| FIRST ISLAMIC MODARABA |
|
|
|
|
|
|
|
| ( Annual Report 1997) |
|
|
|
| CORPORATE
INFORMATION |
|
|
|
| Modaraba Company |
|
Islamic Investment Bank
Limited. |
|
| chairman |
|
Sultan M. Khan |
|
| Vice Chairman |
|
Giulio Franzinetti |
|
| President
& Chief Executive |
M. Nadeem Anwar |
|
| Directors |
|
Andrew Geoffrey Yates |
|
|
|
Abdul Wadud Khan |
|
|
|
Bashir Ahmad |
|
|
|
Jahangir Siddiqui |
|
|
|
Jon Thorn |
|
|
|
Muhammad
Munawar |
|
|
|
Shahid Hafiz Kardar |
|
| Secretary |
|
M.H.M Burney |
|
| Auditors |
|
Hameed Chaudhri & Co. |
|
|
|
Chartered Accountants |
|
| Legal
Retainers |
|
M/s. Habib-ur-Rahman
& Co. |
|
|
|
Barrister &
Advocates, Karachi |
|
| Bankers |
|
Schon Bank Limited |
|
|
|
Bolan Bank Limited |
|
|
|
Industrial Development
Bank of Pakistan |
|
|
|
Union Bank Limited |
|
| Principal
Place |
|
State Life Building No.2, |
|
| of
Business |
|
4th Floor, Wallace Road, |
|
|
|
Off. I.I Chundrigar Road, |
|
|
|
Karachi |
|
|
|
|
|
| DIRECTORS'
REPORT |
|
| The
Board of Directors of Islamic Investment Bank Ltd., the Management Company of
First Islamic Modaraba, |
|
| have
pleasure in presenting 3rd Annual Report of the Modaraba togetherwith the
audited accounts for the |
|
| period
from July 01, 1996 to June 30, 1997. |
|
|
| Financial
Result |
|
|
| Summarised
results for the year under report are as under:- |
|
|
(Rs. in "000") |
|
|
June 1997 |
June 1996 |
|
|
| -
Total Operating Income |
|
21,445 |
17,178 |
|
| -
Net Profit before Management Fee & taxation |
12,703 |
11,215 |
|
| -
Less: Management Fee -10% |
|
1,155 |
1,019 |
|
|
--------- |
--------- |
|
| -
Net Profit for the period |
|
11,548 |
10,196 |
|
| -
Add: Unappropriated profit B/F |
|
935 |
278 |
|
|
--------- |
--------- |
|
| -
Profit available for appropriation |
|
12,483 |
10,474 |
|
|
|
|
| Appropriations |
|
| -
Transfer to statutory reserve |
|
2,309 |
2,039 |
|
| -
Interim Profit distribution in Cash 6.5% (1996 - 7.5%) |
6,500 |
7,500 |
|
| - Final profit
distribution in cash 3.5% |
3,500 |
- |
|
| (1996
- Nil) |
|
|
|
|
|
12,309 |
9,539 |
|
| -
Unappropriated profit carried forward |
|
174 |
935 |
|
|
--------- |
--------- |
|
|
12,483 |
10,474 |
|
|
| The
total operating income of the Modaraba for the period under review was Rs.
21.44 Million as against |
|
| Rs.
