| FIRST IBL MODARABA |
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| Annual
Report 1997 |
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| CONTENTS |
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| Corporate
Information |
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| Director's
Report |
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| Auditors'
Report to the Certificate Holders |
|
| Balance
Sheet |
|
| Profit
and Loss Account |
|
| Statement
of Changes in Financial Position |
|
| Notes
to the Accounts |
|
| Pattern
of Certificate Holding |
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| CORPORATE
INFORMATION |
|
|
| Modaraba Company |
IBL Modaraba Management
(Private) Limited |
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|
| Board
of Directors |
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| Chief
Executive |
|
Inayat Ismail |
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| Director |
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|
Chishty Mujahid |
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| Director |
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|
Arshad Abdulla |
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| Company
Secretary |
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Masood Anwer Khan |
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|
| Auditors |
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|
Daudally, Lalani &
Co. |
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|
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|
Chartered Accountants |
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| Bankers |
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|
Muslim Commercial Bank
Ltd. |
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|
Citi Bank N. A. |
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United Bank Ltd. |
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Security Investment Bank
Ltd. |
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|
Orix Investment Bank
Pakistan Ltd. |
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| Registrar |
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Khalid, Majid, Hussain,
Rehman |
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Chartered Accountants |
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16-K, Block - 6,
P.E.C.H.S, |
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Near Chanesar Halt
Station, |
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Off. Shahra -e- Faisal,
Karachi. |
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| Registered
Office |
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First Floor, N.I.C.
Building |
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Abbasi Shaheed Road, |
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Karachi. |
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| DIRECTORS'
REPORT |
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| The
Board of Directors of IBL Modaraba Management (Private) Limited have pleasure
in |
|
| presenting
the Seventh Annual Report of First IBL Modaraba together with audited
accounts |
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| for
the year ended 30th June, 1997. |
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|
| FINANCIALS: |
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| Financial
results for the year under report are summarized as under: |
|
|
|
|
|
Rs. '000' |
|
| Profit
for the period |
|
4,226 |
|
| Unappropriated
profits brought forward |
|
9,397 |
|
|
|
|
---------- |
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|
|
|
|
|
13,623 |
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| Transfer
to statutory reserve |
I |
|
|
845 |
|
| Profit
distribution @ 10% |
|
|
11,687 |
|
|
|
|
|
|
---------- |
|
|
|
|
12,532 |
|
|
|
|
---------- |
|
| Unappropriated
profits carried forward |
|
1,091 |
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|
========== |
|
| REVIEW
OF OPERATIONS: |
|
|
| The
Modaraba during the year concentrated on trading as its main business
activity besides |
|
| musharikas,
morabahas and leasing albeit on small scale as per strategic decision
reported last |
|
| year.
The trading activity afforded a moderate profit of Rs. 10.55 million to the
Modaraba, which |
|
| although
short of expectations, is considered satisfactory in wake of unfavorable
economic |
|
| conditions
and uncertain business climate in the country. |
|
|
| In
other activities i.e. musharikas, morabahas and leasing, the Modaraba
performed according to |
|
| expectations
resulting in satisfactory profits. |
|
|
| In
pursuance of its diversification plan, the Modaraba further reduced its
investment portfolio |
|
| during
the year to Rs. 7.8 million from Rs. 12.3 million last year with a view to
diverting the |
|
| funds
to trading activities. Owing to continued bearish spell in stock exchanges,
the disposal of |
|
| shares
entailed a loss of Rs. 5.5 million, which is responsible for depressing the
Modaraba's overall |
|
| profitability. |
|
|
| DISTRIBUTION: |
|
|
| The
Board has approved a Final Dividend for the year ended June 30, 1997 at the
rate of 10% |
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| i.e.
