| Al Faysal Investment Bank Limited |
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| Annual
Report 2000 |
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| Contents |
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| Company
Information |
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| Financial
Highlights |
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| Directors'
Report and Chief Executive's Review |
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| Auditors'
Report to the Members |
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| Balance Sheet |
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| Profit
and Loss Account |
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| Statement
of Cash Flow |
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| Statement
of Changes in Equity |
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| Notes
to the Accounts |
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| Pattern
of Shareholding |
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| Notice
of Annual General Meeting |
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| Branch Network |
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| Company
Information |
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| Board
of Directors |
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| HRH
Prince Mohammed Al Faisal Al Saud |
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| Chairman |
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| Mohammad
Khan Hoti |
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| Chief Executive |
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| Farook Bengali |
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| Istaqbal Mehdi |
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| Khaled
Abdullah - Janahi |
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| Mahmood
A. Faruqui |
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| Omar Abdi Ali |
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Corporate Secretary |
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Mansoor H. Hamdani |
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Auditors |
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A. F. Ferguson & Co. |
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Chartered Accountants |
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Legal Advisors |
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Chima & Ibrahim |
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Khokhar Law Chambers |
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Mohsin Tayebaly & Co. |
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Bankers |
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AI Baraka Islamic Bank
B.S.C. (E.C) |
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Allied Bank of Pakistan
Limited |
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Faysal Bank Limited |
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Muslim Commercial Bank
Limited |
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Standard Chartered Bank |
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Registered Office |
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15 West, Jinnah Avenue, |
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Blue Area, Islamabad. |
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Phone: (51) 2272579,
111999786 |
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Fax: (51) 2272578 |
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E-mail: info@alfaysal.net |
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Web site:
www.alfaysal.net |
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Registrars |
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Ferguson Associates (Pvt)
Ltd. |
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1-A., State Life
Building, |
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I. I. Chundrigar Road, |
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P.O. Box 4716, Karachi. |
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Phone: (21) 2426682-6,
2426711-5 |
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Fax: (51) 2415007,
2427938 |
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| Financial
Highlights Five Years at a Glance |
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|
Rupees in Million |
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|
1996 |
1997 |
1998 |
1999 |
2000 |
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| Financial
Position |
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| Total
paid-up capital |
783 |
783 |
979 |
979 |
979 |
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| Total
shareholders' equity |
1,066 |
1,385 |
1,520 |
1,432 |
1,427 |
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| Total assets |
|
12,187 |
12,619 |
19,142 |
24,560 |
18,268 |
|
| Clients'
accounts |
10,470 |
10,596 |
16,866 |
21,924 |
15,265 |
|
| Morabahas |
|
8,096 |
8,856 |
12,349 |
16,551 |
11,919 |
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| Operating
Results |
|
| Fee
based revenue |
120 |
96 |
85 |
86 |
51 |
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| Total revenues |
|
1,641 |
2,092 |
2,100 |
3,583 |
3,136 |
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| Operating
expenses |
139 |
135 |
132 |
127 |
136 |
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| Profit
before provisions and tax |
328 |
498 |
381 |
434 |
445 |
|
| Provisions
and adjustments |
145 |
80 |
131 |
198 |
136 |
|
| Tax |
|
30 |
98 |
80 |
55 |
20 |
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| Profit after tax |
|
153 |
319 |
170 |
181 |
289 |
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| Other Statistics |
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| Earning
per share (Rs.) |
1.95 |
4.08 |
174 |
1.85 |
2.95 |
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| (Basis:
Average number of shares) |
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| Return
on average equity |
14.59% |
26.06% |
11.55% |
12.29% |
20.20% |
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| Return
on average assets |
1.40% |
2.57% |
1.07% |
0.83% |
1.35% |
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| Directors'
Report and Chief Executive's Review |
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| To
Our Shareholders and Clients |
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| As
Salam Alaykoum Wa Rahmatouh Allah Wa Barakatouh |
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| On
behalf of the Board of Directors, we are pleased to present the annual report
on your Bank's operations for |
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| the
year ended December 31, 2000. |
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| ECONOMIC
PERSPECTIVE |
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| The
year 2000 was sluggish on the economic front. It was not till November that
IMF approved the stand-by |
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| arrangement
(SBA) of $ 596 Million. |
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| This
means the reinstatement of Pakistan into the fold of International Financial
Institutions assistance after more |
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| than
18 months. Relations with these organizations had soured due to fiscal
misreporting, unkept promises and |
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| missed
targets on the part of GOP in the past. |
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| However,
with the announcement of a credible reformist agenda and appointment of a
highly regarded economic |
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| team
to implement it, the new military-led government has begun to be viewed as
well-intentioned and serious |
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| in
addressing chronic structural imbalances. |
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| The
Government has to take bold and painful measures if the country is to achieve
sustainable real GDP growth |
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| and
get out of the so-called 'debt trap'. |
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| PERFORMANCE
REVIEW |
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| Notwithstanding
the impact of the slow economy, reduction in foreign currency deposits,
repayment of Federal |
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| Government
Deposits against sale proceeds of Special US Dollar Bonds and the drop in
assets from Rs. 24.6 |
|
| billion
to Rs. 18.3 billion the Company's profit after tax of Rs. 288.7 million,
climbed 59.2% compared to the previous |
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| year.
