| Altowfeek Investment Bank Limited |
|
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|
| Annual
Report 1999 |
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| CONTENTS |
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| Corporate
Information |
|
| Notice
of Meeting |
|
| Statement
U/S 160(1) (b) of the Companies |
|
| Ordinance, 1984 |
|
|
| Chairman's
Report |
|
| Auditors'
Report to the Members |
|
| Balance Sheet |
|
|
| Profit
and Loss Account |
|
| Statement
of Sources and Application of Funds |
|
| (Cash
Flow Statement) |
|
| Notes
to the Accounts |
|
| Pattern
of Share holding |
|
|
|
| CORPORATE
INFORMATION |
|
|
| CHAIRMAN |
|
Mr. Khalid Mahmood
Bhaimia |
|
|
|
- Nominee
AlBaraka Investment & Development Co, Jeddah |
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| VICE
CHAIRMAN |
Mr. Osman A. Suleiman |
|
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|
- Nominee AIBaraka
Investment & Development Co, Jeddah |
|
|
| CHIEF
EXECUTIVE |
Mr. Khalid Majid |
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|
- Nominee AIBaraka
Investment & Development Co, Jeddah |
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| DIRECTORS |
|
Mr. Yelcin Oner |
|
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|
- Nominee AIBaraka
Investment & Development Co, Jeddah |
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|
Mr. Iftikhar Soomro |
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- Nominee AIBaraka
Investment & Development Co, Jeddah |
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|
Mr. Nasim Beg |
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|
- Nominee National
Investment Trust |
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|
Mr. Omer Abdullah Sejieny |
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|
- Nominee Islamic
Development Bank, Jeddah |
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| COMPANY
SECRETARY |
Tariq Aleem |
|
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|
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| AUDITORS |
|
Sidat Hyder Qamar &
Co, Chartered Accountants. |
|
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|
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| SHARE
REGISTRARS |
Software (Pvt) Limited |
|
|
|
5/79 Usman Block, New
Garden Town, Lahore. |
|
|
| REGISTERED
OFFICE |
63-Shahrah-e-Quaid-e-Azam,
Lahore |
|
| LEGAL
ADVISORS |
Salim & Baig
Advocates |
|
| BRANCHES |
|
-63-
Shahrah-e-Quaid-e-Azam, Lahore. |
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|
|
-Lakhani Centre, I.I.
Chundrigar Road, Karachi. |
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| NOTICE
OF THE ANNUAL GENERAL MEETING |
|
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| Notice
is hereby given that the 9th Annual General Meeting of AlTowfeek
Investment Bank Limited will be |
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| held
at Avari Hotel, Shahrah-e-Quaid-e-Azam, Lahore on Friday 25th February, 2000
at 10.00 A.M. to transact |
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| the
following business: |
|
|
| ORDINARY
BUSINESS |
|
|
| 1)
To confirm the minutes of the last Annual General Meeting of the company held
on December 07, 1998. |
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|
|
|
| 2)
To receive, consider and adopt the audited accounts of the Company for the
year ended June 30, 1999 |
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| together
with the Directors' and Auditors' Reports thereon. |
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| 3)
To appoint the auditors for the next term and to fix their remuneration. The
present auditors M/s. SIDAT |
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| HYDER
QAMAR & CO. Chartered Accountants, retire and being eligible, offer
themselves for |
|
| re-appointment. |
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|
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| SPECIAL
BUSINESS |
|
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| 4)
To approve the remuneration of the Chief Executive. Further, to authorize the
Board of Directors to revise |
|
| the
remuneration of the Chief Executive of the company, as and when considered
necessary. |
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| A
statement under section 160 of the Companies Ordinance 1984 pertaining to the
special business is |
|
| being
sent to the shareholders with a copy of the notice. |
|
|
| 5)
To transact any other business with the permission of the chair. |
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|
|
|
By order of the Board |
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| Lahore |
|
|
TARIQ ALEEM |
|
| February
03, 2000 |
|
COMPANY SECRETARY |
|
|
| NOTES |
|
|
| (i)
A member entitled to attend and vote at this meeting is entitled to appoint a
proxy to attend the meeting |
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| and
vote for his / her. Form of Proxy is enclosed with the annual report. Proxies
in order to be effective, |
|
| must
be received at the registered office of the Company, at least 48 hours before
the time of holding |
|
| the meeting. |
|
|
|
|
| (ii)
The members are requested to immediately notify the change in address, if
any. |
|
|
| (iii)
The share transfer books of the Company will remain closed from 17th
February, 2000 to 24th February |
|
| 2000
both days inclusive. |
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|
|