Re. 1/- per certificate of Rs. 10/- each. |
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|
| FUTURE
PROSPECTS: |
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|
| 1996/97
was probably the worst year in the country's economic history as reported by
the Ministry |
|
| of
Finance and State Bank of Pakistan. The new government made some structural
changes and |
|
| brought
in certain economic reforms but the conditions continued to aggravate because
of subsequent |
|
| political
turmoil and constitutional crisis. Modaraba activities are very sensitive to
the economic |
|
| and
business conditions both at macro & micro levels and are affected
accordingly. |
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| Consequent
upon the recent positive developments, political stability appears to be
returning |
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| which
hopefully will lead to economic recovery. Your Modaraba is fully geared up
and has taken |
|
| proactive
measures to take full advantage of any improvement in the economic conditions
and |
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| business
environment. |
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| AUDITORS: |
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| The
present auditors, Messrs. Daudally Lalani & Co., being due for
retirement, have offered |
|
| themselves
for re-appointment for the year ending June 30, 1998. Their appointment has
been |
|
| confirmed
by the Board of Directors, subject to the approval of Registrar of Modaraba
Companies |
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| and
Modarabas. |
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| ACKNOWLEDGMENT: |
|
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| The
directors wish to place on record their appreciation and thanks to
certificate holders for their |
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| continued
confidence in the Modaraba, to the authorities for their guidance and to all
the members |
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| of
management and staff for their dedication and hard work. |
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| AUDITOR'S
REPORT TO THE CERTIFICATE HOLDERS |
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| We
have audited the annexed Balance Sheet as at June 30, 1997 and the related
Profit and Loss Account and Cash |
|
| Flow
Statement together with the Notes to the Accounts for the year ended June 30,
1997 of |
|
| FIRST
IBL MODARABA which are Modaraba Company's (IBL Modaraba Management (Pvt)
Ltd.) 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 IBL |
|
| Modaraba
as required by the Modaraba Companies and Modaraba (Floatation and Control)
Ordinance, 1980; |
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| and
Modaraba Companies and Modaraba Rules, 1981; and |
|
|
| b)
In our opinion, the Balance Sheet and the Profit & Loss Account have been
drawn up in conformity with the |
|
| Modaraba
Companies and Modaraba (Floatation and Control) Ordinance, 1980 and Modaraba
Companies |
|
| and
Modaraba Rules, 1981 and are further in accordance with accounting policies
consistently applied except |
|
| for
the change in accounting policy for valuation of trading stock as fully
described at note 2(g) to these |
|
| accounts
with which we concur and which bears no significant effect on these accounts:
and |
|
|
| 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 Cash Flow
Statement which are |
|
| in
agreement with the books of account, exhibit respectively a true and fair
view of the state of |
|
| Modaraba's
affairs as at June 30, 1997 and the Profit and Cash flow for the year then
ended; |
|
|
|
|
| (ii)
no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980;
and |
|
|
|
|
| (iii)
the business conducted, investment made and the expenditure incurred by the
Modaraba are in |
|
| accordance
with the objects, terms and conditions of the Modaraba. |
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|
Sd/- |
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| Karachi:
