| First Islamic Modaraba |
|
|
|
|
|
|
| Annual
Report 1998 |
|
|
|
| Contents |
|
|
|
| Corporate
Information |
|
| Director's
Report |
|
| Auditor's
Report |
|
| Balance
Sheet |
|
| Profit
and loss Account |
|
| Cash
Flow Statement |
|
| Notes
to the Account |
|
| Pattern
of Certificate |
|
|
|
|
|
| CORPORATE
INFORMATION |
|
|
| Modaraba
Company |
|
Islamic Investment Bank
Limited |
|
| Chairman |
|
Bashir Ahmed |
|
| Vice
Chairman |
|
Giulio David Morgan Rees
Franzinetti |
|
| President
& Chief Executive |
M. Nadeem Anwar |
|
| Directors |
|
Shahid Hafiz Kardar |
|
|
Andrew Geoffrey Yates |
|
|
Abdul Wadud Khan |
|
|
Arshad Wadud Khan |
|
|
Zafar Iqbal Qureshi |
|
|
Abdul Haleem Paracha |
|
|
Bahram Hasan |
|
|
| Secretary |
|
M.H.M. Burney |
|
|
|
| Auditors |
|
Hameed Chaudhri & Co. |
|
|
|
Chartered Accountants |
|
|
|
| Legal
Retainers |
|
M/s. Habib-ur-Rehman
& Co. |
|
|
Barrister &
Advocates, Karachi |
|
|
| Bankers |
|
Schon Bank Limited |
|
|
Bolan Bank Limited |
|
|
Industrial Development
Bank of Pakistan |
|
|
Union Bank Limited |
|
|
Allied Bank of Pakistan
Limited |
|
|
Habib Bank Limited |
|
|
| Principal
Place |
|
Finance & Trade
Centre |
|
| of
Business |
|
B Tower, 2nd Floor, |
|
|
Sharae Faisal, |
|
|
Karachi. |
|
|
|
| DIRECTORS'
REPORT |
|
|
| The
Board of Directors of Islamic Investment Bank Ltd., the Management Company of
First Islamic Modaraba, present |
|
| 4th
annual report of the Modaraba together with audited accounts for the period
from July 01, 1997 to June 30, |
|
| 1998. |
|
|
| Financial
Results |
|
|
| Summarized
results for the year under report are as under:- |
|
|
|
(Rs. in "000") |
|
|
June 1998 |
June 1997 |
|
|
| Total
Operating Income |
|
17,460 |
21,445 |
|
|
--------- |
--------- |
|
| Profit
before Management Fee & taxation |
|
2,278 |
12,703 |
|
| -Less:
Management Fee- 10% |
|
207 |
1,155 |
|
|
--------- |
--------- |
|
| Profit
for the period |
|
2,071 |
11,548 |
|
| Less:
Provision for Taxation |
|
(955) |
0 |
|
|
|
|
| Add:
Unappropriated profit B/F |
|
174 |
935 |
|
|
--------- |
--------- |
|
| Profit
available for appropriation |
|
1,290 |
12,483 |
|
| Appropriations |
|
|
|
| Transfer
to statutory reserve |
|
223 |
2,309 |
|
| Interim
Profit distribution in cash (1997 - 6.5%) |
0 |
6,500 |
|
| Final
Profit distribution in cash nil (1997 - 3.5%) |
0 |
3,500 |
|
|
223 |
12,309 |
|
| Unappropriated
Profit carried forward |
|
1,067 |
174 |
|
|
--------- |
--------- |
|
|
1,290 |
12,483 |
|
|
========= |
========= |
|
|
|
|
| It
will be seen that total income of the Modaraba for the period under review
decreased to Rs. 17.460 Million as |
|
| against
Rs. 21.445 Million during the last year. After providing for Modaraba
Company's Management Fee, debts |
|
| as
per prudential regulations and transfer to statuary reserve, the profit
available for appropriation, inclusive of |
| unappropriated
amount of Rs. O. 174 Million brought forward from 1997, amounted to Rs. 0.950
Million. |
|
|
| Fiscal
& Economic Policies |
|
|
| The
financial year ended June 1997, which turned out to be the worst period of
economic performance by the country |
|
| in
decades, continued to have impact on the country's balance of payment,
foreign exchange reserves, rising budget |
|
| deficit
and lack of pick up in demand of credit from commerce and industry. The year
under review also witnessed |
|
| melt-down
of the region's economy and it was unlikely that we would have escaped
un-hurt. |
|
|
| Review
of Operations |
|
|
| The
Modaraba followed a cautious approach realigning its focus on consolidation,
curtailment of disbursements |
|
| avoiding
over exposure to any particular sector or assets. The downturn prevailed in
all sectors-KSE 100 index |
|
| continued
to fall unabated registering in June 1998 at 880 points from 1566 points at
the end of the financial year |
| 1997
and lack of pick up in demand of credit resulted in decrease in
Morabaha/Musharika transactions. |
|
|
| During
the year under review, we established letters of credit for Rs. 14.056
million for import of goods for trading |
| purposes.
