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Bank Alfalah Limited
Annual Report 1999
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet of BANK ALFALAH LIMITED as at December 31, 1999 and
the related profit and loss account and the cash flow statement, together with the notes forming part thereof
for the year then ended, in which were incorporated the unaudited certified returns from branches except
three branches which have been audited by us 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.
and after due verification thereof, found them satisfactory and, we report that:
(a) in our opinion, proper books of account have been kept by the bank as required by the Companies
Ordinance, 1984, and the returns referred to above received from branches have been found adequate
for the purposes of our audit;
(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 Banking Companies Ordinance, 1962 and 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 change in an accounting policy
as explained in note 3.6 with which we concur,
(ii) the expenditure incurred during the year was for the purpose of the bank's business; and
(iii) the business conducted, investments made and the expenditure incurred during the year were
in accordance with the objects of the Bank and the transactions of the Bank which have come
to our notice have been within the powers of the bank;
(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 and cash flow statement, together with the notes forming part thereof
give the information required by the Banking Companies Ordinance, 1962 and the Companies
Ordinance, 1984 in the manner so required and give a true and fair view of the state of the bank's affairs
as at December 31, 1999 and its true balance of the profit and cash flows for the year then ended; and
(d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980, was deducted
by the bank and deposited in the Central Zakat Fund established under section 7 of that Ordinance.
Karachi Chartered Accountants
Dated: 7 March, 2000 A.F. FERGUSON & CO
BALANCE SHEET AS AT DECEMBER 31, 1999
1999 1998
             (Rupees in thousand)
ASSETS
Cash 4 1,687,256 721,285
Balances with other banks 5 1,161,434 386,211
Money at call and short notice 100,000 248,000
Investments 6 4,993,035 3,406,514
Advances - net of provision 7 10,327,324 7,757,708
Operating fixed assets 8 1,153,607 263,760
Other assets 9 1,596,952 1,537,629
--------------------- ---------------------
21,019,608 14,321,107
LIABILITIES
Deposits and other accounts 10 15,820,473 11,878,221
Borrowings from other banks, agents etc. 11 2,972,240 1,348,313
Bills payable 120,868 51,737
Other liabilities 12 372,855 176,630
Deferred liability - staff retirement gratuity 6,892 7,400
--------------------- ---------------------
19,293,328 13,462,301
--------------------- ---------------------
NET ASSETS 1,726,280 858,806
============ ============
REPRESENTED BY
Share capital 13 600,000 600,000
Reserve fund and other reserves 14 286,399 255,094
Unappropriated profits 8,931 3,712
Shareholders' equity 895,330 858,806
Surplus on revaluation of fixed assets 15 830,950 --
--------------------- ---------------------
1,726,280 858,806
============ ============
MEMORANDUM ITEMS
Bills for collection 16 1,986,830 1,759,691
Acceptances, endorsements and other obligations 1,193,386 963,260
Contingent liabilities and commitments 17
The annexed notes form an integral part of these accounts.
MOHAMMAD SALEEM AKHTAR ABDULLAH AL-MUTAWA
Chief Executive Director
ABDULLA NASEER HAWAILEEL  H.H. SHEIKH NAHAYAN MABARAK AL-NAHAYAN
Director Director
PROFIT & LOSS ACCOUNT FOR THE
YEAR ENDED DECEMBER 31, 1999
Note 1999 1998
          (Rupees in thousand)
Mark up/interest and discount an(J/or return earned 1,905,808 1,625,352
Less: Cost/return on deposits, borrowings etc. 1,474,343 1,313,564
--------------------- ---------------------
431,465 311,788
Fees, commissions and brokerage 58,043 39,438
Profit from investment securities 100 3,345
Profit from dealing securities 13,692 --
Other operating income - income from dealing
in foreign currencies 77,925 121,754
--------------------- ---------------------
149,760 164,537
--------------------- ---------------------
581,225 476,325
Operating expenses:
Administrative expenses 18 402,559 337,447
Provision against non-performing
advances - net 7.2 (136,076) 94,756
Bad debts written off directly 175 --
--------------------- ---------------------
266,658 432,203
--------------------- ---------------------
314,567 44,122
Other income: 19 39,848 23,614
--------------------- ---------------------
Profit before taxation 354,415 67,736
Taxation - current 20 (161,337) (405,141)
- deferred (36,554) 482,770
--------------------- ---------------------
(197,891) 77,629
--------------------- ---------------------
Profit after taxation 156,524 145,365
Unappropriated profit brought forward 3,712 2,420
--------------------- ---------------------
Profit available for appropriation 160,236 147,785
Appropriations:
Transfer to statutory reserve (31,305) (29,073)
Transfer to general reserve -- (115,000)
Proposed dividend at Rs. 2 (1998: nil) per share (120,000) --
--------------------- ---------------------
(151,305) (144,073)
--------------------- ---------------------
Unappropriated profit carried forward 8,931 3,712
============ ============
The annexed notes form an integral part of these accounts.
