| Escorts Investment Bank Ltd - 2006 |
==================================================================================== BALANCE SHEET AS AT JUNE 30, 2006 ==================================================================================== 2006 2005 Notes Rupees Rupees ==================================================================================== ASSETS NON-CURRENT ASSETS: Fixed capital expenditure 3 136,310,773 123,898,000 Cards and rooms 4 45,405,000 44,105,000 Long term investments 5 581,131,615 596,546,284 Long term finances 6 35,294,935 119,500,425 Net investment in lease finance 7 26,561,233 - Long term loans, deposits and prepayments 8 9,194,808 7,466,205 Deferred tax asset 9 15,715,126 5,045,842 CURRENT ASSETS: Current maturities of non-current assets 10 104,516,841 81,605,345 Short term investments 11 848,362,705 917,255,694 Short term finances 12 223,895,088 563,239,877 Short term placements 13 2,270,121,900 742,095,424 Advances, deposits, prepayments and other receivables 14 409,526,938 305,724,464 Cash and bank balances 15 169,720,022 671,204,063 4,026,143,494 3,281,124,867 EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES: Share capital 16 441,000,000 300,000,000 Share deposit money - 85,794,990 Reserves 17 319,269,018 154,218,143 760,269,018 540,013,133 (Deficit)/Surplus on Revaluation of investment 18 (15,402,330) (23,346,354) NON-CURRENT LIABILITIES: Term finance certificates 19 228,983,342 274,835,000 Obligation under finance lease 20 7,529,374 - Long term certificates of deposit 21 397,315,618 305,463,946 Long term security deposit 9,138,301 - CURRENT LIABILITIES: Current maturities of non-current liabilities 22 86,202,070 28,236,515 Short term borrowings 23 1,145,000,000 1,660,000,000 Running finance under mark up arrangements 24 778,338,739 372,498,355 Short term certificates of deposit 25 1,043,141,883 765,919,222 Trade and other payables 26 406,525,439 241,518,195 Provision for taxation 27 28,715,531 12,548,611 3,487,923,662 3,080,720,898 Contingencies and Commitments 28 4,875,756,984 4,177,686,623 ==================================================================================== ==================================================================================== PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2006 ==================================================================================== 2006 2005 Notes Rupees Rupees ==================================================================================== INCOME: Profit on financing 29 70,985,959 47,779,930 Mark-up on lease finance 1,190,760 - Return on placements with financial institutions 30 30,662,330 27,913,738 Return on investments 31 536,417,636 332,028,040 Fees and commission 32 69,716,818 75,366,182 Other income 7,310,870 5,570,581 716,284,373 488,658,471 EXPENSES: Return on certificates of deposit 136,779,784 75,603,652 Return on term finance certificates 27,005,525 16,161,982 Mark-up on short term running finance 31,388,647 6,508,679 Mark-up on borrowings from financial institutions 111,695,679 60,143,878 Amortisation of premium on held to maturity investments 9,081,386 8,358,449 Administrative and other operating expenses 33 190,467,250 141,142,791 Other financial charges 1,139,386 323,512 507,557,657 308,242,943 Operating profit before provisions and taxation 208,726,716 180,415,528 Provision for doubtful finances 13,718,397 3,844,908 Provision for doubtful receivables (2,946,515) 22,500,000 Impairment loss - Held to maturity investments - 20,000,000 10,771,882 46,344,908 Profit before taxation 197,954,834 134,070,620 Taxation 34 11,903,959 4,669,463 Profit after taxation 186,050,875 129,401,157 Earnings per share-basic and diluted 35 4.44 3.77 ==================================================================================== ====================================================================================
CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2006
====================================================================================
2006 2005
Rupees Rupees
====================================================================================
CASH FLOW FROM OPERATING ACTIVITIES:
Profit before taxation 197,954,834 134,070,620
ADJUSTMENT FOR NON CASH EXPENSES AND OTHER ITEMS:
Depreciation on tangible assets 15,456,175 6,164,224
Amortisation on intangible assets 333,300
Provision for doubtful debts 13,718,397 3,844,908
Provision for doubtful receivables (2,946,515) 22,500,000
Impairment loss - Held to maturity investments - 20,000,000
Amortisation of premium on held to maturity investments 9,081,386 8,358,449
Loss on sale of fixed assets 96,673 50,968
Fixed assets written off 40,457 1,238,205
Mark-up/return income (171,421,698) (78,396,223)
Dividend income (74,953,630) (26,896,883)
Return on deposits and borrowings 306,869,635 158,418,191
96,274,180 115,281,839
294,229,014 249,352,459
(INCREASE)/DECREASE IN OPERATING ASSETS:
Repayment / (Disbursements) of finances - net 393,355,541 (268,005,458)
Net investment in lease finance (21,809,360) -
Investment in placements - net (1,528,026,476) (254,821,173)
Investments - net 83,170,296 (171,639,731)
Loans, advances, deposits and prepayments (49,369,346) (112,112,082)
(1,122,679,346) (806,578,444)
INCREASE/ (DECREASE) IN OPERATING LIABILITIES:
Borrowings from financial institutions (515,000,000) 599,970,681
Receipts from/(Repayments of) certificates of deposit 380,643,138 (30,247,799)
Running finance facilities 405,840,384 372,498,355
Trade and other payables 147,156,744 147,741,705
418,640,266 1,089,962,942
Net changes in operating assets and liabilities (704,039,079) 283,384,498
Mark-up/return received 172,232,787 79,972,231
Return on deposits and borrowings paid (288,708,666) (141,673,321)
Dividend received 62,432,255 24,702,958
Net cash (used)/generated
from operating activities before taxes (463,853,689) 495,738,825
Taxes paid (49,959,980) (45,639,832)
Net cash (used)/generated from operating activities (513,813,670) 450,098,993
====================================================================================
====================================================================================
CASH FLOW STATEMENT (CONTD) FOR THE YEAR ENDED JUNE 30, 2006
====================================================================================
2006 2005
Rupees Rupees
====================================================================================
CASH FLOW FROM INVESTING ACTIVITIES:
Fixed capital expenditure incurred (21,196,624) (110,813,598)
Proceeds from sale of fixed assets 1,476,546 2,682,558
Investment in cards and rooms (1,300,000) (1,685,000)
Net cash used in investing activities (21,020,078) (109,816,040)
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds against Right issue 34,205,010 85,794,990
Dividend paid (310,469) (89,290,642)
Term Finance Certificates - net (110,000) 274,945,000
Repayment of lease obligation (434,834) (1,032,002)
Net cash generated from financing activities 33,349,707 270,417,346
Net (decrease)/ increase in cash and cash equivalents (501,484,041) 610,700,299
Cash and cash equivalents at the beginning of the year 671,204,063 60,503,764
Cash and cash equivalents at the end of the year 169,720,022 671,204,063
====================================================================================
=======================================================================================================================================================
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2006
=======================================================================================================================================================
Share Un-
Share deposit Statutory appropriated
capital money reserve profit
Total
Rupees Rupees Rupees Rupees
Rupees
=======================================================================================================================================================
Balance as at June 30 2004 300,000,000 - 37,363,397 77,453,589 414,816,986
Received against 40% right issue - 85,794,990 - - 85,794,990
Net profit for the year - - - 129,401,157 129,401,157
Transfer to statutory reserve - - 25,880,231 (25,880,231) -
Final dividend for 2004 paid @ 15%
(Rs 1.50 per share) - - (45,000,000) (45,000,000)
1st interim dividend for 2005 @15%
(Rs 1.50 per share) - - (45,000,000) (45,000,000)
Balance as at 30 June 2005 300,000,000 85,794,990 63,243,628 90,974,515 540,013,133
Received against 40% right issue - 34,205,010 - - 34,205,010
