| Meezan Bank Ltd - 2003 |
============================================================================================ BALANCE SHEET AS AT DECEMBER 31, 2003 ============================================================================================ 2003 2002 Note (Rupees in '000) ============================================================================================ ASSETS Cash and balances with treasury banks 6 1,042,285 659,349 Balances with other banks 7 683,596 1,058,074 Due from financial institutions - - Investments 8 1,211,667 855,766 Financings 9 7,397,078 3,532,188 Other assets 10 689,226 818,081 Operating fixed assets 11 78,537 35,942 Deferred taxation 12 - 12,048 11,102,389 6,971,448 LIABILITIES Bills payable 13 169,062 46,842 Due to financial institutions 14 988,964 11,831 Deposits and other accounts 15 7,756,862 5,079,478 Subordinated loan - - Liabilities against assets subject to finance leases - - Other liabilities 16 429,790 247,389 Deferred taxation 12 9,236 - 9,353,914 5,385,540 NET ASSETS 1,748,475 1,585,908 REPRESENTED BY Share capital 17 1,064,045 1,001,454 Capital reserves 18 351,444 264,867 Revenue reserves 19 221,073 209,630 1,636,562 1,475,951 Surplus on revaluation of investments 20 111,913 109,957 1,748,475 1,585,908 CONTINGENCIES AND COMMITMENTS 21 Profit/return on financings and placements earned 22 375,567 311,183 Return on deposits and other dues expensed 23 182,354 191,673 Net spread earned 193,213 119,510 Reversal of provision against non-performing financings (net) 9.9 17,769 67,184 Provision for diminution in value of investments 8.2 (1,995) (2,320) Bad debts written off directly 9.10 - (4,187) 15,774 60,677 Net spread after provisions 208,987 180,187 OTHER INCOME Fee, commission and brokerage income 53,869 71,968 Capital gain on sale of investments 105,339 52,809 Dividend income 114,625 111,302 Income from dealing in foreign currencies 5,215 5,799 Other income 24 8,262 46,129 Total other income 287,310 288,007 496,297 468,194 OTHER EXPENSES Administrative expenses 25 255,449 195,045 Other provisions/write offs - - Other charges 26 20 2,619 Total other expenses 255,469 197,664 240,828 270,530 Extraordinary/unusual items - - PROFIT BEFORE TAXATION 240,828 270,530 Taxation - current for the year 27 5,731 59,429 - prior years - - - deferred 27 21,284 (12,048) 27,015 47,381 PROFIT AFFER TAXATION - CARRIED FORWARD 213,813 223,149 PROFIT AFTER TAXATION - BROUGHT FORWARD 213,813 223,149 Profit /(loss) brought forward 630 (53,865) 214,443 169,284 APPROPRIATIONS AND TRANSFERS Transferred to Statutory reserve (42,763) (44,630) Reserve for issue of bonus shares (106,405) (62,591) Proposed final cash dividend at Rs. 0.50 (2002: Rs 0.50) per share on 106,404,514 (2002: 100,145,425) ordinary shares (53,202) (50,073) Revenue reserves - (11,360) (202,370) (168,654) Unappropriated profit carried forward 12,073 630 Basic earnings per share 28 2.01 2.10 ============================================================================================ ============================================================================================ CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2003 ============================================================================================ 2003 2002 (Rupees in '000) ============================================================================================ CASH FLOW FROM OPERATING ACTIVITIES. Profit before taxation 240,828 270,530 Dividend income (114,625) (111,302) Net gain on foreign currency deposits under arrangements with the SBP - (21,509) 126,203 137,719 Adjustments for non-cash charges Provision against non-performing financings - 386 Provision for diminution in value of investments (net) 1,995 2,320 Gain on sale of property, equipment and others (1,391) (6,740) Finance charges on leased assets - 287 Depreciation 19,066 8,564 Amortisation 533 162 20,203 4,979 146,406 142,698 (Increase) / decrease in operating assets Due from financial institutions - 1,200,000 Net investments in held for trading securities (147,393) 5,605 Financings (3,864,890) (733,961) Other assets 204,228 (149,094) (3,808,055) 322,550 Increase / (decrease) in operating liabilities Bills payable 122,220 34,405 Due to financial institutions 977,133 (2,631,469) Deposits and other accounts 2,677,384 2,499,329 Other liabilities 179,186 (196,944) 3,955,923 (294,679) 294,274 170,569 Income tax paid (106,736) (156,815) NET CASH FLOW FROM OPERATING ACTIVITIES - CARRIED FORWARD 187,538 13,754 NET CASH FLOW FROM OPERATING ACTIVITIES - BROUGHT FORWARD 187,538 13,754 CASH FLOW FROM INVESTING ACTIVITIES Net investments in - held to maturity securities (20,263) (35,020) - available for sale securities (345) (130,570) - unquoted subsidiary (67,900) - - quoted associated undertakings (132,939) (424) - unquoted associated undertakings 12,900 - Increase in cash and bank balances on amalgamation - 1,587,786 Dividends received 140,257 102,164 Investments in operating fixed assets (63,379) (37,557) Sale proceeds on disposal of property, equipment and others 2,576 7,113 Amount paid on foreign currency deposits under arrangements with the SBP - (60,211) Net cash flow from investing activities (129,093) 1,433,281 CASH FLOW FROM FINANCING ACTIVITIES Payments of lease obligations - (9,449) Amount received against issue of shares - 100,000 Dividend paid (49,987) (825) Net cash flow from financing activities (49,987) 89,726 Net increase in cash and cash equivalents 8,458 1,536,761 Cash and cash equivalents as at January 1 29 1,717,423 180,662 Cash and cash equivalents as at December 31 29 1,725,881 1,717,423 ============================================================================================ ==============================================================================================================
Capital reserves Revenue reserves
Share Share Statutory Reserve General Unappro Total
capital premium reserve for issue reserve -priated
account of bonus profit/
shares (loss)
Rupees in 000
==============================================================================================================
Balance as
at January 1, 2002 901,000 27,000 124,313 - 204,427 (53,865) 1,202,875
Transfer to reserve for
issue of bonus shares - (27,000) - 33,787 (6,787) - -
Issue of bonus shares 33,787 - - (33,787) - - -
Issue of share capital 66,667 33,333 - - 100,000
Profit for the year - - - - - 223,149 223,149
Transfer to
statutory reserve - - 44,630 - - (44,630) -
Transfer to reserve for
issue of bonus shares - - - 62,591 - (62,591) -
Proposed dividend @ 5% - - - - - (50,073) (50,073)
Transfer to
general reserve - - - - 11,360 (11,360) -
Balance as at
December 31, 2002 1,001,454 33,333 168,943 62,591 209,000 630 1,475,951
Issue of bonus shares 62,591 - - (62,591) - - -
Profit for the year - - - - - 213,813 213,813
Transfer to
statutory reserve - - 42,763 - - (42,763) -
Transfer to reserve
for issue of bonus shares - - - 106,405 - (106,405) -
Proposed dividend - - - - - (53,202) (53,202)
Balance as
at December 31, 2003 1,064,045 33,333 211,706 106,405 209,000 12,073 1,636,562
==============================================================================================================NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 20031. LEGAL STATUS AND NATURE OF BUSINESS The Bank was incorporated in Pakistan on January 27, 1997 as a public limited company under the Companies Ordinance, 1984 and its shares are quoted on the Karachi Stock Exchange. The Bank was registered as an 'Investment Finance Company' on August 8, 1997 and carried on the business of investment banking as permitted under SRO 585(I)/87 dated July 13, 1987 in accordance and in conformity with the principles of Islamic Shariah. A 'certificate of commencement of business' was issued to the Bank on September 29, 1997. The Bank was granted a 'Scheduled Islamic Commercial Bank' licence on January 31, 2002 and formally commenced operations as a scheduled Islamic commercial bank with effect from March 20, 2002 on receiving notification in this regard from the State Bank of Pakistan (SBP) under section 37 of the State Bank of Pakistan Act, 1956. Currently, the Bank is engaged in commercial, consumer and investment banking activities. The Bank and Societe Generale, the French and International Bank - Pakistan branches (SG) amalgamated their operations under a sanction order of the SBP in accordance with section 48 of the Banking Companies Ordinance, 1962 with effect from April 1, 2002. The Bank was operating through ten branches as at December 31, 2003 (2002: six). Its registered office is at 3rd Floor, PNSC Building, Moulvi Tamizuddin Khan Road, Karachi. 2. BASIS OF PRESENTATION The Bank provides financing mainly through murabaha, ijarah and export refinance under Islamic export refinance scheme. Under murabaha the goods are purchased and are then sold to the customers on credit. The purchase and sale arising under these arrangements are not reflected in these financial statements as such but are restricted to the amount of facility actually utifised and the appropriate portion of profit thereon. 3. STATEMENT OF COMPLIANCE 3.1. The financial statements have been prepared in accordance with the requirements of the Companies Ordinance, 1984 (the Ordinance), the Banking Companies Ordinance, 1962 (the Ordinance), the directives issued by the SBP including formal for financial statements of Bank issued by SBP through BSD circular No. 36 dated October 10, 2001, and the International Accounting Standards (IASs) issued by the International Accounting Standards Committee (IASC) and interpretations issued by Standing Interpretation Committee of IASC (the interpretations), as adopted in Pakistan. However, the requirements of these Ordinances and the directives of the SBP have been followed in case where their requirements are not consistent with the requirements of the IASs and the interpretations. 