17.17 Million during the last year showing an increase of 24.84% over the
previous year. After providing |
|
| for
diminution in the value of marketable securities, Modaraba Company's
Management Fee and transfer to |
|
| statutory
reserve, the profit available for appropriation inclusive of unappropriated
amount brought forward |
|
| was
Rs. 12.483 Million out of which Rs. 6.5 Million has already been paid to the
certificate holders as interim |
|
| cash
dividend on the basis of available income for the six months period ended
December 31, 1996. |
|
|
| Fiscal
and Economic Policies |
|
|
| The
economy remained sluggish and subdued. There were three changes in the
Government during the period |
|
| under
review. In the environment of reduced industrial out put, liquidity
constraints, deteriorating parity of Pak |
| Rupee,
frequent strikes and shut downs, rapidly increasing inflation and a general
atmosphere of uncertainties, |
|
| the
financial sector of the country has been finding it difficult to maintain its
momentum of growth and |
|
| profitability. |
|
|
| Review
of Operations |
|
|
| While
business in the country has suffered by successive negative developments and
the sluggish economic |
|
| conditions,
the overall performance of your Modaraba remained satisfactory. We continued
our cautious |
|
| approach
towards new investments as stock market index continued to fall unabated
despite various incentives |
|
| offered
by the Government from time to time to restore the confidence of investors in
stock markets. |
|
|
| Leasing
portfolio, although considered a high yield source, was not expanded
unchecked as in the difficult |
|
| economic
and fiscal conditions, new businesses frequently default in payment of their
lease rentals in the early |
|
| stage
of their existence. The leasing industry as a whole also exercised great
restraint in extending new leases |
|
| to
new customers without good track record. In this perspective, we have made
commitments of providing lease |
|
| finance
of Rs. 15 Million only to highly reputable organisations of the country and,
on disbursement, our leasing |
| portfolio
would become about 1/4th of our paid up capital. Besides, this year too, your
Modaraba arranged |
|
| export
of rice for Rs. 20 Million in collaboration with reputable and experienced
exporters of the country. |
|
|
| Precisely,
we are following a policy of maintaining diversified portfolio with emphasis
on short term investments, |
| leasing,
trading and fee based activities in conformity with the regulations
prescribed by the regulatory |
|
| authorities.
Our success on this score is evident form the fact that out of our total
income of Rs. 21.445 Million, |
| operating
income under these heads alone stood at Rs. 18.5 Million as against Rs. 14.3
Million of last year. |
|
|
| Future
Prospects |
|
|
| Your
management team is on the constant look out to explore new avenues of trade
so as to secure increased |
|
| profitability
for 1997-98. FIM would be going into trade financing and direct trading
activities. We visualize |
|
| that
these will yield very good return. Our approach will, however, be cautious
and all precautions to safe guard |
| our
capital will be taken. I hope with a tranquil political atmosphere and
encouraging economic and fiscal |
|
| policies
of the Government, your Modaraba will achieve a continued and stable growth
for your well being. |
|
|
| However,
while energetic efforts will continue to be made for increasing the
remunerative and suitable areas of |
|
| business,
the quantitative growth in Modaraba's business in the current environment may
well have to be |
|
| sacrificed
to preserve the qualitative strength and stability of the institution. |
|
|
| Final
Dividend |
|
|
| Right
from the inception, Modaraba has distributed almost entire profit in the
shape of cash dividend. In |
|
| addition
to the interim dividend of 6.5% declared earlier, the Board of Directors of
the Management Company |
|
| now
announce payment of additional dividend of 3.5%. Thus, finally the total
dividend for the year ended 30- |
|
| 06-1997
would become 10% which is fair return when viewed in the light of the
Modaraba sector as a whole. |
|
|
| Auditors |
|
|
| The
present auditors, M/s. Hameed Chaudhri and Co, Chartered Accountants, due for
retirement have made |
|
| themselves
available for re-appointment for the year 1997-98. The Board of Directors
have agreed to their |
|
| appointment,
subject to approval of the Registrar of Modarabas. |
|
|
| Acknowledgment |
|
|
| The
Directors wish to place on record their appreciation to all our certificate
holders for their continued |
|
| confidence,
to the authorities for their guidance and to the Members of Management and
staff for their |
|
| dedication
and hard work. |
|
|
| On
Behalf of the Board |
|
|
| (M.