Dec. 15, 1997 |
|
DAUDALLY LALANI & CO. |
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|
Chartered Accountants |
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|
| BALANCE
SHEET AS AT JUNE 30, 1997 |
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|
1997 |
1996 |
|
|
|
|
Note |
Rupees |
Rupees |
|
|
|
| CAPITAL
AND RESERVES |
|
|
| CAPITAL |
|
| Authorised |
|
| 20,000,000
Modaraba Certificates of |
|
| Rs.
10/- each |
|
|
200,000,000 |
200,000,000 |
|
|
| Issued,
Subscribed and paid-up fund |
|
|
| 11,687,500
Modaraba Certificates of Rs. 10/- each |
|
| issued
as fully paid |
|
|
3 |
116,875,000 |
116,875,000 |
|
|
| Statutory
reserve |
|
|
4 |
10,047,929 |
9,202,752 |
|
|
| Unappropriated
Profit |
|
|
|
1,090,480 |
9,397,273 |
|
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
|
128,013,409 |
135,475,025 |
|
|
|
|
|
|
|
| OBLIGATION
UNDER FINANCE LEASE |
|
5 |
188,043 |
92,023 |
|
| SECURITY
DEPOSITS |
|
|
1,029,986 |
1,022,550 |
|
|
|
| CURRENT
LIABILITIES |
|
|
| Due
to associated companies |
|
|
6 |
4,269,304 |
8,092,282 |
|
| Creditors,
Accrued and other Liabilities |
7 |
2,446,957 |
8,902,266 |
|
| Morabaha
payable |
|
|
8 |
18,428,475 |
-- |
|
| Short
term Musharika Finance |
|
-- |
46,000,000 |
|
| Modaraba
Management Fee Payable |
|
714,303 |
1,289,474 |
|
| Unclaimed
Dividend |
|
|
605,884 |
647,535 |
|
| Profit
distribution payable |
|
11,687,500 |
-- |
|
| Provision
for Taxation |
|
|
3,441,737 |
1,719,904 |
|
|
---------- |
---------- |
|
|
|
41,594,160 |
66,651,461 |
|
|
|
---------- |
---------- |
|
|
|
170,825,598 |
203,241,059 |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
| FIXED
ASSETS - Tangible at book value |
|
|
| Assets
in own use |
|
|
9 |
1,187,957 |
1,166,206 |
|
| Assets
leased out |
|
|
10 |
4,516,330 |
5,442,516 |
|
|
|
|
|
|
| LONG
TERM DEPOSITS & DEFERRED COST |
|
11 |
145,969 |
231,245 |
|
| LONG
TERM MORABAHA |
|
|
|
12 |
-- |
10,731 |
|
| CURRENT
ASSETS |
|
|
|
| Stock
- in - trade |
|
|
|
60,595,224 |
52,760,886 |
|
| Trade
debtors |
|
|
|
2,652,251 |
-- |
|
| Sundry
debtors |
|
|
13 |
15,154,654 |
69,410,864 |
|
| Marketable
Securities of quoted companies |
|
|
|
| &
Modarabas |
|
|
14 |
7,796,319 |
12,344,253 |
|
| Morababa
finance |
|
|
15 |
18,704,376 |
46,269,663 |
|
| Short
term Musharika arrangement |
|
16 |
8,225,000 |
975,000 |
|
| Accrued
profit |
|
|
17 |
3,898,906 |
3,186,607 |
|
| Advances,
deposits and Pre-payments |
|
18 |
206,087 |
992,374 |
|
| Other
receivables |
|
|
|
1,896, 133 |
1,229,534 |
|
| Cash
and bank balances |
|
|
19 |
45,846,392 |
9,130,180 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
164,975,342 |
196,299,361 |
|
|
---------- |
---------- |
|
|
|
170,825,598 |
203,241,059 |
|
|
========== |
========== |
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 1997 |
|
|
|
|
|
|
|
Year |
Period from |
|
|
|
|
|
|
ended |
Jan. 01, 1995 |
|
|
|
|
|
|
June 30, 1997 |
to June 30, 1996 |
|
|
|
|
|
Note |
Rupees |
Rupees |
|
| OPERATING
INCOME / (LOSS) |
|
|
|
| Trading
income |
|
20 |
10,552,176 |
-- |
|
| Morabaha
Profit |
|
|
8,269,681 |
12,761,742 |
|
| (Loss)
/ gain on sale of investments |
|
|
(5,465,702) |
11,878,060 |
|
| Dividend
income |
|
21 |
445,778 |
1,092,123 |
|
| Musharika
profit |
|
|
821,571 |
298,267 |
|
| Lease
rentals |
|
|
2,497,260 |
883,168 |
|
| Other
income |
|
22 |
2,488,478 |
2,189,987 |
|
|
|
|
---------- |
---------- |
|
|
|
|
19,609,242 |
29,103,347 |
|
| OPERATING
EXPENSES |
|
|
| Administrative |
|
|
|
23 |
5,005,936 |
5,324,122 |
|
| Financial
charges |
|
|
|
24 |
5,790,717 |
1,104,275 |
|
| Amortization
of leased assets |
|
1,500,544 |
546,548 |
|
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
|
12,297,197 |
6,974,945 |
|
|
|
|
|
|
---------- |
---------- |
|
| Operating
Profit |
|
|
|
7,312,045 |
22,128,402 |
|
|
| Provision for
diminution in the value of investments |
|
|
| written
back |
|
|
|
9,226,521 |
(7,944,191) |
|
| Provision
for doubtful debts |
|
(377,363) |
-- |
|
|
---------- |
---------- |
|
|
|
|
|
|
545,289 |
(7,944,191) |
|
