| First Habib Bank Modaraba |
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| Annual
Report 1999 |
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| Contents |
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| BOARD
OF DIRECTORS |
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| CHAIRMAN'S
REVIEW |
|
| AUDITORS' REPORT |
|
| BALANCE
SHEET |
|
| PROFIT AND LOSS ACCOUNT |
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| NOTES
TO THE ACCOUNTS |
|
| PATTERN
OF CERTIFICATE HOLDING |
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|
|
| BOARD
OF DIRECTORS |
|
|
| BOARD
OF DIRECTORS: |
|
SHAUKAT TARIN |
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|
Chairman |
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|
|
KHALEEQ KAYANI |
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|
Director |
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|
|
SOHAIL MALIK |
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|
Director |
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|
MIAN ASIF SAID |
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|
Director |
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|
MIAN ABDUS SALAM |
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|
Chief Executive |
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|
| COMPANY
SECRETARY |
|
MUHAMMAD SAMIULLAH |
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|
| AUDITORS |
|
M/s Ford Rhodes Robson
Morrow Chartered Accountants |
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| BANKERS |
|
Habib Bank Limited |
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| LEGAL
ADVISOR |
|
MUHAMMAD ARIF ZlA |
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|
Advocate |
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| REGISTERED
OFFICE |
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18 - Habib Bank Plaza, |
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|
I. I. Chundrigar Road,
Karachi-75650. |
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|
Phone # 2412294, 2410967, |
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|
2418000 Ext. 2257 &
2354 |
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|
Fax # 2411860 |
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| SHARES
REGISTRAR |
|
M/s. T. H. K. Associates
(Pvt) Limited |
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|
Ground Floor, Shaikh
Sultan Trust |
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|
Building # 2, Beaumont
Road, Karachi-75530 |
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|
Phone # 5689021 &
5686658 |
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|
Fax # 5685681 |
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| CHAIRMAN'S
REVIEW |
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|
| By
the Grace of Allah, your Modaraba has successfully completed its 8th year of
operations. On behalf of the Board of |
|
| Directors
of Habib Bank Financial Services (Pvt.) Limited, the Managers of Modaraba, I
feel immense pleasure in |
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| presenting
to you the 8th Annual Report of First Habib Bank Modaraba together with
audited accounts for the financial |
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| year
ended 30th June, 1999. |
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|
| The
nuclear explosion in May, 1998, as a reaction to the Indian explosion, on the
one hand helped the country to |
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| attain
self confidence but on the other hand the economic activity during the year
remained subdued due to imposition |
|
| of
economic sanctions, freezing of foreign currency accounts and continuous
depletion of foreign exchange reserves. |
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| However,
with partial lifting of sanctions and resumption of aid from International
Financial Institutions, the situation |
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| has ameliorated. |
|
|
| Inspite
of all these problems, the company maintained its consistent performance
record during the financial year in |
|
| question. |
|
|
| FINANCIAL
RESULTS |
|
| Financial
results of your Modaraba for the year under review are summarized below: - |
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|
|
1999 |
1998 |
|
| Total
Operating Income |
|
229,205,062 |
191,509,007 |
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| Less:
Operating Exp. |
|
148,656,278 |
104,216,411 |
|
| Profit
before Taxation |
|
80,548,784 |
87,292,596 |
|
| Provision
for Taxation |
|
5,690,664 |
17,294,492 |
|
| Net
Profit for the year |
|
74,858,120 |
69,998,104 |
|
| Unappropriated
Profit B/F |
|
234,260 |
3,796,577 |
|
| Profit
available for distribution |
|
75,092,380 |
73,794,681 |
|
|
| APPROPRIATIONS |
|
|
| Transfer
to Statutory Reserve |
|
14,971,624 |
13,999,621 |
|
| Proposed
Dividend @ 15% |
|
59,560,800 |
59,560,800 |
|
|
| Balance
Carried Forward |
|
559,956 |
234,260 |
|
|
| DIVIDEND |
|
|
| The
Board is pleased to declare a cash dividend of 1,5% to the Modaraba |