3.2. The SBP through its BSD circular letter No. 10 dated August 26, 2002 has deferred the implementation of IAS 39, 'Financial Instruments: Recognition and Measurement' and IAS 40, 'Investment Property' for banks in Pakistan. Accordingly, the requirements of those IASs have not been considered in preparation of these financial statements for the year ended December 31, 2003. 4. BASIS OF MEASUREMENT These financial statements have been prepared under the historical cost convention except that investments are valued at market rates in accordance with the requirements of BSD circular 20 dated August 4, 2000. 5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 5.1. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise of cash and balances with treasury banks and balances with other banks in current and deposit accounts and Islamic interbank placements having maturities of three (3) months or less. 5.2. REVENUE RECOGNITION (i) Dividend income is recognised when the Bank's right to receive payment is established. (ii) Purchase and sale of investments are recorded on the dates of contract. Gains and losses on sale of investments are also recorded on those dates. (iii) The Bank follows the finance method in recognising income on ijarah contracts. Under this method the unearned income i.e. the excess of aggregate ijarah rentals over the cost of the asset under ijarah facility is deferred and then amortised over the term of the ijarah, so as to produce a constant rate of return on net investment in the ijarah. Gains / losses on termination of ijarah contracts, documentation charges, front-end fees and other ijarah income are recognised as income on a receipt basis. (iv) Profit on murabaha financings and placements is recognised on accrual basis, except the profit required to be suspended in compliance with the prudential regulations issued by the SBP which is recorded on receipt basis. (v) Commission on letters of credit, acceptances and guarantees is recognised on receipt basis, except for commission on guarantees in excess of Rs 50,000 which is recognised over the period of the guarantee. 5.3. FINANCINGS Financings are stated net of specific provisions against non-performing financings, if any, which are charged to the profit and loss account. The Bank determines the provision against financings on a prudent basis in accordance with the prudential regulations issued by the SBP. Financings are written off when there is no realistic prospect of recovery. 5.4. INVESTMENTS 5.4.1. Consistent with prior years the Bank values its marketable investments (including investments in associates) at market value at the balance sheet date. Any surplus / (deficit) arising on revaluation of investments is kept in a separate account titled 'surplus on revaluation of investments' and is shown below equity Surplus / (deficit) is recognised in the profit and loss account when it is actually realised. Cost is determined on a moving average basis. 5.4.2. Unquoted securities including investments in associates, a subsidiary company and bonds are stated at cost less provision for impairments, if any. 5.4.3. Investments in units of an open end fund are valued at its redemption price as at the balance sheet date. 5.4.4. Impairment loss is recognised whenever the carrying amount of an investment exceeds its recoverable amount. An impairment loss is recognised in income currently. 5.4.5. In accordance with the requirements of BSD circular No. 36 dated October 10, 2001 the Bank classifies its investments as follows. - Held for trading These are investments acquired principally for the purpose of generating profit from short-term fluctuations in price. - Held to maturity These are investments with fixed or determinable payments and fixed maturity and the Bank has positive intent and ability to hold to maturity - Available for sale These are investments which do not fall under the held for trading or held to maturity categories. 5.5. OPERATING FIXED ASSETS 5.5.1. TANGIBLE FIXED ASSETS Operating fixed assets are stated at cost less accumulated depreciation. Depreciation is charged to the profit and loss account applying the straight line method whereby the cost of an asset is written off over its estimated service life. The full annual rate of depreciation is applied on the cost of additions while no depreciation is charged on assets deleted during the year. Capital work in progress is stated at cost. Items of fixed assets costing Rs 10,000 or less are not capitalised and are charged off in the year of purchase. When the carrying amount of an asset is greater than its estimated recoverable amount it is written down immediately to its recoverable amount. Maintenance and normal repairs are charged to income as and when incurred. Profit or loss on disposals of fixed assets is included in income currently. 5.5.2. INTANGIBLE Intangible assets comprise of computer software. Accounting for such assets is on the same basis as for tangible fixed assets owned by the Bank. 5.6. TAXATION CURRENT The charge for taxation is based on expected taxable income for the year at current rates of taxation, and any adjustments to tax payable in respect of previous years, after taking into consideration available tax credits, rebates and tax losses etc. DEFERRED The Bank accounts for deferred taxation using the balance sheet liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using the applicable tax rates. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available and the credits will be utiilsed. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. 5.7. STAFF RETIREMENT BENEFITS DEFINED BENEFIT PLAN The Bank operates a funded gratuity scheme for all its permanent employees who have completed the minimum qualifying eligible service of one year. The scheme was approved by the tax authorities in April 2000 and the last actuarial valuation was conducted as at December 31, 2003. The projected unit credit method, as allowed under IAS 19 'Employee Benefits (revised 2002)', was used for actuarial valuation. Consistent with prior years actuarial gains or losses are recognised in accordance with the actuary's recommendation. DEFINED CONTRIBUTION PLAN The Bank also operates a recognised contributory provident fund for all permanent employees. Equal monthly contributions are made, both by the Bank and the employees, to the fund at a rate of 10% of basic salary. 5.8. FOREIGN CURRENCIES Foreign currency transactions are recorded in rupees at exchange rates prevailing on the date of transaction. Assets, liabilities, contingencies and commitments in foreign currencies except forward contract other than contracts with the SBP at the year end are reported in rupees at exchange rates prevalent on the balance sheet date. Forward contracts other than contracts with the SBP relating to the foreign currency deposits are valued at forward rates applicable to the respective maturities of the relevant foreign exchange contract. Forward contracts with the SBP relating to foreign currency deposits are valued at spot rate prevailing at the balance sheet date. Exchange gains and losses are included in income currently. 5.9. PROVISIONS AND CONTINGENT ASSETS AND LIABILITIES Provisions are recognised when the Bank has a present legal or constructive obligation arising as a result of past events and it is probable that an outflow of resources embodying econonuc benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Contingent assets are not recognised, and are also not disclosed unless the realisation of the asset is virtually certain and contingent liabilities are not recognised, and are disclosed unless the probability of an outflow of resources embodying economic benefits is remote. Acceptances comprise undertakings by the Bank to pay bills of exchange drawn on customers. The Bank expects most acceptances to be settled simultaneously with the reimbursement from the customers. Consistent with prior years acceptances are accounted for as off-balance sheet transactions and are disclosed as contingent liabilities and commitments. 5.10. RELATED PARTY TRANSACTIONS Transaction between the bank and its related parties are carried out on arm's length basis determined in accordance with the methods prescribed. 5.11. OFFSETTING Consistent with prior years financial assets and financial liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. 5.12. COMPENSATED ABSENCES Consistent with prior years the Bank recognises liability in respect of employees compensated absences in the period in which these are earned upto the balance sheet date. 6. CASH AND BANK BALANCES WITH TREASURY BANKS ==================================================================================
2003 2002
Note (Rupees in '000)
==================================================================================
In hand
- local currency 95,870 70,861
- foreign currency 47,870 35,502
With the SBP in
- local currency current accounts 6.1 812,868 460,404
- foreign currency deposit accounts 6.1 85,292 92,197
With National Bank of Pakistan in
- a local currency current account 385 385
1,042,285 659,349
==================================================================================6.1. These represent local and foreign currency amounts required to be maintained by the Bank with the SBP as stipulated by it (the SBP).7. BALANCES WITH OTHER BANKS ==================================================================================
2003 2002
Note (Rupees in '000)
==================================================================================
In Pakistan
- on current accounts 13,335 7,120
- on deposit accounts 7.1 388,549 553,563
Outside Pakistan
- on current accounts 73,198 29,234
- on deposit accounts 7.2 208,514 468,157
683,596 1,058,074
==================================================================================7.1. It includes Rs 188.549 million (2002: Rs 553.563 million) held in a deposit account with an associated undertaking. The depositee has undertaken to utilise such funds in accordance with the principles of Islamic Shariah.7.2. This represents placement of funds with an Islamic financial institution in Bahrain which have been generated through the foreign currency deposit scheme (FE-25). These placements have been made on profit and loss sharing basis and have maturities upto a week. 8. INVESTMENTS =======================================================================================================
