stated at net cost to the modaraba less accumulated amortization. |
|
| Amortization
is charged to income applying the annuity method whereby the amortizable |
|
| value
of assets is amortized over the lease period. |
|
|
| (ii)
Assets in own use and depreciation |
|
| These
are stated at cost less accumulated depreciation. Depreciation is charged to
income |
|
| applying
the straight line method whereby the cost of an asset is written-off over its
estimated |
|
| useful
life. Full year's depreciation is charged on additions during the year
whereas no |
|
| depreciation
is charged in the year of disposal. |
|
|
| (c)
Deferred costs |
|
| Expenditure
incurred in connection with the floatation of Modaraba and right bonus issue
are |
|
| being
written-off over a period of five years from the date of incurrence. |
|
|
| (d)
Investment |
|
| These
are stated at cost determined on a moving average basis less any provision
for permanent |
|
| diminution
in market value of investments. |
|
|
| (e)
Revenue recognition |
|
| (i)
Profit from Morabaha transactions are recognised on pro-rata accrual basis,
calculated on |
|
| number of days funds were utilised. |
|
|
| (ii)
Income from management and other services provided by Modaraba are recognised
as income |
|
| on an accrual basis. |
|
|
| (iii)
Return on short term investments and deposits with banks are recognised as
income on |
|
| accrual basis. |
|
|
| (iv)
Lease rentals are recognised as income on a systematic basis over the lease
period without |
|
| considering grace period if any. |
|
|
| (v)
Dividend income is recognised when the right to receive the dividend is
established. |
|
|
| (f) Taxation |
|
|
| Current |
|
| Provision
for current taxation is based on taxable income at the current rates of
taxation after |
|
| taking
in to account tax credits available. |
|
|
| Deferred |
|
| The
company accounts for deferred taxation using the liability method on all
significant timing |
|
| differences.
However, deferred taxation is not provided if it can be established with
reasonable |
|
| probability
that these timing differences will not reverse in the foreseeable future. |
|
|
|
June 30, |
Dec. 31, |
|
|
1996 |
1994 |
|
|
Rupees |
Rupees |
|
| 3.
ISSUED, SUBSCRIBED AND PAID UP CAPITAL |
|
| 30,000,000
Modaraba certificates of |
|
| Rs.10
each fully paid in cash |
|
300,000,000 |
300,000,000 |
|
| 9,707,200
Modaraba certificates of |
|
97,072,000 |
97,072,000 |
|
| Rs.
10 each fully paid bonus certificate |
|
|
------------- |
------------- |
|
|
397,072,000 |
397,072,000 |
|
|
============= |
============= |
|
| 4.
CAPITAL RESERVE |
|
| Statutory
reserve |
|
| Balance
at the begining of the period |
|
14,458,694 |
- |
|
| Add
' Transfer during the period |
|
20,522,698 |
14,458,694 |
|
|
------------- |
------------- |
|
| Balance
at the end of period |
|
34,981,392 |
14,458,694 |
|
|
============= |
============= |
|
| The
statutory reserve represents profits set aside as |
|
| required
under the State Bank of Pakistan rules for |
|
| Non-Banking
Financial Institutions. |
|
|
| 5.
SUNDRY CREDITORS, ACCRUED AND OTHER LIABILITIES |
|
| Sundry
creditors |
|
7,197 |
68,636 |
|
| Management
fee |
|
11,521,473 |
835,537 |
|
| Accrued
expenses |
|
75,719 |
273,991 |
|
| Margin
held against morabaha finances |
|
- |
230,000 |