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
|
7,857,334 |
14,184,211 |
|
| Modaraba
Management fee |
|
|
714,303 |
1,289,474 |
|
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
|
7,143,031 |
12,894,737 |
|
| Taxation |
|
|
|
|
2,917,147 |
1,719,904 |
|
|
|
|
|
|
---------- |
---------- |
|
| Profit
after taxation |
|
|
4,225,884 |
11,174,833 |
|
| Un
appropriated profit brought forward |
|
9,397,273 |
457,407 |
|
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
|
13,623,157 |
11,632,240 |
|
| APPROPRIATION |
|
|
| Profit
distribution: @ Re. 1.00 per Certificate (1996: Nil) |
11,687,500 |
-- |
|
| transfer
to statutory reserve |
|
845,177 |
2,234,967 |
|
|
---------- |
---------- |
|
| Unappropriated
profit carried forward |
|
1,090,480 |
9,397,273 |
|
|
|
|
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| (CASH
FLOW STATEMENT) |
|
| FOR
THE YEAR ENDED JUNE 30, 1997 |
|
|
|
|
|
Year |
Period from |
|
|
|
|
ended |
Jan. 01, 1995 |
|
|
|
|
June 30, 1997 |
to June 30, 1996 |
|
|
|
|
Rupees |
Rupees |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
| Profit
before taxation |
|
7,143,031 |
12,894,737 |
|
| Adjustment
for non cash items: |
|
|
| Depreciation
on own assets |
|
451,643 |
546,499 |
|
| Amortization
on: |
|
| Assets
leased out |
|
|
1,500,544 |
546,548 |
|
| Deferred
cost |
|
|
126,096 |
224,318 |
|
| Dividend
Income |
|
|
(445,778) |
(1,092,123) |
|
| Financial
charges |
|
|
5,790,717 |
1,104,275 |
|
|
---------- |
---------- |
|
| Operating
profit before working capital changes |
|
14,566,253 |
14,224,254 |
|
| (INCREASE)
/ DECREASE IN OPERATING ASSETS |
|
| Stock
- in trade |
|
|
(7,834,338) |
(52,760,886) |
|
| Other
receivables |
|
|
(666,599) |
(1,175,844) |
|
| Trade
debtors |
|
|
(2,652,251) |
-- |
|
| Sundry
Debtors |
|
|
54,256,210 |
(65,358,364) |
|
| Musharika
receivables |
|
(7,250,000) |
(975,000) |
|
| Short
term investments |
|
4,547,934 |
43,106,201 |
|
| Advances,
Deposits, Pre-payments |
|
745,467 |
(709,133) |
|
| Morabaha
finance |
|
|
27,667,018 |
24,528,606 |
|
| Accrued
profit |
|
|
(712,299) |
308,461 |
|
|
|
|
---------- |
---------- |
|
|
|
|
68,101,142 |
(53,035,959) |
|
| INCREASE
/ (DECREASE) IN CURRENT LIABILITIES |
|
| Musharika
finance |
|
|
(46,000,000) |
46,000,000 |
|
| Morabaha
finance |
|
|
18,428,475 |
-- |
|
| Creditors,
accrued & other liabilities |
|
(6,455,309) |
7, 416,682 |
|
| Modaraba
management fee payable |
|
(575,171 ) |
(397,919) |
|
| Due
to associated companies |
|
(3,822,978) |
7,822,009 |
|
| Profit
distribution payable |
|
|
(13,440,625) |
|
| Un
- claimed dividend |
|
(41,651) |
123,471 |
|
|
|
|
---------- |
---------- |
|
|
|
|
(38,466,634) |
47,523,618 |
|
|
|
|
---------- |
---------- |
|
| Net
cash flow from operating activities |
|
44,200,761 |
8,711,913 |
|
| Income
tax paid |
|
|
(1,195,314) |
(1,679,328) |
|
| Financial
charges paid |
|
(5,790,717) |
(106,947) |
|
|
|
|
---------- |
---------- |
|
| Net
cash from operating activities |
|
37,214,730 |
6,925,638 |
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
|
|
| Purchase
of fixed assets |
|
| Own
assets |
|
|
(538,954) |
(1,276,877) |
|
| Leased
assets |
|
|
(574,358) |
(5,989,064) |
|
| Deferred
cost |
|
|
-- |
(266,080) |
|
| Insurance
claim |
|
|
65,560 |
-- |
|
| Dividend
received |
|
|
445,778 |
1,092,123 |
|
|
---------- |
---------- |
|
| Net
cash (used) in investing activities |
|
(601,974) |
(6,439,898) |
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
| Obligation
under finance lease |
|
96,020 |
(189,102) |
|
| Security
deposit |
|
|
7,436 |
1,022,550 |
|
|
|
|
---------- |
---------- |
|
|
|
|
103,456 |
833,448 |
|
|
|
|
---------- |
---------- |
|
| Net
increase in cash and cash equivalents |
|
36,716,212 |
1,319,188 |
|
| Cash
& cash equivalents at the beginning of the |
|
|
|
| year
/ period |
|
|
9,130,180 |
7,810,992 |
|
|
|
|
|
|
| Cash
& cash equivalents at the end of the |
|
---------- |
---------- |
|
| year
/ period |
|
|
45,846,392 |
9,130,180 |
|
|
========== |
========== |
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED JUNE 30, 1997 |
|
|
| 1.
