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First IBL Modaraba
Annual Report 1998
CONTENTS
Corporate Information
Director's Report
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
CORPORATE INFORMATION
Modaraba Company			IBL Modaraba Management (Private) Limited
Board of Directors
Chief Executive			Inayat Ismail
Director			Chishty Mujahid
Director			Arshad Abdulla
Company Secretary			Masood Anwer Khan
Auditors			Daudally, Lalani & Co.
			Chartered Accountants
Bankers			Muslim Commercial Bank Ltd.
			Citibank N. A.
			United Bank Ltd.
			Crescent Investment Bank Ltd.
			Habib Bank Ltd.
Registrar			Khalid, Majid, Hussain, Rehman
			Chartered Accountants
			16-K, Block - 6, P.E.C.H.S..,
			Near Chanesar Halt Station,
			Off. Shahra-e- Faisal, Karachi.
Registered Office			First Floor, N.I.C. Building
			Abbasi Shaheed Road,
			Karachi.
DIRECTORS' REPORT
The Board of Directors of IBL Modaraba Management (Private) Limited is pleased to present
the Eighth Annual Report of First IBL Modaraba with audited accounts for the year ended 30th
June, 1998.
FINANCIALS:
Results for the year under report are summarized as follows:
					(Rs. in '000')
					Current	Previous
					Year	Year
					(1998)	(1997)
- Gross revenue					20,876	19,609
					==========	==========
- Operating profits					9,069	7,312
					==========	==========
- Net profit for the period					1,075	4,226
- Unappropriated profits brought forward					1,090	9,397
					----------	----------
					2,165	13,623
- Transfer to statutory reserve					215	845
- Profit distribution					-	11,688
					----------	----------
					215	12,533
					----------	----------
- Unappropriated profit carried forward					1,950	1,090
					==========	==========
REVIEW OF OPERATIONS:
The critical economic conditions of the country and unfavorable business climate further aggravated
during the year, as a result of sanctions and other adverse developments following nuclear tests.
External as well as internal pressures, deteriorating law and order situation, constitutional crises
and foreign exchange constraints led to weakening of the country's economy, hitting severely at
macro and micro levels.
The prevailing uncertainty warranting extra caution precluded the management from diversifying
the Modarba's business activities which were trade and stock market operations. Owing to funding
constraints and various fiscal anomalies, the Modaraba could not make the desired breakthrough
in trading business. notwithstanding the group's proven strength in this line of business.
Despite adverse conditions, you will be pleased to observe that the Modaraba performed well
during the year under review barring the investment portfolio. Stock markets crashed in response
to unsustainable economic conditions-of the country. Modaraba's gross revenue during the year
amounted to Rs. 20.8 million and the net operating profits amounting to Rs. 9.0 million, which
compares favorably to the preceding year's gross revenue of Rs. 19.6 million and the net operating
profits of Rs. 7.3 million respectively. However, the provision for diminution in the value of
investments amounting to Rs. 4.0 million and higher tax incidence requiring a provision of
Rs. 3.3 million are responsible for depressing the Modaraba's profitability.
FUTURE OUTLOOK:
Economic and political measures taken by the government, International Monetary Fund (IMF)
and other donor agencies' understanding for adequate economic package, resolution of Independent
Power Producers (IPPs) tussle in the offing and various other tangible factors indicate a positive
outlook. Restoration of tax exemption to non-trading modarabas and removal of certain tax
anomalies pertaining to leasing and modaraba activities further strengthens our optimism and
confidence to diversify modaraba activities into leasing, morabahas and musharakas with a view
to ensuring stable income streams. We, therefore, strive and pray for Modaraba's improved
profitability in the years to come.
YEAR 2000 COMPLIANCE:
The management of your Modaraba has taken adequate steps to counter the year 2000 problem
known as the "Millennium Bug", which include developing a new computerised system of
Accounting and Management reporting.
AUDITORS:
The present auditors, Messrs. Daudally Lalani & Co., Chartered Accountants, being due for
retirement, have offered themselves for re-appointment for the year ending June 30, 1999. Their
appointment has been confirmed by the Board of Directors, subject to approval of Registrar of
Modaraba Companies and Modarabas.
ACKNOWLEDGMENT:
The directors wish to place on record their appreciation and thanks to certificate-holders for their
continued confidence in the Modaraba, to the authorities for their guidance and to all the members
of management and staff for their dedication and hard work.