|
|
| STATEMENT
U/S 160(1) (b) OF THE COMPANIES ORDINANCE, 1984 |
|
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| The
members approval is sought for the payment of remuneration and the provision
of certain other utilities to |
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| the
Chief Executive as per the bank's service rules and as per recommendations of
the Board of Directors of |
|
| the
Company. Further, members approval is sought for authorizing the Board of
Directors to revise the |
|
| remuneration
of the Chief Executive as and when considered necessary. For the purpose it
is proposed to |
|
| pass
with or without amendment following resolution. |
|
|
| "Resolved
that Mr. Khalid Majid Chief Executive shall be paid w.e.f. December 01, 1999
gross remuneration |
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| of
Rs. 250,000 per month alongwith other benefits as per bank's service rules. |
|
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| Further
resolved that the Board of Directors be and is hereby authorized to revise
the remuneration of the |
|
| Chief
Executive of the company from time to time in accordance with the company's
rules and policies" |
|
|
|
| CHAIRMAN'S
REPORT |
|
| TO
THE SHAREHOLDERS |
|
|
| The
Directors of your bank present to you the results for fiscal year ending 30
June, 1999. |
|
|
| Fiscal
year 1999 was worse than fiscal year 1998 and beyond our most pessimistic
expectation. The |
|
| economic
and banking environments deteriorated further. In our semi-annual report
covering July- December |
|
| 1998,
we had pointed out to you that; |
|
|
| *
Debt recovery remained very slow due to legal environment and lack of
political will to |
|
| clean
up the situation. |
|
|
| *
Continuing unfair taxation treatment for investment banks. |
|
|
| *
Increased cost of maintaining blocked foreign currency accounts. |
|
|
| *
Lack of business opportunities for investment banks-especially Islamic banks. |
|
|
| In
that half year, we had a loss of Rs. 36.4 million. However, economic
environment was worse in the second |
|
| half
of the fiscal year, January-June 1999 period. |
|
|
| *
The freeze of FCA and forced increase in the cost of maintaining these
deposits have |
|
| compelled
our overseas depositors to repatriate their $'s out of Pakistan, taking an FX
hit. |
|
| This
is despite these depositors having paid for forward cover fees to SBP. |
|
|
| *
To repay these depositors we had to liquidate our assets- particularly liquid
and high quality |
|
| -
thus reducing our income. Our total assets declined by 891 million - or 30%
during this |
|
| fiscal year. |
|
|
| *
During the year, our revenue declined by 115 million as a result of this
assets shedding. |
|
|
| *
On the other hand, our costs only declined by 59 million for the year,
leaving us with an |
|
| operating
loss of 80 million for the year. |
|
|
| *
We have provided a further 42.7 million for doubtful assets, consistent with
our policies. |
|
|
| *
As a result , we have a loss of 118.8 million for the fiscal year-all to be
provided from the |
|
| shareholder's
equity. |
|
|
| *
Our 310 million capital has now shrunk to 136.5 million. However, for a true
investment bank, |
|
| this
capital is adequate, since investment banks are not in the lending business
as commercial |
|
| banks
are. Furthermore, it is not possible to raise new capital in local stock
markets anyway. |
|
|
| *
On an adjusted basis our operating expenses have been declining as a result
of cost controls |
|
| and
closure of branches and functions. We do not foresee significant further
reduction in view |
|
| of
necessity to maintain proper controls and separation of functions. |
|
|
| Having
begun the process of bad debt recovery well ahead of our peer group, we are
cautiously optimistic |
|
| that
we are coming to an end in this cycle, provided customers now perform in
accordance with the revised |
|
| agreements.
Post fiscal closing changes in the government and public statements of the
country's new |
|
| Chief
Executive are encouraging signs. We hope finally there is a strong political
will to enforce the rule of |
|
| law
in all aspects of our activities - especially in commercial dealings. |
|
|
| In
previous reports we have brought to your attention the irrationality of
current taxation practices - as |
|
| applied
to investment banks in general and your Bank in particular. Despite
continuous successes in law, the |
|
| practical
reality is we have not got any refund back from CBR. Our carrying cost is now
in excess of Rs. 15 |
|
| million
per year. On top of this are the costs incurred in contesting the claims. It
is totally asinine that taxes |
|
| are
first levied and institutions have to pay and then contest to get a refund
back - which takes years. |
|
|
| In
recent months the Supreme Court has finally given its long overdue judgement
on RIBA and banking |
|
| activities
in the country. We are simply delighted that they have spoken out in favour
of total transformation |
|
| of
the banking systems. We no longer feel that we are in niche banking in the
country. We would now like |
|
| to
take this judgement a step further and offer truly Islamic products,
especially on the liability side. We |
|
| have
begun the process and inshallah in the year 2000, we will have some
interesting products for the |
|
| market
place. This should help in turning around our position in the market place. |
|
|
| Mr.
