| Altowfeek Investment Bank Limited |
|
|
|
|
|
|
| Annual
Report 1998 |
|
|
|
| CONTENTS |
|
| Corporate
Information |
|
| Notice
of Meeting |
|
| Pattern
of Share holding |
|
| Chairman's
Report |
|
| Auditors'
Report to the Members |
|
| Balance Sheet |
|
|
| Profit
and Loss Account |
|
| Statement
of Sources and Application of Funds |
|
| Notes
to the Accounts |
|
|
|
| CORPORATE
INFORMATION |
|
|
|
|
| CHAIRMAN |
|
Mr. Khalid Mahmood
Bhaimia |
|
|
|
- Nominee
AlBaraka Investment & Development Co. Jeddah |
|
|
|
| VICE
CHAIRMAN |
Mr. Osman A. Suleiman |
|
|
|
- Nominee
AIBaraka Investment & Development Co. Jeddah |
|
|
| CHIEF
EXECUTIVE |
Mr. Faisal A. Jamall |
|
|
|
- Nominee
AIBaraka Investment & Development Co. Jeddah |
|
|
|
| DIRECTORS |
Mr. Yelcin Oner |
|
|
|
- Nominee
AIBaraka Investment & Development Co. Jeddah |
|
|
|
Mr. Iftikhar Soomro |
|
|
|
- Nominee
AIBaraka Investment & Development Co. Jeddah |
|
|
|
Mr. Nasim Beg |
|
|
|
- Nominee National
Investment Trust |
|
|
|
Mr. Omer Abdullah Sejieny |
|
|
|
- Nominee Islamic
Development Bank, Jeddah |
|
|
| COMPANY
SECRETARY |
Tariq Aleem |
|
|
|
|
|
| AUDITORS |
|
Sidat Hyder Qamar Maqbool
& Co. Chartered Accountants. |
|
|
|
|
| SHARE
REGISTRARS |
Software (Pvt) Limited |
|
|
|
5/79 Usman Block, New
Garden Town, Lahore |
|
|
|
|
| REGISTERED
OFFICE |
63-
Shahrah-e-Quaid-e-Azam, Lahore |
|
|
| LEGAL
ADVISORS |
Salim & Baig
Advocates |
|
|
|
|
| BRANCHES |
|
-63-
Shahrah-e-Quaid-e-Azam, Lahore. |
|
|
|
-Lakhani Centre,
I.I. Chundrigar Road, Karachi. |
|
|
|
-Hotel East Inn Building,
Sheikhupura Road, Faisalabad. |
|
|
|
| NOTICE
OF THE ANNUAL GENERAL MEETING |
|
|
| Notice
is hereby given that the 8th Annual General Meeting of AI Towfeek Investment
Bank Limited will be held |
|
| at
Avari Hotel, Shahrah-e-Quaid-e-Azam, Lahore on Monday December 7,1998 at 9.30
A.M. to transact the |
|
| following
business: |
|
|
| ORDINARY
BUSINESS |
|
| 1)
To receive, consider and adopt the audited accounts of the Company for the
year ended June |
|
| 30,
1998 together with the Directors' and Auditors' Reports thereon. |
|
|
| 2)
To appoint the auditors for the next term and to fix their remuneration. The
present auditors M/S SIDAT |
|
| HYDER
QAMAR MAQBOOL & CO. Chartered Accountants, retire and being eligible,
offer themselves |
|
| for
re-appointment. |
|
|
| 3)
To transact any other business with the permission of the chair. |
|
|
|
By order of the Board |
|
|
|
TARIQ ALEEM |
|
| Lahore:
November 14, 1998 |
|
COMPANY SECRETARY |
|
|
| NOTES |
|
| (i)
A member entitled to attend and vote at this meeting is entitled to appoint a
proxy to attend the |
|
| meeting
and vote for his/her. Form of Proxy is enclosed with the annual report.