LEGAL STATUS AND NATURE OF BUSINESS |
|
| First
IBL Modaraba is registered under the Modaraba Companies and Modaraba
(floatation and Control) |
|
| Ordinance,
1980 and the rules framed thereunder and is managed by IBL Modaraba
Management (Private) |
|
| Limited.
The Modaraba is perpetual and multi - purpose engaged in the business of
Morabaha, Operating |
|
| Lease,
Musharika, Trading, Investments in marketable securities and other related
business. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
| a)
Overall valuation policy |
|
|
| The
accounts have been prepared under the historical cost convention. |
|
|
| b)
Fixed assets and depreciation |
|
|
| (i)
Assets in own use and depreciation |
|
|
| Fixed
assets 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 while no depreciation
is charged on |
|
| assets
disposed off during the year. |
|
|
|
|
| Maintenance
and normal repairs are charged to income as and when incurred. |
|
| Gain
and loss on disposal of fixed assets are included in income currently. |
|
|
| (ii)
Assets leased out and amortization |
|
|
| Leased
assets are stated at cost less accumulated amortization. Amortization is
charged to |
|
| income
applying the annuity method whereby the depreciable value of assets is
amortized over |
|
| the
lease period. |
|
|
|
|
| Profit
and loss on disposal of leased assets is included in income currently. |
|
|
| c)
Leased Assets |
|
|
| Assets
held under finance lease are included in operating assets at cost. |
|
|
| Financial
charges are calculated at the markup rate implicit in the lease and charged
to profit |
|
| and
loss account. |
|
|
| Depreciation
is charged at the same rate as Modaraba's owned assets. |
|
|
| d)
Deferred cost |
|
|
| Deferred
cost is amortized in three years from the date of its incurrence. |
|
|
| e)
Rates of exchange |
|
| Transactions
in foreign currencies are converted into rupees at the rates of exchange
ruling on the date of |
|
| transactions.
Assets and liabilities in foreign currencies are translated into rupees: |
|
|
|
|
| In
case of bills payable against import covered at the contracted rates by forward
exchange |
|
| contracts |
|
|
|
|
| In
case of other assets and liabilities |
at the rate of exchange
ruling at the balance |
|
| sheet
date. |
|
|
|
|
|
| Other
exchange gains and losses are included in income currently. |
|
|
| f)
Trade Debts and Other Receivables |
|
| Debts
considered irrecoverable are written off and provision is made against those
considered doubtful of |
|
| recovery. |
|
|
| g)
Trading stock |
|
| (i)
Trading stock is valued at lower of cost or market value. Effective July
01,1996 cost is determined |
|
| on
FIFO basis which previously was determined on moving - average basis. The
change has been |
|
| made
to align the stock valuation with its physical movement. However, there is no
significant |
|
| effect
of this change in accounting policy on these financial statements or on those
of the prior |
|
| year. |
|
|
|
|
|
| (ii)
Goods - in - transit are stated at invoice value plus other charges paid
thereon. |
|
|
| h)
Investment |
|
| (i) Long term investments are valued at cost. |
|
|
| (ii)
Marketable securities are valued at lower of average cost or market value on
an aggregate portfolio |
|
| basis. |
|
|
|
|
|
|
| (iii)
Profit or loss on sale of investment is accounted for in the year in which it
arises. |
|
|
| (iv)
Full provision is made against permanent diminution in the value of long term
investments. |
|
|
|
| i) Revenue recognition |
|
| (i)
Profit on sale of goods is recognized on despatch of goods to customers. |
|
|
| (ii)
Divident income is recognized when right is established which usually
coincide with the date |
|
| of
book closure of the company declaring the dividends. |
|
|
|
|
| (iii)
Profit on Modaraba finances are recorded on the accrual basis, calculated on
number of days |
|
