| First Habib Modaraba |
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| Annual
Report 1998 |
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| CONTENTS |
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| CORPORATE
INFORMATION |
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| DIRECTORS'
REPORT |
|
| AUDITORS'
REPORT |
|
| BALANCE SHEET |
|
| PROFIT
AND LOSS ACCOUNT |
|
| STATEMENT
AND CHANGES IN FINANCIAL POSITION |
|
| NOTES
TO THE ACCOUNTS |
|
| PATTERN OF CERTIFICATE HOLDINGS |
|
|
|
| CORPORATE
INFORMATION |
|
|
| Board
of Directors |
|
| Mr.
Wazir Husain Jafree |
|
| Mr.
Muhammad Shoaib |
|
| Mr.
F. H. Mukhi |
|
| Mr.
Abbas Ali Muhammad |
|
| Mr.
S. Shahanshah H. Rizvi |
|
| Mr.
Zia Shafi Khan |
|
|
| Auditors |
|
| Ford,
Rhodes, Robson, Morrow |
|
| Chartered
Accountants |
|
|
| Bankers |
|
| Habib
Bank AG Zurich |
|
| Metropolitan
Bank Limited |
|
| Bank
Al Habib Limited |
|
| Union
Bank Limited |
|
| Askari
Commercial Bank Limited |
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| Soneri
Bank Limited |
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| Gulf
Commercial Bank Limited (Formely Schon Bank Limited) |
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| Faysal
Bank Limited |
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|
| Registered
Office |
|
| Hirani
Centre |
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| I.I.
Chundrigar, Road, |
|
| Karachi. |
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|
| Registrar |
|
| Noble
Computer Services (Pvt) Limited |
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| 6th
Floor, Hirani Centre |
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| I.I.
Chundrigar, Road, |
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| Karachi. |
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|
| REPORT
OF THE DIRECTORS |
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| FOR
THE YEAR ENDED 30TH JUNE, 1998 |
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| The
Board of Directors of the Management Company are pleased to present audited
accounts for the year |
|
| ended
30th June, 1998. |
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|
| FINANCIAL
RESULTS |
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|
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|
(Rupees in 000's) |
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|
Year ended |
Year ended |
|
|
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|
June 30, |
June 30, |
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|
1998 |
1997 |
|
|
|
|
| Total
Operating Income |
|
302,836 |
232,160 |
|
| Total
Operating expenses |
|
238,515 |
164,581 |
|
|
|
---------- |
---------- |
|
|
|
64,321 |
67,579 |
|
| Less: |
Modaraba Company's
Management Fee |
|
5,847 |
6,143 |
|
|
|
---------- |
---------- |
|
| Profit
for the year |
|
58,474 |
61,436 |
|
|
|
|
| Less:
Provision for Taxation |
Current Year |
14,000 |
11,500 |
|
|
|
Prior Year |
|
(3,662) |
6,500 |
|
|
|
|
|
---------- |
---------- |
|
|
|
48,136 |
43,436 |
|
| Add:
Unappropriated profit B/F |
|
2,304 |
12,755 |
|
|
|
---------- |
---------- |
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| Profit
available for appropriation |
|
50,440 |
56,191 |
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|
| APPROPRIATIONS |
|
|
|
|
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|
| Cash
Dividend 7.50% (Rs. 0.375 per |
|
18,900 |
25,200 |
|
| certificate
of Rs. 5/- each) |
|
|
| (1997
cash dividend 10% i.e. Rs. 0.50 |
|
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| per
certificate of Rs. 5/- each) |
|
|
|
|
|
| Transfer
to statutory reserve |
|
9,627 |
8,687 |
|
| (@20%
of the profit) as per |
|
|
|
| requirements
of State Bank of |
|
|
|
| Pakistan. |
|
|
|
|
|
|
|
|
| Transfer
to General Reserve |
|
|
20,000 |
20,000 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
48,527 |
53,887 |
|
|
|
|
|
---------- |
---------- |
|
| Un-appropriated
profit C/F |
|
|
1,913 |
2,304 |
|
|
|
|
|
========== |
========== |
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| PROFIT
DISTRIBUTION |
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| The
Directors are pleased to declare a 7.50% cash dividend, i.e., Rs. 0.375 per
certificate of Rs. 5/- each. |
|
|
| REVIEW
OF OPERATIONS |
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| The
year under review was a difficult one for the overall economy of the Country.