Proxies in order to |
|
| be
effective, must be received at the registered office of the Company, at least
48 hours before the |
|
| time
of holding the meeting. |
|
|
| (ii)
The members are requested to immediately notify the change in address, if
any. |
|
|
|
|
| (iii)
The share transfer books of the Company will remain closed from December 01,
1998 to December |
|
| 05,
1998 both days inclusive. |
|
|
|
| PATTERN
OF SHARE HOLDING |
|
| AS
ON JUNE 30, 1998 FORM 34 |
|
|
|
No. of |
Total |
|
| From |
To |
Shareholders |
Shares Held |
|
|
|
100 |
95 |
9,500 |
|
| 10 |
500 |
983 |
451,200 |
|
| 50 |
1000 |
1,260 |
1,233,600 |
|
| 100 |
5000 |
487 |
1,222,200 |
|
| 500 |
10000 |
63 |
496,000 |
|
| 1000 |
15000 |
16 |
210,300 |
|
| 1500 |
20000 |
11 |
201,900 |
|
| 2000 |
25000 |
14 |
333,900 |
|
| 2500 |
30000 |
4 |
103,700 |
|
| 3000 |
35000 |
2 |
64,100 |
|
| 3500 |
40000 |
3 |
119,600 |
|
| 4500 |
50000 |
3 |
147,800 |
|
| 8500 |
90000 |
2 |
174,100 |
|
| 12000 |
125000 |
1 |
122,700 |
|
| 12500 |
130000 |
2 |
257,500 |
|
| 14500 |
150000 |
1 |
150,000 |
|
| 18000 |
185000 |
1 |
185,000 |
|
| 21500 |
220000 |
1 |
216,600 |
|
| 24500 |
250000 |
1 |
250,000 |
|
| 27500 |
280000 |
1 |
277,200 |
|
| 146500 |
1470000 |
1 |
1,465,900 |
|
| 154500 |
1550000 |
1 |
1,550,000 |
|
| 315500 |
3160000 |
1 |
3,157,200 |
|
| 859500 |
8600000 |
1 |
18,600,000 |
|
|
--------------- |
--------------- |
|
|
2,955 |
31,000,000 |
|
|
========== |
========== |
|
|
|
|
No. of Share |
Total |
|
|
| Share
Holders |
|
Holders |
Shares Held |
Percentage |
|
|
| 1. Individuals |
|
2,902 |
4,516,100 |
14.57 |
|
| 2.
Financial Institutions |
|
4 |
54,600 |
0.18 |
|
| 3.
Public Limited Companies |
|
6 |
237,200 |
0.77 |
|
| 4.
Private Limited Companies |
|
6 |
270,900 |
0.87 |
|
| 5.
Banking/Investment Companies |
16 |
25,361,500 |
81.81 |
|
| 6.
Insurance Companies |
|
6 |
205,600 |
0.66 |
|
| 7. Modarabas |
|
11 |
200,900 |
0.65 |
|
| 8.
Leasing Companies |
|
2 |
22,400 |
0.07 |
|
| 9.
Proprietor/Partnership |
|
1 |
1,000 |
0.00 |
|
| 10. Others |
|
1 |
129,800 |
0.42 |
|
|
|
--------------- |
--------------- |
--------------- |
|
|
|
2,955 |
31,000,000 |
100.00 |
|
|
|
========== |
========== |
========== |
|
|
|
| CHAIRMAN'S
REPORT |
|
| TO
THE SHAREHOLDERS |
|
|
| The
Directors of your Bank are pleased to present to you the results of the Bank
for the fiscal year ended 30th |
|
| June, 1998. |
|
|
| 1998
was financially an extremely disappointing year for the economy, in many
aspects, the worst in recent |
|
| history.
In our 1997 Annual we had hope for an improvement in 1998. Unfortunately
conditions have worsened |
|
| and
they are continuing into fiscal year 1999. |
|
|
| During
the year, our financial markets simply collapsed. The stock markets
collapsed; rupee took beating; all |
|
| foreign
currency accounts have been frozen; FE-45 Swap funds are not allowed to be
repatriated; long awaited |
|
| new
legal framework to recover bad assets has still not materialised; economic
slowdown has continued; |
|
| etc.