This is particularly satisfying since we have been through a significant
reduction in profit regimes and the |
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| resultant
eroding of margins. |
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| Financial
discipline is, and will continue to be, a vital ingredient to our success,
particularly in the areas of expense |
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| control
and financial risk. On the expense side we have undertaken a number of
initiatives like downsizing and |
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| outsourcing
to increase efficiency. We now have one of the lowest overhead ratios in the
industry. In absolute |
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| terms
the increase in administration and operating expenses is entirely due to an
exceptional and non-recurring |
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| item. |
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| Our
core activities are: |
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| 1.
Morabaha Financings. |
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| We
are in the risk business and managing risk productively with detailed risk
management systems can |
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| create
significant strategic advantages. It is important to diversify and develop
systems and tests that will |
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| allow
us to anticipate and respond to the unexpected, whether it is financial
market fluctuations, currency |
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| changes
or government edicts. |
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| Following
the reduction in deposits, Morabahas declined by28% to Rs. 11.9 billion. As a
matter of |
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| abundant
precaution we have made a provision of Rs. 60.44 million against doubtful
financings. |
|
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| 2.
Capital Market and Investment Management Services. |
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| The
equity market continued to be depressed though there was a shod period of
buoyancy at the beginning |
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| of
the year, which we successfully exploited. Continuing our prudent approach we
have adjusted Rs.58.64 |
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| million
for diminution in value of long-term investments. |
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| 3.
Corporate Finance and Advisory Services. |
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| This
sector was sluggish in line with the general economic environment. We expect
this division to remain |
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| the
weakest performer out of our businesses. |
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| 4.
Private Client Services. |
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| This
sector continues to be very competitive. There was a healthy 124% improvement
in the local currency |
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| deposits.
However, the foreign currency deposits dropped by almost 28% in the period
under review, |
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| and
will reduce further in the coming year. |
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| In
view of the impressive results for the year, your Board of Directors proposes
a dividend of 30%. The movement |
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| in
the profit appropriated are as under: |
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|
Rupees in thousand |
|
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|
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| Profit
after taxation |
|
|
288,720 |
|
| Unappropriated
profit brought forward |
|
226,562 |
|
|
|
|
------------------ |
|
| Profit
available for appropriation |
|
|
515,282 |
|
|
|
|
| Appropriations: |
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| Transfer
to statutory reserve |
|
|
57,744 |
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| Proposed
dividend @ 30% |
|
|
293,616 |
|
|
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|
------------------ |
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|
351,360 |
|
|
------------------ |
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| Unappropriated
Profit carried forward |
|
163,922 |
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|
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|
========== |
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| THE BOARD |
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| During
the year Mr. Muazzam Ali, the Vice-Chairman, announced his resignation from
the Board due to health |
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| reasons.
