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First Habib Modaraba
Annual Report 1999
CONTENTS
CORPORATE INFORMATION
DIRECTORS' REPORT
AUDITORS' REPORT
BALANCE SHEET
PROFIT AND LOSS ACCOUNT
STATEMENT AND CHANGES IN FINANCIAL POSITION
NOTES TO THE ACCOUNTS
PATTERN OF CERTIFICATE HOLDINGS
CORPORATE INFORMATION
BOARD OF DIRECTORS
Mr. Wazir Husain Jafree
Mr. Muhammad Shoaib
Mr. F.H. Mukhi
Mr. Abbas All Muhammad
Mr. S. Shahanshah H. Rizvi
AUDITORS
Ford, Rhodes, Robson, Morrow
Chartered Accountants
BANKERS
Askari Commercial Bank Limited
Bank AI Habib Limited
Faysal Bank Limited
Gulf Commercial Bank Limited
Habib Bank AG Zurich
Habib Bank Limited
Metropolitan Bank Limited
Soneri Bank Limited
Union Bank Limited
REGISTERED OFFICE
Hirani Centre
I.I. Chundrigar, Road,
Karachi.
REGISTRAR
Noble Computer Services (Pvt) Ltd.
1st Floor, AI-Manzoor Building,
Dr. Ziauddin Ahmed Road,
Karachi.
REPORT OF THE DIRECTORS FOR THE YEAR
ENDED JUNE 30, 1999
The Board of Directors of the Management Company are pleased to present audited accounts for the year ended 30th June,
1999.
FINANCIAL RESULTS
					(Rupees in '000)
					Year ended	Year ended
					June 30,	June 30,
					1999	1998
Total Operating income					351,748	302,836
Total Operating expenses					278,364	238,515
					----------	----------
					73,384	64,321
Less:  Modaraba Co's Management Fee					6,671	5,047
					----------	----------
Profit for the year					66,713	5,474
Less:  Provision for Taxation
Current					--	14,000
Prior year					1,640	(3,662)
					----------	----------
					1,640	10,338
					----------	----------
Net Profit					65,073	48,136
Add · Unappropriated profit B/F					1,913	2,304
					----------	----------
Profit available for appropriation					66,986	50,440
					==========	==========
APPROPRIATION
Cash dividend 20% (Rs. l/- per Certificate of Rs. 5/- each)					50,400	18,900
(1998 cash dividend 7.50% i.e. Rs.0.375 per certificate of Rs. 5/- each)
Transfer to statutory reserve @ 20% of profit					13,014	9,627
Transfer to General Reserve					--	20,000
Un-appropriated profit C/F					3,572	1,913
					----------	----------
					66,986	50,440
					==========	==========
PROFIT DISTRIBUTION
The Directors are pleased to declare a 20% cash dividend i.e Rs. 1.00 per
certificate of Rs. 5/- each.
REVIEW OF OPERATIONS
The country has long been in the grip of constantly declining economic
activity. The fiscal year 1998-99 did not prove to be an economic good year
for the country because of the overall economic scenario reflected negative
trend. The GDP estimated to have grown by 3.1% in 1998-99 compared to
4.3% in 1997-98. The slower GDP growth resulted mainly due to the
reduction in agricultural growth and value-added goods in large scale
manufacturing, as well as in services sector.		1995 1996 1997 1998 1999
However, by the grace of God your Modaraba has again maintained its
steady and balanced growth. Your Modaraba depicted significant growth in
net investment in leases as well as in profits.
The new leases executed during the period amounted to Rs. 303.0 million
as compared to Rs. 294.0 million of corresponding period of last year. The
net investment in leases rose from Rs. 527.0 million to 567.0 million.
The gross lease rentals have also increased from Rs. 300.0 million to Rs.
349.0 million. This shows excellent recovery during the year. The profit
after tax has been improved form Rs. 48.0 million to Rs. 65.0 million.
The main elements of achievement of above maintained results inspite of
overall slow down of economy are, efficient utilization of funds in good
quality earning assets in prudent manner and vigorous monitoring of
recovery and controlling of operating expenses.
FUTURE OUTLOOK
Keeping in view the various measures taken by the Government
particularly its encouraging agreements with all international lenders, the
lifting of sanctions to some extent, it is hoped that very soon economy of
the country will be back on its growth track. However, that the restoration
of confidence and improvement in institutional perception of the country's
creditability will take time. Advancement of growth and stability will neither
be automatic nor easy and it requires careful handling of economy with
consistent monetary policies.