Nadeem Anwar) |
|
| President
& Chief Executive |
|
|
|
|
| AUDITORS'
REPORT TO THE CERTIFICATE HOLDERS |
|
| We
have audited the annexed balance sheet as at 30 June, 1997 and the related
profit and loss account and |
|
| cash
flow statement, together with notes to the accounts for the year ended 1997
of First Islamic Modaraba, |
|
| which
are Modaraba Company's (Islamic Investment Bank 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 accounts have been kept by the Modaraba
Company in respect |
|
| of
First Islamic Modaraba as required by the Modaraba Companies and Modaraba
(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 Modaraba (Floatation 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 to us; |
|
|
| (i)
the balance sheet and the related profit and loss account and the cash flow
statement |
|
| position,
which are in agreement with the books of accounts, exhibit respectively a
true and |
|
| fair
view of the state of Modaraba's affairs as at 30 June, 1997 and of the profit
and |
|
| cash
flows for the year ended on that date; |
|
|
| (ii)
Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 was
deducted by the |
|
| Modaraba
and deposited in 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. |
|
|
| Karachi: |
|
HAMEED CHAUDHRI & CO |
|
| December
29, 1997 |
|
CHARTERED ACCOUNTANTS |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1997 |
|
|
|
NOTE |
1997 |
1996 |
|
|
Rupees |
Rupees |
|
|
| CAPITAL
AND RESERVES |
|
|
| Certificate
capital Authorised |
|
| 14,000,000 Modaraba
Certificates of |
|
140,000,000 |
140,000,000 |
|
| Rs.
10/- each |
|
| Issued
subscribed and paid up |
|
3 |
100,000,000 |
100,000,000 |
|
| Reserve
& unappropriated profit |
|
| Statutory
reserve |
|
4 |
6,293,516 |
3,983,778 |
|
| Unappropriated
profit |
|
174,060 |
935,109 |
|
|
|
6,467,576 |
4,918,887 |
|
|
----------- |
----------- |
|
|
106,467,576 |
104,918,887 |
|
| Obligation
under Finance leases |
5 |
258,917 |
799,952 |
|
| Deferred
Liabilities |
|
| Lease
Key money |
|
1,007,950 |
0 |
|
| Current
Liabilities |
|
|
| Creditors,
accrued charges & other liabilities |
6 |
2,811,654 |
1,765,508 |
|
| Current
obligation under finance leases |
|
541,035 |
442,164 |
|
| Unclaimed
profit distribution |
|
793,721 |
176,969 |
|
| Profit
distribution payable |
|
3,500,000 |
7,500,000 |
|
|
|
|
|
7,646,410 |
9,884,641 |
|
|
----------- |
----------- |
|
|
115,380,853 |
115,603,480 |
|
|
=========== |
=========== |
|
|
|
|
|
| Operating
fixed assets |
|
7 |
2,900,360 |
2,715,665 |
|
| Assets
given on lease |
|
8 |
8,555,762 |
0 |
|
|
| Long
Term Investments-at cost |
|
9 |
10,509,975 |
13,067,289 |
|
| Long
term deposit & Deferred Costs |
10 |
1,222,570 |
1,696,930 |
|
| Long
Term Loans |
|
11 |
515,966 |
0 |
|
| Current
Assets |
|
| Short
Term Musharakah finances |
12 |
12,298,750 |
35,780,000 |
|
| Short
Term Morabaha finances |
|
13 |
6,000,000 |
11,000,000 |
|
| Short
Term Investments |
|
14 |
55,514,300 |
15,605,190 |
|
| Advances, deposits,
prepayments & Other |
15 |
3,390,739 |
4,332,189 |
|
| receivables |
|
| Cash
& Bank balances |
|
16 |
14,472,431 |
31,406,21 7 |
|
|
91,676,220 |
98,123,596 |
|
|
----------- |
----------- |
|
|
115,380,853 |
115,603,480 |
|
|
=========== |
=========== |
|
|
|
|
| The
annexed notes form an integral part of these accounts |
|
| (M.