There was just no positive indicator to report. |
|
|
| The
poor economic environment is reflected in the performance of stock markets.
The number of new listings |
|
| was
the lowest in six years - clearly reflecting the overall economic slowdown
and the poor health of the |
|
| economy.
In 1994 - 72 companies were listed; in1995-41; in 1996-30; in 1997- 4 and in
this year only 1. |
|
|
| Our
aspirations to recover a substantial part of bad assets has not materialised,
simply because of the regulatory/ |
|
| legal
environment. A clear example is our deal with our largest difficult customer
we converted the total debt |
|
| into
equity, taking over the assets and then selling it back in the market. Former
clients then filed a suit against |
|
| the
bank as a result of that - we lost 8 months, incurred additional costs and
opportunity loss on top of it. The |
|
| deal
is finally done. |
|
|
| Another
anomaly is taxation. As an Investment Bank, we are required to pay income tax
on profit at listed |
|
| company
rate. However, CBR is attempting to tax us at a rate of Banking Company
rates. Obviously we are |
|
| not
agreeing to this and the issue is in litigation. This applies to all the
Investment Banks. Furthermore under yet |
|
| another
rule of CBR we are required to pay advance income tax based on last tax
cleared financial- even |
|
| though
in our case it is 1991-92. As a result we have now paid Rs. 63 million in
advance tax even though we |
|
| have
no income tax liability. This advance tax alone has a carrying cost for your
bank of around Rs, 10 million |
|
| per
annum. Clearly overall regulatory environment is not pro business and simple. |
|
|
| As
a result of this poor macro environment your Bank has also suffered. Our
results thus reflect this overall |
|
| environment. |
|
|
|
|
Rupees' 000 |
|
|
|
|
| Operating
Loss Before Provision |
|
24,808 |
|
| Provision |
|
|
1,081 |
|
|
|
|
--------------- |
|
| Loss
Before Tax |
|
25,889 |
|
| Tax |
|
|
1,125 |
|
|
|
|
--------------- |
|
| After
Tax Loss |
|
27,014 |
|
|
|
|
========== |
|
|
| In
our Operating loss before provision in our operating results you will need to
recognize the following: |
|
|
| *
That we have realized a profit of Rs. 96.124 million on sale/Appreciation of
our Investment Portfolio. |
|
|
| Despite,
suffering loss we are required to pay income tax (turnover) of Rs. 1.1
million - yet another tax anomaly. |
|
|
| In
our last report we had advised you of your Board's decision to remain
conservative and prudent. As a result |
|
| of
this policy and in view of very poor market conditions, we have further
reduced our Murabaha Portfolio by |
|
| Rs.
385.755 million. Our deposit base has declined due to the uncertainty created
by freeze on foreign currency |
|
| accounts.
Our deposits have declined by Rs. 100.947 million. |
|
|
| We
have been able to reduce our operating expenses by 10.93% down to Rs, 34,199,
This includes a |
|
| disproportionately
large amount of legal fees - reflecting the cost of recovery of difficult
portfolio. During the |
|
| year
we also closed our Peshawar office, |
|
|
| In
view of the poor stock market we have not attempted to raise further capital
through the stock markets at |
|
| this
time, On the other hand our capital adequacy problem has eased due to drop of
our assets. On a risk |
|
| based
capital we are within the limit of SBP Rules for NBFI's, We are at 1: 9.58
times as of June 1998. |
|
|
| Our
efforts to truly Islamise the Bank has continued, During the year Albaraka
Turkey had run a special program |
|
| to
educate and train the staff here. We have implemented a new Morabaha document
designed by Maulana |
|
| Taqi
Usmani. We pray that the Regulatory Environment improves so we can introduce
pure Islamic products |
|
| which
are also viable. |
|
|
| During
the year we had 2 Board changes: |
|
|
| *
Mr. Shahid Ghaffar of NIT left us to become Managing Director of Karachi
Stock Exchange. Mr. Nasim |
|
| Beg,
who has 28 years of industry investment and capital market experience
replaced Mr. Ghaffar. |
|
|
| *
Dr. Morteza Gharehbaghian, Minister in Government of lran - representing
Islamic Development Bank, |
|
| Jeddah
left your Board, He has been replaced by Mr. Omar Abdullah Sejieny, Mr.