Your Modaraba will continue to exercise cautious approach towards
employment of funds. We will, as usual, maintain strict standards for
evaluating lease proposals. So far by the grace of God we have been
successful in establishment of our Modaraba on sound footing in financial
sector. However, we can not be expected to remain immune from any
future unpredictable situation of Country's economy. Our moto is to employ
available resources in prudent manner, enhance the image of reliability
and security, which shall enable us to achieve best possible results.
Y2K COMPLIANT
You will be pleased to note that year 2000 compliance within Modaraba
has been completed. Our systems are perfectly Y2K compliant and fully
geared to meet future requirements.
AUDITORS
The present auditors M/s Ford, Rhodes, Robson, Morrow have consented
to their re-appointment for the year ended 30th June, 2000. The Directors
have confirmed their appointment subject to required official approval.
ACKNOWLEDGMENT
We are grateful to the certificate holders, valued customers, financial
institutions for their support. Our sincere thanks to Registrar of Modaraba,
the Securities of Exchange Commission of Pakistan, for their constant
guidance.
We also express our deep gratitude to our staff members for their hard
work and devotion towards accomplishment of desired objectives.
Karachi: November 10, 1999				For and on behalf of Board of Directors
				Wazir Husain Jafree
				Chairman & Chief Executive
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 (Cash Flow Statement) together with the notes to the accounts for the year
then ended of First Habib Modaraba which are Modaraba Company's (Habib Modaraba Management 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 Habib
Modaraba as required by the Modaraba Companies and Modaraba (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 Modaraba (Floatation 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 Statement of Changes in Financial
Position (Cash Flow Statement) 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 (cash flow statement) for the year ended on that date;
(ii)  Zakat deductible at source if any, under the Zakat and Ushr Ordinance, 1980 has been deducted 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 for the Modaraba.
Karachi: November 10, 1999				Ford, Rhodes, Robson, Morrow
				Chartered Accountants
BALANCE SHEET AS AT JUNE 30 1999
					1999	1998
				Notes	Rupees	Rupees
TANGIBLE  FIXED ASSETS				3
Fixed assets leased out					564,642,771 ,	526,888,597
Fixed assets in own use					235,938	516,624
					564,878,709	527,405,221
LONG TERM ADVANCES AND DEPOSIT				4	823,359	221,171
CURRENT ASSETS
Short term investments				5	28,755,373	23,875,195
Advances, prepayments and other receivables				6	703,142	297,061
Lease rentals receivable-considered good					2,754,364	1,368,398
Cash and bank balances				7	1,467,716	810,790
					----------	----------
					33,680,595	26,351,444
					----------	----------
					599,382,663	553,977,836
CAPITAL AND RESERVES					==========	==========
Certificate capital:
Authorised:
60,000,000 (1998 ' 60,000,000) certificates of Rs.5 each					300,000,000	300,000,000
					==========	==========
Issued, subscribed and paid-up				8	252,000,000	252,000,000
Capital reserve:
Statutory reserve					49,656,290	36,641,548
Revenue reserve:
General reserve					40,000,000	4,000,000
Unappropriated profit					3,571,593	1,912,623
					----------	----------
Certificate holders' equity					345,227,883	330,554,171
DEFERRED LIABILITIES				9	43,380,309	43,999,738
CURRENT LIABILITIES
Finance arrangements				10	124,000,000	131,500,000
Lessees' security deposits-current portion					18,626,728	8,724,932
Creditors and accrued liabilities				11	14,492,423	13,309,485
Provision' for taxation					378,948	4,685,942
Unclaimed profit distribution					2,876,372	2,303,568
Proposed profit distribution					50,400,000	18,900,000
					----------	----------
					210,774,471	179,423,927
					----------	----------
					599,382,663	553,977,836
					==========	==========
The annexed notes form integral part of these accounts.