2003 2002
Held by Given as Total Held by Given as Total
the Bank collateral the Bank collateral
NOTES Rupees in '000
=======================================================================================================
Investments by types
Held for trading
securities 8.3 423,291 - 423,291 275,898 - 275,898
Held to maturity
securities 8.4 57,397 - 57,397 37,134 - 37,134
Available for sale
securities 8.5 130,915 - 130,915 130,570 - 130,570
Subsidiary (unquoted)
8.6 67,900 - 67,900 - - -
Associates (quoted)
8.7 355,826 - 355,826 222,887 - 222,887
Associates (unquoted)
8.8 69,000 - 69,000 81,900 - 81,900
1,104,329 - 1,104,329 748,389 - 748,389
Add: Surplus on
revaluation of investments
20 111,913 - 111,913 109,957 - 109,957
1,216,242 - 1,216,242 858,346 - 858,346
Less: Provision for diminution in value
of investments 8.2 4,575 - 4,575 2,580 - 2,580
1,211,667 - 1,211,667 855,766 - 855,766
=======================================================================================================8.1. INVESTMENTS BY SEGMENTS=============================================================
2003 2002
NOTES (Rupees in '000)
=============================================================
Fully paid up ordinary shares
- Listed companies 754,432 629,355
- Unlisted companies 136,900 81,900
Musharika term finance certificate 30,600 36,365
Bonds 57,397 -
Units of an open end fund 125,000 -
Other investment
- Certificate of investment - 769
1,104,329 748,389
Add: Surplus on revaluation
of investments 20 111,913 109,957
Less: Provision for diminution in
value of investments 8.2 4,575 2,580
1,211,667 855,766
=============================================================8.2. PARTICULARS OF PROVISION=============================================================
2003 2002
(Rupees in '000)
=============================================================
Opening balance 2,580 260
Charge for the year 1,995 2,580
Reversals - (260)
1,995 2,320
Closing balance 4,575 2,580
=============================================================8.2.1. This provision is against investment in an unquoted associated undertaking.8.3. HELD FOR TRADING SECURITIES The Bank holds investments in ordinary shares of Rs 10 each, unless stated otherwise, in the following listed investee companies: ==========================================================================================================
Name of the investee company 2003 2002 2003 2002
Number of shares Cost
Rupees in '000
==========================================================================================================
Textile composite
Nishat (Chunian) Limited - 100,000 - 3,514
Nishat Mills Limited - 29,500 - 508
Legler Nafees Denim Mills Limited 500,000 - 6,250 -
Synthetic and rayon
Dewan Salman Fibres Limited - 100,240 - 1,578
Ibraflim Fibres Limited - 83,000 - 1,388
Cement
Cherat Cement Limited - 500,000 - 15,058
Meple Leaf Cement Limited - 32,500 - 277
Lucky Cement Limited 100,000 - 2,481 -
Refinery
National Refinery Limited 26,000 30,000 3,524 2,087
Power generation and distribution
Hub Power Company Limited 1,240,000 1,298,000 46,913 40,720
Kohinoor Energy Limited - 25,000 - 383
Southern Electric Power Company Limited 100,000 - 2,091 -
Oil and gas marketing
Pakistan State Oil Company Limited 406,900 - 112,928 -
Sui Northern Gas Pipelines Limited 969,012 194,512 36,932 3,930
Shell Pakistan Limited 17,500 20,600 7,337 6,336
Sui Southern Gas Company Limited 310,212 122,202 8,543 1,659
Oil and gas exploration
Pakistan Oil Fields Limited 97,500 57,000 21,215 8,560
Oil and Gas Development Company Limited 451,987 - 14,468 -
Automobile assembler
Dewan Farooque Motors Limited - 151,500 - 1,514
Honda Atlas Cars Pakistan Limited - 35,000 - 1,517
Indus Motors Company Limited - 74,500 - 3,197
Technology and communication
Pakistan Telecommunication Company Limited (A) 840,000 2,945,000 29,461 69,285
World Call Payphone Limited 105,375 129,300 1,621 1,791
Fertifizer
Engro Chemical Pakistan Limited 522,001 240,401 45,145 17,833
Fauji Fertilizer Bin Qasim Company Limited 100,000 25,000 1,765 190
Fauji Fertilizer Company Limited 481,300 995,000 41,926 65,758
Pharmaceutical
Glaxo Smithkline Pakistan Limited - 16,000 - 1,347
Chemical
ICI Pakistan Limited 25,000 29,830 2,130 1,325
Paper and board
Packages Limited 56,712 69,212 5,387 4,221
Food and personal care products
Unilever Pakistan Limited - note 8.3.1 24,475 18,000 29,432 16,062
Nestle Milkpak Limited - 25,150 - 4,799
Miscellaneous
Tri-Pack Films Limited 44,000 25,000 3,742 1,061
423,291 275,898
==========================================================================================================8.3.1. THE NOMINAL VALUE OF THESE SHARES IS Rs 50 EACH8.4. HELD TO MATURITY SECURITIES ========================================================================================
Name of the investee company 2003 2002 2003 2002
Number of certificates Cost
Rupees in '000
========================================================================================
Certificate of investment
First Leasing Corporation Limited - 1 - 769
Bonds
Qatar Global Sukuk Bonds
(Sukuk) - note 8.4.1 1,000,000 - 57,397 -
Musharika Term Finance Certificates (MTFCs)
Sitara Chemicals Limited - note 8.4.2
- 7,273 - 36,365
57,397 37,134
========================================================================================8.4.1. The paid up value of Sukuk is US $ 1 per bond. The return on Sukuk is on the basis of London inter-bank offered rate plus a fixed credit spread of forty basis points. These Sukuk bonds will mature in 2010.8.4.2. The paid up value of MTFCs is Rs 5,000 per certificate. The return on MTFCs is on musharika basis and will mature in 2007. 8.5. AVAILABLE FOR SALE SECURITIES The Bank holds investments in ordinary shares and Musharika Term Finance Certificates (MTFCs) of a nominal value of Rs 10 each, unless stated otherwise, in the following listed investee companies: =================================================================================================
Name of the invested company 2003 2002 2003 2002
Number of shares/certificates Cost
Rupees in '000
=================================================================================================
Ordinary shares
Power generation and distribution
Hub Power Company Limited 1,500,000 1,500,000 54,194 42,101
Oil and gas marketing
Pakistan State Oil Company Limited 280 48,280 33 5,756
Sui Northern Gas Pipelines Limited - 250,000 - 3,813
Shell Pakistan Limited 45,000 30,000 15,305 7,863
Sui Southern Gas Company Limited - 200,000 - 2,717
Technology and communication
Pakistan Telecommunication
Company Limited (A) 160,000 1,500,000 4,323 29,710
Fertilizer
Fauji Fertilizei Company Limited 50,000 250,000 2,733 13,663
Paper and board
Packages Limited 30,000 50,000 1,829 3,049
Food and personal care products
Unilever Pakistan Limited - note 8.3. 24,540 24,540 21,898 21,898
MTFCs
Sitara Chemicals Limited - note 8.4.2 6,120 - 30,600 -
130,915 130,570
=================================================================================================8.6. SUBSIDIARY (UNQUOTED)=====================================================================================================================
Particulars 2003 2002 2003 2002 Percentage Break up Latest Name of
of equity value per available the chief
holding share financial executive
statements
Number of shares Rupees in ' 000 % Rupees
=====================================================================================================================
Al-Meezan Investment
Management Limited
(ordinary shares)
- notes 8.6.1 and 8.6.2 700,000 - 67,900 - 70 142.50 December Mr. Muhammad
31, 2003** Shoaib
Total 67,900 -
=====================================================================================================================**Ha1f yearly unaudited financial statements.8.6.1. THE NOMINAL VALUE OF THESE SHARES IS Rs 100 EACH 8.6.2. As at December 31, 2003, the Bank's investment in Al-Meezan Investment Management Limited amounted to Rs 67.9 million (2002: Rs 12.9 million) representing a 70% holding (2002: 30%) in that investee company. The further investment was made in pursuance of the SBP's consent received througil its letter No.BPD (PU.35)/682-36/3762/2003 dated April 5, 2003 which restricted the Bank's holding in the subsidiary to approximately 65%. Subsequent to December 31, 2003 the Bank has disposed off the shares held in excess of the limit specified by the SBP. 8.7. ASSOCIATES (QUOTED) The bank holds investments in ordinary shares of Rs 10 each, unless stated otherwise, in the following listed investee companies: ====================================================================================================
Name of the Investee company 2003 2002 Percentage 2003 2002
of direct equity
holding
Number of shares/ % Rupees in '000
certificates / units
====================================================================================================
Ordinary shares
Close end mutual fund
Al-Meezan Mutual Fund Limited 1,965,500 1,250,000 2.54 16,230 8,291
Modaraba
Fayzan Manufacturing Modaraba 1,457,500 21,457,500 23.84 214,596 214,596
Units of an open end fund
Meezan Islamic Fund - note 8.7.1 2,500,000 - NA 125,000 -
355,826 222,887
====================================================================================================8.7.1. THE NOMINAL VALUE OF THESE UNITS IS Rs EACH8.8. ASSOCIATES (UNQUOTED) The bank holds investments in ordinary shares of Rs 10 each, unless stated otherwise, in the following listed investee companies: ========================================================================================================================
Particulars 2003 2002 2003 2002 Percentage Break up Latest Name of
of equity value per available the chief