NADEEM ANWAR) |
|
(MUHAMMAD MUNAWAR) |
|
| President
& Chief Executive |
|
Director |
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 1997 |
|
|
|
NOTE |
1997 |
1996 |
|
|
Rupees |
Rupees |
|
|
| Operating
Income |
|
17 |
18,516,431 |
14,398,406 |
|
| Other
Income |
|
18 |
2,928,168 |
2,779,710 |
|
|
|
----------- |
----------- |
|
|
|
21,444,599 |
17,178,116 |
|
|
|
|
|
| Operating
expenses |
|
19 |
8,452,252 |
4,884,862 |
|
| Financial
expenses |
|
20 |
230,714 |
227,385 |
|
| Other
charges |
|
21 |
58,075 |
850,750 |
|
|
8,741,041 |
5,962,997 |
|
|
----------- |
----------- |
|
| Profit
for the year before management fee |
12,703,558 |
11,215,119 |
|
| Modaraba
Company's management fee |
|
1,154,869 |
1,019,556 |
|
|
----------- |
----------- |
|
|
11,548,689 |
10,195,563 |
|
| Unappropriated
profit brought forward |
|
935,109 |
278,659 |
|
|
----------- |
----------- |
|
| Profit
available for appropriation |
|
12,483,798 |
10,474,222 |
|
|
| Appropriations |
|
| Transfer
to statutory reserve |
|
2,309,738 |
2,039,113 |
|
| Interim Profit
distribution in cash 6.5% |
|
| (1996.7.5%) |
|
6,500,000 |
7,500,000 |
|
| Final Profit distribution
in cash -3.5% |
|
| (1996.Nil) |
|
3,500,000 |
0 |
|
|
----------- |
----------- |
|
|
12,309,738 |
9,539,113 |
|
|
----------- |
----------- |
|
| Unappropriated
profit carried forward |
|
174,060 |
935,109 |
|
|
=========== |
=========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
| (M.
NADEEM ANWAR) |
|
(MUHAMMAD MUNAWAR) |
|
| President
& Chief Executive |
|
Director |
|
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED JUNE 30, 1997 |
|
|
|
NOTE |
1997 |
1996 |
|
|
Rupees |
Rupees |
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
A |
43,733,717 |
8,511,030 |
|
| RETURN
ON INVESTMENT & SERVICING OF FINANCE |
|
| Finance
charges on leased assets |
|
(204,013) |
(199,831) |
|
| Zakat
paid |
|
0 |
(1,310)j |
|
| Profit
distribution paid |
|
(13,383,248) |
(7,323,031) |
|
| Dividend
Income |
|
246,945 |
100,147 |
|
|
|
(13,340,316) |
(7,424,025) |
|
| TAXATION |
|
| Tax
deducted at source |
|
(123,810) |
(54,656) |
|
| INVESTING
ACTIVITIES |
|
| Capital
expenditure |
|
(916,774) |
(507,986) |
|
| Investments |
|
(983,260) |
(1,593,205) |
|
| Sale
proceeds of fixed assets |
|
0 |
713,000 |
|
| Sale
Proceeds of investments |
|
9,874,537 |
11,588,510 |
|
| Assets
leased out |
|
(9,071,550) |
0 |
|
|
| Cash
(outflow)/inflow from investing activities |
(1,097,047) |
10,200,319 |
|
|
----------- |
----------- |
|
| Cash
inflow/(outflow) before financing activities |
29,172,544 |
11,232,668 |
|
| FINANCING
ACTIVITIES |
|
| Long
term loans |
|
(664,166) |
0 |
|
| Lease
deposits paid |
|
0 |
(155,280) |
|
| Obligation
under lease finance paid |
|
(442,164) |
(310,684) |
|
| Cash
(outflow) from financing activities |
(1,106,330) |
(465,964) |
|
| Increase
in Cash & Cash equivalents |
|
----------- |
----------- |
|
|
B |
28,066,214 |
10,766,704 |
|
|
|
=========== |
=========== |
|
|
|
|
|
| (M.