Goods of the value of about Rs. 8.945 million were sold out over which profit
of Rs. 1.172 million was |
|
| earned.
Momentum of trading activities was also difficult to sustain because of
changes in tax structure and L/C |
|
| opening
requirements. |
|
|
| Leasing
sector which depends on industrial development also exercised great restraint
in extending new leases and |
|
| solicited
only blue chip clients. Despite all these handicaps, we extended our leasing
portfolio from Rs. 8.55 million |
| to
about Rs. 1 7.625 Million. |
|
|
| In
the back drop of the above mentioned scenario, the Modaraba most of the time
maintained excessive liquidity |
|
| which
was placed with financial institutions at low prevailing rates avoiding under
risk on the hope of higher returns. |
| Thus,
the Modaraba could manage total operating income of Rs. 17,459,810/- as
against Rs. 21,445,599/- as |
|
| on
June 30, 1 997. |
|
|
| Future
Prospects: |
|
|
| Subsequent
to atomic explosions in May 1998, Government decision to freeze all foreign
currency accounts to avert |
|
| financial
collapse, decrease in foreign currency reserves and default like situation in
meeting the debt repayment |
|
| schedule,
the country faced unprecedented crises of confidence. Law and order situation
in the country, particularly |
| in
Karachi, added fire to the scenario. |
|
|
| The
role of financial institutions has assumed greater importance and the
challenges of post explosion sanctions can |
| only
be met through sincere and sustained efforts. Your Modaraba have chalked out
future strategy for continued |
|
| growth
and taking steps for prudent and risk free investments in profitable avenues. |
|
|
| The
Government has restored tax exemption to the Modaraba sector from the
assessment year 1999 - 2000 |
|
| provided
that 90% profit of the Modaraba in the year is distributed to the certificate
holders. This relief to Modarabas |
| will
be an additional advantage for our certificate holders. |
|
|
| Your
Modaraba will continue to follow cautious approach for expending remunerative
and suitable areas of |
|
| business
i.e. Morabaha/Musharika transactions, leasing and trading activities without
compromising on the |
|
| qualitative
strength and ability of the institution. |
|
|
| Dividend |
|
|
| Though
right from the inception in September 94, your Modaraba has distributed
almost entire profit in the shape |
|
| of
cash dividend. from year to year, the Board of Directors of the Management
Company have decided to carry |
|
| forward
the amount available for appropriation to next year. |
|
|
| 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 1998-99. The Board of Directors
have agreed to their |
|
| appointment,
subject to approval of the Registrar of Modaraba. |
|
|
| 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, 1998 and the related
profit and loss account and cash |
|
| flow
statement, together with the notes to the accounts for the year ended 1998 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 account have been kept by the Modaraba
Company in respect of First |
|
| Islamic
Modaraba as required by the modaraba Companies and modaraba (Flotation 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 (Flotation 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, 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 30 June, 1998 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,
1980wasdeducted 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 |
|
|
| (d)
Without qualifying our opinion we report that as explained in note 23.1, the
Modaraba had given loans |
|
| and
advances to and on behalf of Modaraba Company which is in violation of
Section 17(2) of Modaraba |
|
| Companies
and Modaraba (flotation and Control) Ordinance, 1980. |
|
|
| Karachi |
|
HAMEED CHAUDHRI & CO. |
|
| 06-02-99 |
|
CHARTERED ACCOUNTANTS |
|
|
|
| BALANCE
SHEET AS AT 30 JUNE, 1998 |
|
|
|
NOTE |
1998 |
1997 |
|
|
|
Rupees |
Rupees |
|
|
| CAPITAL
AND RESERVES |
|
|
| Certificate
capita |
|
| Authorised
14,000,000 Modaraba Certificates of |
|
| Rs.
