| First Allied Bank Modaraba |
|
|
|
|
|
|
|
| Annual
Report 1997 |
|
|
| CONTENTS |
|
| CORPORATE
INFORMATION |
|
| CHAIRMAN'S
REVIEW |
|
| AUDITORS'
REPORT |
|
| BALANCE
SHEET |
|
| PROFIT
& LOSS ACCOUNT |
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| NOTES
TO THE ACCOUNTS |
|
| PATTERN
OF CERTIFICATE HOLDING |
|
| REPORT
FOR THE YEAR ENDED JUNE 30, 1997 |
|
|
| CORPORATE
INFORMATION |
|
| MODARABA
COMPANY |
|
| Allied
Management Services (Private) Limited. |
|
| A
wholly owned subsidiary of |
|
| Allied
Bank of Pakistan Limited. |
|
|
| BOARD
OF DIRECTORS |
|
|
| Mr.
Rashid M. Chaudhry |
|
Chairman |
|
| Syed
Jauhar Husain |
|
Director |
|
| Mr.
M. Salim Shaikh |
|
Director |
|
| Mr.
I. A. Usmani |
|
Director |
|
| Mr. Akhter Ali Khan |
|
Director |
|
| Mr.
Zahoor A. Siddiqui |
|
Director |
|
| Mr.
Tahir Saeed Effendi |
Chief Executive |
|
|
| COMPANY
SECRETARY |
|
| Mr.
Sahnan A. Qazalbash |
|
|
| AUDITORS |
|
| Rahim
lqbal Rafiq & Company |
|
| Chartered
Accountants |
|
|
| Saeed
Karoran Patel & Company |
|
| Chartered
Accountants |
|
|
| BANKERS
TO THE MODARABA |
|
| Allied Bank of Pakistan Limited. |
|
|
| PRINCIPAL
PLACE OF BUSINESS |
|
| 17th Floor, N.I.C.
Building, Abbasi Shaheed Road, |
|
| Off. Sharea Faisal, Karachi. |
|
| Tel:
5670340 - 75678212, 5674024 - 6 |
|
| Fax:
5674023 & 5660136 |
|
| EMAIL: fabm @ biruni.erum.com.pk. |
|
|
| SHARES
REGISTRAR |
|
| Uni
Corporate & Financial Services, |
|
| 4th
Floor, Bank House No.2, |
|
| Habib
Square, M. A. Jinnah Road, Karachi. |
|
| Tel:
2426927 - 2426932 Fax: 2423593 |
|
|
|
| CHAIRMAN'S
REVIEW |
|
| On
behalf of the Board of Directors of Allied Management Services (Private)
Limited, the Managers of First Allied |
|
| Bank
Modaraba, I take pleasure in presenting the 4th Annual Report of First Allied
Bank Modaraba together with |
|
| the
Audited Accounts for the period ended June 30, 1997 duly approved in the
meeting held at Karachi on |
|
| September
24, 1997. |
|
|
| FINANCIAL
RESULTS |
|
| Financial
results for the period ended June 30, 1997 are summarised as under: |
|
|
|
|
|
( Rupees in ooo*s) |
|
|
June, 30 |
June. 30 |
|
|
1997 |
1996 |
|
|
(12 months) |
(18 months)* |
|
|
|
| Net
Profit before Management Fee |
|
74,593 |
99.14 |
|
| Less:
Modaraba Company's Management Fee |
746 |
991 |
|
| Profit
for the year/period |
|
73,847 |
98.14 |
|
| Less:
Provision for Taxation |
|
8,300 |
-- |
|
| Add:
Unappropriated profit brought forward |
364 |
748 |
|
|
--------- |
--------- |
|
|
65,9l1 |
98,892 |
|
|
========== |
========== |
|
| APPROPRIATIONS |
|
|
| Transfer
to Statutory Reserve |
|
13,109 |
19,778 |
|
| Cash
Dividend |
|
52,500 |
78,750 |
|
| Unappropriated
profit carried forward |
302 |
364 |
|
| Earning
per certificate before management fee |
Rs. 2.13 |
Rs. 2.83 |
|
| Dividend
per certificate |
|
Rs. 1.50 |
Rs. 2.25 |
|
|
|
|
| *NOTE: |
|
| In