Faisal Jamall who had been with the Bank since inception and whose last
position was Acting CEO, |
|
| left
the Bank and the country. We are fortunate that we have Mr. Khalid Majid, who
had been incharge of |
|
| all
activities other than the Karachi Branch. Your Board has been highly pleased
to appoint him the new |
|
| Chief
Executive Officer of the Bank. We welcome him and look forward to greater
contributions in the |
|
| coming period. |
|
|
| We
are cautiously optimistic about the recent changes in the country, especially
at the micro level at least. |
|
| We
want to see political will to change the way banking activities are conducted
especially where |
|
| enforcement
of contract and banking law are concerned. We do not believe financial
institutions should |
|
| become
risk averse due to the fear of either customer activities not working out or
for fear of being judged |
|
| by
hindsight. Economic revival is critical for the country and your Bank is part
of the bigger picture. |
|
| However,
it is too early for us to predict a total turnaround in our fortunes. We are
cautiously optimistic for |
|
| coming years. |
|
|
| On
behalf of the shareholders and the Board, we thank the staff for their
continuing dedication. We also |
|
| thank
our customers for continuing to direct their business to our bank -
especially when good customers |
|
| have
a range of choices. |
|
|
|
|
For and on behalf of the Board of Directors |
|
|
|
|
|
|
|
|
|
Khalid Mahmood Bhaimia |
|
| Dated:
January 24, 2000 |
|
Chairman |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of ALTOWFEEK
INVESTMENT BANK LIMITED as at 30 |
|
| June
1999 and the related profit and loss account and statement of sources and
application of funds (cash |
|
| flow
statement), 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 and, after due verification thereof, we report
that: |
|
|
| a)
In our opinion, proper books of account 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; |
|
|
| 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; |
|
|
| 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 the statement of sources and application
of funds (cash flow |
|
| statement),
together with the notes forming part thereof, 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 and 30 June, 1999 and of the loss and the changes in sources
and application |
|
| of
funds (cash flow statement), for the year then ended; |
|
|
| d)
in our opinion, zakat deductible at source under the Zakat and Ushr
Ordinance, 1980 was deducted by |
|
| the
Company and deposited in the Central Zakat Fund established under section 7
of that Ordinance. |
|
|
| LAHORE: |
|
|
SlDAT HYDER QAMAR & CO. |
|
| Dated:
January 26, 2000 |
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1999 |
|
|
|
|
|
Rupees '000 |
|
|
|
Note |
1999 |
1998 |
|
| SHARE
CAPITAL RESERVES AND LIABILITIES |
|
|
|
|
|
|
| SHARE
CAPITAL |
|
|
|
|
|
|
|
| Authorised
capital |
|
|
|
| 100,000,000
ordinary shares of Rs. 10/- each |
|
1,000,000 |
1,000,000 |
|
|
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up capital: |
|
|
| 31,000,000
ordinary shares of Rs. 10/- each |
|
|
| fully
paid up in cash |
|
310,000 |
310,000 |
|
|
|
|
| RESERVES |
|
|
|
| Statutory
reserve |
|
3 |
25,826 |
25,826 |
|
| Accumulated
(Loss) |
|
|
(199,314) |
(80,499) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(173,488) |
(54,673) |
|
|
|
|
------------------ |
------------------ |
|
| SHAREHOLDERS'
EQUITY |
|
|
136,512 |
255,327 |
|
|
|
|
| CUSTOMER
DEPOSITS - Due after one year |
|
4 |
306 |
5,200 |
|
|
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
|
| Customer
deposits - Due within one year |