holding share financial executive
statements
Nunber of shares Rupees in' 000 % Rupees
========================================================================================================================
Plexus (Private) Limited
- Meezan
Education and
Development December Mr. Ariful
(Private) Limited 1,499,980 1,499,980 15,000 15,000 50 6.96 31, 2003* Islam
Al-Meezan Investment
Management Limited - 150,000 - 12,900 30 - - -
Faysal Management
Services (Private) December Mr. Khalid
Limited - note 8.8.1 540,000 540,000 54,000 54,000 30 123.17 31,2003 5. Tirmizey
Total 69,000 81,900
========================================================================================================================UNAUDITED8.8.1. The nominal value of these shares is Rs 100 each. 9. FINANCINGS ======================================================================================
2003 2002
(Rupees in '000)
======================================================================================
In Pakistan
- Murabaha flnancings 4,678,811 2,850,720
- Net investment in ijarah - note 9.2 1,440,353 643,656
- Export refinance under Islamic scheme -. (Istisna) 988,964 16,000
- Financing's against bills 145,564 1,425
- Loans, cash credit, running finances, etc. - notes 9.4 & 9.5 101,498 195,644
- Musharika financings 95,700 -
- House financing's 8,380 -
Total financing - note 9.6 7,459,270 3,707,445
Less: Provision against non-performing financing's
- notes 9.8 & 9.9 62,192 175,257
7,397,078 3,532,188
======================================================================================9.1. PARTICULARS OF FINANCINGS9.1.1. PARTICULARS OF FINANCINGS ======================================================================================
2003 2002
(Rupees In '000)
======================================================================================
In
- local currency 6,841,848 3,109,867
- foreign currencies 555,230 422,321
7,397,078 3,532,188
======================================================================================9.1.2. SHORT-TERM (FOR UPTO ONE YEAR)======================================================================================
2003 2002
(Rupees In '000)
======================================================================================
6,290,711 3,011,092
Long-term (for over one year) 1,106,367 521,096
7,397,078 3,532,188
======================================================================================9.2. NET INVESTMENT IN IJARAH====================================================================================================
2003 2002
Not later Later than Over five Total Not later Later than Over five Total
than one one and years than one one and years
year less than year less than
five years five years
Rupees in '000
====================================================================================================
Ijarah rentals
receivable 600,299 946,778 - 1,547,077 248,950 532,353 - 781,303
Residual value 25,546 140,105 - 165,651 - 41,233 - 41,233
Minimum ijarah
payments 625,845 1,086,883 - 1,712,728 248,950 573,586 - 822,536
Profits for future
periods 132,249 140,126 - 272,375 76,517 102,363 - 178,880
Present value of
minimum ijarah
payments 493,596 946,757 - 1,440,353 172,433 471,223 - 643,656
====================================================================================================9.3. During the year the Bank has received Rs 16.449 million from Joint Official Liquidators of Mohib Textile Mills Limited (MTML) as full and final settlement against running finance facility and export refinance facility of Rs 51.826 million and Rs 59.919 million respectively.The amount received was adjusted against the running finance facility outstanding. The balance amount of Rs 95.296 was written off against the provision. Further, suspended income aggregating Rs 137.685 million thereon was also waived. 9.4. Pakland Cement Limited (PCL) has issued TFCs under a scheme of arrangement sanctioned by the High Court of Sindh. The TFCs have been issued at a face value of Rs 102.120 million in place of various financing facilities granted by the Bank to PCL aggregating Rs 34.989 million. These TFCs will be redeemed between the period June 30, 2003 to June 30, 2009 and a further grace period of two and a half years was completed on June 30, 2003. The TFCs have been issued by PCL in two series, series 'A' represents the principal amount and will carry a yield of 16 percent per annum, whereas series 'B' has been issued for accrued mark-up and carries no yield. The transfer of these TFCs can only be effected among the creditors of PCL and transfer to a third party (other than a creditor) will require prior written consent of the issuer. The amount is fully provided. 9.5. It includes Rs 39.306 million representing mark-up free loans to staff advanced under the Bank human resource policies. 9.6. It includes Rs 4.367 million which is due for payment after a period of twelve months from the date of balance sheet and is outstanding for period exceeding three years. 9.7. Particulars of loans and financings to directors, associated companies etc. =============================================================================================
Balance as at Maximum
December 31, total amount
2003 of financings
including
temporary
financings
granted
during the
year*
---------------------------------------------------------------------------------------------
(Rupees in '000)
=============================================================================================
Debts due by directors, executives or officers of the Bank or
any of them either severally or jointly with any other persons 39,306 39,306
Debts due by companies or firms in which the directors of the
Bank are interested as directors, partners or in the case of
private companies as members 100,000 100,000
Debts due by subsidiary companies, controlled firms,
managed modarabas and other related parties - -
139,306 139,306
=============================================================================================*The maximum amount has been calculated by reference to month end balances.9.8. Financings include Rs 62.192 million (2002: Rs 175.257 million) which have been placed under non-performing status as detailed be1ow: ====================================================================================
Category of classification Domestic Overseas Total Provision Provision
Required held
Rupees in '000
====================================================================================
Other assets especially mention - - - - -
Substandard
Doubtful - - - - -
Loss 62,192 - 62,192 62,192 62,192
62,192 - 62,192 62,192 62,192
====================================================================================9.9. PARTICULARS OF PROVISION AGAINST NON-PERFORMING FINANCINGS===================================================================================
2003 2002
Specific General Total Specific General Total
Rupees in '000
===================================================================================
Opening balance 175,257 - 175,257 - - -
On amalgamation - - - 257,754 - 257,754
Charge for the year - - 386 - 386
Reversals (17,769) - (17,769) (67,570) - (67,570)
(17,769) - (17,769) (67,184) - (67,184)
Amounts written off
- note 9.10.1 (95,296) - (95,296) (15,313) - (15,313)
Closing balance 62,192 - 62,192 175,257 - 175,257
===================================================================================9.10. PARTICULAR OF WRITE OFF9.10.1. AGAINST PROVISION ======================================================================
2003 2002
Note (Rupees in '000)
======================================================================
9.9 95,296 15,313
Directly charged to profit and loss account - 4,187
95,296 19,500
======================================================================9.10.2.======================================================================
2003 2002
(Rupees In '000)
======================================================================
Write offs of Rs 500,000 and above 95,296 19,500
Write offs below Rs 500,000 - -
95,296 19,500
======================================================================9.11. Details of loan write off of Rs 500,000 and aboveIn terms of sub-section (3) of section 33A of the Banking Companies Ordinance, 1962, the statement in respect of written off loans or any other financial relief of five hundred thousand rupees or above allowed to any person during the year ended December 31, 2003 is as follows: ===================================================================================================================================================
1. Name and Name of directors* Father's name Outstanding liabilities at the date of write Principal Mark-up Other Total
address of (with NIC number) off written waived financial
the borrower Principal Mark-up Others Total off relief
provided
Rupees '000
===================================================================================================================================================
Mohib Mr. Asif Saigol Mr. Rafique Saig 95,296 137,68,5 - 232,981 95,296 137,68 - 232,981
Textile (270-57-00602)
Mills Mr. Arif Saigol Mr. Rafique Saigol
Limited (270-57-00603)
Mr. Abid Saigol Mr. Rafique Saigol
(270-57-00604)
Mr Shahzad Saigol Mr. Shafique Saigol
(270-87-432238)
Mr. Shahid Saigol Mr. Shafique Saigol
(270-87-432240)
Mr. Shafiq Saigol Mr. Shafique Saigol
Mr. Sarwar Ali
(BEL's nominee) Details not available
===================================================================================================================================================* As available in the records of the Bank10. OTHER ASSETS ===================================================================================
2003 2002
NOTE (Rupees in '000)
===================================================================================
Profit / return accrued in local currency 66,690 40,378
Profit / return accrued in foreign currency 2,451 1,822
