Jahangir Siddiqui Investment Bank Limited - Annual Reports

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Jahangir Siddiqui Investment Bank Limited

Annual Report 2001

Contents

Company Information

Board of Directors

Executive Committee/Assets & Liability Committee

Company Secretary

Auditors

Bankers

Share Registrar

Registered Office

Branch Office

JSIBL Product Information

JSIBL offers a wide range of products to cater to the varied needs of its clients:

Certificates of Investment (COI)

JSIBL offers attractive returns on its registered CO1

scheme. Investors can invest in COI for period(s) suitable

to their requirements ranging from one month to five

years. Investors are eligible to avail term finance of up

to 75 percent of their investment in COI.

Lending

JSIBL provides short-term margin finance and term

finance at competitive mark-up rates.

Corporate Finance

JSIBL assists clients in raising capital through securities

underwriting, private placements, and loan syndications.

We also provide financial advisory services such as

acquisitions, financial restructuring, etc.

Banker to the Issue

JSIBL facilitates Issuers of debt and equity instruments

by collecting subscription from subscribers.

Portfolio Trading

Investors who wish to invest in stocks to earn higher

returns can benefit from our Portfolio Trading Services

(PTS). Our sales team assists retail investors in timely

execution of their trades at the stock exchange.

Notice of Eighth Annual General Meeting

Notice is hereby given that the Eighth Annual General Meeting of Jahangir Siddiqui Investment Bank Limited will be

held at Kohinoor Hall, Pearl Continental Hotel, Club road, Karachi on Saturday, October 20, 2001 at 10:00 a.m. to transact

the following business:

Ordinary Business

1. To confirm the minutes of the seventh annual general meeting held on September 30, 2000.

2. To receive and consider the audited financial statements of the Company for the year ended June 30, 2001 together

with the Director's and Auditors' report thereon.

3. To approve 30 percent interim bonus shares already issued to shareholders.

4. To appoint the auditors for the ensuing year and fix their remuneration. Messrs. Ford, Rhodes, Robson, Morrow

Chartered Accountants, retire and offer themselves for reappointment.

Special Business

5. To consider and if thought fit to pass with or without modifications, the following resolution as Special Resolution

RESOLVED that

The share capital of the Company be increased from Rs. 200,000,000/- divided in 20,000,000 shares of Rs. 10/

each, to Rs. 500,000,000/- divided in 50,000,000 shares of Rs. 10/- each, by the creation of 30,000,000 new shares

of the nominal value of Rs. 10/- each.

The Company be authorised to have different kinds of share capital and different classes of shares under each

kind with different right and privileges attached thereto in accordance with the Companies Share Capital (Variation

in Rights and Privileges) Rules, 2000 as amended from time to time.

That the Memorandum of Association of the Company be altered so as to replace Clause VI thereof with the

following provision:

"The Authorised Capital of the Company is Rs. 500,000,000/- divided into 50,000,000 shares of Rs. 10/- each, with

power to the Company from time to time to increase or reduce its capital. The share capital shall comprise of one

or more kinds of shares and different classes of shares under each kind as permitted by the Companies Shares

Capital (Variation in Rights and Privileges) Rules, 2000 as amended from time to time, with such rights

and privileges attached thereto as may be approved by the Members from time to time by a Special Resolution."

That the Articles of Association of the Company be altered as follows so as to replace Article 4 thereof with the

following provision:

"The Authorised Capital of the Company is Rs. 500,000,000/- divided into 50,000,000 shares of Rs. 10/- each, with

power to the Company from time to time to increase or reduce its capital. The share capital shall comprise of one

or more kinds of shares and different classes of shares under each kind as permitted by the Companies Shares

Capital (Variation in Rights and Privileges) Rules, 2000 as amended from time to time, with such rights and

privileges attached thereto as may be approved by the Members from time to time by a Special Resolution. Without

prejudice to the foregoing, the Company shall have the right to issue preference shares of up to Rs. 200,000,000/-

divided into 20,000,000 shares of Rs. 10/- each having the following rights and privileges attached thereto.''