|
4 |
1,878,871 |
2,543,267 |
|
| Accrued
and other liabilities |
|
5 |
67,103 |
169,886 |
|
| Unclaimed
dividend |
|
|
231 |
231 |
|
| Provision
for taxation |
|
|
1,200 |
1,125 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
1,947,405 |
2,714,509 |
|
| COMMITMENTS
AND CONTINGENT LIABILITIES |
6 |
-- |
-- |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
2,084,223 |
2,975,036 |
|
|
|
|
========== |
========== |
|
|
| ASSETS |
|
|
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
|
| Cash
and bank balances |
|
7 |
243,014 |
63,843 |
|
|
|
|
|
| Advances,
prepayments |
|
|
|
| and
other receivables |
|
8 |
166,622 |
233,154 |
|
|
|
|
|
| Investments |
|
9 |
230,751 |
848,183 |
|
| Morabaha
finance |
|
10 |
1,257,391 |
1,524,621 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
1,897,778 |
2,669,801 |
|
| LONG
TERM MORABAHA FINANCE |
|
10 |
8,818 |
125,168 |
|
|
|
|
|
| LONG
TERM INVESTMENTS |
|
11 |
129,253 |
131,033 |
|
|
|
|
|
| LONG
TERM ADVANCES AND SECURITY |
|
|
| DEPOSITS |
|
12 |
1,822 |
8,197 |
|
|
|
|
| DEFERRED
TAX ASSET |
|
|
39,365 |
31,387 |
|
| TANGIBLE
FIXED ASSETS |
|
13 |
7,187 |
9,450 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
2,084,223 |
2,975,036 |
|
|
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts |
|
|
|
CHAIRMAN |
|
CHIEF EXECUTIVE |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 1999 |
|
|
|
|
|
Rupees '000 |
|
|
|
Note |
1999 |
1998 |
|
|
|
|
|
| INCOME |
|
|
|
| Profit
on morabaha finance |
|
|
176,379 |
245,826 |
|
| Profit
on bank deposits |
|
|
26,509 |
16,006 |
|
| Non
fund based income |
|
|
2,641 |
7,357 |
|
| Dividend
income |
|
|
27,293 |
11,698 |
|
| Profit
from investments |
|
14 |
25,351 |
96,124 |
|
| Profit
on disposal of fixed assets |
|
|
1,572 |
137 |
|
| Other Income |
|
|
2,871 |
-- |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
262,616 |
377,150 |
|
|
|
|
| EXPENDITURE |
|
|
|
| Return
on deposits |
|
|
298,710 |
367,759 |
|
| Administrative
& Operating expenses |
|
15 |
44,046 |
34,199 |
|
|
|
|
------------------ |
------------------ |
|
|
|
342,756 |
401,958 |
|
|
|
------------------ |
------------------ |
|
| OPERATING
LOSS BEFORE PROVISIONS |
|
80,140 |
24,808 |
|
|
|
|
|
|
|
| PROVISIONS |
|
|
|
| Doubtful
morabaha financing |
|
35,556 |
(2,230) |
|
| Doubtful
receivables |
|
5,417 |
3,311 |
|
| Diminution
in the value of long term |
|
|
|
| unquoted
investments |
|
1,780 |
-- |
|
|
|
------------------ |
------------------ |
|
|
|
42,753 |
1,081 |
|
|
|
------------------ |
------------------ |
|
| LOSS
BEFORE TAXATION |
|
122,893 |
25,889 |
|
|
|
|
|
| TAXATION |
|
|
|
| Current |
|
16 |
3,900 |
11251 |
|
| Deferred |
|
|
(7,978) |
-- |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(4,078) |
1 125 |
|
|
|
|
| LOSS
FOR THE YEAR AFTER TAX |
|
|
118,815 |
27,014 |
|
| ACCUMULATED
LOSS BROUGHT FORWARD |
|
|
80,499 |
53,485 |
|
| ACCUMULATED
LOSS CARRIED FORWARD TO |
|
------------------ |
------------------ |
|
| BALANCE
SHEET |
|
199,314 |
80,499 |
|
|
|
|
========== |
========== |
|
| Earnings
per share - Basic and diluted |
|
22 |
(3.83) |
(0.87) |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts, |
|
|
|
CHAIRMAN |
|
CHIEF EXECUTIVE |
|
|
|
| STATEMENT
OF SOURCES AND APPLICATION OF FUNDS (CASH FLOW STATEMENT) |
|
| FOR
THE YEAR ENDED JUNE 30, 1999 |
|
|
|
|
|
|
Rupees' 000 |
|
|
|
|
|
1999 |
1998 |
|
|
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
| Loss
before taxation |
|
(122,893) |
(25,889) |
|
| Adjustments
for: |
|
|
|
|
|
|
| Gain
on investments |
|
(25,351) |
(96,124) |
|
| Gain
on disposal of fixed assets |
|
(1,572) |
(137) |
|
| Depreciation |
|
2,025 |
2,515 |