Most of the key |
|
| indicators
of the economy registered decline. As a result even very strong business
groups have |
|
| experienced
low profitability and adverse cash flow impact on their businesses. |
|
|
| However,
Al Hamdolillah your Modaraba has maintained its steady and balanced growth.
The total footing |
|
| of
balance sheet has increased from Rs. 476.589 million to Rs. 553.977 million.
New leases executed |
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| during
the period amounted to Rs. 294.0 million and net investment in leases thus
rose from Rs. 457.0 |
|
| million
to Rs. 527.0 million. |
|
|
| Significant
improvement has also been made in business volume as well as in profit. The
gross lease |
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| rentals
have also improved from Rs. 22.0.5 million in 1997 to Rs. 300.0 million in
1998. The profit after |
|
| tax
has increased to Rs. 48.0 million as compared to Rs. 43.0 million of
corresponding period of last year. |
|
|
| The
Management of your Modaraba has continued to pursue its policy of cautious
lending in a prudent |
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| manner.
Due to this utmost care and due diligence, financial risk was substantially
reduced. The collection |
|
| of
lease rentals of Rs. 300.0 million during the year show excellent recovery
thus providing strong interpal |
|
| cash
generation. |
|
|
| This
year your directors have transferred Rs. 9.627 million and Rs. 20.000 million
as statutory and general |
|
| reserve
after giving cash dividend of Rs. 18.900 million. The creation of such
reserve will strengthen the |
|
| financial
health and operational base of your Modaraba which in turn will enhance the
profitability of |
|
| Modaraba. |
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|
| FUTURE
OUTLOOK |
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| The
economic forecast of current fiscal year does not show sign of much
improvement over the existing |
|
| levels.
The industrial growth will remain low due to general recession and
devaluation of rupee. The |
|
| depreciation
of rupee has increased domestic liquidity which would fuel inflation to cross
double digit |
|
| levels.
The current year in general would remain to be an unpredictable and difficult
year unless there is |
|
| a
decision on waiver of economic sanctions by the donor countries and
restoration of funding lines from |
|
| International
Monetary Agencies for Pakistan. |
|
|
| Leasing
is gradually becoming popular as alternative source of financing for medium
and long terms. The |
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| share
of leasing in the country is estimated at around 8% of the total private
fixed capital expenditure |
|
| which
indicates further growth potential. Unfortunately the slow down in economy
have resulted in |
|
| decline
in fixed investment hence there exist low demands for lease financing. |
|
|
| However,
your Modaraba will continue its efforts to consolidate its position in
current economic situation and |
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| will
explore all opportunities for its further growth. Your Modaraba will continue
to follow prudent lending |
|
| policy
taking exposure on such borrowers who have a proven track record with low
risk profile. |
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|
| In
the recent Financial Bill 1998 the Government of Pakistan has restored tax
exemption status of Modaraba |
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| which
will be applicable from the assessment year 1999-2000. This is a welcome
change for the Modaraba |
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| and
their Certificate holders for which we are thankful to Central Board of
Revenue. |
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|
| AUDITORS |
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| The
present auditors M/s. Ford, Rhodes, Robson, Morrow have consented to their
reappointment for |
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| the
year ending 30th June, 1999. The directors have confirmed their appointment
subject to required |
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| official
approval. |
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| ACKNOWLEDGMENT |
|
| In
the end, we take this opportunity to thank our Certificate holders, valued
Customers, Financial |
|
| Institutions.