Sejieny is a very senior |
|
| professional
central banker from Saudi Arabia. |
|
|
| On
your behalf, we thank the departing directors for their contributions and
look forward to the new directors |
|
| to
lead your bank to achieve our objectives, |
|
|
| We
are not very optimistic about fiscal year 1999. Current conditions do not
provide any basis for optimism, |
|
| Without
a clear political will to change, current legal/regulatory environment will
not enable banks to fully |
|
| enforce
their rights against difficult customers. Similarly CBR needs to close the
issue of Investment Banks |
|
| taxation.
Current practices are detrimental for viability of Investment Banks. Lastly.
do not believe all of this will |
|
| happen
in fiscal year 1999 and accordingly we are not foreseeing a major turnaround
in our results in 1999. |
|
|
| On
behalf of the shareholder and the Board we thank the staff for their
dedication during the year. We also |
|
| thank
our customers for continuing to direct their business to our Bank, specially
when good customers have |
|
| many
choices. We are grateful for their commitments to Altowfeek. |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of ALTOWFEEK
INVESTMENT BANK LIMITED as at 30 June, 1998 |
|
| and
the related profit and loss account and statement of sources and application
of funds, together with the |
|
| notes
forming part thereof, for the year then ended and we state that we have
obtained all the information |
|
| and
explanations which to the best of our knowledge and belief were necessary for
the purposes of our audit |
|
| and,
after due verification thereof, we report that: |
|
|
| a)
in our opinion, proper books of account have been kept by the Company as
required by the |
|
| Companies
Ordinance, 1984; |
|
|
| b)
in our opinion: |
|
|
| i)
the balance sheet and profit and loss account together with the notes thereon
have been |
|
| drawn
up in conformity with the Companies Ordinance, 1984, and are in agreement
with |
|
| the
books of account and are further in accordance with accounting policies
consistently |
|
| applied; |
|
|
|
|
| ii)
the expenditure incurred during the year was for the purpose of the Company's
business; and |
|
|
| iii)
the business conducted, investments made and the expenditure incurred during
the year |
|
| were
in accordance with the objects of the Company; |
|
|
| c)
in our opinion and to the best of our information and according to the
explanations given to us, the |
|
| balance
sheet, profit and loss account and the statement of sources and application
of funds, |
|
| together
with the notes forming part thereof, give the information required by the
Companies |
|
| Ordinance,
1984, in the manner so required and respectively give a true and fair view of
the state of |
|
| the
Company's affairs as at and 30 June, 1998 and of the loss and the changes in
sources and |
|
| application
of funds, for the year then ended; |
|
|
| d)
in our opinion, zakat deductible at source under the Zakat and Ushr
Ordinance, 1980, was deducted |
|
| by
the Company and deposited in the Central Zakat Fund established under section
7 of that |
|
| Ordinance. |
|
|
|
|
|
SIDAT HYDER QAMAR MAQBOOL
& CO. |