MOHAMMAD SALEEM AKHTAR ABDULLAH AL-MUTAWA
Chief Executive Director
ABDULLA NASEER HAWAILEEL  H.H. SHEIKH NAHAYAN MABARAK AL-NAHAYAN
Director Director
CASH FLOW STATEMENT FOR THE 
YEAR ENDED DECEMBER 31, 1999
1999 1998
              (Rupees in thousand)
CASH FLOW FROM OPERATING ACTIVITIES
Profit before taxation 354,415 67,736
Adjustment for non-cash charges
Depreciation 26,668 15,274
Provision against non-performing advances - net -- 94,756
Profit on sale of fixed assets (3,523) (265)
Provision for gratuity 7,824 15,751
-------------------- --------------------
30,969 125,516
-------------------- --------------------
385,384 193,252
Increase/(Decrease) in operating assets
Government securities (1,526,857) 82,888
Advances (2,569,616) (3,002,811 )
Other assets (112,829) (32,510)
-------------------- --------------------
(4,209,302) (2,952,433)
Increase/(Decrease) in operating liabilities
Deposits and other accounts 3,942,252 2,859,444
Bills payable 69,131 (12,754)
Other liabilities 79,535 (5,449)
-------------------- --------------------
4,090,918 2,841,241
-------------------- --------------------
Cash flow before gratuity and tax 267,000 82,060
Gratuity paid (11,642) (3,158)
Income tax paid (144,385) (206,824)
-------------------- --------------------
Net cash flow from operating activities 110,973 (127,922)
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of investments other than government securities (123,887) (147,500)
Net proceeds from the redemption of term finance certificates 64,223 6,845
Fixed capital expenditure (86,355) (107,057)
Sale proceeds of fixed assets · 4,313 3,685
-------------------- --------------------
Net cash flow from investing activities (141,706) (244,027)
CASH FLOW FROM FINANCING ACTIVITIES
Borrowings from other banks, agents etc. 1,623,9'27 795,271
-------------------- --------------------
Net cash flow from financing activities 1,623,927 795,271
-------------------- --------------------
Increase in cash and cash equivalents during the year 1,593,194 423,322
Cash and cash equivalents at the beginning of the year 1,355,496 932,174
-------------------- --------------------
Cash and cash equivalents at the end of the year 2,948,690 1,355,496
============ ============
Cash and cash equivalents
Cash 1,687,256 721,285
Balances with other banks 1,161,434 386,211
Money at cell and short notice 100,000 248,000
-------------------- --------------------
2,948,690 1,355,496
============ ============
The annexed notes form an integral part of these accounts.
MOHAMMAD SALEEM AKHTAR ABDULLAH AL-MUTAWA
Chief Executive Director
ABDULLA NASEER HAWAILEEL  H.H. SHEIKH NAHAYAN MABARAK AL-NAHAYAN
Director Director
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1999
1. STATUS AND NATURE OF BUSINESS
Bank Alfalah Limited was incorporated on June 21, 1992 as a public limited company under the
Companies Ordinance, 1984 and commenced banking operations from November 1, 1992. It is
engaged in commercial banking and related services as defined in the Banking Companies Ordinance.
1962.
2. BASIS OF PRESENTATION
In accordance with the directives of the Federal Government regarding the shifting of the banking system
 to Islamic modes, the State Bank of Pakistan has issued various circulars from time .to time
Permissible forms of trade related modes of financing include purchase of goods by the banks from
their customers and immediate resale to them at appropriate mark-up in price on deferred payment
basis. The purchase and sale arising under these arrangements are not reflected in these accounts as
such but are restricted to the amount of facility actually utilised and the appropriate portion of mark-up
thereon.
3. SIGNIFICANT ACCOUNTING POLICIES
3.1 Accounting Convention
These accounts have been prepared under the historical cost convention, except that certain fixed
assets have been included at revalued amounts referred to in note 3.5 below.
3.2 Advances
These are stated net of provision for had and doubtful debts. The provision for bad and doubtful 
balances is made in accordance with the prudential regulations of the State Bank of Pakistan.
3.3 Investments
Investments are stated at cost less provisions for any diminution in value. Gains or losses on disposals
during the year are taken to profit and loss account. Premium/discount on purchase of investments are
amortised over the term of such investments.
3.4 Foreign Currencies
Assets and liabilities in foreign currencies are translated into Pak rupees at the rates of exchange
approximating those prevailing at the balance sheet date.
From the current year the bank translated outstanding forward exchange contracts on a market to 
market basis. Until last year outstanding forward exchange contracts were translated into Pak Rupees at
the contracted rates.
The policy has been changed to comply with the requirements of State Bank of Pakistan FE Circular
No. 2 dated March 24, 1999. Had the policy for translating outstanding forward exchange contracts
remained unchanged, other operating income and profit before tax would have been higher by Rs. 1.26
million.
Commitments for letters of credit and acceptances are translated at the contracted rates.