compliance of Finance Act 1995, the accounting year of Modaraba was changed
from Calendar Year to Financial |
|
| Year
i.e. July - June instead of January - December. However, to synchronize with
the approval of Registrar |
|
| Modaraba,
the accounts were compiled for 18 months i.e. from January 01, 1995 to June
30, 1996. |
|
|
| OPERATIONS |
|
| You
would be pleased to note that despite the adverse business environment and
less than expected performance of |
|
| the
Modaraba Sector, your Modaraba has again shown high growth both in business
and profitability by successfully |
|
| diversifying
its business activities and deploying its resources in various new avenues to
optimize the return to the |
| certificate
holders. |
|
|
| INCREASE IN VOLUME OF BUSINESS: |
|
|
|
( Rupees in ooo's ) |
|
|
As on 30th June |
|
|
1997 |
1996 |
%increase |
|
|
|
|
| Total
Assets |
|
644,043 |
474,024 |
36 |
|
| Leasing. |
|
134,704 |
70,061 |
92 |
|
| Musharika. |
|
248,788 |
163,241 |
52 |
|
| Morabaha. |
|
79,313 |
85,759 |
(8) |
|
| Trading
Stocks. |
|
40,768 |
14,446 |
182 |
|
|
| INCREASE
IN INCOME: |
|
|
( Rupees in ooo's ) |
|
|
Monthly Average |
|
|
1997 |
% Increase |
1996 |
|
|
| Total
Income. |
|
7,995 |
6,675 |
20 |
|
| Income
from Lease Financing. |
2,114 |
563 |
275 |
|
| Income
from Morabaha Financing. |
1,626 |
1,139 |
43 |
|
| Income
from Musharika Financing. |
4,117 |
3,420 |
20 |
|
| Trading
& Other Income. |
648 |
529 |
22 |
|
|
| TAXATION |
|
| The
Tax exemption available to the Modaraba for the first Three Years of its
operation has expired on June 30, |
|
| 1996.
Accordingly, Modaraba has to pay tax from July 01, 1996 for which a provision
of Rs.8.30 Million has been |
|
| made. |
|
|
| CASH
DIVIDEND |
|
| The
management of First Allied Bank Modaraba is committed to pass on maximum
benefits to the certificate holders. |
|
| During
the last three years the Modaraba has distributed almost entire profit to the
certificate holders in the shape of |
| Bonus
Certificate / Cash Dividends. Once again the Board feels great pleasure in
declaring a Cash Dividend of 15% |
|
| i.e.
Rs. 1.50 per certificate to the certificate holders for the year ending June
30, 1997. |
|
|
| RESOURCE
MOBILIZATION |
|
| During
the period the Modaraba has increased its leveraging and has tapped funds
from Financial Institutions clue to |
|
| which
the volume of business and revenue has also increased. In order to further
expand our operations we are |
|
| exploring
the possibility of raising additional funds from Financial Institutions as
well as by issuance of Certificate |
| of
Musharika. already approved by the Registrar Modaraba. We are confident that
by further leveraging we would |
|
| be
able to generate more earning per certificate in the next accounting year. |
|
|
| FUTURE
STRATEGY |
|
| The
Modaraba had started its operation with a Paid up Fund of Rs. 300.00 Million.