|
| Lahore:
13 November, 1998 |
|
Chartered Accountant |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1998 |
|
|
|
|
Rupees' 000 |
|
|
|
|
|
Note |
1998 |
1997 |
|
|
|
|
|
|
|
|
| SHARE
CAPITAL, RESERVES AND LIABILITIES |
|
|
|
|
| SHARE
CAPITAL |
|
|
|
|
|
|
| Authorised
capital: |
|
|
|
| 100,000,000
ordinary shares of Rs, 10/- each |
|
1,000,000 |
1,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up capital: |
|
|
| 31,000,000
ordinary shares of Rs, 10/- each |
|
|
|
|
| fully
paid up in cash |
|
310,000 |
310,000 |
|
|
|
|
| RESERVES |
|
|
|
| Statutory
reserve |
|
|
3 |
25,826 |
25,826 |
|
| Accumulated
(Loss) |
|
|
|
(80,499) |
(53,485) |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
(54,673 |
(27,659) |
|
|
|
|
|
| SHAREHOLDERS'
EQUITY |
|
|
255,327 |
282,341 |
|
|
|
|
|
| CUSTOMER
DEPOSITS - Due after one year |
4 |
200 |
509,101 |
|
|
|
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
|
| Customer
deposits - Due within one year |
|
4 |
2,274,356 |
1,866,402 |
|
| Accrued
and other liabilities |
|
5 |
169,818 |
173,420 |
|
| Unclaimed
dividend |
|
|
231 |
250 |
|
| Provision
for taxation |
|
|
1,125 |
2,000 |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
2,445,530 |
2,042,072 |
|
| COMMITMENTS
AND CONTINGENT LIABILITIES |
6 |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
2,701,057 |
2,833,514 |
|
|
|
|
|
========== |
========== |
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
|
|
|
| Cash
and bank balances |
|
7 |
63,843 |
148,054 |
|
| Short
term placements |
|
|
-- |
110,000 |
|
| Advances,
deposits, prepayments |
|
|
|
| and
other receivables |
|
8 |
235,648 |
209,117 |
|
|
|
|
|
| Investments |
|
9 |
777,366 |
387,129 |
|
|
|
|
|
| Morabaha
finance |
|
10 |
1,375,878 |
1,759,404 |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
2,452,735 |
2,613,704 |
|
|
|
|
|
| LONG
TERM INVESTMENTS |
|
11 |
201,850 |
170,937 |
|
| LONG
TERM SECURITY DEPOSITS |
|
12 |
5,635 |
4,801 |
|
| DEFERRED
TAX ASSET |
|
|
31,387 |
31,387 |
|
| TANGIBLE
FIXED ASSETS |
|
13 |
9,450 |
12,685 |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
|
2,701,057 |
2,833,514 |
|
|
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts |
|
|
|
|
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
|
|
|
Rupees' 000 |
|
|
Note |
1998 |
1997 |
|
|
|
|
| INCOME |
|
|
|
| Profit
on morabaha finance |
|
201,476 |
306,804 |
|
| Profit
on bank deposits |
|
16,008 |
39,442 |
|
| Non
fund based income |
|
7,357 |
11,965 |
|
| Dividend
income |
|
11,698 |
14,920 |
|
| Profit
from investments |
|
14 |
96,124 |
14,796 |
|
| Profit
on disposal of fixed assets |
|
15 |
137 |
348 |
|
|
|
|
--------------- |
--------------- |
|
|
|
332,800 |
388,275 |
|
|
|
|
| EXPENDITURE |
|
|
|
| Return
on deposits |
|
|
323,409 |
347,931 |
|
| Operating
expenses |
|
16 |
34,199 |
38,396 |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
357,608 |
386,327 |
|
|
|
|
--------------- |
--------------- |
|
| OPERATING
(LOSS)/PROFIT BEFORE PROVISIONS |
|
(24,808) |
1,948 |
|
|
|
|
|
|
|
|
| PROVISIONS |
|
|
| Doubtful
morabaha financing |
|
|
2,230 |
(26,105) |
|
| Doubtful
receivables |
|
|
(3,311) |
(5,059) |
|
|
|
|
--------------- |
--------------- |