Right share issued (40%) 120,000,000 (120,000,000) - - -
Bonus shares @ 5% issued 21,000,000 - - (21,000,000) -
Net profit for the year - - - 186,050,875 186,050,875
Transfer to statutory reserve - - 37,210,175 (37,210,175) -
Balance as at 30 June 2006 441,000,000 - 100,453,803 218,815,215 760,269,018
=======================================================================================================================================================NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 20061. LEGAL STATUS AND NATURE OF BUSINESS Escorts Investment Bank Limited ("the Company") is a public limited company incorporated in Pakistan under the Companies Ordinance, 1984. The company was incorporated in Pakistan on 15 May 1995 and started its commercial operation on 16 October 1996. The company is listed on the Karachi and Lahore stock exchanges. Escort Investment Bank Limited is licensed to carry out investment finance services, leasing business and housing finance services as a Non-Banking Finance Company under Section 282C of the Companies Ordinance, 1984 and Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003. The registered office of the Company is situated at Escort House, 26 Davis Road, Lahore 3CR VIS Credit Rating Company Limited has upgraded the Short Term Credit Rating of the Bank to "A-1" (Single A one) from "A-2" (Single A two), while Long Term Credit Rating has been maintained at "A" (Single A), with stable outlook. The Company is a member of Karachi Stock Exchange (Guarantee) Limited and Lahore Stock Exchange (Guarantee) Limited. The company has undertaken to contribute to the assets of the Karachi and Lahore Stock Exchanges, an amount not exceeding one thousand rupee each, in the event of their winding up, in accordance with their Memorandums of Association. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1. ACCOUNTING CONVENTION These financial statements have been prepared under the historical cost convention, except for held for trading investments and available for sale investments, which have been recognised at fair value. 2.2. STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan and the requirements of Companies Ordinance, 1984. Approved accounting standards comprise of such International Accounting Standards as notified under the provisions of the Companies Ordinance, 1984. Wherever, the requirements of the Companies Ordinance, 1984 or directives issued by the Securities and Exchange Commission of Pakistan differ with the requirements of these standards, the requirements of Companies Ordinance, 1984 or the requirements of the said directives take precedence. 2.3. FIXED CAPITAL EXPENDITURE Property, plant and equipment These are stated at cost less accumulated depreciation and impairment, if any, except for Capital Work in Progress which is stated at cost. Depreciation is charged using "Straight line method" so as to write off the historical cost of an asset over its estimated useful life at the following rates: ============================================
Rate in %
============================================
Office premises 5
Leasehold improvements 20
Furniture and fixture 10
Computer equipment 33
Office equipment 10
Motor vehicles 20
============================================Full month's depreciation is charged on additions during the month in which asset is acquired, while no depreciation is charged in the month of disposal.Maintenance and normal repairs are charged to income as and when incurred. Profit/(loss) on disposal of operating fixed assets is included in income currently. Intangible assets Intangible assets are stated at cost less accumulated amortisation and impairment, if any. Amortisation is recorded when these assets are available for use, using straight line method whereby the cost of an intangible asset is amortised over its estimated useful life at the following rates: ============================================
Rate in %
============================================
Computer Software 33
============================================2.4. ASSETS SUBJECT TO FINANCE LEASEThe Company accounts for assets acquired under finance lease by recording the assets and related liabilities at the lower of present value of minimum lease payments under the lease agreement and the fair value of leased assets. Financial charges are allocated to accounting periods in a manner so as to provide constant periodic rate of charge on the outstanding liability. Depreciation is charged using "straight line method" at the rates specified in ` 2.3. 2.5. CARDS AND ROOMS These are stated at cost less impairments, if any. The carrying amounts are reviewed at each balance sheet date to assess whether these are recorded in excess of their recoverable amounts, and where carrying value is in excess of recoverable amount, these are written down to their estimated recoverable amount. 2.6. INVESTMENTS The company classifies its investments as held to maturity, available for sale or held for trading. Held to maturity Investments with fixed maturity where management has both the intent and ability to hold to maturity are classified as held to maturity. Available for sale Investments intended to be held for an unidentified period of time, which may be sold in response to need for liquidity or changes to interest rates, exchange rates or equity prices are classified as available for sale. Held for trading Investments that are acquired principally for the purpose of generating profit from short-term fluctuations in price or dealer's margin are classified as held for trading. All investments are initially recognised at cost, being the fair value of the consideration given. Subsequent to initial recognition, in accordance with the requirements of circulars issued by State Bank of Pakistan, Investments held for Trading and Investments Available for Sale for which active market exists, are measured at their market value while Investments Held till Maturity are stated at amortised cost using the effective interest rate method less impairment, if any. All "regular way" purchases and sales of listed shares are recognised on the trade date, i.e. the date that the company commits to purchase/sell the asset. Any surplus or deficit on revaluation of Held for Trading Investments are charged to income currently, while in case of available for sale investments, the resulting surplus/(deficit) is kept in a separate account and is shown in the balance sheet below the shareholders' equity. At the time of disposal the respective surplus or deficit is transferred to income currently. Amortisation cost is charged to profit and loss account. 2.7. SECURITIES UNDER REPURCHASE/REVERSE REPURCHASE AGREEMENTS Transactions of repurchase/reverse repurchase of investment securities are entered into at contracted rates for specified periods of time and are accounted for as follows: Repurchase agreements Investments sold with a simultaneous commitment to repurchase at a specified future date (repo) continue to be recognised in the balance sheet and are measured in accordance with accounting policies for investments. The counterparty liability for amounts received under these agreements is included in borrowings from banksf NBFCs. The difference between sale and repurchase price is treated as mark-up on borrowings from banks/ NBFCs and accrued over the life of the repo agreement. Reverse repurchase agreements Investments purchased with a corresponding commitment to resell at a specified future date (reverse repo) are not recognised in the balance sheet. Amounts paid under these agreements are recorded as fund placements. The difference between purchase and resale price is treated as return from fund placements with financial institutions or income from reverse repurchase transactions of listed shares, as the case may be, and accrued over the life of the reverse repo agreement. 2.8. NET INVESTMENT IN LEASE FINANCE Leases where all the risks and rewards incidental to ownership of the assets are substantially transferred to the lessee are classified as finance leases. Net investment in lease finance is recognised at an amount equal to the aggregate of minimum lease payments including any guaranteed residual value and excluding unearned finance income, write-offs and provision for doubtful lease finances, if any. 2.9. CASH AND CASH EQUIVALENTS Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement, cash and cash equivalents comprise cash in hand and cash with banks in current and deposit accounts. 