By the end of June 30, 1997 the |
|
| equity
including Statutory Reserves has increased to Rs.396.00 Million through the
issuance of Bonus Certificates |
|
| and
transfer to Statutory Reserve @ 20% of the annual profit, which has further
strengthened the equity base of the |
|
| Modaraba. |
|
|
| The
management has now decided to mobilize additional funds from other sources
like borrowing from financial |
|
| institutions
/ tapping of funds by issuance or' Certificates of Musharika. We have already
fulfilled all the pre- |
|
| requisites
to launch Certificate of Musharika (COM) of Rs. 100.00 Million and approval
of the competent authority |
|
| has
been received to sell the certificates over the counter, through network of
Allied Bank of Pakistan Limited. The |
|
| additional
funds / gearing would be utilized for diversifying the First Allied Bank
Modaraba's activities into new |
|
| avenues
to result in the optimization of return. It would ultimately increase return
on equity and certificate holders |
| will get higher profit
on their Investment. |
|
|
| ACKNOWLEDGMENTS |
|
| The
Board wishes to place on record its appreciation and gratefulness to the
certificate holders for their continued |
|
| confidence
in the Modaraba, the State Bank of Pakistan especially NBFIs Department,
Corporate Law Authority, |
|
| Registrar
Modaraba Companies and Modarabas for the guidance provided by them from time
to time and to the |
|
| staff
for their dedication and hard work, who made the achievement of: these
results possible. |
|
|
|
For and on behalf of the
Board |
|
| Karachi |
|
RASHID M. CHAUDHRY |
|
| September
24, 1997. |
|
CHAIRMAN |
|
|
| RAHIM IQBAL RAFIQ & CO. |
SAEED KAMRAN PATEL &
CO. |
|
| Chartered
Accountants |
|
Chartered Accountants |
|
| 180-A, Sindhi Muslim |
|
2nd Floor, |
|
| Co-operative
Housing Society, |
Bund Markaz Blue Area, |
|
| Karachi. |
|
Islamabad. |
|
|
|
| AUDITORS'
REPORT TO THE CERTIFICATE HOLDERS |
|
| We
have audited the annexed Balance Sheet as at June 30, 1997 and the related
Profit and Loss Accounts and Cash |
|
| Flow
Statement, together with the notes to the accounts for the year ended June
30, 1997 of First Allied Bank |
|
| Modaraba
which are Modaraba Company's (Allied management Services (Private) Limited)
representation and we |
|
| state
that we have obtained all the information and explanations which we required
and after due verification there- |
|
| of',
we report that: |
|
|
| a)
In our opinion, proper books of account have been kept by the Modaraba
Company in respect of First |
|
| Allied
Bank Modaraba as required by the Modaraba Companies and Modaraba (Flotation
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 Modaraba Flotation and Control) Ordinance, 1980 and
Modaraba |
|
| Companies
and Modaraba Rules, 1981; and |
|
|
| c)
In our opinion and to the best of our information and according to the
explanations given It) us: |
|
|
| i)
The Balance Sheet and the related Profit and Loss Account and the Cash Flow
Statement, 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, 1997; and the profit and the changes in
financial position |
|
| for
the year ended on that date; |
|
|
| ii)
Zakat deductible at source 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. |
|
|
| RAHIM
IQBAL RAFIQ & CO. |
SAEED KAMRAN PATEL &
CO. |
|
| Chartered
Accountants |
|
Chartered Accountants |
|
|
| Karachi: |
|
| September
24, 1997 |
|
|
|
| BALANCE SHEET AS AT JUNE 30, 1997 |
|
|