Rights and privileges attached to Preference Shares

a) Preference shareholder shall carry entitlement of a fixed cumulative preferential dividend as determined by

the Board of Directors.

b) Preference shares shall not carry entitlement of ordinary dividend, right shares or bonus shares or have any

further right to participate in the profits of the Company. The Preference Shares shall be converted into Ordinary

Shares at such time as may be decided upon by the directors. The conversion price shall be decided by the

Board of Directors. The conversion price will be subject to adjustment for, amongst other things, subdivision,

bonus issues, rights issues and other dilutive events.

c) Preference shareholders shall have the same voting rights as Ordinary shareholders.

d) Preference shareholders shall have a right to receive notices and attend the general meetings.

e) In case of winding up of the Company or repayment of capital, Preference Shares will carry a preferential right

over Ordinary Shares.

f) Preference Shares shall be convertible into Ordinary Shares or redeemed.

The Company Secretary be and is hereby authorised by the Company to file appropriate returns for giving effect

to the increase of capital and the alteration to the Memorandum and Articles of Association as required by law.

6. To consider and if thought fit to pass with or without modification, the following resolution as Special Resolution:

RESOLVED THAT subject to confirmation by the Securities & Exchange Commission of Pakistan, the following

new paragraph 6A be inserted after paragraph 6 in Clause III of the Memorandum of Association of the Company.

6A. To act as a trustee for the benefit of any investors, financiers or lenders and to hold any property or interest

in any property mortgaged, charged or pledged to the Company for the benefit of any investors, financiers and

lenders.

7. Any other business with the permission of the Chair.

By order of the Board

Suleman Lalani

Karachi: July 28, 2001

Company Secretary

Notes:

(i) Share transfer books of the Company will remain closed from August 29, 2001 to September 07,2001 (both days inclusive).

(ii) A member of the Company entitled to attend and vote may appoint another member as his/her proxy to attend and vote

instead of him/her.

(iii) Proxies must be received at the Head Office of the Company not less than 48 hours before the time of the meeting.

(iv) Beneficial owners of the shares registered in the name of Central Depository Company of Pakistan (CDC) and/or

their proxies are required to produce their original National Identity Card (NIC) or passport for identification purpose

at the time of attending the meeting. The form of the proxy must be submitted with the Company within the stipulated

time, duly witnessed by two persons whose names, addresses and NIC numbers must be mentioned on the form, alongwith

attested copies of the NIC or the passport of the beneficial owner and the proxy.

(v) Shareholders are requested to notify immediately of any change in their address.

Statement Under Section 160

of the Companies Ordinance, 1984

1. The State Bank of Pakistan vide BSD Circular No. 23 dated June 1, 2001 has directed all the investment banks to increase

their paid-up capital and unencumbered reserves to Rs. 500 million by January 1, 2003. The present authorized and paid-up

capital of Jahangir Siddiqui Investment Bank Limited (JSIBL) is Rs. 200 million and Rs. 182 million respectively. Accordingly

JSIBL needs to increase its authorized capital in order to comply with the SBP directives and to allow future increase in

paid-up capital through capitalization of profits or issue of rights shares. The proposed amendment in Memorandum and

Articles of Association would allow the Company to issue different kinds of shares.

2. There are no clear provisions in Clause III of the Memorandum of Association of the Company authorizing it to act as a trustee

for the benefit of investors, financiers and lenders and in particular for those investors, financiers and lenders whose investment

and facilities are to be secured by any mortgage, charge or pledge in favor of any trustee. This is a most essential requirement

of modem financing structures especially syndicated loans and facilities. For this reason it is proposed to insert paragraph 6A

in Clause Ill of the Memorandum of Association of the Company.

3. None of the directors of Jahangir Siddiqui Investment Bank Limited have any interest in the business to be transacted at the

Annual General Meeting.

Directors' report to the Shareholders

The directors of Jahangir Siddiqui Investment Bank Limited ("JSIBL") are pleased to present to you the audited financial

statements for the year ended June 30, 2001.

Performance Review

The Company earned an after tax profit of Rs. 44.945 million during the year under review compared to Rs. 20.042

million earned during the preceding period of 18 months. This significant improvement in operating results is attributable

to:

Higher spreads earned by effective management of our treasury department and active participation in the

money market;

Prudent investment strategy relating to equity investments;

Higher revenue from advisory and fee based income; and

Initiation of credit and financing activity. The Company. has built a loan portfolio of Rs. 96.680 million as at the

year-end, in order to diversify revenue stream as desired by the State Bank of Pakistan.

The Company's balance sheet has also registered a major growth compared to last year. Total assets have increased by

69% compared to last year. The deposit base under our registered Certificates of Investment (COI) has risen by 58 %.