Our sincere thanks to Central Board of Revenue for restoration tax exemption
status of |
|
| Modaraba
and Registrar of Modaraba for their assistance in above tax issue and their
constant guidance |
|
| and
support. |
|
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| We
would also like to express our deep appreciation to the staff for their
continuous efforts and dedication |
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| without
which it would have not been possible to achieve the present results. |
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| Karachi:
October 27, 1998 |
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For and on behalf of Board of Directors |
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|
Wazir Husain Jafree |
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|
Chairman & Chief Executive |
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|
| AUDITORS'
REPORT TO THE CERTIFICATE HOLDERS |
|
|
| We
have audited the annexed Balance Sheet as at June 30, 1998 and the related
Profit and Loss Account and |
|
| Statement
of changes in Financial Position (Cash Flow Statement) together with the
notes to the accounts for the |
|
| year
then ended of First Habib Modaraba which are Modaraba Company's (Habib
Modaraba Management 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
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 |
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| 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 Statement of
Changes in Financial |
|
| Position
(Cash Flow Statement) which are in agreement with the books of account,
exhibit |
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| respectively
a true and fair view of the state of the Modaraba's affairs as at June 30,
1998 and the |
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| profit
and the changes in the financial position (cash flow statement) for the year
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 for the Modaraba. |
|
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|
Ford, Rhodes, Robson, Morrow |
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| Karachi:
October 27, 1998 |
|
Chartered Accountants |
|
|
|
|
(MEMBER FIRM OF ERNST
& YOUNG INTERNATIONAL) |
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|
|
| BALANCE
SHEET AS AT JUNE 30, 1998 |
|
|
|
|
|
1998 |
1997 |
|
| TANGIBLE
FIXED ASSETS |
|
Note |
Rupees |
Rupees |
|
|
|
|
| Fixed
assets leased out |
|
4 |
526,888,597 |
456,170,160 |
|
| Fixed
assets in own use |
|
|
516,624 |
798,815 |
|
|
|
|
---------- |
---------- |
|
|
|
|
527,405,221 |
456,968,975 |
|
|
|
|
|
|
| LONG
TERM ADVANCES |
|
5 |
221,171 |
305,143 |
|
|
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
|
|
|
|
|
| Short
term investments |
|
6 |
23,875,195 |
16,600,192 |
|
| Advances,
prepayments and other receivables |
7 |
297,061 |
533,539 |
|
| Lease
rentals receivable-considered good |
|
1,368,398 |
798,564 |
|
| Cash
and bank balances |
|
8 |
810,790 |
1,383,412 |
|
|
|
|
---------- |
---------- |
|
|
|
|
26,351,444 |
19,315,707 |
|
|
|
|
---------- |
---------- |
|
|
|
|
553,977,836 |
476,589,825 |
|
|
|
|
========== |
========== |
|
| CAPITAL
AND RESERVES |
|
|
|
| Certificate
capital: |
|
|
|
| Authorised: |
|
|
|
| 60,000,000
(1997: 60,000,000) certificates of Rs. 5 each |
300,000,000 |
300,000,000 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| Issued,
subscribed and paid-up |
|
9 |
252,000,000 |
252,000,000 |
|
|
|
|
| Capital
reserve: |
|
|
|
| Statutory
reserve |
|
36,641,548 |
27,014,339 |
|
|
|
|
| Revenue
reserve: |
|
|
|
| General
reserve |
|
|
40,000,000 |
20,000,000 |
|
| Unappropriated
profit |
|
1,912,623 |
2,303,789 |
|
|
|
---------- |
---------- |
|
| Certificate
holders' equity |