Mr. Muazzam All had been associated with the organization since its
inception. On behalf of the Board, |
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| we
would like to thank Mr. Muazzam Ali for his wise counsel, his efforts towards
the promotion of Islamic Banking |
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| and
valuable contributions over the years and wish him good health and happiness
for the future. |
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| We
owe a special thanks to all our employees for an outstanding year. It is the
talents and skills of our staff that |
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| differentiate
us from competition. |
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| Your
company has the advantage of relationships, market leading position in its
core businesses and balance |
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| sheet
strength. It is also able to offer clients a wide range of products and
services, through associates. |
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| We
have Alhamdolillah developed strong, reliable and diverse income streams and
given our focus on good |
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| governance,
we look to the future with optimism. |
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|
|
Mohammad Khan Hoti |
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| February
21, 2001 |
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Chief Executive |
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|
|
| Auditors'
Report to the Members |
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| We
have audited the annexed balance sheet of Al Faysal Investment Bank Limited
as at December 31,2000 |
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| and
the related profit and loss account, cash flow statement and statement of
changes in equity together with |
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| the
notes forming part thereof, for the year then ended and we state that we have
obtained all the information |
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| and
explanations which, to the best of our knowledge and belief, were necessary
for the purposes of our audit. |
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| It
is the responsibility of the Company's management to establish and maintain a
system of internal control, |
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| and
prepare and present the above said statements in conformity with the approved
accounting standards and |
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| the
requirements of the Companies Ordinance, 1984. Our responsibility is to
express an opinion on these |
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| statements
based on our audit. |
|
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| We
conducted our audit in accordance with the auditing standards as applicable
in Pakistan. These standards |
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| require
that we plan and perform the audit to obtain reasonable assurance about
whether the above said |
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| statements
are free of any material misstatement. An audit includes examining on a test
basis, evidence |
|
| supporting
the amounts and disclosures in the above said statements. An audit also
includes assessing the |
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| accounting
policies and significant estimates made by management, as well as, evaluating
the overall |
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| presentation
of the above said statements. We believe that our audit provides a reasonable
basis for our opinion |
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| and,
after due verification, we report that: |
|
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| (a)
in our opinion, proper books of account have been kept by the Company as
required by the Companies |
|
| Ordinance, 1984; |
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|
|
| (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 |