The shareholders equity has also increased by 17%.

Results of Operations

The financial results for the year ended June 30, 2001 are presented below:

(Rs. in '000s)

Profit after taxation

44,945

Unappropriated profit brought forward

77,681

----------

Profit available for appropriation

122,626

Appropriation

Interim bonus @ 30%

42,000

Transfer to special reserve

8,989

----------

50,989

----------

Unappropriated profit carried forward

71,637

==========

The earnings per share works to Rs. 2.47

Minimum Capital Requirement

The State Bank of Pakistan ("SBP") has required all the investment banks to increase their capital and unencumbered

general reserves (excluding reserve fund maintained under Rule 3 of Rules of Business) to Rs. 500 million by January

1, 2003. Investment banks not meeting the above minimum capital requirement within the stipulated time period would

be allowed only to undertake such business and transactions as may be specified by the SBP. While acknowledging

the need for a strong equity base for investment banks, the directors feel that the time frame allowed by the SBP is not

sufficient to comply with the requirement due to bearish condition of the stock market.

Pursuant to Board's decision on January 20, 2001, your company has already issued bonus shares @ 30%. Keeping in

view the minimum capital requirement prescribed by the SBP, the directors wish to caution the shareholders that the

Company may not be able to declare any cash dividend till it meets the prescribed minimum capital requirement.

Future outlook

The Karachi Stock Exchange is implementing the "T+3" settlement system. It is generally believed that the new system

would affect the volume of carry-over transactions at the stock exchange. The expected decline in carry-over transactions

would increase the opportunities for margin finance against shares of listed companies. Your Company is well positioned

to take full benefit from this opportunity.

The recent movement in discount rate and the cut-off yield on Treasury Bills indicate that borrowing cost may increase

next year. This will have a direct impact on our spreads. The management is concentrating on broadening the deposit

base by targetting the retail customer base, which provides a low cost source of funds.

Credit Rating

The directors are pleased to inform you that The Pakistan Credit Rating Agency (Pvt.) Limited has assigned your

Company the long-term and short-term rating of "A-" and "A2" respectively. The ratings denote a low expectation of

credit risk and the capacity for timely payment of financial commitments is considered strong. The management is

striving to further improve the above ratings.

Change in Board of Directors

Dr. Amjad Waheed, nominee director representing NIT, has resigned and Miss Shahnila Parekh has been appointed

as member of the Board. The Board thanks Dr. Amjad Waheed for his invaluable services to the Company. The Board

also welcomes Miss Shahnila Parekh on the Board.

Auditors

The retiring auditors, Messrs Ford, Rhodes, Robson, Morrow, Chartered Accountants, ("FROM") have expressed their

willingness to continue as Company's auditors for the ensuing year. A resolution to reappoint FROM as auditors of

the Company and authorize the directors to fix their remuneration will be proposed at the Annual General Meeting.

Pattern of Shareholding

Statement of Pattern of Shareholding as on June 30, 2001 appears on page 31.

Acknowledgment

The Board places on record its appreciation for the dedicated services and hard work of the JSIBL team for achieving

the exemplary results. We also thank our valued clients and the financial institutions for their support and confidence.

The Board also expresses its gratitude to the State Bank of Pakistan, the Securities and Exchange Commission of Pakistan

the Central Board of Revenue and the Stock Exchanges for their continued cooperation and guidance.

M. Ali Jameel

Adil Matcheswala

Karachi: July 28, 2001

Chief Executive

Director

Auditors' Report to the Members

We have audited the annexed balance sheet of Jahangir Siddiqui Investment Bank Limited as at June 30, 2001 and

the related profit and loss account, cash flow statement and statement of changes in equity 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.

It is the responsibility of the company's management to establish and maintain a system of internal control, and prepare

and present the above said statements in conformity with the approved accounting standards and the requirements

of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require

that we plan and perform the audit to obtain reasonable assurance about whether the above said 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 accounting policies and significant

estimates made by management, as well as evaluating the overall presentation of the above said statements. We believe

that our audit provides a reasonable basis for our opinion and, after due verification, we report that:

(a) in our opinion, proper books of accounts 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, except for the changes as stated in note

2.2 to the accounts with which we concur;

(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;

sheet, profit and loss account, cash flow statement and statement of changes in equity together with the

notes forming part thereof, conform with approved accounting standards as applicable in 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 June 30, 2001 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.