|
|
330,554,171 |
301,318,128 |
|
|
|
|
| DEFERRED
LIABILITIES |
|
10 |
43,999,738 |
34,706,447 |
|
| CURRENT
LIABILITIES |
|
|
|
|
| Finance
arrangements |
|
11 |
131,500,000 |
80,000,000 |
|
| Lessees'
security deposits-current portion |
|
8,724,932 |
5,483,466 |
|
| Creditors
and accrued liabilities |
12 |
13,309,485 |
13,350,146 |
|
| Provision
for taxation |
|
|
4,685,942 |
14,676,925 |
|
| Unclaimed
profit distribution |
|
|
2,303,568 |
1,854,713 |
|
| Proposed
profit distribution |
|
|
18,900,000 |
25,200,000 |
|
|
|
|
---------- |
---------- |
|
|
|
|
179,423,927 |
140,565,250 |
|
|
|
|
---------- |
---------- |
|
|
|
|
553,977,836 |
476,589,825 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| The
annexed notes form integral part of these accounts. |
|
|
|
Sd/- |
|
Sd/- |
|
Sd/- |
|
|
Chief Executive |
|
Director |
|
Director |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
|
|
1998 |
1997 |
|
|
Note |
Rupees |
Rupees |
|
| INCOME |
|
|
|
|
|
| Lease
rentals |
|
|
|
300,041,383 |
220,500,823 |
|
| Morabaha
profit |
|
|
|
- |
7,164,932 |
|
| Other
income |
|
13 |
2,795,027 |
4,506,261 |
|
|
|
|
---------- |
---------- |
|
|
|
|
302,836,410 |
232,172,016 |
|
|
|
|
|
|
| EXPENSES |
|
|
|
|
|
|
| Depreciation
on fixed assets leased out |
|
209,221,236 |
152,042,152 |
|
| Financial
charges |
|
|
16,672,553 |
5,933,427 |
|
| Other
expenses |
|
|
8,466,955 |
5,588,414 |
|
|
|
|
---------- |
---------- |
|
|
|
|
234,360,744 |
163,563,993 |
|
|
|
|
---------- |
---------- |
|
|
|
|
68,475,666 |
68,608,023 |
|
| Provision
for classified receivables no more required |
- |
85,170 |
|
| Diminution
in value of investments written off |
(4,153,914) |
(859,245) |
|
|
|
|
---------- |
---------- |
|
|
|
|
64,321,752 |
67,833,948 |
|
| Effect
of change in accounting policy - prior year |
- |
(254,351) |
|
|
|
|
---------- |
---------- |
|
| Profit
before management fee |
|
|
64,321,752 |
67,579,597 |
|
| Modaraba
company's management fee |
|
(5,847,432) |
(6,143,600) |
|
|
|
|
---------- |
---------- |
|
| Profit
before taxation |
|
|
58,474,320 |
61,435,997 |
|
|
|
|
| TAXATION |
|
|
|
|
|
|
| Current |
|
|
14,000,000 |
11,500,000 |
|
| Prior
years |
|
|
(3,661,723) |
6,500,000 |
|
|
|
|
---------- |
---------- |
|
|
|
|
10,338,277 |
18,000,000 |
|
|
|
|
---------- |
---------- |
|
| Profit
after taxation |
|
|
48,136,043 |
43,435,997 |
|
|
|
|
| Unappropriated
profit brought forward |
|
2,303,789 |
12,754,991 |
|
|
|
|
---------- |
---------- |
|
|
|
|
50,439,832 |
56,190,988 |
|
| APPROPRIATIONS |
|
|
|
|
|
|
| Proposed
profit distribution @ 7.50% (1997:10%) |
18,900,000 |
25,200,000 |
|
| Transfer
to statutory reserve (20% of the profit) |
|
| as
per requirement of State Bank of Pakistan |
|
9,627,209 |
8,687,199 |
|
| Transfer
to general reserve |
|
|
20,000,000 |
20,000,000 |
|
|
|
|
---------- |
---------- |
|
|
|
|
48,527,209 |
53,887,199 |
|
|
|
|
---------- |
---------- |
|
| Unappropriated
profit carried forward |
|
1,912,623 |
2,303,789 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form integral part of these accounts. |
|
|
|
Sd/- |
|
Sd/- |
|
Sd/- |
|
|
Chief Executive |
|
Director |
|
Director |
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| (CASH
FLOW STATEMENT) FOR THE YEAR ENDED JUNE 30, 1998 |
|
|
|
|
|
|
|
|
|
|
|
1998 |
1997 |
|
|
|
|
|
Rupees |
Rupees |
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
| Profit
before taxation |
|
|
58,474,320 |
61,435,997 |
|
| Adjustment
for |
|
|
|
| Profit
on disposal of fixed assets leased out |
(889,650) |
(414,927) |
|
| Loss
on sale of investments |
|
120,000 |
12,000 |
|
| Depreciation
- fixed assets leased out |
|
209,221,236 |
152,042,152 |
|
|
- fixed assets in own use |
|
364,541 |
124,357 |
|
| Provision