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| Certificate
holders for the period ended on 30th June 1999 subject to |
|
| deduction
of Zakat and Withholding tax at source, wherever applicable. |
|
|
| OPERATING RESULTS |
|
|
| We
feel gratified to mention here that despite adverse economic |
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| conditions,
the operating income of FHBM increased from last year's |
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| figure
of Rs. 189.989 million to Rs. 229.133 million registering an |
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| increase
of Rs. 39.144 i.e. 20.60%. This income is derived totally |
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| through
Islamic Modes of Financing. The net profit over the same |
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| period
has increased by 6.94% from last years' figure of Rs. 69.998 |
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| million
to Rs. 74.858 million. |
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| Our
leased assets at cost at Rs.491.423 million at the end of the period |
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| under
review, recorded an increase of 27.03% over last years figure of |
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| Rs.386.844
million. |
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|
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| Overdue
and defaults are inherent in financing transactions. Your |
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| Modaraba
following a conservative and prudent policy has made |
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| adequate
provision for potential business losses. This policy of |
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| strengthening
the Modaraba financials provide additional comfort to |
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| certificateholders. |
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|
| MODARABA MANAGEMENT COMPANY FEE |
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| With
a view to distributing maximum profit among its certificate holders, |
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| the
Board has decided to charge only 7.5% management fee this year as |
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| against
its minimum entitlement of I0%. |
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|
| Y2K
COMPLIANCE |
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| All
the computer systems of the company both hardware and software in |
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| use
are fully Y2K compliant. |
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|
| TRAINING |
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| The
management is well aware of the fact that training is an essential |
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| part
of human resource development in a progressive institution. |
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| Accordingly
employees of your Modaraba Company were given |
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| adequate
training in Information Technology, Finance and Corporate |
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| affairs
with the assistance of Lahore University of Management Sciences |
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| (LUMS)
& National management Centre
(Karachi) and Management |
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| Development
Institute, Habib Bank Limited, Karachi. |
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|
| FUTURE
PROSPECTS |
|
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| Although
FHBM is a multipurpose Modaraba, its major component of |
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| asset
is in lease finance. Leasing sector has a very important role to play |
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| in
the development of medium and small scale. industries. The share of |
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| leasing
is estimated around 8% of the total private fixed capital |
|
| expenditure
in the country whereas in developed countries its share is |
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| reposed
around 35 to 40 percent. This indicates substantial growth |
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| potential. |
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| Leasing
sector draws its business from a vibrant industrial sector. The government is
mobilizing all its resources to |
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| revive
the economy and to accelerate the pace of industrial growth, We are confident
that the latest steps to collect |
|
| against
willful default will eventually help in boosting the overall economy. It is
expected that these efforts will improve |
|
| the
investment climate in the near future, which will create more demand for
lease financing in the country. However, |
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| in