2.10. FINANCIAL INSTRUMENTS Financial assets Financial assets are cash and bank balances, placements, investments, financing and other receivables. Finances and receivable from clients are stated at their nominal value as reduced by provision for doubtful finances and receivables, while other financial assets are stated at cost except for investments, which have been revalued as per accounting policy. Financial liabilities Financial liabilities are classified according to the substance of the contractual arrangement entered into. Significant financial liabilities include redeemable capital, certificates of deposit, borrowings, trade and other payables. Mark-up based financial liabilities are recorded at gross proceeds received. Other liabilities are stated at their nominal value. Derivatives Derivative instruments held by the Company comprise of future and forward contracts in the capital and money markets. These are stated at fair value at the balance sheet date. The fair value of the derivatives is equivalent to the unrealised gain or loss from marking the derivatives using prevailing market rates at the balance sheet date. The unrealised gains are included in other assets while unrealised losses are included in other liabilities in the balance sheet. The corresponding gains and losses are included in the profit and loss. Recognition and derecognition All the financial assets and financial liabilities are recognised at the time when the Company becomes party to the contractual provisions of the instrument. Financial assets are derecognised when the company looses control of the contractual rights that comprise the financial assets. Financial liabilities are derecognised when they are extinguished i.e. when the obligation specified in the contract is discharged, cancelled or expires. Any gain or loss on derecognition of the financial assets and financial liabilities is taken to income currently. Offsetting of financial assets and financial liabilities A financial asset and a financial liability is offset and the net amount is reported in the balance sheet if the Company has legally enforceable right to set-off the recognised amount and intends either to settle on a net basis or to realise the a sset and settle the liability simultaneously. 2.11. PROVISIONS Provisions are recorded when the Company has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of obligation. 2.12. STAFF RETIREMENT BENEFITS Employees compensated absences Liability for accumulated compensated absences of employees is accounted for in the period in which these absences are earned. Provident fund The company operates approved contributory provident fund for all permanent employees. Equal monthly contribution is made both by employees and the Company to the fund at 10% of Basic Salary. The fund is administrated by the Trustees. 2.13. REVENUE RECOGNITION Return on finances provided, placements, government securities and term finance certificates are recognised on time proportionate basis. Mark-up on lease finance is recognised using the finance method. Under this method, the unearned lease income i.e. the excess of aggregate lease rentals and the residual value over the cost of the leased asset, is deferred and taken to income so as to produce a constant periodic rate of return on the outstanding net investment in lease finance. Processing fee, documentation charges and other lease related income are taken to income currently. Brokerage commission and other advisory fee are recognised when such services are provided. Guarantee commission is received in advance, and deferred over the guarantee period. Consultancy and corporate advisory fee income is recognised using percentage of completion method. Dividend income is recognised when the right to receive payment is established. 2.14. RETURN ON DEPOSITS AND BORROWINGS Return on Certificates of Deposit (CODs) and borrowings are recognised on a time proportionate basis taking into account the relevant issue date and final maturity date. 2.15. TAXATION Current Provision for current taxation is based on taxable income at the current rates of taxation after taking into account tax credits available, rebates and exemptions, if any, or one-half of one percent of turnover, whichever is higher. Deferred Deferred tax is provided, using the balance sheet method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that the temporary differences will reverse in the future and taxable income will be available against which the temporary differences can be utilised. The carrying amount of deferred tax asset is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the assets realised or the liability is settled, based on the tax rates (and tax laws) that have been enacted or subsequently enacted at the balance sheet date. 2.16. RELATED PARTY TRANSACTIONS The Company enters into transactions with related parties on an arm's length basis. Prices for transactions with related parties are determined using admissible valuation methods. 3. FIXED CAPITAL EXPENDITURE ====================================================================================
2006 2005
Notes Rupees Rupees
====================================================================================
Property, plant and equipment 3.1 133,644,073 122,998,000
Intangible assets 3.2 2,666,700 -
136,310,773 122,998,000
Capital work in progress - Software - 900,000
136,310,773 123,898,000
====================================================================================3.1. PROPERTY, PLANT AND EQUIPMENT===================================================================================================================================================================================================================
Cost Depreciation Net book
value
As at As at As at As at As at
01, July Additions 30, June 01, July For (Disposals)/ 30, June 30 June
2005 (disposals) Transfers 2006 2005 the year transfers 206 2006
Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees
===================================================================================================================================================================================================================
OWNED:
Office premises 89,685,600 7,000 - 89,692,600 373,690 4,484,659 - 4,858,349 84,834,251
Leasehold improvements 9,461,791 27,020 - 9,488,811 2,929,712 1,637,579 - 3,930,291 5,558,520
Office furniture and fixtures 4,470,259 606,315 - 4,878,914 705,279 428,368 - 1,066,739 3,812,175
(197,660) (66,908)
Computer equipments 7,973,421 5,507,520 - 13,480,941 3,159,434 2,777,027 - 5,936,461 7,544,480
Office equipments 5,691,553 2,722,326 - 8,292,374 1,308,464 638,731 - 1,922,829 6,369,545
(121,505) (24,366)
Vehicles 23,151,353 9,853,443 - 29,477,156 9,596,398 4,140,966 - 11,595,509 17,881,647
(3,527,640) (2,141,855)
140,433,977 18,723,624 - 155,310,796 17,435,977 14,107,330 - 29,310,178 126,000,618
(3,846,805) (2,233,129)
LEASED:
Vehicles - 8,992,300 - 8,992,300 - 1,348,845 - 1,348,845 7,643,455
2006 140,433,977 23,869,119 - 164,303,096 17,435,977 15,456,175 (2,233,129) 30,659,023 133,644,073
2005 36,944,919 103,489,058 - 140,433,977 16,286,215 6,164,224 (5,014,462) 17,435,977 122,998,000
===================================================================================================================================================================================================================3.2. INTANGIBLE ASSETS==============================================================================================================================================================
Cost Amortisation Net book
value
As at As at As at As at As at
01, July Additions 30, June 01, July For (Disposals)/ 30, June 30 June
2005 (disposals) Transfers 2006 2005 the year transfers 2006 2006
Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees
==============================================================================================================================================================
Computer software - 3,000,000 - 3,000,000 - 333,300 - 333,300 2,666,700
2006 - 3,000,000 - 3,000,000 - 333,300 - 333,300 2,666,700
2005 - - - - - - - - -
==============================================================================================================================================================3.3. FOLLOWING ASSETS WERE DISPOSED OFF DURING THE YEAR====================================================================================================================================================