Advances, deposits, advance rent and other prepayments 30,837 14,950
Advance taxation (payments less provisions) 186,077 85,072
Unrealised gain (net) on forward
foreign exchange contracts - 786
Receivable on account of sale of securities 31,339 530,462
Dividends receivable 2,242 27,874
Stamps 879 471
Advance against future murabaha 298,921 61,516
Advance against future ijarah 67,020 51,748
Security deposits 2,594 2,463
Prepaid exchange risk fee 129 415
Other 10.1 47 124
689,226 818,081
===================================================================================10.1. This represents amount recoverable from the SBP upon encashment of various instruments on behalf of the SBP by the Bank.11. OPERATING FIXED ASSETS ==============================================================================
2003 2002
Note (Rupees in 000)
==============================================================================
Tangible assets
- Capital work-in-progress 11.1 9,268 8,072
- Property, equipment and others 11.2 64,636 26,411
73,904 34,483
Intangible assets 11.3 4,633 1,459
78,537 35,942
==============================================================================11.1. CAPITAL WORK-IN-PROGRESS==============================================================================
2003 2002
(Rupees in 000)
==============================================================================
- Advances to suppliers and contractors for
building renovation 6,708 8,072
- Advances for purchase of vehicles 2,560 -
9,268 8,072
==============================================================================11.2. PROPERTY, EQUIPMENT AND OTHERS===============================================================================================================================
COST DEPRECIATION
As at Additions / As at As at Charge/ As at Net book Rate of
January 1, (disposals) December January 1, (on December value depre
2003 31, 2003 2003 disposals) 31, 2003 as at -ciation
December %
31, 2003
Rupees in '000
===============================================================================================================================
Leasehold improvements 6,445 20,089 26,534 645 2,653 3,298 23,236 10%
Furniture and fixtures
1,927 4,228 6,155 505 616 1,121 5,034 10%
Electrical, office and
computer equipments
12,409 20,562 32,971 7,426 9,468 16,894 16,077 33%
Vehicles 22,362 13,597 32,313 8,156 6,329 12,024 20,289 20%
(3,646) (2,461)
2003 43,143 58,476 97,973 16,732 19,066 33,337 64,636
(3,646) (2,461)
2002 16,982 27,864 43,143 9,498 8,564 16,732 26,411
(1,703) (1,330)
===============================================================================================================================11.2.1. Included in cost of property, equipment and others are fully depreciated items still in use aggregating Rs 6.721 million.11.2.2. Details of disposal of fixed assets to executives and other persons are as follows: =====================================================================================================
Description Cost Accumulated Net book Sale Mode of Particulars of Addresses
Depreciation value proceeds disposal purchaser
Rupees in '000
=====================================================================================================
Vehicles
Toyota Corolla 1,079 971 108 108 Bank policy Ariful Islam 77-B, Khayaban-e--
(Employee) Shahbaz, Phase-VI,
DHA, Karachi.
Honda City 735 306 369 282 Bank policy Arshad Majeed B-213, 13-D/1,
(Employee) KDA Scheme No.24,
Gulshan-e-Iqbal,
Karachi
Honda City 800 400 400 452 Bank policy Muhammad Haris 18, B-2 Street
(Employee) Khayaban-e-Ghazi,
Phase-V1, DHA,
Karachi
Suzuki Cultus 516 362 154 181 Bank policy Samin Atique A-288, Rlock-5,
(Ex-employee) Gulshan-e-Iqbal,
Karachi
Suzuki Cultus 516 362 154 116 Bank policy Muhammed 51/1,Lane B-6,
Farhanullah Khan Phase V. DHA,
(Ex-employee) Karachi
Mitsubishi
Pajero - - - 1,343 Negotiation Yasir Ahmed C-4, Block 8,
(unrelated party Gulshan-e-Iqbal
Karachi
Office equipment - - - 34 Negotiation General Traders 1st Floor,
Alfalah Court
I. I. Chundrigar
Road Karachi
3,646 2,461 1,185 2,576
=====================================================================================================11.3. INTANGIBLE ASSETS===============================================================================================
COST AMORTISATION
As at Addition As at As at Charge As at Net book Rate of
January 1, December January 1, December value Amorti
2003 31, 2003 2003 31, 2003 as at -sation
Decembe %
31, 2003
Rupees in '000
===============================================================================================
Computer
software 1,621 3,707 5,328 162 533 695 4,633 10
2002 - 1,621 1,621 - 162 162 1,459
===============================================================================================12. DEFERRED TAXATION========================================================================================
2003 2002
(Rupees in '000)
========================================================================================
Debit / (credit) balances arising on account of:
Excess of tax written down values over accounting
net book values of owned assets 1,314 2,245
Other staff benefits 26,488 24,235
Excess of ijarah financing's over tax written down
values of ijarah assets (67,063) (14,432)
Carried forward unassessed losses 28,149 -
Provision for diminution in value of investments 1,876 -
(9,236) 12,048
========================================================================================13. BILLS PAYABLE========================================================================================
2003 2002
(Rupees in 000)
========================================================================================
In Pakistan 163,008 46,842
Outside Pakistan 6,054 -
169,062 46,842
========================================================================================14. DUE TO FINANCIAL INSTITUTIONS=======================================================================================
2003 2002
(Rupees in 000)
=======================================================================================
In Pakistan 988,964 10,000
Outside Pakistan - 1,831
988,964 11,831
=======================================================================================14.1. PARTICULARS OF DUE TO FINANCIAL INSTITUTIONS=======================================================================================
2003 2002
(Rupees in 000)
=======================================================================================
In local currency 988,964 10,000
In foreign currencies - 1,831
988,964 11,831
=======================================================================================14.2. DETAILS OF DUE TO FINANCIAL INSTITUTIONS=======================================================================================
2003 2002
Note (Rupees in 000)
=======================================================================================
Secured
Under Islamic export refinance scheme 14.2.1 988,964 10,000
Unsecured
Overdrawn nostro accounts - 1,831
988,964 11,831
=======================================================================================14.2.1. These borrowings are on a profit and loss sharing basis maturing between January 30 to June 23, 2004 and are secured against demand promissory notes executed in favour of the SBP.A limit of Rs 1,496 million has been allocated to the Bank by SBP under Islamic export refinance scheme for the financial year ending June 30, 2004. 15. DEPOSITS AND OTHER ACCOUNTS =======================================================================================
2003 2002
(Rupees in '000)
=======================================================================================
Customers
- Fixed deposits schemes 3,102,645 2,806,612
- Savings deposits 3,566,193 1,871,950
- Current accounts - remunerative - -
- Current accounts - non-remunerative 601,349 193,109
- Margin 11,496 4,384
7,281,683 4,876,055
Financial institutions
- Remunerative deposits 474,712 201,526
- Non-remunerative deposits 467 1,897
475,179 203,423
7,756,862 5,079,478
=======================================================================================15.1. PARTICULARS OF DEPOSITS=======================================================================================
2003 2002
(Rupees in 000)
=======================================================================================
In
- local currency 6,982,937 4,203,756
- foreign currencies 773,925 875,722
7,756,862 5,079,478
=======================================================================================16. OTHER LIABILITIES=======================================================================================
2003 2002
Note (Rupees in '000)
=======================================================================================
Return on deposits and other dues
- payable in local currency 16.1 40,764 36,009
- payable in foreign currency 526 513
Unearned commission 7,159 4,193
Accrued expenses 15,494 11,818
Advance payments 2,493 1,983
Unclaimed dividends 107 21
Unrealised loss (net) on forward foreign
exchange contracts 386 -
Payable to defined benefit plan 31.3 2,889 1,113
Provision against off-balance sheet
obligations 16.2 1,600 1,600
Security deposits against ijarah 188,401 53,199
Payable on account of purchase of securities 23,917 -
Other staff benefits 64,605 55,079
Proposed dividend 53,202 50,073
Others 16.3 28,247 31,788
429,790 247,389
=======================================================================================16.1. It includes Rs 3.143 million (2002: Rs Nil) in respect of return accrued on borrowings from the SBP under the Islamic export refinance scheme.16.2. PROVISION AGAINST OFF-BALANCE SHEET OBLIGATIONS =======================================================================================
2003 2002
Note (Rupees in '000)
=======================================================================================
Opening balance 1,600 -
On amalgamation 16.2.1 - 1,600
Charge for the year - -
Reversals - -
Amount written off - -
Closing balance 1,600 1,600