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| 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 |
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| 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, cash flow statement and statement of changes
in equity together |
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| with
the notes forming part thereof conform with approved accounting standards as
applicable in |
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| Pakistan,
and 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 December |
|
| 31,
2000 and of the profit, its cash flows and changes in equity for the year
then ended; and |
|
|
| (d)
in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance,
1980 (XVIII of 1980), |
|
| was
deducted by the Company and deposited in the Central Zakat Fund established
under section 7 |
|
| of
that Ordinance. |
|
|
|
| Islamabad |
|
A. F. Ferguson & Co. |
|
| February
23, 2001 |
|
Chartered Accountants |
|
|
|
|
| Balance
Sheet as at December 31, 2000 |
|
|
|
Note |
2000 |
1999 |
|
|
|
Rupees in
thousand |
|
| SHARE
CAPITAL |
|
|
| Authorised
capital |
|
|
|
| 100,000,000
ordinary shares of Rs. 10 each |
|
1,000,000 |
1,000,000 |
|
|
|
========== |
========== |
|
| Issued capital |
|
|
|
| 97,875,000
(1999: 97,875,000) ordinary |
|
|
| shares
of Rs. 10 each |
|
|
978,750 |
978,750 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| Subscribed
and paid-up capital |
|
3 |
978,721 |
978,721 |
|
|
|
|
|
|
| CAPITAL
RESERVE |
|
|
|
| Statutory
reserve |
|
|
284,451 |
226,707 |
|
|
| REVENUE
RESERVE |
|
| Unappropriated
profit |
|
|
163,922 |
226,562 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
1,427,094 |
1,431,990 |
|
|
|
|
|
|
| LONG
TERM CERTIFICATES OF INVESTMENT |
4 |
2,356,051 |
2,412,278 |
|
|
|
|
|
|
| CURRENT
LIABILITIES AND PROVISIONS |
|
|
|
| Liability
against assets subject to finance lease |
|
-- |
5,523 |
|
| Certificates
of investment |
|
4 |
12,549,374 |
16,181,436 |
|
| Federal
Government Deposits against sale |
|
| proceeds
of Special US Dollar Bonds |
|
-- |
3,314,499 |
|
| Due to banks |
|
5 |
360,000 |
15,000 |
|
| Creditors,
accrued and other liabilities |
6 |
1,282,061 |
1,003,907 |
|
| Proposed
dividend |
|
|
293,616 |
195,744 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
14,485,051 |
20,716,109 |
|
| CONTINGENCIES
AND COMMITMENTS |
7 |
|
|
|
------------------ |
------------------ |
|
|
|
|
18,268,196 |
24,560,377 |
|
|
|
|
========== |
========== |
|
|
|
|
| FIXED ASSETS |
|
8 |
116,895 |
124,850 |
|
|
|
|
|
| LONG
TERM MORABAHA FINANCING |
9 |
3,286,252 |
5,483,404 |
|
|
|
|
|
| LONG
TERM INVESTMENT |
|
10 |
1,413,081 |
1,370,996 |
|
|
|
|
|
| LONG
TERM RECEIVABLES AND PREPAYMENTS |
11 |
42,309 |
23,617 |
|
|
|
|
| DEFERRED
TAXATION |
|
103,168 |
69,850 |
|
|
|
|
| CURRENT
ASSETS |
|
|
|
| Deposits,
prepayments and other receivables |
12 |
1,133,440 |
1,739,812 |
|
| Short
term morabaha financing |
|
13 |
8,632,829 |
11,067,754 |
|
| Short
term investment |
|
14 |
860,822 |
313,460 |
|
| Cash
and bank balances |
|
15 |
2,679,400 |
4,366,634 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
13,306,491 |
17,487,660 |
|
|
------------------ |
------------------ |
|
|
|
|
18,268,196 |
24,560,377 |
|
|
|
|
========== |
========== |
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Mohammad Khan Hoti |
|
|
Farook Bengali |
|
|
Chief Executive |
|
|
Director |
|
|
|
| Profit
and Loss Account |
|
| for
the year ended December 31, 2000 |
|
|
|
|
|
Note |
2000 |
1999 |
|
|
|
Rupees in
thousand |
|
| INCOME |
|
| Profit
on morabaha financing |
|
2,267,402 |
2,552,807 |
|
| Income
on investment and bank placements |
16 |
638,100 |
824,299 |
|
| Net
gain on sale of investment |
|
|
179,617 |
120,334 |
|
| Other income |
|
|
17 |
50,589 |
85,607 |
|
|
|
|
|
------------------ |
------------------ |
|
|
3,135,708 |
3,583,047 |
|
|
| EXPENDITURE |
|
| Return on |
|
|
|
|
| Certificates
of investment and related costs |
18 |
2,176,921 |
2,737,600 |
|
| Federal
Government Deposits against sale |
|
|
| proceeds
of Special US Dollar Bonds |
|
209,649 |
211,376 |
|
| Due to banks |
|
|
|
168,291 |
73,371 |
|