NADEEM ANWAR) |
|
(MUHAMMAD MUNAWAR) |
|
| President
& Chief Executive |
|
Director |
|
|
| (CASH
FLOW STATEMENT) |
|
| FOR
THE YEAR ENDED JUNE 30, 1997 |
|
|
|
NOTE |
1997 |
1996 |
|
|
Rupees |
Rupees |
|
| A.
CASH FLOW FROM OPERATING ACTIVITIES |
|
|
|
| Net
profit for the year |
|
11,548,689 |
10,195,563 |
|
| Adjustment
for:- |
|
|
|
| Depreciation |
|
674,708 |
541,727 |
|
| Amortization
of deferred costs |
|
474,360 |
474,360 |
|
| Amortization
of assets leased out |
|
1,523,738 |
0 |
|
| Dividend
income |
|
(246,945) |
(100,147) |
|
| Profit
on sale of investments |
|
(1,178,500) |
(211,410) |
|
| Finance
charges on leased assets |
|
204,013 |
199,831 |
|
| Diminution
in value of investments written back |
(191,925) |
850,750 |
|
| Provision
for doubtful receivable |
|
250,000 |
0 |
|
| Zakat |
|
0 |
1,310 |
|
| Profit
on sale of assets |
|
0 |
(199,291 ) |
|
|
|
1,509,449 |
1,557,130 |
|
|
----------- |
----------- |
|
|
13,058,138 |
11,752,693 |
|
| (Increase)/decrease
in current assets |
|
| Short
term Musharakah finances |
|
23,231,250 |
3,9'70,000 |
|
| Short
term Morabaha finances |
|
5,000,000 |
(6,000,000) |
|
| Advances,
deposits, prepayments & |
|
|
|
| other
receivables |
|
1,289,812 |
(1,786,600) |
|
|
|
|
|
29,521,062 |
(3,816,600) |
|
| Increase
in current liabilities |
|
| Creditors,
accrued charges & others liabilities |
1,154,517 |
574,937 |
|
|
----------- |
----------- |
|
| Cash
flow from operating activities |
|
43,733,717 |
8,511,030 |
|
|
=========== |
=========== |
|
| B.
ANALYSIS OF CHANGES IN CASH & CASH EQUIVALENTS |
|
|
| Balance
as at 30 June, 1996 |
|
41,406,21 7 |
30,639,513 |
|
| Increase
in cash & cash equivalents |
|
28,066,214 |
10,766,704 |
|
|
----------- |
----------- |
|
| Balance
as at 30 June, 1997 |
|
69,472,431 |
41,406,21 7 |
|
|
=========== |
=========== |
|
| C.
CASH & CASH EQUIVALENTS |
|
| Cash
& bank balances |
|
14,472,431 |
31,406,217 |
|
| Fund
Management Scheme |
|
55,000,000 |
10,000,000 |
|
|
----------- |
----------- |
|
|
69,472,431 |
41,406,217 |
|
|
=========== |
=========== |
|
| D.
NON CASH TRANSACTION |
|
| Assets
acquired under finance leases |
|
0 |
1,552,800 |
|
|
=========== |
=========== |
|
|
|
|
| (M.
NADEEM ANWAR) |
|
(MUHAMMAD MUNAWAR) |
|
| President
& Chief Executive |
|
Director |
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED JUNE 30, 1997 |
|
|
| 1. LEGAL STATUS AND NATURE OF
BUSINESS |
|
| First
Islamic Modaraba is multipurpose, perpetual and multidimensional modaraba
formed under the |
|
| Modaraba
Companies and Modaraba (Floatation and Control) Ordinance, 1980 and the Rules |
|
| framed
thereunder and is managed by First Islamic Investment Bank Limited, a company
incorporated |
|
| in
Pakistan. The Modaraba is listed on Karachi Stock Exchange (Guarantee)
Limited. |
|
|
| The
Modaraba is engaged in business of leasing, musharakah, morabaha financing
trading in securities |
|
| and
other commodities. |
|
|
| 2. SIGNIFICANT ACCOUNTING
POLICIES |
|
|
| 2.1 ACCOUNTING CONVENTION |
|
| These
accounts have been prepared under the historical cost convention. |
|
|
| 2.2
FIXED ASSETS |
|
|
| (a)
Operating fixed assets are stated at cost less 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. Proportionate depreciation is charged on additions and deletions during
the year. |
|
|
| (b)
Maintenance and normal repairs are charged to income as and when incurred.