Accumulated Written Sale
Cost depreciation down value proceedsGain/(loss) Mode of Particulars
Dispose
Rupees Rupees Rupees Rupees Rupees Rupees
====================================================================================================================================================
Vehicles 609,000 (297,192) 311,808 311,808 - Negotiations Arsalan Baig, Ex employee
1,366,825 (858,416) 508,409 508,409 - Company Policy Rashid Mansur, President & CEO
555,000 (380,716) 174,284 174,284 - company Policy Hasan Abid Zaidi, Head of Investments
996,815 (605,531) 391,284 391,284 - Company Policy Arshad I. Khan, EVP
3,527,640 (2,141,855) 1,385,785 1,385,785 -
Office furniture and fixtures 136,500 (46,205) 90,295 34,761 (55,534) Insurance Claim EFU Insurance
Office equipments 121,505 (24,366) 97,139 56,000 (41,139) Negotiations Miscellaneous Vendors
ASSETS WRITTEN-OFF:
Office furniture and fixtures 61,160 (20,703) 40,457 - -
Total 3,846,805 (2,233,129) 1,613,676 1,476,546 (96,673)
====================================================================================================================================================4. CARDS AND ROOMS====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Corporate membership of Karachi and
Lahore stock exchanges 42,420,000 42,420,000
Rooms 2,985,000 1,685,000
45,405,000 44,105,000
====================================================================================5. LONG TERM INVESTMENTS====================================================================================
2006 2005
Notes Rupees Rupees
====================================================================================
HELD TO MATURITY:
Pakistan Investment Bonds 5.1 568,781,465 577,862,851
Term Finance Certificates - Unlisted 5.2 23,016,750 29,350,033
591,798,215 607,212,884
LESS: CURRENT MATURITY OF:
Term Finance Certificates 10 10,666,600 10,666,600
581,131,615 596,546,284
====================================================================================5.1. PAKISTAN INVESTMENT BONDS====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Cost 606,221,300 606,221,300
Less: Amortisation - Opening 8,358,449 -
Charge for the year 9,081,386 8,358,449
588,781,465 597,862,851
Less: Impairment loss 20,000,000 20,000,000
568,781,465 577,862,851
====================================================================================These represent investment in 10 and 20 years' bonds issued by the Government of Pakistan.Period to maturity of these investments range from five and a half years to 18 years and carry mark-up at rates (coupon rate) ranging from 10% to 12% per annum (2005: 10% to 12% per annum). These investments are held by other financial institutions as security under Repurchase Transaction. 5.2. TERM FINANCE CERTIFICATES-UNLISTED ===================================================================================================================
Name Redemption terms Rate Rupees
===================================================================================================================
New Khan Transport Principal payable in 60 equal monthly instalments, 4.50% above 16,350,000
Company (Private) Limited while mark-up is payable on quarterly
basis in arrears 6 months KIBOR
with 8.25% as floor.
Development Securitisation Principal payable in 9 equal quarterly instalments, 4.00% above 6,666,750
Trust while mark-up is payable on quarterly basis 3 months KIBOR
with 7.50% as floor.
23,016,750
===================================================================================================================6. LONG TERM FINANCES====================================================================================
2006 2005
Notes Rupees Rupees
====================================================================================
RELATED PARTIES-SECURED AND CONSIDERED GOOD:
Associated companies 6.1 3,162,451 4,136,111
Executives 6.2 15,437,622 15,481,246
18,600,073 19,617,357
Others - Secured and considered good 6.3 85,984,706 133,033,485
104,584,779 152,650,842
CONSIDERED DOUBTFUL:
Others 6.4 38,395,049 42,678,623
Less: Provision for doubtful finances 6.5 24,142,402 11,709,405
14,252,647 30,969,218
118,837,426 183,620,060
Less: Current maturity 10 83,542,491 64,119,635
35,294,935 119,500,425
====================================================================================6.1. ASSOCIATED COMPANIESThese represent finance provided against hypothecation of vehicles for period ranging from three years to 5 years at mark-up rates @ 14% per annum. (2005: 9% to 11% per annum). The maximum balance outstanding at the end any month during the year was: ====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Escorts Pakistan Limited 3,222,715 3,675,082
Essem Hotel Limited 913,396 936,450
====================================================================================6.2. EXECUTIVESThese represent finance provided to the Chief Executive Officer and Executives against mortgage of properties and hypothecation of vehicles in accordance with the terms of employment for period ranging from 2 years to 15 years and carry mark-up ranging from 6% to 13.17% (2005: 6% to 12% per annum). ========================================================================================================
CEO Executives 2006 2005
Rupees Rupees Rupees Rupees
========================================================================================================
Opening Balance 9,964,742 5,957,441 15,922,183 4,207,193
Add: Disbursements - 1,160,877 1,160,877 11,347,900
9,964,742 7,118,318 17,083,060 15,555,093
Less: Repayments 167,650 1,477,788 1,645,438 73,847
9,797,092 5,640,530 15,437,622 15,481,246
========================================================================================================The finance provided to the CEO includes house finance of Rs 9,797,092 (2005: Rs 9,964,742) against mortgage of property with 20% margin.This facility carries markup at the rate of 6% per annum, payable on monthly basis. One fourth (25%) of the principal amount is payable at maturity while the remaining balance is payable in unequal monthly instalments. The remaining period of this facility is six years and five months. ====================================================================================
2006 2005
Rupees Rupees
====================================================================================
The maximum balance outstanding
at the end of any month during the year. 15,922,183 15,481,246
====================================================================================The difference in the opening balance represents amount of financing executives included this year in accordance with 1 the 4th schedule of the Companies Ordinance, 1984.6.3. These finance facilities are secured by hypothecation of or charge on assets, mortgage of property, lien over bank deposits and pledge of stocks for a period up to 5.5 years. The expected rate of return range from 9% to 18% per annum (2005: 8% to 18% per annum). 6.4. These finance facilities include Rs 38.395 million (2005: Rs 42.679 million) which have been classified under non-performing status detailed below: ====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Other assets especially mentioned. 6,505,552 10,745,195
Substandard - 15,821,694
Doubtful 15,587,763 15,133,334
Loss 16,301,734 978,400
38,395,049 42,678,623
====================================================================================6.5. PARTICULARS OF PROVISION FOR DOUBTFUL FINANCES====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Opening balance 11,709,405 11,045,946
Charge for the year 12,432,997 663,459
Closing balance 24,142,402 11,709,405
====================================================================================7. NET INVESTMENTS IN LEASE FINANCE====================================================================================
2006 2005
Note Rupees Rupees
====================================================================================
Net investment in lease finance 30,947,661 -
Less: Current maturity 10 4,386,4282 -
26,561,233
====================================================================================7.1. PARTICULARS OF NET INVESTMENT IN LEASE FINANCE==========================================================================================================================
2006 2005
Later than one year