10/- each |
|
140,000,000 |
140,000,000 |
|
|
| Issued
subscribed and paid up |
3 |
100,000,000 |
100,000,000 |
|
| Reserve
& unappropriated profit |
|
| Statutory
reserve |
|
4 |
6,516,826 |
6,293,516 |
|
| Unappropriated
profit |
|
|
1,067,300 |
174,060 |
|
|
|
--------- |
--------- |
|
|
|
7,584,126 |
6,467,576 |
|
|
|
--------- |
--------- |
|
|
|
107,584,126 |
106,467,576 |
|
| Obligation
under Finance leases |
5 |
0 |
258,917 |
|
| Deferred
Liabilities |
|
| Lease
key money |
|
1,552,950 |
1,007,950 |
|
|
| Current
Liabilities |
|
|
| Creditors,
accrued charges & other liabilities |
6 |
966,172 |
2,811,654 |
|
| Current
obligation under finance leases |
|
217,611 |
541,035 |
|
| Provision
for taxation |
|
955,000 |
0 |
|
| Unclaimed
profit distribution |
|
329,320 |
793,721 |
|
| Profit
distribution payable |
|
0 |
3,500,000 |
|
|
---------- |
---------- |
|
|
2,468,103 |
7,646,410 |
|
|
---------- |
---------- |
|
|
111,605,179 |
115,380,853 |
|
|
========== |
========== |
|
|
| Operating
fixed assets |
7 |
2,770,350 |
2,900,360 |
|
| Assets
given on lease |
|
8 |
17,628,248 |
8,555,762 |
|
|
|
|
|
| Long
term investments-at cost |
9 |
10,509,975 |
10,509,975 |
|
| Long
term deposit & deferred costs |
10 |
706,910 |
1,222,570 |
|
| Long
Term Loans |
|
11 |
0 |
515,966 |
|
| Current
Assets |
|
|
| Stocks
in trade |
|
6,283,834 |
0 |
|
| Trade
debtors-unsecured considered good |
|
1,328,088 |
0 |
|
| Short
Term Musharakah finances |
12 |
13,000,000 |
12,298,750 |
|
| Short
Term Morabaha finances |
13 |
3,000,000 |
6,000,000 |
|
| Short
Term investments |
14 |
45,350,270 |
55,514,300 |
|
| Advances,
deposits, prepayments & other |
|
| receivables |
|
15 |
9,081,487 |
3,390,739 |
|
| Cash
& bank balances |
|
16 |
1,946,017 |
14,472,431 |
|
|
---------- |
---------- |
|
|
79,989,696 |
91,676,220 |
|
|
---------- |
---------- |
|
|
111,605,179 |
115,380,853 |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts |
|
|
| (M.
NADEEM ANWAR) |
|
(ABDUL WADUD KHAN) |
|
| President
& Chief Executive |
Director |
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE, 1998 |
|
|
|
NOTE |
1998 |
1997 |
|
|
|
Rupees |
Rupees |
|
|
| Operating
Income |
|
17 |
15,120,936 |
18,516,431 |
|
| Other
Income |
|
18 |
2,338,874 |
2,928,168 |
|
|
|
--------- |
--------- |
|
|
|
17,459,810 |
21,444,599 |
|
|
|
|
|
| Operating
expenses |
|
19 |
11,609,904 |
8,452,252 |
|
| Financial
expenses |
|
20 |
117,771 |
230,714 |
|
| Other
charges |
|
21 |
3,453,430 |
58,075 |
|
|
|
---------- |
---------- |
|
|
|
15,181,105 |
8,741,041 |
|
|
|
---------- |
---------- |
|
| Profit
for the year before management fee |
|
2,278,705 |
12,703,558 |
|
| Modaraba
Company's management fee |
|
207,155 |
1,154,869 |
|
|
|
---------- |
---------- |
|
| Profit
for the year before taxation |
|
2,071,550 |
11,548,689 |
|
| Provision
for taxation |
22 |
955,000 |
0 |
|
|
|
---------- |
---------- |
|
|
|
1,116,550 |
11,548,689 |
|
| Unappropriated
profit brought forward |
|
174,060 |
935,109 |
|
|
|
---------- |
---------- |
|
| Profit
available for appropriation |
|
1,290,61 0 |
12,483,798 |
|
|
|
|
| Appropriations |
|
|
|
| Transfer
to statutory reserve |
|
223,310 |
2,309,738 |
|
| Interim
Profit distribution in cash - nil (1997- 6.5%) |
0 |
6,500,000 |
|
| Final
Profit distribution in cash - nil (1997- 3.5%) |
0 |
3,500,000 |
|
|
|
---------- |
---------- |
|
|
|
223,310 |
12,309,738 |
|
|
|
---------- |
---------- |
|
| Unappropriated
profit carried forward |
|
1,067,300 |
174,060 |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts |
|
|
| (M.