the backdrop of slow economic growth leasing companies will have to follow a
more stringent policy to ensure |
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| security
of their funds and recovery of rentals on time. |
|
|
| Being
a leasing Modaraba we will continue to focus on our core activity of leasing,
while at the same time diversifying |
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| our
lease portfolio to include companies with sound financials/track records and
to sectors with growth potential and |
|
| low risk profile. |
|
|
| The
Board wishes to record appreciation of the valuable contribution of Mr. Aneeq
Khawar (outgoing Director) and Mr. |
|
| Muhammad
Nawaz Cheema (Outgoing Chief Executive) and welcomes new incumbents Mian Asif
Said and Mian Abdus |
|
| Salam
on the Board. |
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|
| ACKNOWLEDGMENT |
|
|
| The
Board would like to place on record its appreciation for having enjoyed the
support and confidence of Modaraba |
|
| Certificate
holders, Securities & Exchange Commission of Pakistan (SECP), Registrar
Modaraba Companies, State |
|
| Bank
of Pakistan, Leasing Association of Pakistan, Modaraba Association of
Pakistan, for the guidance provided by |
|
| them
from time to time. The Board also appreciates the efforts and hard work put
in by Modaraba Personnel. |
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|
| AUDITORS |
|
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| The
present auditors M/s Ford, Rhodes, Robson, Morrow, Chartered Accountants are
due for retirement and being |
|
| eligible
have offered themselves for re-appointment. |
|
|
| The
Board has approved their reappointment for the period July, 1999 to June,
2000. |
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|
On behalf of the board |
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|
|
SHAUKAT TARIN |
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|
Chairman |
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|
|
| AUDITORS'
REPORT TO THE CERTIFICATE HOLDERS |
|
|
| We
have audited the annexed balance sheet as at June 30, 1999 and the related
profit and loss account and |
|
| statement
of changes in financial position together with the notes to the accounts for
the year ended June |
|
| 30,
1999 of First Habib Bank Modaraba which are modaraba company's (Habib Bank
Financial Services |
|
| (Private)
Limited) representation and we state that we have obtained all the
information and evaluations |
|
| 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 |
|
| Habib
Bank Modaraba as required by the Modaraba Companies and Modarabas (Floatation
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 Modarabas (Floatation and Control) Ordinance, 1980
and |
|
| Modaraba
Companies and Modarabas Rules, 1981 and are further in accordance with
accounting |
|
| policies
consistently applied; |
|
|
| (c)
in our opinion and to the best of our information and according to the
explanations given to us; |
|
|
| (i)
the balance sheet and 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 the Modaraba's affairs as at June 30, 1999 and the profit and
the changes in |
|
| the
financial position for the year ended on that date; |
|
|
| (ii)
zakat deductible at source, if any, under the Zakat and Ushr Ordinance, 1980,
has been deducted |
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| by
the Modaraba and deposited in the 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, |
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|
| Karachi- |
|
Ford, Rhodes, Robson,
Morrow |
|
| November
5, 1999 |
|
Chartered Accountants |
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|
|
| BALANCE
SHEET |
|
| AS
AT JUNE 30, 1999 |
|
|
|
|
1999 |
1998 |
|
|
Note |
Rupees |
Rupees |
|
| TANGIBLE
FIXED ASSETS |
|
| Assets
given on lease - at cost less accumulated amortization |
3 |
490,921,769 |
386,298,645 |
|
| Assets
in own use - at cost less accumulated depreciation |
4 |
501,088 |
545,143 |
|
|
|
---------- |
---------- |
|
|
|
491,422,857 |
386,843,788 |
|
| DEFERRED
COSTS |
|
5 |
-- |
31,415 |
|
| LONG
TERM DEPOSIT |
|
6 |
600,000 |
-- |
|
| LONG
TERM INVESTMENTS |
|
7 |
10,197,520 |
11,079,740 |
|
| Quoted
shares. Market value Rs.8,206,842 |
|
| (1998:Rs.8,300,71
0) |
|
| CURRENT
ASSETS |
|
| Short
term investments |
|
8 |
9,925,000 |
-- |
|
| Morabaha
finances - secured |
|
9 |
6,355,242 |
102,304,224 |
|
| Lease
rentals receivable - secured |
|
10 |
64,402,501 |
39,582,648 |
|
| Prepayments
and other receivables |
|
11 |
5,112,789 |
7,419,010 |
|
| Cash
and bank balances |
|
12 |
26,810,626 |
34,183,682 |
|
|
|
---------- |
---------- |
|
|
112,606,158 |
183,489,564 |
|
|
---------- |
---------- |
|
|
614,826,535 |
581,444,507 |
|
|
========== |
========== |
|
| CAPITAL
AND RESERVES |
|
| Certificate
capital |
|
| Authorised |
|
500,000,000 |
500,000,000 |
|
|
========== |
========== |
|
| 50,000,000
(1998: 50,000,000) Modaraba |
|
| Certificates
of Rs. 10 each |
|
| Issued,
subscribed and paid-up |
|
13 |
397,072,000 |
397,072,000 |
|
| Reserves |
|
14 |