Not later than one but not later than
year five years Total Total
==========================================================================================================================
Leased rentals receivable 7,354,906 22,447,721 29,802,627 -
Add: Residual value - 9,138,301 9,138,301 -
Gross investment in lease finance 7,354,906 31,586,022 38,940,928 -
Less: Unearned finance income 2,968,478 5,024,789 7,993,267 -
Net investment in lease finance 4,386,428 26,561,233 30,947,661 -
==========================================================================================================================7.2. The leases made by the Company are for a period ranging from three years to five years.Security deposits obtained at the time of disbursement of lease facility range from 10% to 61.53% (2005: Nil) of the lease amount. Leased assets are insured in favour of the company. The rate of return range from 10.69% to 17% per annum (2005:Nil). Penalty is charged in case of delayed payment. 8. LONG TERM LOANS, DEPOSITS ====================================================================================
2006 2005
Notes Rupees Rupees
====================================================================================
Loan to staff - Unsecured, considered good 8.1
Executives - Related parties 2,915,297 1,093,155
Other employees 2,041,973 1,729,776
4,957,270 2,822,931
Security deposits 6,562,250 2,477,150
Prepayments 10 3,596,610 8,985,234
15,116,130 14,285,315
Less: Current maturity 5,921,322 6,819,110
9,194,808 7,466,205
====================================================================================8.1. These represent interest free loan to staff for a period of three years repayable in equal monthly instalments, in accordance with the company's Policy for staff loans.====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Opening Balance 2,135,613 1,747,945
Add: Disbursements during the year 2,686,773 453,679
4,822,386 2,201,624
Less: Repayments during the year 1,907,089 1,108,469
2,915,297 1,093,155
The maximum balance outstanding from executives at
the end any month during the year was: 3,356,233 1,741,280
====================================================================================8.2. The difference in the opening balance represents amount of loan to staff included in the executive category this year in accordance with the 4th schedule of the Companies Ordinance, 1984.9. DEFERRED TAX ASSET/(LIABILITY) ====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Taxable temporary differences on fixed assets (20,558,958) (20,688,579)
Deductible temporary differences on investments 16,837,252 9,925,457
Deductible temporary differences on
finances and receivables 21,020,507 16,792,034
Taxable temporary differences on trade
and other payables (1,463,025) (983,070)
Deductible temporary differences on leasing finance (120,650) -
15,715,126 5,045,842
====================================================================================9.1. MOVEMENT IN DEFERRED TAX ASSET====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Opening balance 5,045,842 (333,226)
Provision during the year 10,669,284 5,379,068
Closing balance 15,715,126 5,045,842
====================================================================================10. CURRENT MATURITIES OF NON-CURRENT ASSETS====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Long term investments 10,666,600 10,666,600
Long term finances 83,542,491 64,119,635
Net investment in lease finance 4,386,428 -
Long term loans, deposits and prepayments 5,921,322 6,819,110
104,516,841 81,605,345
====================================================================================11. SHORT TERM INVESTMENTS================================================================================================================================================================
2006 2005
Held by Reserve Held by Reserve
Bank Repo repo Total Bank Repo repo Total
Notes Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees
================================================================================================================================================================
AVAILABLE FOR SALE:
Pakistan Investment Bonds - - - - - 215,096,630 215,096,630
Listed Term Finance
Certificates 11.1 79,944,972 - - 79,944,972 117,720,354 131,560,000 131,560,000 117,720,354
Listed shares/units 11.2 54,014,038 - - 54,014,038 114,153,444 668,823,048 686,778,248 96,198,244
133,959,010 - - 133,959,010 231,873,798 1,015,479,678 1,033,434,878 213,918,598
HELD FOR TRADING:
Listed shares 11.3 714,403,695 - - 714,403,695 703,337,096 - - 703,337,096
848,362,705 - - 848,362,705 935,210,894 1,015,479,678 1,033,434,878 917,255,694
================================================================================================================================================================11.1. PARTICULARS OF LISTED TERM FINANCE CERTIFICATES====================================================================================================================
2006 2005
No of Certificates Market Market
2006 2005 Name Cost Value Cost Value
Rupees Rupees Rupees Rupees
====================================================================================================================
SUGAR AND ALLIED:
- 1,000 Al-Noor Sugar Mills Limited - - 624,750 618,503
- 2,000 Shahmurad Sugar Mills Limited - - 3,332,000 3,365,986
CHEMICAL AND PHARMACEUTICAL:
2,000 2,000 Ittehad Chemicals Limited 6,661,360 6,661,360 9,992,000 10,091,920
8,543 8,543 Pharmagen Limited 30,510,714 31,120,928 42,715,000 42,715,000
OIL AND GAS EXPLORATION COMPANIES:
4,000 4,000 First Oil and Gas
Securitisation Company Ltd 3,421,2003,421,200 10,264,560 10,264,560
2,000 2,000 Naimat Basal Oil and Gas
Securitisation Company 8,263,040 8,345,670 9,900,000 9,801,000
CEMENT:
4,000 4,000 Maple Leaf Cement Factory Limited 3,332,000 3,365,320 9,996,000 10,145,940
INVESTMENT COMPANIES AND BANKS:
- 1,000 Atlas Investment Bank Limited - - 832,667 857,645
1,316 1,316 Prime Commercial Bank Limited 6,577,368 6,511,594 6,580,000 6,580,000
LEASING:
2,000 2,000 AlZamin Leasing Modaraba - I 10,000,000 9,200,000 10,000,000 9,600,000
951 951 AlZamin Leasing Modaraba - II 4,755,000 4,469,700 4,755,000 4,564,800
1,000 1,000 Orix Leasing Pakistan Limited 5,000,000 4,850,000 5,000,000 4,950,000
1,000 1,000 Crescent Standard Investment Bank 2,499,000 1,999,200 4,165,000 4,165,000
Limited
81,019,682 79,944,972 118,156,97 117,720,354
81,019,682 79,944,972 118,156,97 117,720,354
==================================================================================================================== Other particulars of listed TFCs are as follows=============================================================================================================================
Certificate Profit rate per Profit
Particulars denomination annum payments Maturity date
=============================================================================================================================
CHEMICAL AND PHARMACEUTICAL:
Ittehad Chemicals Limited 5,000 2.50% over SBP discount rate with Semi annually 27 June 2008
7.00% p.a. as floor and 12.00% p.a.
as ceiling.
Pharmagen Limited 5,000 2.50% over weighted average of the Semi annually 17 October 2008
last 3 cut-off yields of 5 year PIBs
with 8.50% p.a. as floor and 11.50%
p.a. as ceiling.
OIL AND GAS EXPLORATION COMPANIES:
First Oil and Gas Securitization 5,000 2.50% over SBP's discount rate with Monthly 4 December 2006
Company Limited 10.50% as floor and 14.50% as
ceiling.
Naimat Basal Oil and Gas Securitization 5,000 2.50% over 6 months KIBOR with Monthly 12 April 2010
Company 7.50% p.a. as floor and 13.00% p.a.
as ceiling.
CEMENT:
Maple Leaf Cement Factory Limited 5,000 2.50% over weighted average of the Semi annually 19 July 2007
last 3 cut-off yields of 5 year PIBs
with 15.25% p.a. as floor and
17.75% p.a. as ceiling.
INVESTMENT COMPANIES AND BANKS:
Prime Commercial Bank Limited 5,000 1.90% over 6 months KIBOR Semi annually 9 March 2014
LEASING:
AlZamin Leasing Modaraba - I 5,000 8.00% p.a Semi annually 24 December 2008
AlZamin Leasing Modaraba - II 5,000 9.50% p.a Semi annually 1 June 2010
Orix Leasing Pakistan Limited 5,000 2.00% over SBP discount rate with Semi annually 31 July 2007
10.00% p.a. as floor and 13.00% p.a.
as ceiling.
Crescent Standard Investment Bank 5,000 2% over SBP discount rate with Semi annually 7 July 2007
Limited 10.50% p.a. as floor and 13.50% p.a.
as ceiling.