|
|
|
|
1997 |
1996 |
|
|
Note |
Rupees |
Rupees |
|
|
| CAPITAL
AND RESERVES |
|
| Authorized |
|
| 50,000,000 modaraba |
|
| certificate of Rs. 10/-each |
|
500,000,000 |
500,000,000 |
|
|
========== |
========== |
|
| Issued, subscribed and paid up |
|
3 |
350,000,000 |
350,000,000 |
|
|
| Statutory
reserve |
|
4 |
46,200,178 |
33,090,673 |
|
| Unappropriated profit |
|
302,182 |
364,161 |
|
|
---------- |
---------- |
|
|
396,502,360 |
383,454,834 |
|
| LONG
TERM MUSHARIKA FINANCE |
|
5 |
130,000,000 |
-- |
|
| LONG TERM SECURITY DEPOSIT |
|
16,783,552 |
7,148,580 |
|
| CURRENT
LIABILITIES |
|
| Short
term musharika finance |
|
6 |
23,000,000 |
-- |
|
| Security deposit |
|
|
152,000 |
-- |
|
| Creditors,
accrued and other liabilities |
7 |
11,460,972 |
2,093,701 |
|
| Unclaimed
profit |
|
|
5,344,234 |
2,577,100 |
|
| Proposed
profit distribution |
|
|
52,500,000 |
78,750,000 |
|
| Taxation |
|
|
8,300,000 |
-- |
|
|
---------- |
---------- |
|
|
100,757,206 |
83,420,801 |
|
|
---------- |
---------- |
|
|
644,043,118 |
474,024,215 |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these financial statements. |
|
|
|
1997 |
1996 |
|
|
Note |
Rupees |
Rupees |
|
|
| FIXED
ASSETS-TANGIBLE |
|
8 |
126,229 |
89,033 |
|
| DEFERRED
COSTS |
|
9 |
1,550,810 |
2,574,928 |
|
| NET
INVESTMENT IN LEASE FINANCE |
|
10 |
101,065,309 |
52,604,539 |
|
| LONG TERM MUSHARIKA FINANCE |
|
11 |
43,512,501 |
22,808,338 |
|
| LONG
TERM INVESTMENT |
|
12 |
2,000,000 |
2,000,000 |
|
|
| CURRENT
ASSETS |
|
| Stock-in-trade |
|
|
40,768,537 |
14,446,810 |
|
| Trade
debts-secured |
|
|
4,138,696 |
2,040,556 |
|
| Current
portion of long term assets |
13 |
70,548,138 |
49,590,039 |
|
| Short
term morabaha finance-secured |
|
79,313,000 |
85,759,000 |
|
| Short
term musharika finance-secured |
|
167,991,600 |
108,300,000 |
|
| Short
term investments |
|
14 |
51,496,782 |
53,894,034 |
|
| Accrued
profit |
|
15 |
43,258,571 |
24,129,186 |
|
| Advances,
prepayment and |
|
|
|
|
| other
receivables |
|
16 |
10,985,165 |
3,932,338 |
|
| Cash
and bank balances |
|
17 |
27,287,780 |
51,855,414 |
|
|
---------- |
---------- |
|
|
495,788,269 |
393,947.38 |
|
|
---------- |
---------- |
|
|
644,043,118 |
474,024,215 |
|
|
========== |
========== |
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR THE YEAR ENDED JUNE 30, 1997 |
|
|
|
Eighteen |
|
|
months ended |
|
|
June 30, |
|
|
1997 |
1996 |
|
|
Rupees |
Rupees |
|
|
| INCOME |
|
18 |
90,208,525 |
115,216,916 |
|
| EXPENDITURE |
|
| Operating
expenses |
|
19 |
4,965,946 |
5,835,483 |
|
| Financial
charges |
|
24,179,301 |
59,719 |
|
| Provision for diminution in
the |
|
| value
of short term investments |
|
(8,012,428) |
15,119,229 |
|
| Provision
for doubtful debts |
|
208,846 |
-- |
|
|
--------- |
--------- |
|
|
21,341,665 |
21,014,431 |
|
|
--------- |
--------- |
|
|
68,866,860 |
94,202,485 |
|
| OTHER
INCOME |
|
20 |
5,726,601 |
4,933,036 |
|
|
--------- |
--------- |
|
|
74,593,461 |
99,135,521 |
|
| MODARABA
COMPANY'S MANAGEMENT FEE |
|
21 |
745,935 |
991,355 |
|
|
|
--------- |
--------- |
|
| PROFIT
FOR THE YEAR/PERIOD BEFORE TAXATION |
|
73,847,526 |
98,144,166 |
|
| Provision
for taxation |
|
8,300,000 |
-- |
|
|
--------- |
--------- |
|
|
65,547,526 |
98,144,166 |
|
| Unappropriated
profit brought forward |
|
364,161 |
748,534 |
|
|
--------- |
--------- |
|
|
65,911,687 |
98,892,700 |
|
| APPROPRIATION |
|
|
| Transferred
to statutory reserves |
|
13,109,505 |