=======================================================================================16.2.1. This represents provision made against a bail bond issued on behalf of former employees of Societe Generale, The French and International Bank in a suit pending before a court.16.3. It includes charity payable aggregating Rs 2.773 million (2002: Rs 2.935 million). Charity was neither paid in excess of Rs 0.100 million to any individual / organisation nor to whom in a director or his spouse had any interest at any time during the year. 17. SHARE CAPITAL 17.1. AUTHORISED CAPITAL =======================================================================================
2003 2002
(Rupees in '000)
=======================================================================================
150,000,000 ordinary shares of Rs 10 each 1,500,000 1,500,000
=======================================================================================17.2. ISSUED, SUBSCRIBED AND PAID UP=======================================================================================
2003 2002
(Rupees in 000)
=======================================================================================
96,766,675 (December 31, 2002: 96,766,675)
ordinary shares of Rs 10 each 967,667 967,667
9,637,839 (December 31, 2002: 3,378,750)
ordinary shares of Rs 10 each issued as bonus shares 96,378 33,787
1,064,045 1,001,454
=======================================================================================17.2.1. The Bank intends to issue 9.9 million ordinary shares of Rs 10 each having a face value of Rs 99 million under an employee stock option plan.17.3. RECONCILIATION OF NUMBER OF SHARES AT THE BEGINNING AND END OF THE YEAR =======================================================================================
2003 2002
(Rupees in '000)
=======================================================================================
Opening balance 100,145,425 90,100,008
Issue of bonus shares 6,259,089 3,378,750
Issue of share capital - 6,666,667
Closing balance 106,404,514 100,145,425
=======================================================================================17.4. SHARES OF THE BANK HELD BY A SUBSIDIARY AS AT DECEMBER 31, 2003=======================================================================================
2003 2002
(Rupees in 000)
=======================================================================================
Number of shares
Subsidiary
- Al-Meezan Investment Management Limited 20,904
=======================================================================================18. CAPITAL RESERVES=======================================================================================
2003 2002
Note (Rupees in '000)
=======================================================================================
Share premium account 33,333 33,333
Statutory reserve 18.1 211,706 168,943
Reserve for issue of bonus shares 106,405 62,591
351,444 264,867
=======================================================================================18.1. Under section 21 of the Banking Companies Ordinance, 1962 an amount not less than 20% of the profit is to be transferred to create a reserve fund tifi such time the reserve fund and the share premium account equal the amount of the paid up capital.19. REVENUE RESERVES =======================================================================================
2003 2002
(Rupees in '000)
=======================================================================================
General reserve 209,000 209,000
Unappropriated profit 12,073 630
221,073 209,630
=======================================================================================20. SURPLUS ON REVALUATION OF INVESTMENTS=======================================================================================
2003 2002
(Rupees in 000)
=======================================================================================
Quoted shares 111,270 108,830
Other securities (Quoted MTFCs) 643 1,127
111,913 109,957
=======================================================================================21. CONTINGENCIES AND COMMITMENTS21.1. DIRECT CREDIT SUBSTITUTES =======================================================================================
2003 2002
(Rupees in 000)
=======================================================================================
Government 62,587 62,587
=======================================================================================21.2. TRANSACTION RELATED CONTINGENT LIABILITIES=======================================================================================
2003 2002
(Rupees in 000)
=======================================================================================
Guarantees favouring
- Government 1,976,350 1,484,781
- Banks 9,634 3,902
- Others 372,420 378,568
2,358,404 1,867,251
=======================================================================================21.3. TRADE RELATED CONTINGENT LIABILITIES=======================================================================================
2003 2002
(Rupees in 000)
=======================================================================================
Import letters of credit 1,487,620 605,208
Acceptances 666,632 390,012
2,154,252 995,220
=======================================================================================21.4. While finalising the assessment of the Bank for the income year ended June 30,2001 (assessment year 2001-2002) the assessing officer has subjected to tax gain on foreign currency deposits claimed as exempt in the return of income.The matter has been set aside by the Commissioner of Income Tax, Appeals for reexamination by the assessing officer, recognising the fact that the State Bank of Pakistan through its letter No. 6226/Sec-296-2001 dated October 3, 2001 has confirmed that the assessee's deposits in its opinion were covered under the Protection of Economics Reforms Act, 1992. The amount of tax levied by the assessing officer on such gain aggregated Rs 141.689 million, whereas the net tax liability for the aforesald assessment year and other relevant assessment years after considering relief for the related expenditure amounts to approximately Rs 41 million. The management is confident that the ultimate outcome of the fresh assessment would be in favour of the Bank and accordingly no provision has been recognised in the financial statements in this regard. 21.5. COMMITMENTS IN RESPECT OF =======================================================================================
2003 2002
(Rupees in 000)
=======================================================================================
Financings 5,954,993 1,602,531
=======================================================================================21.6. COMMITMENTS IN RESPECT OF FORWARD EXCHANGE CONTRACTS=======================================================================================
2003 2002
(Rupees in 000)
=======================================================================================
Purchases 279,873 250,831
Sales 483,936 399,547
=======================================================================================21.7. OTHER COMMITMENTS=======================================================================================
2003 2002
(Rupees in '000)
=======================================================================================
Bills for collection (inland) 8,052 7,550
Bills for collection (foreign) 489,177 168,367
497,229 175,917
=======================================================================================22. PROFIT / RETURN ON FINANCINGS AND PLACEMENTS EARNED=======================================================================================
2003 2002
Note (Rupees in 000)
=======================================================================================
On financing's to:
- Customers 22.1 352,842 282,187
- Financial institutions 212 2,888
On deposits with financial institutions 22,513 25,994
On securities purchased under resale agreements - 114
375,567 311,183
=======================================================================================22.1. It includes return aggregating Rs 5.942 million (2002: Rs 3.068 million) on investments made in Qatar Global Sukuk Bonds, MTFCs and financing under musharika arrangements.23. RETURN ON DEPOSITS AND OTHER DUES EXPENSED =======================================================================================
2003 2002
(Rupees in 000)
=======================================================================================
Deposits 176,244 157,680
Other short term borrowings 6,110 33,335
Borrowings from banks abroad - 658
182,354 191,673
=======================================================================================24. OTHER INCOME=======================================================================================
2003 2002
NOTE (Rupees in 000)
=======================================================================================
Gain on sale of property equipment and others 1,391 6,740
Gain on realisation of other assets - 17,488
Net gain on foreign currency deposits under
arrangements with the SBP - 21,509
Others 24.1 6,871 392
8,262 46,129
=======================================================================================24.1. It includes reversal of provision amounting to Rs 5 million (2002: Rs Nil) for the proposed small business support fund.25. ADMINISTRATIVE EXPENSES =======================================================================================
2003 2002
Note (Rupees in 000)
=======================================================================================
Salaries, allowances, etc. 108,547 94,948
Charge for defined benefit plan 31.3 2,889 994
Contribution to defined contribution plan 3,985 2,160
Directors' fees, allowances and other expenses 9,596 9,445
Rent, taxes, insurance, electricity, etc. 34,491 19,188
Legal and professional charges 6,501 9,656
Communication 13,327 6,913
Repairs and maintenance 3,010 1,802