Gains or |
|
| Josses
if any, on disposal of fixed assets are taken to profit and loss account. |
|
|
| (c)
ASSETS ACQUIRED UNDER FINANCE LEASES |
|
|
| The
Modoraba accounts for assets acquired under finance lease by recording the
asset and |
|
| related
liability. These amounts are determined on the basis of discounted value of
minimum lease |
|
| payments.
Finance charges are allocated to accounting periods in a manner so as to
provide a |
|
| constant
periodic rate of charge on the outstanding liability. Depreciation is charged
to income |
|
| on
straight line basis at the rates given in Note 7. |
|
|
| (d)
ASSETS LEASED OUT AND AMORTISATION |
|
|
| Assets
leased out are stated at cost less accumulated amortisation. Amortisation is
charged to |
|
| income
applying the annuity method whereby the cost of asset less estimated residual
value is |
|
| amortised
over the lease period. |
|
|
| 2.3
INVESTMENTS |
|
|
| Long
Term Investments are stated at cost. Provision for diminution in value of
investment is made |
|
| against
permanent diminution, if any. |
|
|
| Short
Term Investments are valued at lower of average cost and realisable value
determined on |
|
| investment
portfolio basis. |
|
|
| Gains
or losses on sale of investments during the year are included in the income
currently. |
|
|
| 2.4
DEFERRED COSTS |
|
| Expenses
incurred in connection with flotation of Modaraba and other preliminary
expenses are |
|
| being
amortised over a period of sixty months. |
|
|
| 2.5
REVENUE RECOGNITION |
|
|
| Income
from morabaha/musharakah transaction is recognised on prorata accrual basis
taking |
|
| into
account duration of placement of funds and the estimated profit receivable. |
|
|
| Rental
income from lease contract is recognised on the basis of the related time
pattern of rentals |
|
| receivable
as contained in the lease transactions. |
|
|
| Dividend
income is accounted for on receipt basis. |
|
|
| 2.6
PRESENTATION |
|
| Figures
in the accounts have been rounded off to the nearest Rupee. Previous year's
figures have |
|
| been
rearranged, wherever necessary, for the purposes of comparison. |
|
|
| 3. ISSUED, SUBSCRIBED
& PAID UP CAPITAL |
|
|
1997 |
1996 |
|
|
Rupees |
Rupees |
|
| 10,000,000
Modaraba certificates of Rs. 10 each |
|
| fully
paid in cash |
|
100,000,000 |
100,000,000 |
|
|
=========== |
=========== |
|
|
| 3.1 Islamic Investment Bank Limited (Modaraba
company) held 69.28% of the paid up certificates. |
|
|
| 4.
STATUTORY RESERVE |
|
|
1997 |
1996 |
|
|
Rupees |
Rupees |
|
|
| Balance
as at 30 June, 1996 |
|
3,983,778 |
1,944,665 |
|
| Transferred
during the year |
|
2,309,738 |
2,039,113 |
|
|
----------- |
----------- |
|
| Balance
as at 30 June, 1997 |
|
6,293,516 |
3,983,778 |
|
|
=========== |
=========== |
|
|
| 4.1
The reserve has been created to comply with the State Bank of Pakistan's
regulations for Non |
|
| Banking
Financial Institutions. |
|
|
| 5.
OBLIGATION UNDER FINANCE LEASES |
|
|
|
1997 |
1996 |
|
|
Rup |