Ford, Rhodes, Robson, Morrow

Karachi: August 03, 2001

Chartered Accountants

Balance Sheet as at June 30, 2001

June 30,

Note

2001

2000

(Rs. in '000s)

Assets

Non-current assets

Fixed assets

2,629

2,322

Long-term deposits

998

986

Long term loans and term finance

11,602

Long-term investments

141,843

101,327

-----------

157,072

104,635

Current assets

Current maturity of long -term investments

1,521

2,760

Short-term investments

634,456

279,764

Short-term loans

85,607

250

Fund placements with financial institutions

335,000

160,000

Receivable for sale of marketable securities

117,132

Prepayments, accruals and other receivables

31,340

10,332

Taxation - net

53,243

91,123

Cash and bank balances

9,320

6,033

-----------

1,150,487

667,394

-----------

1,307,559

772,029

Equity and Liabilities

Share capital and reserves

Authorised capital

20,000,000 ordinary shares of Rs. 10 each

200,000

==========

Issued, subscribed and paid-up capital

18,200,000 (2000: 10,000,000) ordinary shares of Rs. 10 ea

182,000

100,000

Reserves

121,814

158,869

-----------

Shareholders' equity

303,814

258,869

Surplus on revaluation of investments

14,188

Non-current liabilities

Liabilities against assets subject to finance lease

241

457

Certificates of investment

-----------

291

457

Current liabilities

Current maturity of liabilities against assets subject to finance lease

389

345

Certificates of investment

292,367

184,588

Running finance utilised under markup arrangements

210,772

106,404

Borrowings from banks/NBFIs

320,000

162,000

Payable for purchase of marketable securities

89,193

Advances, accrued expenses and other liabilities

76,545

49,366

Final dividend payable

10,000

-----------

989,266

512,703

Contingencies and commitments

-----------

The annexed notes form an integral part of these accounts.

1,307,559

772,029

==========

M. Ali Jameel

Adil Matcheswala

Chief Executive

Director

Profit and Loss Account

For the year ended June 30, 2001

For the year

For the eighteen

ended

months ended

June 30,

Note

2001

2000

(Rs. in '000s)

Income

Income from investments

56,069

21,714

Capital gains on disposal of investments - net

24,238

31,704

Income from demand promissory note (DPN)

13,756

Exchange gain

33,572

18,315

Income on short-term loans

2,991

Return on fund placements with financial institutions

42,294

8,486

Consulting and corporate advisory fees

4,916

2,686

Commission and fees

3,030

2,072

Other income

2,634

3,624

-----------

169,744

102,357

Operating Expenses

Loss on disposal of government securities

3,359

Return on certificates of investment

40,540

25,122

Mark-up on short term running finance

10,409

4,787

Mark-up on borrowings from banks/NBFIs

45,072

27,984

Provision for diminution in value of investments

(681)

681

Administrative and operating expenses

22,031

22,741

Loss on sale of fixed assets

-----------

(120,799)

(81,315)

-----------

Profit before taxation

48,945

21,042

Taxation

(4,000)

(1,000)

-----------

Profit after taxation

44,945

20,042

Unappropriated profit brought forward

77,681

126,647

-----------

Profit available for appropriation

122,626

146,689

Appropriations

Transfer to special reserve

8,989

4,008

Transfer to capital reserve for issue of bonus shares

40,000

Interim issue of bonus shares @ 30% (2000: nil)

42,000

Interim dividend at the rate of Rs. nil (2000: Rs. 1.50) per share

15,000

Final dividend at the rate of Rs. nil (2000: Rs. 1.00) per share

10,000

-----------

(50,989)

(69,008)

-----------

Unappropriated profit carried forward

71,637

77,681

==========

Rupees

Basic earnings per share

2.47

1.10

==========

The annexed notes form an integral part of these accounts.

M. Ali Jameel

Adil Matcheswala

Chief Executive

Director

Cash Flow Statement

For the year ended June 30, 2001

months ended

For the eighteen

June 30,

Note

2001

2000

(Rs. in '000s)

Cash flows from operating activities:

Profit for the year/period before taxation

48,945

21,042

Adjustments for:

Exchange gain

(33,572)

(18,315)

Post acquisition profits of associated undertaking

(737}

Amortisation of premium paid on FIBs

218

Loss on disposal of government securities

3,359