=============================================================================================================================11.2. PARTICULARS OF LISTED SHARES / UNITSAll shares / units have face value of Rs 10 each, except for Atlas Income Fund (Rs 500 each) and Faysal Balance Growth Fund (Rs 100). ========================================================================================================================
2006 2005
No of Certificates Market Market
2006 2005 Name Cost Value Cost Value
Rupees Rupees Rupees Rupees
========================================================================================================================
MUTUAL FUND - OPEN END:
- 20,000 Atlas Income Fund - - 10,000,000 10,000,000
65,515 50,000 Faysal Balanced Growth Fund 5,000,000 6,857,455 5,000,000 5,000,000
MUTUAL FUND - CLOSE END:
1,277,000 2,500,000 Abamco Composite Fund 12,724,280 10,854,500 25,000,000 17,250,000
800,000 1,994,000 Pakistan Strategic Allocation Fund 8,000,000 8,520,000 19,940,000 19,242,100
26,400 - Dawood Capital Management Fund 204,300 396,000 - -
21,500 - PICIC Growth Fund 752,500 679,400 - -
VENTURE CAPITAL:
- 24,000 Dawood Venture Capital - - 204,300 168,000
TEXTILE SPINNING:
1,591,326 1,737,826 Dewan Farooq Spinning Mills Limited 15,913,260 10,661,883 17,378,260 15,292,869
POWER GENERATION AND DISTRIBUTION:
592,000 925,000 Hub Power Company Limited 19,882,083 13,616,000 31,065,727 24,420,000
- 24,000 Kohinoor Energy Limited - - 823,127 624,000
368,000 604,500 Southern Electric Power Company Ltd 5,865,235 2,428,800 9,696,563 4,201,275
68,341,658 54,014,038 119,107,977 96,198,244
========================================================================================================================11.3. Particulars of listed shares - Held for trading investments Investment in ordinary shares of Rs 10 each of the following companies:============================================================================================================================
2006 2005
No of Certificates Market Market
2006 2005 Name Cost Value Cost Value
Rupees Rupees Rupees Rupees
============================================================================================================================
INVESTMENT BANKS / INVESTMENT COMPANIES:
- 4,500 PICIC Limited - - 362,286 315,000
COMMERCIAL BANKS:
- 193,900 Bank Alfalah Limited - - 8,721,722 7,901,425
25,000 125 MCB Bank Limited 4,129,253 5,257,500 1,946 9,912
40,300 60,000 National Bank of Pakistan 7,171,660 8,684,650 6,480,354 6,477,000
TEXTILE WEAVING:
- 25,000 Samin Textile Mills Limited - - 262,526 143,750
TEXTILE COMPOSITE:
- 25,000 Nishat Mills Limited - - 1,942,448 1,900,000
48,070 - Nishat (Chunian) Ltd 5,053,790 2,139,115 - -
CEMENT:
- 266,750 Maple Leaf Cement Factory Limited - - 7,838,274 5,815,150
3,500 - Fauji Cement Company Limited 67,200 67,200 - -
OIL AND GAS MARKETING COMPANIES:
- 5,000 Pakistan State Oil Company Limited - - 1,931,941 1,930,000
- 15,000 Sui Northern Gas Pipeline Company Limited - - 979,098 919,500
- 328,500 Sui Southern Gas Pipeline Company Limited - - 10,867,336 7,604,775
OIL AND GAS EXPLORATION COMPANIES:
45,000 85,000 Oil and Gas Development Company Limited 5,797,693 6,153,750 9,182,168 8,950,500
- 30,000 Pakistan Petroleum Limited - - 6,569,929 6,453,000
TECHNOLOGY AND COMMUNICATION:
- 50,000 Pakistan Telecommunication Company Limited - - 3,331,970 3,297,500
489,117 - Eye Television Network Limited 4,891,170 3,423,819 - -
FERTILISER:
- 8,500 Fauji Fertilizer Bin Qasim Limited - - 248,305 228,650
CHEMICALS:
- 180,000 Pakistan PTA Limited - - 2,349,085 1,440,000
27,110,766 25,726,034 61,069,388 53,386,162
Value of shares sold in futures market
(Note 11.3.1) 685,484,526 688,677,661 646,288,943 649,950,934
712,595,292 714,403,695 707,358,331 703,337,096
============================================================================================================================11.3.1. These represent investment in shares purchased and simultaneously sold in futures market with settlement dates subsequent to the year's end.12. SHORT TERM FINANCES ====================================================================================
2006 2005
Notes Rupees Rupees
====================================================================================
Secured and considered good 12.1
Associated companies 10,000,000 10,000,000
Executives 600,000 -
Others 193,231,488 553,239,877
CONSIDERED DOUBTFUL: 12.2
Others 35,116,834 13,767,834
Less: Provision for doubtful finances 12.3 15,053,234 13,767,834
20,063,600 -
223,895,088 563,239,877
====================================================================================12.1. These are secured by hypothecation of or charge on assets, mortgage of property, lien over bank deposits and pledge of stocks.The expected rate of return range from 9% to 18% per annum (2005: 8% to 18% per annum). These include finances against pledge of listed shares and Bank's own Certificates of Deposit amounting to Rs 5.114 million (2005: Rs 87.297 million), while Rs 130,124 million (2005: Rs 303.270) were disbursed as Margin Finance in accordance with Margin Trading Rules, 2004 issued by Securities and Exchange Commission of Pakistan. 12.2. These finance facilities include Rs 35.117 million (2005: Rs 13.768 million) which have been placed under non-performing status detailed below: ====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Doubtful 21,349,000 -
Loss 13,767,834 13,767,834
35,116,834 13,767,834
====================================================================================12.3. PARTICULARS OF PROVISION FOR DOUBTFUL FINANCES====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Opening balance 13,767,834 10,586,385
Charge for the year 1,285,400 3,181,449
15,053,234 13,767,834
====================================================================================13. SHORT TERM PLACEMENTS====================================================================================
2006 2005
Notes Rupees Rupees
====================================================================================
CONSIDERED GOOD:
Unsecured 13.1 36,250,000 88,073,425
Secured under reverse repurchase agreements 13.2 2,233,871,900 654,021,999
2,270,121,900 742,095,424
====================================================================================13.1. These represent clean placements with financial institutions and carry mark-up @ 11% per annum (2005: 6% to 15% per annum).13.2. SECURITIES HELD AS COLLATERAL - MARKET VALUE ====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Pakistan Investment Bonds - 215,096,630
Term Finance Certificates - 131,560,000
Quoted shares 2,285,086,376 446,978,248
2,285,086,376 793,634,878
====================================================================================These represent secured placements for a maximum period of upto 30 days and carrymark-up ranging from l2.99% to 27.32% per annum (2005: 8% to 19% per annum). 14. ADVANCES, DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES ====================================================================================
2006 2005
Note Rupees Rupees
====================================================================================
ADVANCES - CONSIDERED GOOD:
Staff - 795,681
Others 10,000 518,613
10,000 1,314,294
Advance income tax 143,367,032 99,813,375
Accrued mark-up 14,752,731 17,756,754
Deposits against exposure limits 203,640,035 127,066,852
Prepayments 2,837,334 955,679
Dividend receivable 14,765,300 2,243,925
Receivable from clients 14.1 23,718,825 49,150,982
Income tax refundable 5,808,854 5,808,854
Fair value adjustment - derivative financial instrument - 634,647
Other receivables 626,827 979,102
409,526,938 305,724,464
====================================================================================14.1. RECEIVABLE FROM CLIENTS====================================================================================
2006 2005
Note Rupees Rupees
====================================================================================
Considered good 22,409,356 49,150,982
Considered doubtful 20,862,954 22,500,000