for classified receivables |
|
- |
(85,170) |
|
|
|
|
| Provision
for gratuity |
|
187,315 |
151,640 |
|
| Diminution
in value of investments written off |
4,153,914 |
859,245 |
|
| Effect
of change in accounting policy |
|
- |
254,351 |
|
| Income
on PLS time deposit account |
|
- |
(713,962) |
|
| Dividend
income |
|
|
(424,835) |
(1,005,523) |
|
| Financial
charges on: |
|
|
|
| Musharika |
|
|
|
16,173,739 |
5,910,616 |
|
| Morabaha |
|
|
|
443,104 |
- |
|
|
|
---------- |
---------- |
|
|
|
16,616,843 |
5,910,616 |
|
| Gratuity
received |
|
- |
65,055 |
|
|
|
---------- |
---------- |
|
| Operating
profit before changes in operating assets |
287,823,684 |
218,635,831 |
|
|
|
|
|
|
|
| (Increase)/decrease
in operating assets: |
|
|
|
|
|
|
| Short
term morabaha finance |
|
- |
65,000,000 |
|
| Advances
and other receivables |
|
195,764 |
552,623 |
|
| Rentals
receivable |
|
|
(569,834) |
498,974 |
|
|
|
|
|
---------- |
---------- |
|
|
|
287,449,614 |
284,687,428 |
|
|
|
|
|
| Increase/(decrease)
in operating liabilities: |
|
|
|
|
| Lessees'
security deposits: |
|
|
|
|
|
|
| Received |
|
18,775,338 |
20,007,994 |
|
| Refund |
|
(6,427,896) |
(6,512,172) |
|
|
|
---------- |
---------- |
|
|
|
|
|
12,347,442 |
13,495,822 |
|
|
|
|
|
1,597,664 |
4,469,349 |
|
|
|
---------- |
---------- |
|
| Net
cash from operating activities before financial charges |
|
| and
income-tax paid |
|
301,394,720 |
302,652,599 |
|
| Income
-tax paid |
|
(20,329,260) |
(8,354,920) |
|
|
|
---------- |
---------- |
|
| Net
cash from operating activities (A) |
|
281,065,460 |
294,297,679 |
|
|
|
========== |
========== |
|
|
|
|
|
|
1998 |
1997 |
|
|
|
|
|
Rupees |
Rupees |
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
| Purchase
of fixed assets in own use |
|
(82,350) |
(602,772) |
|
| Purchase
of fixed assets leased out |
|
(294,269,587) |
(336,684,409) |
|
| Proceeds
from disposal of fixed assets leased out |
15,219,564 |
11,233,871 |
|
| Long
term advances |
|
|
|
83,972 |
(213,185) |
|
| Purchase
of shares |
|
|
|
(12,113,917) |
(10,949,705) |
|
| Proceeds
from sale of investment |
|
|
565,000 |
205,500 |
|
| Dividend
received |
|
|
|
390,430 |
1,005,523 |
|
| Profit
on time deposit account |
|
|
75,119 |
2,057,120 |
|
|
|
|
|
---------- |
---------- |
|
| Net
cash from investing activities (B) |
|
(290,131,769) |
(333,948,057) |
|
|
|
========== |
========== |
|
|
|
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
| Dividend
paid |
|
|
|
(24,751,145) |
(36,984,079) |
|
| Finance
arrangements |
|
|
|
51,500,000 |
80,000,000 |
|
| Musharika
profit paid |
|
|
|
(18,255,168) |
(3,760,653) |
|
|
|
|
|
---------- |
---------- |
|
| Net
cash financing activities (C) |
|
8,493,687 |
39,255,268 |
|
|
|
========== |
========== |
|
|
|
|
|
| NET
DECREASE IN CASH AND CASH EQUIVALENTS (A+B+C) |
(572,622) |
(395,110) |
|
| CASH
AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR |
1,383,412 |
1,778,522 |
|
|
|
|
|
---------- |
---------- |
|
| CASH
AND CASH EQUIVALENTS AT THE END OF THE YEAR |
810,790 |
1,383,412 |
|
|
|
========== |
========== |
|
|
|
|
|
Sd/- |
|
Sd/- |
|
Sd/- |
|
|
Chief Executive |
|
Director |
|
Director |
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
| 1.
STATUS AND NATURE OF BUSINESS |
|
|
|
|
|
|
| The
First Habib Modaraba is a perpetual, multi-purpose modaraba floated and
managed by Habib Modaraba |
|
| Management
Limited and is listed on the stock exchanges of Pakistan. The Modaraba is
engaged in the business |
|
| of
leasing, morabaha financing and other related business, without involving the
element of riba (interest). |
|
|
| 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.1
Accounting convention |
|
| These
accounts have been prepared under the historical cost convention. |
|