79,666,482 |
64,369,162 |
|
|
|
---------- |
---------- |
|
| Certificate
holders' equity |
|
|
476,738,482 |
461,441,162 |
|
| DEFERRED
LIABILITY |
|
|
|
|
|
| Security
deposits 'on lease contracts |
|
|
52,002,697 |
44,937,001 |
|
| CURRENT
LIABILITIES |
|
|
|
| Current
.portion of security deposits on lease contracts |
|
5,010,000 |
8,940,059 |
|
| Creditor,
accrued and other liabilities |
|
15 |
9,042,937 |
1,471,314 |
|
| Provision
for taxation - net |
|
|
6,829,080 |
2,399,643 |
|
| Unclaimed
profit distribution |
|
|
5,642,539 |
2,694,528 |
|
| Proposed
profit distribution |
|
|
59,560,800 |
59,560,800 |
|
|
|
---------- |
---------- |
|
|
|
86,085,356 |
75,066,344 |
|
| COMMITMENTS |
|
16 |
---------- |
---------- |
|
|
614,826,535 |
581,444,507 |
|
| The
annexed notes form an integral part of these accounts. |
|
========== |
========== |
|
|
|
FIRST HABIB BANK MODARABA |
|
|
Managed by |
|
|
HABIB BANK FINANCIAL SERVICE (PRIVATE) LIMITED |
|
|
| Mian
Abdus Salam |
|
Mian Asif Said |
|
Sohail Malik |
|
| Chief Executive |
|
Director |
|
Director |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 1999 |
|
|
|
|
1999 |
1998 |
|
|
Note |
Rupees |
Rupees |
|
| INCOME |
|
| Lease rentals |
|
204,574,605 |
163,270,498 |
|
| Return
on Morabaha transactions |
|
12,861,550 |
18,274,994 |
|
| Dividend
income |
|
1,943.42 |
119,140 |
|
| Return
on saving accounts |
|
2,640,244 |
8,325,163 |
|
| Gain
on sale of investments - net |
|
7,113,782 |
-- |
|
| Other income |
|
17 |
71,466 |
1,519,212 |
|
|
|
---------- |
---------- |
|
|
229,205,062 |
191,509,007 |
|
| EXPENSES |
|
| Amortisation
of leased assets |
|
121,147,691 |
93,751,919 |
|
| Administrative
and operating expenses |
|
18 |
4,666,892 |
4,857,242 |
|
| Modaraba
Company's management fee |
|
6,041,159 |
436,463 |
|
|
---------- |
---------- |
|
|
131,855,742 |
99,045,624 |
|
|
---------- |
---------- |
|
|
97,349,320 |
92,463,383 |
|
| Provision
for diminution in value of investments |
|
770,906 |
482,424 |
|
| Provision
for potential lease losses |
|
12,013,463 |
1,592,777 |
|
| Provision
for potential morabaha losses |
|
3,172,904 |
3,093,258 |
|
|
---------- |
---------- |
|
|
15,957,273 |
5,168,459 |
|
|
---------- |
---------- |
|
| OPERATING
PROFIT |
|
81,392,047 |
87,294,924 |
|
| Financial
charges |
|
19 |
843,263 |
2,328 |
|
|
|
---------- |
---------- |
|
| PROFIT
BEFORE TAXATION |
|
80,548,784 |
87,292,596 |
|
| Current |
|
-- |
16,715,318 |
|
| Prior |
|
5,690,664 |
579.17 |
|
|
---------- |
---------- |
|
|
5,690,664 |
17,294,492 |
|
| NET
PROFIT FOR THE YEAR |
|
74,858,120 |
69,998,104 |
|
| Unappropriated
profit brought forward |
|
234,260 |
3,796,577 |
|
|
---------- |
---------- |
|
| Profit
available for appropriation |
|
75,092,380 |
73,794,681 |
|
| APPROPRIATIONS |
|
| Transfer
to ,statutory reserve @ 200/0 on profit after tax |
|
14,971,624 |
13,999,621 |
|
| Proposed
profit distribution @ 15% (1998:15%) |
|
59,560,800 |
59,560,800 |
|
|
---------- |
---------- |
|
|
74,532,424 |
73,560,421 |
|
| UNAPPROPRIATED
PROFIT CARRIED FORWARD |
|
559,956 |
234,260 |
|
|
|
========== |
========== |
|
| BASIC
EARNINGS PER CERTIFICATE |
|
12 |
189 |
1.76 |
|
|
|
========== |
========== |
|
| The
annexed notes .form an integral part of these accounts. |
|
|
|
FIRST HABIB BANK MODARABA |
|
|
Managed by |
|
|
HABIB BANK FINANCIAL SERVICE (PRIVATE) LIMITED |
|
|
| Mian
Abdus Salam |
|
Mian Asif Said |
|
Sohail Malik |
|
| Chief Executive |
|
Director |
|
Director |
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| (CASH
FLOW STATEMENT) FOR THE YEAR ENDED JUNE 30, 1999 |
|
|
|
|
1999 |
1998 |
|
|
Note |
Rupees |
Rupees |
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
| Net
profit before taxation |
|
80,548,784 |
87,292,596 |
|
| Adjustments
for non cash and other items |
|
|
|
| Amortisation
of leased assets |
|
121,147,691 |
93,751,919 |
|
| Provision
against potential lease losses |
|
12,013,463 |
1,592,777 |
|
| Provision
against morabaha finance |
|
3,172,904 |
3,093,258 |
|
| Provision
against investments |
|
770,906 |
482,424 |
|
| Depreciation
on assets in own use |
|
233,543 |
190,802 |
|
| Amortization
of deferred costs |
|
31,415 |
68,332 |
|
| Gain
on disposal of fixed assets |
|
-- |
(15,000) |
|
| Dividend
income |
|
(1,943,415) |
(119,140) |
|
| Financial
charges |
|
843,263 |
2,328 |
|
|
---------- |
---------- |
|
|
136,269,770 |
99,047,700 |
|
| Cash
generated from operations |
|
:216,818,.5.54 |
186,340,296 |
|
| Decrease
in current assets |
|
58,415,796 |
15,668,227 |
|
| Increase
in creditors, accrued and other liabilities |
|
7,063,380 |
(7,266,430) |
|
|
282,297,730 |
194,742,093 |
|
| Financial
charges paid |
|
(335,020) |
(2,328) |
|
| Taxes paid |
|
(1,261,234) |
(25,533,225) |
|
| Net
cash from operating activities |
|
280,701,476 |
169,206,540 |
|
|
|
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
| Purchase
of - Leased assets |
|
(237,257,802) |
(186,043,349) |
|
| - Own assets |
|
(189,488) |
(680,202) |
|
| Investment
in shares/securities |
|
(9,813,686) |
(10,761,830) |
|
| Proceeds
from sale of fixed assets - Leased |