Less: Provision for doubtful receivables 14.2 (19,553,485) (22,500,000)
1,309,469 -
23,718,825 49,150,982
====================================================================================14.2. PARTICULARS OF PROVISION FOR DOUBTFUL RECEIVABLES====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Opening balance 22,500,000
Charge for the year - 22,500,000
Less: Reversals (2,946,515) -
(2,946,515) 22,500,000
19,553,485 22,500,000
====================================================================================15. CASH AND BANK BALANCES====================================================================================
2006 2005
Note Rupees Rupees
====================================================================================
CASH WITH BANKS
CURRENT ACCOUNTS WITH:
State Bank of Pakistan 680,163 382,194
Others 21,984,438 116,483,219
22,664,601 116,865,413
Deposit accounts 15.1 147,055,421 554,338,650
169,720,022 671,204,063
====================================================================================15.1. Rate of return on these accounts range from 1.5% to 4% per annum (2005: 0.5% to 2% per annum).16. SHARE CAPITAL ====================================================================================
2006 2005
Rupees Rupees
====================================================================================
AUTHORISED SHARE CAPITAL:
50,000,000 (2005: 50,000,000) ordinary shares of
Rs 10 each 500,000,000 500,000,000
Issued, subscribed and paid-up capital
42,000,000 (2005: 30,000,000) ordinary shares of
Rs 10 each issued as fully paid in cash 420,000,000 300,000,000
2,100,000 (2005: Nil) ordinary shares of Rs 10 each
issued as fully paid bonus shares 21,000,000 -
441,000,000 300,000,000
====================================================================================17. RESERVES====================================================================================
2006 2005
Note Rupees Rupees
====================================================================================
CAPITAL RESERVE:
Statutory reserve 17.1 100,453,803 63,243,628
REVENUE RESERVE:
Unappropriated profits 218,815,215 90,974,515
319,269,018 154,218,143
====================================================================================17.1. This represents special reserve created in compliance with the Rule 2 of Part III of Prudential Regulations for Non-Banking Finance Companies issued by Securities and Exchange Commission of Pakistan.18. DEFICIT ON REVALUATION OF INVESTMENTS ====================================================================================
2006 2005
Rupees Rupees
====================================================================================
AVAILABLE FOR SALE:
Listed term finance certificates (1,074,710) (436,623)
Listed shares / units (14,327,620) (22,909,731)
(15,402,330) (23,346,354)
====================================================================================19. TERM FINANCE CERTIFICATES====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Face value 275,000,000 275,000,000
Less: Redeemed - Opening balance 55,000 -
Redeemed during the year 110,000 55,000
165,000 55,000
274,835,000 274,945,000
Less: Current maturity 45,851,658 110,000
228,983,342 274,835,000
====================================================================================19.1. These represent unlisted Term Finance Certificates (TFCs) issued to institutional investors carrying a profit rate of 6 months KIBOR plus 275 bps, with a floor of 5% per annum and a ceiling of 10% per annum, payable semi annually.These are redeemable in 6 equal semi annual instalments commencing from 30th month and carry call option exercisable after three years of the issue date. These are secured against hypothecation of Rs 367 million on all present and future current assets of the company. Face value of each certificate is Rs 5,000,000. 20. OBLIGATION UNDER FINANCE LEASE ====================================================================================
2006 2005
Notes Rupees Rupees
====================================================================================
Obligation under finance lease 20.1 8,184,466 -
Less: Current maturity 22 655,092 -
7,529,374 -
====================================================================================20.1. PARTICULARS OF OBLIGATION UNDER FINANCE LEASE=============================================================================================================================
2006 2005
Later than one year
Not later than but not later than
one year five years Total Total
=============================================================================================================================
Leased rentals payable 1,080,444 3,601,480 4,681,924 -
Add: Residual value - 4,619,300 4,619,300 -
1,080,444 8,220,780 9,301,224 -
Less: Future financial charges 425,352 691,406 1,116,758 -
Present value of minimum lease payment 655,092 7,529,374 8,184,466 -
=============================================================================================================================20.2. The obligation represents the unpaid balance of the total minimum lease payments and the residual value payable at the end of the lease period.The facility carries mark-up at the rate of six months KIBOR plus 3% with a floor of 13%. Lease rentals are payable monthly. The Company has the option to purchase the asset upon the completion of the lease period and has the intention to exercise this option. There are no financial restrictions imposed by the lessor. 21. LONG TERM CERTIFICATES OF DEPOSIT ====================================================================================
2006 2005
Notes Rupees Rupees
====================================================================================
Long term certificates of deposit 21.1 437,010,938 333,590,461
Less: Current maturity 22 39,695,320 28,126,515
397,315,618 305,463,946
====================================================================================21.1. These have been issued for term ranging from above 1 year to 5 years and expected return on these certificates ranges from 6.60% to l2.75% per annum (2005: 6.25% to 12.50% per annum) payable monthly, quarterly, semiannually or on maturity.22. CURRENT MATURITIES OF NON-CURRENT LIABILITIES ====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Liability against assets subject to finance lease 655,092 -
Redeemable capital 45,851,658 110,000
Long term certificates of deposit 39,695,320 28,126,515
86,202,070 28,236,515
====================================================================================23. SHORT TERM BORROWINGS====================================================================================
2006 2005
Note Rupees Rupees
====================================================================================
FINANCIAL INSTITUTIONS:
Unsecured 23.1 645,000,000 715,000,000
Secured 23.2 500,000,000 945,000,000
1,145,000,000 1,660,000,000
====================================================================================23.1. These carry mark-up ranging from 9% to 11% per annum (2005: 4.50% to 12% per annum) and are for a period from 3 days to 3 months (2005: 2 days to 3 months).23.2. These represent borrowings under repurchase agreements and carry mark-up ranging from 8.65% to 8.95% per annum (2005: 6.10% to 11.25% per annum) and are for a period from 3 months to 6 months (2005: 2 days to 3 months). These are secured against pledge of PIBs and shares of quoted companies. 24. RUNNING FINANCE UNDER MARK-UP ARRANGEMENTS The aggregate running finance facilities under mark-up arrangements from commercial banks amount to Rs 975 million (2005: 445 million). These facilities carry mark-up at rates based on three and six months KIBOR plus a spread of 2.00% per annum (2005: 1.50% to 2.00% per annum) with a floor ranging from 7.50% to 10.5% per annum (2005: 5.00% to 10.00% per annum). These facilities are secured by pledge of listed securities. 25. SHORT TERM CERTIFICATES OF DEPOSIT These have been issued for terms ranging from 1 month to one year and expected rate of return on these certificates ranges from 6.65% to 13% per annum (2005: 5% to 10% per annum) payable monthly, quarterly, semi-annually or on maturity. 26. TRADE AND OTHER PAYABLES ====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Payable to NCCPL 149,000,581 100,913,630