				On behalf of the Board
Karachi: December 22, 1998				Chief Executive
AUDITOR'S 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 m Financial Position, together with the notes to the accounts, for the year ended June 30,
1998 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; and Modaraba Companies and Modaraba Rules, 1981;
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
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, 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, 1998 and the Profit and Cash flow for the
year then ended;
(ii) In our opinion zakat deductible at source under the Zakat and Ushr Ordinance, 1980 was deducted
by the Modaraba and deposited in the Central Zakat Fund established under section 7 of the
Ordinance; 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.
				DAUDALLY LALANI & CO.
Karachi: December 22,1998				Chartered Accountants
BALANCE SHEET AS AT JUNE 30, 1998
					1998	1997
				Note	Rupees	Rupees
CAPITAL AND RESERVES
CAPITAL
Authorised Fund
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				3	116,875,000	116,875,000
Statutory reserve				4	10,262,855	10,047,929
Unappropriated Profit					1,950,185	1,090.48
					----------	----------
					129,088,040	128,013,409
OBLIGATION UNDER FINANCE LEASE				5	1,083,516	188,043
SECURITY DEPOSITS					656,086	1,029,986
CURRENT LIABILITIES
Due to Management company				6	5,407,332	4,983,607
Creditors, Accrued and other Liabilities				7	4,881,451	2,446,957
Morabaha Finance					-	18,428,475
Musharika Finance				8	30,680,905	-
Unclaimed Dividend					761,016	605,884
Profit distribution payable					-	11,687,500
Provision for Taxation					6,752,637	3,441,737
					----------	----------
					48,483,341	41,594,160
					----------	----------
					179,310,983	170,825,598
					==========	==========
FIXED ASSETS - Tangible at book value
Assets in own use				9	2,258,299	1,187,957
Assets leased out				10	1,904,889	4,516,330
LONG TERM DEPOSITS & DEFERRED COST				11	223,759	145,969
CURRENT ASSETS
Stock - in - trade					-	60,595,224
Trade debtors-Unsecured, Considered good					58,269,066	2,652,251
Sundry debtors-Unsecured, Considered good					428,652	15,154,654
Marketable Securities of quoted companies
& Modarabas				12	8,116,486	7,796,319
Morabaha finance				13	18,591,636	18,704,376
Musharika arrangement				14	11,488,789	8,225,000
Accrued profit				15	10,591,003	3,898,906
Advances, deposits and Pre-payments				16	1,203,740	206,087
Other receivables				17	3,899,408	1,896,133
Cash and bank balances				18	62,335,256	45,846,392
					----------	----------
					174,924,036	164,975,342
					----------	----------
					179,310,983	170,825,598
					==========	==========
The annexed notes form an integral part of these accounts.
Inayat Ismail			Chishty Mujahid			Arshad Abdulla
(Chief Executive)			(Director)			(Director)
IBL Modaraba Management			IBL Modaraba Management			IBL Modaraba Management
(Private) Limited			(Private) Limited			(Private) Limited
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED JUNE 30, 1998
					1998	1997
				Note	Rupees	Rupees
OPERATING INCOME/(LOSS)
Trading income				19	3,421,472	10,552,176
Morabaha Profit					4,276,502	8,269,681
(Loss) on sale of Marketable Securities					(4,102,658)	(5,465,702)
Dividend income					236,302	445,778
Musharika profit					1,797,320	821,571
Lease rentals					2,341,690	2,497,260
Other income				20	12,905,649	2,488,478
					----------	----------
					20,876,277	19,609,242
OPERATING EXPENSES
Administrative				21	5,296,992	5,005,936
Financial charges				22	4,732,867	5,790,717
Amortization of leased assets					1,777,646	1,500,544
					----------	----------
					11,807,505	12,297,197
					----------	----------
Operating Profit					9,068,772	7,312,045
Provision for diminution in the value of investments					(4,072,457)	922,652
Provision for doubtful debts					(142,845)	(377,363)
					----------	----------
					(4,215,302)	545,289
					----------	----------
					4,853,470	7,857,334
Modaraba Management fee					441,225	714,303
					----------	----------
Profit before taxation					4,412,245	7,143,031
Taxation					3,337,614	2,917,147
					----------	----------
Profit after taxation					1,074,631	4,225,884
Un appropriated profit brought forward					1,090,480	9,397,273
					----------	----------
Profit available for appropriation					2,165,111	13,623,157
APPROPRIATION
Profit distribution Nil (1997: 10%)					-	11,687,500
Transfer to statutory reserve					214,926	845,177
					----------	----------
Unappropriated profit carried forward					1,950,185	1,090,480
					==========	==========
Earning per Certificate					0.09	0.36
The annexed notes form an integral part of these accounts.