Exchange gains or losses are included in the profit and loss account.
3.5 Operating Fixed Assets and Depreciation
Office premises have been revalued from December 28, 1999 to December 30, 1999 by independent
valuers and are shown at revalued amount less accumulated depreciation. All other assets are stated at
cost less accumulated depreciation.
Previously all assets were stated at cost less accumulated depreciation.
Depreciation is charged to income applying the straight line method.
Maintenance and normal repairs are charged to income as and when incurred. Major renewals and
improvements are capitalised. Gains or losses on disposal of fixed assets are taken to the profit and
loss account.
3.6 Taxation
Taxation charge in the accounts is based on the taxable income at the current rates of taxation. The
bank accounts for deferred taxation on timing differences using the liability method.
3.7 Staff Retirement Benefits
The bank operates an unapproved unfunded gratuity scheme for its clerical staff who have completed
the qualifying period of service under scheme.
The bank also operates an approved funded gratuity scheme for officers and executives. Contributions
are made on the basis of actuarial valuation. The actuarial valuation of the scheme has been carded out
as at January 1, 1999 in accordance with IAS-19. (revised) using the projected unit credit method which
disclosed the fair value of fund's assets and liabilities of Rs. 15.00 million and Rs. 28.88 million respectively.
The transitional obligation Of Rs, 13,88 million is to be recognised by the bank over a period of
five years commencing 1999 on a straight line basis, The following significant assumptions are used for
valuation of the scheme:
Expected rate of increase in salary level 10 percent per annum compound.
Expected rate of interest on investment 12 percent per annum.
3.8 Deferred Costs
These are amortised over a maximum period of five years commencing from the year in which these
are incurred.
3.9 Revenue Recognition
Mark-up/return on advances and investments are recognised on accrual basis. Fee, commission and
brokerage except income from guarantees are accounted for on receipt basis.
1999 1998
               (Rupees in thousand)
4. CASH
In hand
- local currency 165,748 89,281
- foreign currencies 82,503 89,239
-------------------- --------------------
248,251 178,520
In transit - foreign currency -- 65,734
With State Bank of Pakistan
- Current account 800,642 477,031
- Foreign currency placements 638,363 --
-------------------- --------------------
1,687,256 721,285
=========== ===========
5. BALANCES WITH OTHER BANKS
In Pakistan
- on current accounts 500 8,248
Outside Pakistan
- on current accounts 232,107 107,668
- on deposit accounts 928,827 270,295
-------------------- --------------------
1,161,434 386,211
=========== ===========
6. INVESTMENTS
Investment securities
Federal and Provincial Government Securities
Central Government Loans 308,800 320,000
Provincial Government Loans -- 18,350
Federal Investment Bonds 2,241,362 1,375,000
Treasury Bills 2,115,203 1,425,158
Government Bonds 85,341 85,341
Prize Bonds 9,207 195
-------------------- --------------------
4,759,913 3,224,044
Others
Term Finance Certificates- Unquoted 200,610 147,500
Term Finance Certificates - Quoted 32,512 34,970
-------------------- --------------------
4,993,035 3,406,514
=========== ===========
Market value of quoted investments Rs. 33.332 million (1998: Rs. 35.739 million)
Book value of unquoted investments Rs. 4.961 billion (1998: Rs. 3.372 billion)
7. ADVANCES
Loans, cash credits, overdrafts etc.
In Pakistan 10,352,512 8,264,486
Bills discounted and purchased
Payable in Pakistan 306,228 403,742
Payable outside Pakistan 909,947 505,898
-------------------- --------------------
1,216,175 909,640
-------------------- --------------------
11,568,687 9,174,126
Specific provision for non-performing advances - note 7.2 (1,241,363) (1,416,418)
-------------------- --------------------
10,327,324 7,757,708
=========== ===========
Advances include Rs. 1.716 billion which have been placed on non-performing status. However, the
provision has been made thereagainst in accordance with requirements of prudential regulations issued
by the State Bank of Pakistan.
7.1 Particulars of advances
- In local currency 10,327,324 7,757,708
=========== ===========
Debts considered good in respect of which the bank
is fully secured 10,321,191 7,752,369
Debts considered good for which the bank holds no other
security than the debtors' personal security 6,133 5,339
Debts considered good secured by the personal liabilities of
one or more parties in addition to the personal security of the
debtors -- --
Debts considered bad or doubtful not provided for -- --
-------------------- --------------------
10,327,324 7,757,708
=========== ===========
Balance Maximum total
outstanding at amount of
December 31, advances
1999 including
temporary
advances
granted during
the year
          (Rupees in thousand)
Debts due by directors or executives of the bank or
any of them either severally or jointly with any other persons 1,248 1,354
Debts due by companies or firms in which the
directors of the bank are interested as directors,
partners or in case of private companies, as members -- --
Debts due by the subsidiary companies, controlled firms,
managed modarabas and other associated undertakings -- --