Finance charges on leased assets - 287
Stationery and printing 6,758 5,382
Advertisement and publicity 9,164 6,980
Auditors' remuneration 25.1 2,527 3,024
Depreciation 11.2 19,066 8,564
Amortisation 11.3 533 162
Travelling 3,911 3,535
Entertainment 1,212 1,119
Local transportation and car running 4,616 2,849
Security charges 2,356 1,093
Office supplies 871 690
Service charges 32.2 13,812 11,302
Brokerage and commission 2,210 1,623
Hardware and software maintenance 1,986 1,520
Others 4,081 1,809
255,449 195,045
=======================================================================================25.1. AUDITORS' REMUNERATION=======================================================================================
2003 2002
(Rupees in 000)
=======================================================================================
Audit fee 750 600
Fee for audit of employees' funds 75 50
Special certifications and sundry advisory services 1,518 1,755
Tax services 89 460
Out of pocket expenses 95 159
2,527 3,024
=======================================================================================26. OTHER CHARGES=======================================================================================
2003 2002
(Rupees in 000)
=======================================================================================
Penalties imposed by the SBP 20 30
Lease termination charges - 1,968
Others - 621
20 2,619
=======================================================================================27. TAXATION=======================================================================================
2003 2002
(Rupees in '000)
=======================================================================================
- Current for the year 5,731 59,429
- Deferred 21,284 (12,048)
27,015 47,381
=======================================================================================27.1. RELATIONSHIP BETWEEN TAX EXPENSE AND ACCOUNTING PROFIT=======================================================================================
2003 2002
NOTE (Rupees in 000)
=======================================================================================
Profit before taxation 240,828 270,530
Tax at the applicable rate of 47% 127,149
Tax effect of expenses that are not
allowable in determining taxable income (30,350)
Tax effect of dividend income taxed at a
different rate 27.2 -- (46,747)
Effect of deferred taxation as of December 31,
2002 now recognised / not recognised (1,850)
Effect of difference in tax rates considered
for deferred and current taxation purposes (821)
47,381
=======================================================================================27.2. The provision for current taxation for the year ended December 31, 2003 has been made on the basis of presumptive tax.28. BASIC EARNINGS PER SHARE =======================================================================================
Note 2003 2002
=======================================================================================
Profit for the year (Rupees in '000) 213,813 223,149
Weighted average number of ordinary shares 106,404,514 106,404,514
Basic earnings per share 28.1 2.01 2.10
=======================================================================================28.1. The number of ordinary shares as at December 31, 2002 has been adjusted for issue of bonus shares28.2. There were no convertible dilutive potential ordinary shares outstanding on December 31, 2003 and 2002. 29. CASH AND CASH EQUIVALENTS =======================================================================================
2003 2002
(Rupees in '000)
=======================================================================================
Cash and balances with treasury banks 1,042,285 659,349
Balances with other banks 683,596 1,058,074
1,725,881 1,717,423
=======================================================================================30. STAFF STRENGTH=======================================================================================
2003 2002
=======================================================================================
Total number of employees at the end of the year 238 159
=======================================================================================31. DEFINED BENEFIT PLAN31.1. PRINCIPAL ACTUARIAL ASSUMPTIONS =======================================================================================
2003 2002
=======================================================================================
Discount rate 7% p.a. 8% p.a.
Expected rate of increase in salaries 7% p.a. 8% p.a.
Expected rate of return on investments 7% p.a. 8% p.a.
Normal retirement age 60 years 60 years
=======================================================================================31.2. RECONCILIATION OF PAYABLE TO DEFINED BENEFIT PLAN=======================================================================================
2003 2002
NOTE (Rupees in '000)
=======================================================================================
Present value of defined benefit obligations 7,332 4,422
Fair value of plan assets 31.6 (1,931) (785)
Net actuarial losses not recognised (2,512) (2,524)
2,889 1,113
=======================================================================================31.3. MOVEMENT IN PAYABLE TO DEFINED BENEFIT PLAN=======================================================================================
2003 2002
(Rupees in 000)
=======================================================================================
Opening balance 1,113 119
Charge for the year 2,889 994
Contribution made during the year (1,113)
Closing balance 2,889 1,113
=======================================================================================31.4. CHARGE FOR DEFINED BENEFIT PLAN=======================================================================================
2003 2002
(Rupees in 000)
=======================================================================================
Current service cost 2,450 858
Interest cost 354 167
Expected return on plan assets (63) (74)
Actuarial losses 148 43
2,889 994
=======================================================================================31.5. ACTUAL RETURN ON PLAN ASSETS=======================================================================================
2003 2002
(Rupees in 000)
=======================================================================================
315 61
=======================================================================================31.6. It includes a balance of Rs. 1.636 million (2002: Rs. 0.772 million) kept in a savings account with the Bank.32. REMUNERATION OF THE PRESIDENT AND CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES The amounts charged in these financial statements are as follows: =========================================================================================
President and
Chief Executive Directors Executives
2003 2002 2003 2002 2003 2002
Rupees in '000
=========================================================================================
Fees* 899 899 *8,697 *8,546 - -
Managerial
remuneration 7,931 10,492 10,568 9,779 25,494 15,131
Charge for defined
benefit plan - - 440 355 1,308 865
Contribution to defined
contribution plan - - 528 425 1,523 891
House rent - - - 149 85 766
Utilities - - 528 426 1,675 1,094
Medical 113 126 332 38 1,575 281
Conveyance 233 - - - - -
Others 56 109 515 377 1,953 1,068
9,232 11,626 21,608 20,095 33,613 20,096
Number of persons 1 1 12 12 18 14
=========================================================================================* This represents amounts charged in these financial statements as fees to eleven (2002: eleven) non-executive directors.32.1. Certain executives are provided with free use of the Bank cars and certain items of household furniture and fixtures in accordance with their entitlements. 32.2. In addition to the above, service charges (note 25) include Rs. 11.489 million (2002: Rs. 6.915 million) in respect of reimbursement, to a related party, of salary and other benefits paid by that associated company to the chief executive as he is on secondment from that related party. 33. MATURITIES OF ASSETS AND LIABILITIES =============================================================================================
2003
Category of classification Total Up to three Over three Over one Over
months months to year to five years
one year five years
Rupees in '000
=============================================================================================
Assets
Cash and balances with
treasury banks 1,042,285 1,042,285 - - -
Balances with other banks 683,596 583,596 100,000 - -
Investments 1,211,667 1,123,027 - 31,243 57,397
Financings 7,397,078 4,142,597 2,148,114 1,076,273 30,094
Other assets 689,226 686,632 - - 2,594
Operating fixed assets 78,537 - - - 78,537
11,102,389 7,578,137 2,248,114 1,107,516 168,622
Liabilities
Bills payable 169,062 169,062 - - -
Due to financial institutions 988,964 526,964 462,000 - -
Deposits and other
accounts - note 33.1 7,756,862 5,228,963 708,505 1,819,394 -
Other liabilities 429,790 176,784 31,982 221,024 -
Deferred taxation 9,236 - - 9,236 -
9,353,914 6,101,773 1,202,487 2,049,654 -
Net Assets 1,748,475 1,476,364 1,045,627 (942,138) 168,622
Share capital 1,064,045
Capital reserves 351,444
Revenue reserves 221,073
Surplus on revaluation of investment 111,913
1,748,475
=============================================================================================33.1. Current and savings deposits have been classified under maturity upto three months as these do not have any contracted maturity.Further, the Bank estimates that these deposits are a core part of its liquid resources and will not fall below the current year's level. 34. YIELD/PROFIT RATE RISK Yield/profit rate sensitivity position for on-balance sheet instruments is based on the earlier of contractual repricing or maturity date and for off-balance sheet instruments is based on settlement date. ===============================================================================================================