|
| Provisions |
|
42,755 |
1,081 |
|
|
|
------------------ |
------------------ |
|
|
|
17,855 |
(92,665) |
|
|
|
------------------ |
------------------ |
|
| OPERATING
LOSS BEFORE CHANGES IN OPERATING ASSETS |
(105,038) |
(118,554) |
|
| (INCREASE)/DECREASE
IN OPERATING ASSETS |
|
| Advances,
prepayments and other receivables |
|
94,467 |
(2,891) |
|
| Morabaha
finance |
|
348,025 |
385,756 |
|
|
|
|
| (DECREASE)
IN OPERATING LIABILITIES |
|
|
| Customer
deposits |
|
(669,290) |
(100,947) |
|
| Accrued
and other liabilities |
|
(102,783) |
(3,602) |
|
|
|
|
------------------ |
------------------ |
|
| NET
CASH FLOWS FROM OPERATING ACTIVITIES |
|
| BEFORE
DIVIDEND AND INCOME TAX |
|
(434,619) |
159,762 |
|
|
|
|
|
| Dividend paid |
|
-- |
(19) |
|
| Income Tax paid |
|
(37,176) |
(28,951) |
|
|
|
------------------ |
------------------ |
|
| NET
CASH FLOWS FROM OPERATING ACTIVITIES |
|
(471,795) |
130,792 |
|
|
|
|
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
| Proceeds
from sale of short term investments |
|
642,782 |
(294,113) |
|
| Purchase
of long term investments |
|
-- |
(30,913) |
|
| Advances
and security deposits |
|
6,375 |
(834) |
|
| Purchase
of fixed assets |
|
(637) |
(2,666) |
|
| Sale
proceeds of fixed assets |
|
2,446 |
3,523 |
|
|
|
------------------ |
------------------ |
|
| NET
CASH FLOWS FROM INVESTING ACTIVITIES |
|
650,966 |
(325,003) |
|
|
|
|
|
| NET
INCREASE/(DECREASE) IN CASH AND CASH |
|
| EQUIVALENTS |
|
|
179,171 |
(194,211) |
|
|
|
|
| CASH
AND CASH EQUIVALENTS AT BEGINNING OF YEAR |
|
63,843 |
258,054 |
|
|
|
|
------------------ |
------------------ |
|
| CASH
AND CASH EQUIVALENTS AT END OF YEAR |
|
243,014 |
63,843 |
|
|
|
|
========== |
========== |
|
|
|
CHAIRMAN |
|
CHIEF EXECUTIVE |
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED JUNE 30, 1999 |
|
|
| 1.
LEGAL STATUS AND PRINCIPAL ACTIVITIES |
|
|
| AITowfeek
Investment Bank Limited is a Public Limited Company Incorporated in Pakistan
under the |
|
| Companies
Ordinance, '1984. The Company is quoted on the Karachi, Lahore and Islamabad
Stock |
|
| Exchanges.
The Company has been registered as an "Investment Bank" to carry on
Investment |
|
| finance
business in accordance with the objects and functions contained in SRO
585(1)/87 dated |
|
| July
13, 1987 and further in accordance with the principles of Islamic Banking. |
|
|
|
| 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
|
|
| 2.1
Accounting Convention |
|
|
|
| These
accounts have been prepared under the historical cost convention modified by
adjustment |
|
| of
exchange differences as referred to in note no. 2.6. |
|
|
|
| 2.2
Tangible Fixed Assets and Depreciation |
|
|
| Fixed
assets are stated at cost less accumulated depreciation. Depreciation is
charged to income |
|
| using
the straight line method over the expected useful lives of the assets. |
|
|
|
|
|
| A
half year's depreciation is charged on additions made in the second half of
the year and |
|
| deletions
in the first half, while a full year's depreciation is charged on assets
deleted during the |
|
| second
half of the year. |
|
|
|
|
| Normal
repairs and maintenance and gains or losses on disposal of fixed assets are
taken to the |
|
| Profit
and Loss Account. Major renewals and improvements are capitalised. |
|
|
| 2.3 Investments |
|
|
|
| Long
term quoted and unquoted investments are stated at cost. Provision for
diminution in value |
|
| is
made only if considered other than temporary. |
|
|
|
|
|
|
| Short
term quoted investments are carried at market value. |
|
|
|
| Quoted
investments purchased under resale arrangements are included under short term |
|