19,778,539 |
|
|
| - Amount of profit
distribution @ 15% |
|
| -
(1996- Amount of profit distribution for eighteen months) |
|
|
52,500,000 |
78,750,000 |
|
|
--------- |
--------- |
|
| Unappropriated Profit carried
forward |
|
302,182 |
364,161 |
|
|
|
========== |
========== |
|
| These
accounts should be read in conjunction with the annexed notes. |
|
|
|
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| (CASH
FLOW STATEMENT) |
|
| FOR
THE YEAR ENDED JUNE 30, 1997. |
|
|
Eighteen |
|
|
months ended |
|
|
June 30, |
|
|
1997 |
1996 |
|
|
Rupees |
Rupees |
|
|
| CASH FLOWS FROM OPERATING
ACTIVITIES |
|
| Profit
for the year/period |
|
73,847,526 |
98,144,166 |
|
| Adjustment
for: |
|
|
|
| Amortisation
of deferred |
|
1,273,284 |
1,909,927 |
|
| Depreciation |
|
45,804 |
42,744 |
|
| Diminution
in value of investment -- net |
|
(8,012,428) |
13,806,826 |
|
| Provision for doubtful debts |
|
208,846 |
-- |
|
|
---------- |
---------- |
|
|
(6,484,494) |
15,759,547 |
|
|
---------- |
---------- |
|
| Operating
Profit before working capital changes |
67,363,032 |
113,903,713 |
|
|
|
|
|
| CHANGES
IN WORKING CAPITAL |
|
| (INCREASE)/DECREASE
IN CURRENT ASSETS |
|
|
| Stock-in-trade |
|
(26,321,727 |
17,580,228 |
|
| Trade
debts |
|
(2,098,140 |
(2,040,556) |
|
| Short
term morabaha finance |
|
6,446,000 |
51,474,196) |
|
| Short
term musharika finance |
|
(59,691,600) |
56,900,000 |
|
| Short
term investments |
|
20,409,680 |
14,738,647) |
|
| Certificate
of investment |
|
(10,000,000) |
-- |
|
| Accrued
profit |
|
(19,304,791) |
(17,720,845) |
|
| Advances,
prepayments and other receivable |
|
(7,052,827 |
(3,403,018) |
|
|
---------- |
---------- |
|
| (Increase)
in current assets |
|
(97,613,405) |
14,897,034) |
|
|
|
|
| INCREASE/(DECREASE)
IN CURRENT LIABILITIES |
|
| Security
deposits |
|
152,000 |
(5,457,800) |
|
| Creditors,
accrued and other liabilities |
|
9,367,271 |
591,611 |
|
|
---------- |
---------- |
|
| Increase/(Decrease)
in current liabilities |
|
9,519,271 |
(4,866,189) |
|
|
---------- |
---------- |
|
| Cash
(outflow)/generated from operations |
|
(20,731,102) |
94,140,490 |
|
|
|
|
|
| Dividend
paid |
|
(75,982,866) |
(49,922,900) |
|
| Long
term security deposits received |
|
9,634,972 |
7,148,580 |
|
|
---------- |
---------- |
|
|
(66,347,894) |
(42,774,320) |
|
|
---------- |
---------- |
|
| Net
cash (used in) from operating activities |
|
(87,078,996) |
51,366,170 |
|
|
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
| Purchase
of fixed assets |
|
(83,000) |
(21,205) |
|
| Long
term musharika finance |
|
(25,854,164) |
16,724,997 |
|
| Deferred
expenditure |
|
(249,166) |
(665,000) |
|
| Long
term investments |
|
-- |
(2,000,000) |
|
| Assets
leased out |
|
(64,302,308) |
(70,061,247) |
|
|
---------- |
---------- |
|
| Net
cash used in investing activities |
|
(90,488,638) |
(56,022,455) |
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
| Musharika
finance obtained |
|
153,000,000 |
-- |
|
|
|
|
| Net
cash from financing activities |
|
153,000,000 |
-- |
|
| Net
decrease in cash and bank balances |
|
(24,567,634) |
(4,656,285) |
|
| Cash
and bank balances at the beginning |
|
|
|
| of
the year / period |
|
51,855,414 |
56,511,699 |
|
|
---------- |
---------- |
|
| Cash
and bank balances at the end of year / period |
27,287,780 |
51,855,414 |
|
|
========== |
========== |
|
|
|
| NOTES
TO THE FINANCIAL STATEMENTS |
|
| FOR
THE YEAR ENDED JUNE 30, 1997. |
|
|
| 1.