NADEEM ANWAR) |
|
(ABDUL WADUD KHAN) |
|
| President
& Chief Executive |
Director |
|
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
NOTE |
1998 |
1997 |
|
|
|
Rupees |
Rupees |
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
A |
(7,638,622) |
43,733,717 |
|
|
| RETURN
ON INVESTMENT & SERVICING OF FINANCE |
|
| Finance
charges on leased assets |
|
(94,505) |
(204,013) |
|
| Zakat paid |
|
(844) |
0 |
|
| Profit
distribution paid |
|
(3,964,401) |
(13,383,248) |
|
| Dividend
income |
|
209,508 |
246,945 |
|
|
--------- |
--------- |
|
|
(3,850,242) |
(13,340,316) |
|
| TAXATION |
|
|
|
| Tax
deducted at source |
|
(882,625) |
(123,810) |
|
| INVESTING
ACTIVITIES |
|
|
|
| Capital
expenditure |
|
(1,065,672) |
(916,774) |
|
| Investments |
|
(711,690) |
(983,260) |
|
| Sale
proceeds of fixed assets |
|
400,000 |
0 |
|
| Sale
proceeds of investments |
|
1,004,312 |
9,874,537 |
|
| Assets
leased out |
|
(9,905,000) |
(9,071,550) |
|
|
--------- |
--------- |
|
| Cash
(out flow) from investing activities |
|
(10,278,050) |
(1,097,047) |
|
|
--------- |
--------- |
|
| Cash
(out flow)/inflow before financing activities |
(22,649,539) |
29,172,544 |
|
|
|
|
|
| FINANCING
ACTIVITIES |
|
| Long
term loans |
|
664,166 |
(664,166) |
|
| Lease
deposits received |
|
41,300 |
0 |
|
| Obligation
under lease finance paid |
|
(582,341) |
(442,164) |
|
|
--------- |
--------- |
|
| Cash
inflow/(Out flow) from financing activities |
123,125 |
(1,106,330) |
|
|
--------- |
--------- |
|
| (Decrease)/Increase
in Cash & Cash equivalents |
B |
(22,526,414) |
28,066,214 |
|
|
========== |
========== |
|
| (M.
NADEEM ANWAR) |
|
(ABDUL WADUD KHAN) |
|
| President
& Chief Executive |
|
Director |
|
|
|
NOTE |
1998 |
1997 |
|
|
|
Rupees |
Rupees |
|
|
|
| A.
CASH FLOW FROM OPERATING ACTIVITIES |
|
2,071,550 |
11,548,689 |
|
| Net
profit for the year |
|
|
|
| Adjustment
for:- |
|
|
|
| Depreciation |
|
732,531 |
674,708 |
|
| Amortisation
of deferred costs |
|
474,360 |
474,360 |
|
| Amortisation
of assets leased out |
|
1,377,514 |
1,523,738 |
|
| Dividend
income |
|
(209,508) |
(246,945) |
|
| Loss/(Profit)
on sale of investments |
|
5,640 |
(1,178,500) |
|
| Finance
charges on leased assets |
|
94,505 |
204,013 |
|
| Diminution
in value of investments/(written back) |
203,430 |
(191,925) |
|
| Provision
for doubtful receivable |
|
3,250,000 |
250,000 |
|
| Zakat |
|
844 |
0 |
|
| Profit
on sale of assets |
|
(95,220) |
0 |
|
|
---------- |
---------- |
|
|
5,834,096 |
1,509,449 |
|
|
---------- |
---------- |
|
|
7,905,646 |
13,058,138 |
|
| (Increase)/decrease
in current assets |
|
|
|
| Short
term Musharakah finances |
|
(951,250) |
23,231,250 |
|
| Short
term Morabaha finances |
|
0 |
5,000,000 |
|
| Stocks
in trade |
|
(6,283,834) |
0 |
|
| Trade
debtors |
|
(1,328,088) |
0 |
|
| Advances,
deposits, prepayments & |
|
|
|
| other
receivables |
|
(5,160,614) |
1,289,812 |
|
|
---------- |
---------- |
|
|
(13,723,786) |
29,521,062 |
|
| (Decrease)/Increase
in current liabilities |
|
|
|
| Creditors,
accrued charges & other liabilities |
|
(1,820,482) |
1,154,517 |
|
|
---------- |
---------- |
|
| Cash
flow from operating activities |
|
(7,638,622) |
43,733,717 |
|
|
========== |
========== |
|
| B.