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
2,554,861 |
3,022,347 |
|
| Administrative
and other operating expenses |
19 |
136,029 |
126,715 |
|
|
|
|
|
------------------ |
------------------ |
|
|
|
2,690,890 |
3,149,062 |
|
|
------------------ |
------------------ |
|
| OPERATING
PROFIT BEFORE PROVISION AND ADJUSTMENT |
444,818 |
433,985 |
|
| Provision
against doubtful morabaha financing & other receivables |
80,612 |
75,658 |
|
| Reversal
of provision against investment under purchase and |
|
| resale
agreements |
|
(3,458) |
(8,207) |
|
| Investment
under purchase and resale agreements |
|
| written off |
|
-- |
646 |
|
| Adjustment
for diminution in value of long term investment |
58,639 |
129,737 |
|
|
------------------ |
------------------ |
|
| PROFIT
BEFORE TAXATION |
|
309,025 |
236,151 |
|
| PROVISION
FOR TAXATION |
|
20 |
20,305 |
54,812 |
|
|
------------------ |
------------------ |
|
| PROFIT
AFTER TAXATION |
|
|
288,720 |
181,339 |
|
| Unappropriated
profit brought forward |
|
226,562 |
350,639 |
|
|
------------------ |
------------------ |
|
|
|
|
515,282 |
531,978 |
|
| Appropriations: |
|
|
|
|
|
| Transfer
to statutory reserve |
|
|
57,744 |
36,268 |
|
| Interim
dividend - Nil (1999: 7.5%) |
|
|
-- |
73,404 |
|
| Proposed
final dividend - 30% (1999: 20%) |
|
293,616 |
195,744 |
|
|
------------------ |
------------------ |
|
|
|
|
351,360 |
305,416 |
|
|
|
|
------------------ |
------------------ |
|
| UNAPPROPRIATED
PROFIT CARRIED FORWARD |
163,922 |
226,562 |
|
|
|
========== |
========== |
|
|
|
|
|
(Rupees) |
|
|
|
|
| Earnings
per share |
|
25 |
2.95 |
1.85 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Mohammad Khan Hoti |
|
Farook Bengali |
|
|
Chief Executive |
|
Director |
|
|
|
| Statement
of Cash Flow |
|
| for
the year ended December 31, 2000 |
|
|
|
|
|
Note |
2000 |
1999 |
|
|
|
Rupees in
thousand |
|
|
|
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
| Cash
(used in) / generated from operations |
23 |
(2,157,656) |
3,380,752 |
|
| Net
(decrease) /increase in certificates of investment |
(3,688,289) |
1,773,958 |
|
| Net
decrease / (increase) in morabaha financing |
|
4,551,631 |
(4,277,409) |
|
| Taxes paid |
|
|
(73,973) |
(127,584) |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash (used in) / generated from operating activities |
(1,368,287) |
749,717 |
|
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
| Sale
proceeds of fixed assets |
|
11,898 |
9,644 |
|
| Addition
to fixed assets |
|
(10,787) |
(115,666) |
|
| Long
term investment |
|
(100,724) |
(219,793) |
|
| Long
term prepayments and receivables |
|
(18,692) |
19,043 |
|
|
|
------------------ |
------------------ |
|
| Net
cash used in investing activities |
|
(118,305) |
(306,772) |
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
| Dividend paid |
|
|
(195,119) |
(73,404) |
|
| Liability
against assets subject to finance lease |
|
(5,523) |
(5,223) |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash used in financing activities |
|
(200,642) |
(78,627) |
|
|
------------------ |
------------------ |
|
| NET
(DECREASE) / INCREASE IN CASH AND |
|
| CASH
EQUIVALENTS |
|
|
(1,687,234) |
364,316 |
|
|
|
| CASH
AND CASH EQUIVALENTS AT BEGINNING OF |
|
| THE YEAR |
|
|
4,366,634 |
4,002,316 |
|
|
|
|
------------------ |
------------------ |
|
| CASH
AND CASH EQUIVALENTS AT END OF THE YEAR |
15 |
2,679,400 |
4,366,634 |
|
|
|
|
========== |
========== |
|
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Mohammad Khan Hoti |
|
Farook Bengali |
|
|
Chief Executive |
|
Director |
|
|
|
| Statement
of Changes in Equity |
|
| for
the year ended December 31, 2000 |
|
|
|
|
Subscribed |
Statutory |
Unappropriated |
Total |
|
|
|
and paid-up |
reserve |
profit |
|
|
|
|
capital |
|
|
|
|
(note 3) |
|
|
|
|
Rupees in
thousand |
|
|
| Balance
as at January 1, 1998 |
978,721 |
190,439 |
350,639 |
1,519,799 |
|
| Net
profit for the year |
-- |
-- |
181,339 |
181,339 |
|
| Transfer
to statutory reserve |
-- |
36,268 |
(36,268) |
-- |
|
| Interim dividend |
|
-- |
-- |
(73,404) |
(73,404) |
|
| Proposed
final dividend |
-- |
-- |
(195,744) |
(195,744) |
|
|
|
------------------ |