2003
Effective Total Exposed to yield/profit risk Not exposed
yield/profit Upto three Over three Over one Over five to yield/
rate months months to year to five years profit risk
one year years
Rupees in '000
===============================================================================================================
On-balance sheet
financial instruments
Assets
Cash and balances
with treasury banks - 1,042,285 - - - - 1,042,285
Balances with
other banks 2.14 683,596 497,063 100,000 - - 86,533
Investments 5.20 1,211,667 - - 31,243 57,397 1,123,027
Financings 5.23 7,397,078 4,650,621 2,226,362 475,789 5,000 39,306
Other assets - 471,304 - - - - 471,304
10,805,930 5,147,684 2,326,362 507,032 62,397 2,762,455
Liabilities
Bills payable - 169,062 - - - - 169,062
Due to financial
institutions 1.50 988,964 529,964 462,000 - - -
Deposits and
other accounts 2.49 7,756,862 4,615,651 708,505 1,819,394 - 613,312
Other liabilities - 226,862 - - - - 226,862
9,141,750 5,142,615 1,170,505 1,819,394 - 1,009,236
On-balance sheet gap 1,664,180 5,069 1,155,857 (1,312,362) 62,397 1,753,219
Non-financial assets 296,459
Non-financial liability (212,164)
Total net assets 1,748,475
Off-balance sheet
financial instruments
Forward lendings - - - - - -
Forward borrowings - - - - - -
Off-balance sheet gap - - - - - -
Total yield / profit risk
sensitivity gap 5,069 1,155,857 (1,312,362) 62,397
Cummulative yield /
profit risk sensitivity gap 5,069 1,160,926 (151,436 (89,039)
===============================================================================================================Yield risk is the risk of decline in earnings due to adverse movement of the yield curve.Profit rate risks is the risk that the value of the financial instruments will fluctuate due to changes in the market profit rates. 35. CURRENCY RISK ====================================================================
2003
Assets Liabilities Off-balance Net foreign
sheet items currency
exposure
Rupees in '000
====================================================================
Pakistan rupees 9,775,978 8,361,245 (204,061) 1,210,672
United States dollars 970,623 752,307 176,004 394,320
Great Britain pounds 12,395 7,608 3,695 8,482
Japanese yen 1,389 - - 1,389
Euro 45,259 20,590 24,362 49,031
Singapore dollars 3 - - 3
Swiss francs 283 - - 283
10,805,930 9,141,750 - 1,664,180
====================================================================The currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Bank does not take any currency exposure except to the extent of statutory net open position prescribed by the SBP.Foreign exchange open and mismatch positions are controlled through internal limits and are marked to market on a daily basis to contain forward exposures. 36. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of investments in listed securities is based on quoted market prices. Fair value of unquoted equity investments is determined on the basis of break-up value of those investments based on the latest available financial statements as disclosed in notes 8.6 and 8.8. The fair value of advances, other assets, other liabilities and deposits and other accounts cannot be calculated with sufficient reliability due to absence of current and active market for such assets and liabilities and reliable data regarding market rates for similar instruments. The provision for impairment of financings has been calculated in accordance with the Bank's accounting policy as stated in note 5.3. In the opinion of the management, the fair value of the remaining financial assets and liabilities are not significantly different from their carrying values as these assets and liabilities are either short term in nature or in the case of advances and deposits are frequently repriced. 37. CONCENTRATION OF CREDIT AND DEPOSITS Credit risk represents the accounting loss that would be recognised at the reporting date if counter parties failed completely to perform as contracted. However, the Bank does not believe that it is exposed to major concentration of credit risk. The Bank manages its exposure to credit risk by portfolio diversification and adequate collateral, wherever applicable. The Bank has well-defined credit structure duly approved by the Board of Directors, under which delegated authorities at various levels are operating which critically scrutinise and sanction financings. The emphasis is to provide short to medium term trade related financing to reputable names which are self-liquidating and Shariah compatible. The risk appraisal system of the Bank has enabled it to build a sound portfolio. The Bank has developed a system to monitor problem accounts so that instant instructions based on early warning signals are passed on to units to deal with potential problem accounts. 37.1. SEGMENT BY CLASS OF BUSINESS ====================================================================================================================
2003
Contingencies and
Financings Deposits commitments
Rupees Percent Rupees Percent Rupees Percent
in '000 in '000 in '000
====================================================================================================================
Chemical and
pharmaceuticals 413,799 5.59% 114,729 1.48% 1,334,566 11.28%
Agribusiness 5,964 0.08% - - - -
Textile 3,386,295 45.78% 97,847 1.26% 3,426,499 28.96%
Cement 13,362 0.18% 455 0.01% 62,587 0.53%
Sugar 486,997 6.58% 10,140 0.13% 211,864 1.79%
Shoes and leather
garments 440,969 5.96% 23,666 0.31% 418,542 3.54%
Automobile and
transportation
equipment 305,266 4.13% 54,842 0.71% 749,489 6.33%
Financial 195,800 2.65% 475,179 6.13% 2,073,256 17.52%
Insurance - - 4,752 0.06% - -
Electronics and
electrical appliances 175,584 2.37% 4,623 0.06% 502,232 4.24%
Production and
transmission
of energy 95,700 1.29% 25,218 0.33% 254,300 2.15%
Individuals 561,977 7.61% 4,688,883 60.43% 160,479 1.36%
Others 1,315,365 17.78% 2,256,528 29.09% 2,638,460 22.30%
7,397,078 100% 7,756,862 100% 11,832,274 100%
====================================================================================================================37.2. SEGMENT BY SECTOR====================================================================================================================
2003
Contingencies and
Financings Deposits commitments
Rupees Percent Rupees Percent Rupees Percent
in '000 in '000 in '000
====================================================================================================================
Public / Government - - - - - -
Private 7,397,078 100% 7,756,862 100% 11,832,274 100%
7,397,078 100% 7,756,862 100% 11,832,274 100%
====================================================================================================================38. GEOGRAPHICAL SEGMENT ANALYSIS================================================================================================
2003
Profit before Total assets Net assets Contingencies
taxation Employed employed and
commitments
================================================================================================
Pakistan 240,828 11,102,389 1,748,475 11,832,274
Asia Pacific (including South Asia) - - - -
Europe - - - -
United States of America and Canada - - - -
Middle East - - - -
Others - - - -
240,828 11,102,389 1,748,475 11,832,274
================================================================================================39. RELATED PARTY TRANSACTIONS39.1. Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions and include a subsidiary company, associated companies with or without common directors, retirement benefit funds, director, and key management personnel. 39.2. A number of banking transactions are entered into with related parties in the normal course of business. These include loans, deposits and foreign currency transactions. These transactions were carried out on commercial terms and at market rates. The services charges relating to secondment are on actual basis. Transactions with related parties are executed on commercial terms. 39.3. NAMES AND NATURE OF RELATED PARTY RELATIONSHIP Subsidiary company - Al-Meezan Investment Management Limited Associated companies / related parties - Al-Meezan Mutual Fund Limited - Faysal Management Services (Private) Limited - Fayzan Manufacturing Modaraba - Pakistan Kuwait Investment Company (Private) Limited - Plexus (Private) Limited [formerly Al-Meezan Education and Development (Private) Limited] - The General Tyre and Rubber Company of Pakistan Limited - Al-Meezan Investment Bank Limited - Staff Provident Fund - Al-Meezan Investment Bank Limited - Staff Gratuity Fund Meezan Islamic Fund 39.4. KEY MANAGEMENT PERSONNEL - Mr Irfan Siddiqui (President and Chief Executive Officer) - Mr Ariful Islam (Chief Operating Officer) 39.5. The volumes of related party transactions, outstanding balances at the year end, and related expense and income for the year are as follows: ===========================================================================
2003 2002
(Rupees in '000)
===========================================================================
Bank balance 188,549 553,563
Murabaha financing outstanding 100,000 25,000
Murabaha financing disbursed during the year 150,000 25,000
Profit receivable on murabaha financing 181 52
Deposits and other accounts maintained with the Bank 441,235 157,662
Service charges payable by the Bank 208 5,380
Acceptances 25,351 -
Letter of credit (unfunded) 31,518 -
Profit earned on murabaha financing854 52
Profit earned on a bank account 12,472 20,664
Return on deposits expensed 4,024 1,409
Divided income earned 50,810 9,534
Service charges incurred 13,977 10,990
Dividend paid 30,443 -
===========================================================================Transactions with retirement benefits funds - notes 16, 25 and 31 Remuneration to directors and key management personnel - note 3240. DATE OF AUTHORISATION these financial statements were authorised for issue on March 4, 2004 by the Board of Director of the Bank. |