ANALYSIS OF CHANGES IN CASH & CASH EQUIVALENTS |
|
| Balance
as at 30 June, 1997 |
|
69,472,431 |
41,406,217 |
|
| (Decrease)/Increase
in cash & cash equivalents |
|
(22,526,414) |
28,066,214 |
|
|
---------- |
---------- |
|
| Balance
as at 30 June, 1998 |
|
46,946,017 |
69,472,431 |
|
|
========== |
========== |
|
| C.
CASH & CASH EQUIVALENTS |
|
| Cash
& bank balances |
|
1,946,017 |
14,472,431 |
|
| Fund
Management Scheme |
|
45,000,000 |
55,000,000 |
|
|
---------- |
---------- |
|
|
46,946,017 |
69,472,431 |
|
|
========== |
========== |
|
| (M.
NADEEM ANWAR) |
|
(ABDUL WADUD KHAN) |
|
| President
& Chief Executive |
Director |
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED JUNE 30, 1998 |
|
|
| 1.
LEGAL STATUS AND NATURE OF BUSINESS |
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| First
Islamic Modaraba is multipurpose, perpetual and multidimensional Modaraba
formed under the |
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| Modaraba
Companies and Modaraba (Floatation and Control) Ordinance, 1980 and the Rules
framed |
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| thereunder
and is managed by Islamic Investment Bank Limited, a company incorporated in
Pakistan. The |
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| Modaraba
is listed on Karachi Stock Exchange (Guarantee) Limited. |
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| The
Modaraba is engaged in the business of leasing, Musharakah, Morabaha
financing, trading in |
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| securities
and other commodities. |
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| 2.
SIGNIFICANT ACCOUNTING POLICIES |
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| 2.1
ACCOUNTING CONVENTION |
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| These
accounts have been prepared under the historical cost convention. |
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| 2.2
TAXATION |
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| (a)
Provision for current taxation is based on taxable income at the current rate
of taxation, after taking |
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| into
account tax credits and rebates available, if any. |
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| (b)
The Modaraba accounts for deferred taxation using the liability method on all
major timing |
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| differences
excluding tax effects on timing differences which are not likely to reverse
in the foreseeable |
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| future. |
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| 2.3
FIXED ASSETS |
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| (a)
Operating fixed assets are stated at cost less depreciation. Depreciation is
charged to income |
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| applying
the straight line method whereby the cost of an asset is written off over its
estimated useful |
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| life.
Proportionate depreciation is charged on additions and deletions during the
year. |
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| (b)
Maintenance and normal repairs are charged to income as and when incurred.
Gains or losses if |
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| any,
on disposal of fixed assets are taken to profit and loss account. |
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| (c)
Assets acquired under finance leases. |
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| The
Modaraba accounts for assets acquired under finance lease by recording the
assets and related |
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| liability.
These amounts are determined on the basis of discounted value of minimum
lease payment. |
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| Finance
charges are allocated to accounting periods in a manner so as to provide a
constant periodic |
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| rate
of charge on the outstanding liability. Depreciation is charged to income on
straight line basis |
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| at
the rates given in Note 7. |
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| (d)
Assets leased out and amortisation |
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| Assets
leased out are stated at cost less accumulated amortisation. Amortisation is
charged to income |
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| applying
the annuity method whereby the cost of the asset less estimated residual
value is amortised |
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| over
the lease period. |
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| 2.4
INVESTMENTS |
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| (a)
Long term investments are stated at cost. Provision for diminution in value
of investment is made |
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| against
permanent diminution, if any. |
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| (b)
Short term investments are valued at lower of average cost and realisable
value determined on |
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| investment
portfolio basis. |
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| (c)
Gains or losses on sale of investments during the year are included in the
income currently. |
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| 2.5
DEFERRED COSTS |
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| Expenses
incurred in connection with floatation of Modaraba and other preliminary
expenses are |
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| being
amortised over a period of sixty months. |
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| 2.6
STOCKS IN TRADE |
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| These
are valued at lower of cost, determined on average basis and net realisable
value. Net |
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| realisable
value is determined on the basis of estimated selling price in the ordinary
course of business |
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| less
costs necessary to be incurred for its sale. |
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| 2.7
REVENUE RECOGNITION |
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