|
11,486,996 |
860,789 |
|
| Proceeds
from sa}e of fixed assets - owned |
|
-- |
15,000 |
|
| Morahaba
finance |
|
-- |
6,666,666 |
|
| Dividend
received |
|
1,776,600 |
119,140 |
|
| Customers
security deposits |
|
3,135,637 |
16,350,911 |
|
| Long
term security deposit |
|
(600,000) |
-- |
|
|
---------- |
---------- |
|
| Net
cash used in investing activities |
|
(231,461,743) |
(173,472,875) |
|
|
---------- |
---------- |
|
|
49,239,733 |
(4,266,335) |
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
| Profit paid |
|
(56,612,789) |
(58,851,731) |
|
|
---------- |
---------- |
|
| Net
decrease in cash and cash equivalents |
|
(7,373,056) |
(63,118,066) |
|
| CASH
AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR |
|
34,183,682 |
97,301,748 |
|
|
|
---------- |
---------- |
|
| CASH
AND CASH EQUIVALENTS AT END OF THE YEAR |
|
26,810,626 |
34,183,682 |
|
|
========= |
========= |
|
|
FIRST HABIB BANK MODARABA |
|
|
Managed by |
|
|
HABIB BANK FINANCIAL SERVICE (PRIVATE) LIMITED |
|
|
| Mian
Abdus Salam |
|
Mian Asif Said |
|
Sohail Malik |
|
| Chief Executive |
|
Director |
|
Director |
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED JUNE 30,1999 |
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| 1.
LEGAL STATUS AND NATURE OF BUSINESS |
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| First
Habib Bank Modaraba is a perpetual, multi-purpose and multi-dimensional
Modaraba formed under the |
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| Modaraba
Companies and Modarabas (Floatation and Control) Ordinance, 1980, and the
rules framed |
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| thereunder
and is managed by Habib Bank Financial Services (Pvt) Limited, a wholly owned
subsidiary of Habib |
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| Bank
Limited. The Modaraba is currently engaged in various modes of Islamic
funding and other related |
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| business.
It is listed on the Karachi, Lahore and Islamabad Stock Exchanges. |
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| 2.
SIGNIFICANT ACCOUNTING POLICIES |
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| (a)
Overall valuation policy |
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| These
accounts have been prepared under the historical cost convention. |
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| (b) Fixed assets |
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| (i) Assets given on lease and amortization |
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| All
lease agreements are accounted for as operating leases. |
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| Leased
assets are stated at net cost to the modaraba less accumulated amortization.
Amortization is |
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| charged
to income applying the annuity method whereby the amortizable value of assets
is amortized |
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| over
the lease period. |
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| (ii)
Assets in own use and depreciation |
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| These
are stated at cost less accumulated depreciation. Depreciation is charged to
income applying |
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| the
straight line method whereby the cost of an asset is written-off over its
estimated useful life. Full |
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| years
depreciation is charged on additions during the year whereas no depreciation
is charged in the |
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| year
of disposal. |
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| (c) Deferred costs |
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| Expenditure
incurred in connection with the right/bonus issue are being written-off over
a period of five |
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| years
from the date of incurrence. |
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| (d) Investment |
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| Long term |
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| These
are stated at cost determined on a moving average basis less any provision
for permanent diminution |
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| in
market value of investments. |
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| Short term |
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| These
are stated at lower of moving average cost and market value determined on an
individual investment basis. |
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| (e) Taxation |
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| Provision
for current taxation is based on taxable income at the current rates of
taxation after taking into |
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| account
tax credits available, if any. |
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| (f)
Revenue recognition |
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