Sd/-				Sd/-			Sd/-
Chief Executive				Director			Director
PROFIT AND LOSS ACCOUNT FOR THE YEAR
ENDED JUNE 30, 1999
					1999	1998
				Notes	Rupees	Rupees
INCOME
Lease rentals					348,921,197	300,041,383
Other income				12	2,827,116	2,795,027
					----------	----------
					351,748,313	302,836,410
EXPENSES
Depreciation on fixed assets leased out					245,414,905	209,221,236
Financial charges				13	21,374,449	16,672,553
Other expenses				14	11,412,449	8,466,955
					----------	----------
					278,201,803	234,360,744
					----------	----------
					73,546,510	68,475,666
Diminution in value of investments written off					(161,194)	(4,153,914)
					----------	----------
Profit before management fee					73,385,316	64,321,752
Modaraba company's management fee					(6,671,392)	(5,847,432)
					----------	----------
Profit before taxation					66,713,924	58,474,320
TAXATION
Current					--	14,000,000
Prior years					1,640,212	(3,661,723)
					----------	----------
					1,640,212	10,338,277
					----------	----------
Profit after taxation					65,073,712	48,136,o43
Unappropriated profit brought forward					1,912,623	2,303,789
					----------	----------
					66,986,335	50,439,832
APPROPRIATIONS
Proposed profit distribution @ 20% (1998: 7.5%)					50,400,000	18,900,000
Transfer to statutory reserve					13,014,742	9,627,209
Transfer to general reserve					--	20,000,000
					----------	----------
					63,414,742	48,527,209
					----------	----------
Unappropriated profit carried forward					3,571,593	1,912,623
					==========	==========
The annexed notes form integral part of these accounts.
Sd/-			Sd/-			Sd/-
Chief Executive			Director			Director
STATEMENT OF CHANGES IN FINANCIAL POSITION (CASH FLOW STATEMENT)
FOR THE YEAR ENDED JUNE 30, 1999
					1999	1998
					Rupees	Rupees
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation					66,713,924	58,474,320
Adjustment for:
Profit on disposal of fixed assets leased out					(1,638,334)	(889,650)
(Profit) / Loss on sale of investments					(4,020)	120,000
Depreciation - fixed assets leased out					245,414,905	209,221,236
- fixed assets in own use					404,511	364,541
Provision for gratuity					214,265	187,315
Diminution in value of investments written off					161,194	4,153,914
Profit on PLS term deposit account					(8,987)	--
Dividend income					(34,097)	(424,835)
Financial charges on:
Musharika					20,474,507	16.173,739
Morabaha					843,904	443,104
					----------	----------
					21,318,411	16,616,843
					----------	----------
Operating profit before changes in operating assets					332,541,772	287,823,684
(Increase)/decrease in operating assets:					(424,892)	195,764
Advances and other receivables					(1,385,966)	(569,834)
					----------	----------
Rentals receivable					330,730,914	287,449,614
Increase/(decrease) in operating liabilities:
Lessees' security deposits:
Received					17,776,189	18,775,338
Refund-					(8,708,087)	(6,427,896)
					----------	----------
Net lessees security deposits					9,068,102	12,347,442
Creditors and accrued liabilities					1,306,836	1,597,664
					----------	----------
Net cash from operating activities before financial charges
and income-tax paid					341,105,852	301,394,720
Income -tax paid					(5,947,206)	(20,329,260)
					----------	----------
Net cash from operating activities (A)					335,158,646	281,065,460
					==========	==========
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets in own use					(123,825)	(02,350)
Purchase of fixed assets leased out					(303,290,054)	(294,269,587)
Proceeds from disposal of fixed assets leased out					21,759,309	15,219,564
Long term advances and deposit					(602,188)	83,972
Purchase of shares					(5,045,452)	(12,113,917)
Proceed from sale of investments					8,100	565,000
Dividend received					52,908	390,430
Profit on PLS term deposit account					8,987	75,119
					----------	----------
Net cash from investing activities (B)					(287,232,215)	(290,131,769)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividend paid					(18,327,196)	(24,751,145)
Finance arrangements					(7,500,000)	51,500,000
Musharika and Morabaha profit paid					(21,442,309)	(18,255,168)
					----------	----------
Net cash financing activities (c)					(47,269,505)	8,493,687
					==========	==========
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C)					656,926	(572,622)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR					810,790	1,383,412
					----------	----------
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR					1,467,716	810,790
					==========	==========
Sd/-		Sd/-		Sd/-
Chief Executive		Director		Director
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED JUNE 30, 1999
1. STATUS AND NATURE OF BUSINESS
The First Habib Modaraba is a perpetual, multi-purpose modaraba floated and managed by Habib Modaraba
Management Limited and is listed on the stock exchanges of Pakistan. The Modaraba is engaged in the business
of leasing, musharika, morab