|
|
|
|
(1,081) |
(31,164) |
|
|
|
|
--------------- |
--------------- |
|
| LOSS
BEFORE TAXATION |
|
|
(25,889) |
(29,216) |
|
|
|
|
| TAXATION |
|
|
|
| Current |
|
|
|
|
(1,125) |
(2,000) |
|
| Deferred |
|
|
|
|
-- |
8,365 |
|
|
|
|
|
|
--------------- |
--------------- |
|
|
|
|
(1,125) |
6,365 |
|
|
|
|
| LOSS
FOR THE YEAR AFTER TAX |
|
|
(27,014) |
(22,851) |
|
| LOSS
BROUGHT FORWARD |
|
|
(53,485) |
(30,634) |
|
|
|
|
|
--------------- |
--------------- |
|
| ACCUMULATED
LOSS CARRIED FORWARD |
|
(80,499) |
(53,48.5) |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| STATEMENT
OF SOURCES AND APPLICATION OF FUNDS (CASH FLOW) |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
Rupees' 000 |
|
|
|
1998 |
1997 |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
|
|
|
| Loss
after taxation |
|
|
|
(27,014) |
(22,851) |
|
| Adjustments
for items not involving the movement of funds |
|
|
|
| Gain
on disposal of fixed assets |
|
|
(137) |
(348) |
|
| Gain
on investments |
|
|
|
(96,124) |
(14,796) |
|
| Provisions
for doubtful advances and receivables |
|
(1,081) |
31,164 |
|
| Provisions
for deferred tax |
|
|
|
-- |
(8,365) |
|
| Depreciation |
|
|
|
2,515 |
2,362 |
|
|
|
|
|
--------------- |
--------------- |
|
|
|
|
|
(94,827) |
10,017 |
|
|
|
|
|
--------------- |
--------------- |
|
| CASH
FLOWS FROM OPERATIONS |
|
|
(121,841) |
(12,834) |
|
|
|
|
|
| WORKING
CAPITAL ADJUSTMENTS: |
|
|
|
|
| Decrease
in term finance |
|
385,755 |
271,125 |
|
| Decrease
in receivables, prepayments & deposits |
|
396 |
21,872 |
|
| (Decrease
)/Increase in accounts payable |
|
(3,602) |
26,187 |
|
| (Decrease)
in customer deposits |
|
(100,947) |
(171,054) |
|
|
|
--------------- |
--------------- |
|
|
|
281,602 |
148,130 |
|
| Dividend paid |
|
|
(19) |
(308) |
|
| Income
tax paid |
|
(28,951) |
(15,351) |
|
|
|
--------------- |
--------------- |
|
|
|
252,632 |
132,471 |
|
| NET
CASH FLOWS FROM OPERATING ACTIVITIES |
130,791 |
119,637 |
|
|
|
|
|
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
| (Increase)/Decrease
in security deposits |
|
|
(834) |
397 |
|
| Additions
to fixed assets |
|
|
|
(2,666) |
(4,687) |
|
| Sale
proceeds of fixed assets |
|
|
|
3,523 |
1,926 |
|
| (Increase)
in long term investments |
|
|
(30,913) |
(168,437) |
|
| (Increase)
in short term investments |
|
|
(294,112) |
(91,906) |
|
|
|
|
|
--------------- |
--------------- |
|
| NET
CASH FLOWS FROM INVESTING ACTIVITIES |
|
(325,002) |
(262,707) |
|
|
|
|
--------------- |
--------------- |
|
| NET
(DECREASE) IN CASH AND CASH EQUIVALENTS |
(194,211) |
(143,070) |
|
| CASH
AND CASH EQUIVALENTS AT BEGINNING OF YEAR |
258,054 |
401,124 |
|
|
|
|
|
|
--------------- |
--------------- |
|
| CASH
AND CASH EQUIVALENTS AT END OF YEAR |
|
63,843 |
258,054 |
|
|
|
========== |
========== |
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
| 1.
LEGAL STATUS AND PRINCIPAL ACTIVITIES |
|
| AlTowfeek
Investment Bank Limited is a Public Limited Company incorporated in Pakistan
under the |
|
| Companies
Ordinance, 1984. The Company is quoted on the Karachi, Lahore and Islamabad
Stock |
|
| Exchanges.
The Company has been registered as an "Investment Bank" to carry on
investme |