Inayat Ismail			Chishty Mujahid			Arshad Abdulla
(Chief Executive)			(Director)			(Director)
IBL Modaraba Management			IBL Modaraba Management			IBL Modaraba Management
(Private) Limited			(Private) Limited			(Private) Limited
STATEMENT OF CHANGES IN FINANCIAL POSITION
(CASH FLOW STATEMENT)
FOR THE YEAR ENDED JUNE 30, 1998
					1998	1997
					Rupees	Rupees
CASH FLOW FROM OPERATING ACTIVITIES
Profit before taxation					4,412,245	7,143,031
Adjustment for non-cash items:
Depreciation on own assets					832,143	451,643
Amortization on:
Assets leased out					1,777,646	1,500,544
Deferred cost					65,248	126,096
Provision for diminution in value of investment					4,072,457	(922,652)
Provision for doubtful debts					142,845	377,363
Gain on termination of leased assets					(61,977)	-
					----------	----------
					6,828,362	1,532,994
Adjustment for separate consideration:
Dividend income					(236,302)	5,790,717
Financial charges					4,732,867	(445,778)
					----------	----------
Cash from operating activities before working capital changes					15,737,172	14,020,964
(INCREASE)/DECREASE IN CURRENT ASSETS
Stock- in- trade					60,595,224	(7,834,338)
Trade debtors					(55,616,815)	(2,652,251)
Sundry Debtors					14,726,002	54,256,210
Musharika finance					(3,263,789)	(7,250,000)
Morabaha finance					112,740	27,667,018
Accrued profit					(6,692,097)	(712,299)
Advances, Deposits and Pre-payments					59,676	(67,547)
Other receivables					(2,146,119)	(1,043,962)
					----------	----------
					7,774,822	62,362,831
INCREASE/(DECREASE) IN CURRENT LIABILITIES
Due to management companies					423,725	(4,398,149)
Creditors, accrued & other liabilities					(126,168)	(6,531,239)
Morabaha finance					(18,428,475)	18,428,475
Musharika finance					30,680,905	(46,000,000)
					----------	----------
					12,549,987	(38,500,913)
					==========	==========
					1998	1997
					Rupees	Rupees
Cash flow from operating activities					36,061,981	37,882,882
after working capital changes
Income tax paid					(1,084,043)	(341,480)
Financial charges paid					(2,630,868)	(5,790,717)
					----------	----------
Net cash generated from operating activities					32,347.07	31,750,685
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of assets in own use;
Owned					(73,100)	(130,750)
Leased					(1,829,385)	(408,204)
Purchase of assets leased out					-	(574,358)
Proceeds on termination of leased assets					521,872	-
Long term deposit					(143,039)	(40,820)
Net (investment)/disinvestment in marketable securities					(4,392,624)	5,470,586
Insurance claim received					-	65,560
Dividend received					236,302	445,778
					----------	----------
Net cash (used) in/generated from investing activities					(5,679,974)	4,827,792
CASH FLOW FROM FINANCING ACTIVITIES
Arrangement under finance lease					1,829,385	408,204
Paid back obligation under finance lease					(475,249)	(236,254)
Security deposit					-	7,436
Profit distribution paid					(11,532,368)	(41,651)
					----------	----------
Net cash (used) in/generated from financing activities					(10,178,232)	137,735
					----------	----------
Net increase in cash and cash equivalents					16,488,864	36,716,212
Cash & cash equivalents at tile beginning of the year					45,846,392	9,130,180
					----------	----------
Cash & cash equivalents at the end of the year					62,335,256	45,846,392
					==========	==========
Inayat Ismail			Chishty Mujahid			Arshad Abdulla
(Chief Executive)			(Director)			(Director)
IBL Modaraba Management			IBL Modaraba Management			IBL Modaraba Management
(Private) Limited			(Private) Limited			(Private) Limited
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED JUNE 30, 1998
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 businesses.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Overall valuation policy
The accounts have been prepared under the historical cost convention.
b) Fixed assets and depreciation
(i) 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 arc 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 amortizable 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