MODARABA AND ITS OPERATIONS |
|
| First
Allied Bank Modaraba is a multipurpose, perpetual Modaraba formed under the
Modaraba |
|
| Companies
and Modaraba (floatation and control) Ordinance, 1980 and the rules framed
thereunder and is |
|
| managed
by the Allied Management Services (Private) Limited, a company incorporated
in Pakistan. |
|
| The
Modaraba is listed on the Karachi, Lahore and Islamabad Stock Exchanges. |
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| The
Modaraba is currently engaged in various Islamic modes of financing and
business, including leasing, |
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| morabaha,
musharika arrangements, trading in listed securities and other commodities. |
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| 2.
SIGNIFICANT ACCOUNTING POLICIES |
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| 2.1
Accounting convention |
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| These
financial statements have been prepared on the basis of historical cost
convention'. |
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| 2.2
Taxation |
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| Current |
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| Provision
for current taxation is based on taxable income at current tax, rates after
taking into |
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| account
tax rebates and tax credit available, if any. |
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| Deferred |
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| The
modaraba accounts for deferred taxation on all major timing differences using
the liability |
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| method. |
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| 2.3
Fixed assets and depreciation |
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| Fixed
assets are stated at cost less accumulated depreciation. Depreciation is
charged to income |
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| applying
the straight line method based on the useful life of the asset. Normal repair
of assets is |
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| charged
to income currently. |
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| Full
year's depreciation is charged on additions while no depreciation is charged
¢~n assets |
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| disposed
of during the year. |
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| 2.4
Deferred costs |
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| Expenditure
incurred in connection with floatation of Modaraba is being written off' over
a period |
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| of
five years. |
|
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| However,
expenses incurred in connection with the permission obtained for the
floatation of |
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| Musharika
Certificates will be amortized over a period of five years commencing flora
the date of' |
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| floatation
of Musharika Certificates. |
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| 2.5
Stock-in-trade |
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| These
are stated at lower of cost and net realisable value determined on weighted
average cost |
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| basis. |
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| 2.6
Investments |
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| Long term |
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| Long
term investments are stated at cost. The effect of permanent diminution, if
any, in the value |
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| of
investment is charged to profit and loss account. |
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|
| Short term |
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| Short
term investments in listed securities are stated at lower of cost or market
value determined |
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| on
an aggregate portfolio basis. The effect of permanent diminution, if any, in
the value of invest- |
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| ment
is charged to profit and loss account. |
|
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| 2.7
Revenue recognition |
|
| --
For lease transactions, the unearned lease income is deferred and amortized
to income |
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| over
the term of lease, so as to produce a constant rate of return on the net
investment. |
|
| --
Profit on morabaha and musharika finance is accrued on time basis. |
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| --
Dividend income is recognised at the time of declaration. |
|
| --
Profit on sale of goods is recognised on despatch of goods. |
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| 2.8
Provision for doubtful debts |
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| The
provision for doubtful debts is maintained which, in the judgement of
management, is adequate |
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| to
provide for potential losses on lease, Musharika and Morabaha receivables,
that can be |
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| reasonably
anticipated. The provision is increased / decreased by charging / crediting
the income. |
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|