Customers' credit balances 154,997,534 84,598,974
Accrued return on certificates of deposit 24,573,847 13,761,842
Accrued return on redeemable capital 7,176,253 6,812,899
Accrued mark-up on unsecured borrowings 1,308,548 869,274
Accrued mark-up on secured borrowings 24,356,419 11,922,081
Accrued expenses and other payables 13,357,438 16,191,985
Fair value adjustment - derivative financial instrument 26,040,030 -
Provision for compensated absences 4,180,071 2,808,772
Unearned income 1,076,050 2,869,601
Unclaimed dividend 458,668 769,137
406,525,439 241,518,195
====================================================================================27. PROVISION FOR TAXATION27.1. CURRENT STATUS The company's assessments up to and including assessment year 2002-2003 have been finalised. Assessments for the tax years 2003 and 2004 were deemed assessed under the provisions of the Income Tax Ordinance, 2001. However, the case for tax year 2003 had been selected for total audit by the income tax department, against which the Company filed a suit in the Lahore High Court. The case has been decided in favor of the Company which has been appealed against by the department in the Supreme Court, which has been accepted. 27.2. TAX RATE The company has used income tax rates applicable to listed companies (other than banking companies) in computing the tax liabilities for the tax year upto 2005. In the initial assessments made by Deputy Commissioner of Income Tax (DCIT), the rate applicable to banking companies had been used for the assessment years 1997-1998 to 2001-2002, for which Company had filed appeals with the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) directed the DCIT to apply the rates applicable to listed companies for the assessment years 1997-1998 to 2001-2002 against which the department preferred appeals before Income Tax Appellate Tribunal (ITAT). ITAT has rejected these appeals in assessment years 1997-1998 to 1999-2000 whereas appeals in 2000-2001 and 2001-2002 are pending fixation. The Income Tax Department has filed a reference application before the ITAT for the assessment years 1997-1998 and 1998-1999, who has referred the case to the Lahore High Court for their authoritative resolution. The management is confident that the outcome of the case will be in their favour. 27.3. TAXABILITY OF DIVIDEND INCOME The ITAT has referred the matter of taxability of dividend income as separate block of income instead of business income for assessment years 1997-1998 and 1998-1999 to the Lahore High Court. The management is confident that the outcome of the case will be decided in their favor. 27.4. WITHHOLDING TAX In the assessments for the assessment years 1999-2000 and 2000-2001 no disallowances were made by the DCIT on the issue for non deduction of tax on return on interbank deposits, on the grounds that Company has been assigned the status of a banking company. This treatment, however, is subject to the decision of an appeal filed by the department in the Lahore High Court against the decision of ITAT on the same issue for previous assessment years. The management is of the opinion that these amounts are clean borrowings from the banks/NBFCs and not deposits and, therefore, withholding tax provision do not apply. 28. CONTINGENCIES AND COMMITMENTS 28.1. CONTINGENCIES (a) Guarantees Outstanding guarantees as on balance sheet date were Rs 198.422 million (2005: Rs 92.422 million). (b) Taxation In event of unfavorable decisions pending detailed in note 27, the Company would be faced with maximum tax liability of Rs 8.619 million (2005: Rs 8.619 million) and maximum charge of 27.01 million (2005: Rs 27.01 million). 28.2. COMMITMENTS ====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Future sale contract - Shares 825,636,590 658,917,261
Forward purchase contract - Shares 84,651,900 -
Forward sale contract - PIBs - 50,000,000
Forward purchase contract - PIBs - 50,000,000
Underwriting - 5,000,000
Capital expenditure 2,100,000
====================================================================================29. PROFIT ON FINANCING====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Long term finances 16,753,270 17,663,205
Short term finance 54,232,689 30,116,725
70,985,959 47,779,930
====================================================================================30. RETURN ON PLACEMENTS WITH FINANCIAL INSTITUTION====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Clean placements 8,955,445 10,690,862
Placements under reverse repurchase agreements 21,706,885 17,222,876
30,662,330 27,913,738
====================================================================================31. RETURN ON INVESTMENTS====================================================================================
2006 2005
Rupees Rupees
====================================================================================
MARK-UP / RETURN ON INVESTMENTS
HELD TO MATURITY INVESTMENTS:
Government securities 55,999,999 62,417,121
Term Finance Certificates 1,181,836 2,224,391
AVAILABLE FOR SALE INVESTMENTS:
Term Finance Certificates 11,400,814 13,754,711
DIVIDEND INCOME
AVAILABLE FOR SALE INVESTMENTS:
Listed shares/certificates/units 11,678,550 11,088,550
HELD FOR TRADING INVESTMENTS:
Listed shares/certificates/units 63,275,080 15,808,333
Capital gain/(loss) on investments/
reverse repurchase transactions
Held to maturity investments 10,000 (3,235,850)
Available for sale investments (388,611) (3,192,579)
Held for trading investments 393,259,968 233,163,363
536,417,636 332,028,040
====================================================================================32. FEES AND COMMISSION====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Brokerage commission 65,587,954 73,150,826
Guarantee commission 1,778,364 1,791,607
Consultancy and corporate advisory 2,000,000 266,858
Underwriting commission 350,500 156,891
69,716,818 75,366,182
====================================================================================33. ADMINISTRATIVE AND OTHER OPERATING EXPENSES====================================================================================
2006 2005
Notes Rupees Rupees
====================================================================================
Salaries, wages, other benefits & allowances 33.1 67,125,575 67,085,264
Staff Training and Welfare 296,367 207,330
Advertisement and business promotion 2,888,258 913,507
Rent, rates and taxes 11,106,036 10,088,666
Utilities 2,721,569 2,078,372
Communication charges 7,256,385 5,036,824
Traveling and vehicle maintenance 7,623,703 4,587,423
Repair and maintenance 2,395,716 1,839,669
Entertainment 2,761,420 2,040,049
Fee and subscriptions 2,980,275 4,480,174
Legal and professional charges 33.2 3,875,227 3,317,737
Printing and stationery 3,452,091 1,816,302
Fee, brokerage and commission 23,209,955 2,040,718
CDC and clearing charges 33,275,570 25,930,342
Insurance 2,268,265 1,424,565
Depreciation 3.1 15,456,175 6,164,224
Amortisation of Intangible assets 3.2 333,300 -
Loss on sale of fixed assets 96,673 50,968
Fixed assets written off 40,457 1,238,205
Donation 33.3 1,075,000 -
Penalty 30,000 -
Staff Motor Vehicle Contribution & Insurance 148,774 -
Miscellaneous expenses 50,459 802,452
190,467,250 141,142,791
====================================================================================33.1. This includes contribution to provident fund amounting to Rs 2.74 million (2005: Rs 1.8 million) made by the Company.33.2. THESE INCLUDE REMUNERATION PAID TO THE AUDITORS AS DETAILED BELOW ====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Audit fee 154,000 140,000
Audit fee of Provident Fund accounts for
years 2001 - 2005 85,000 -
Review of half yearly accounts 76,500 69,500
Certification and consultancy charges 84,500 90,000
Out of pocket expenses 38,049 46,091
438,049 345,591
====================================================================================33.3. The directors and their spouses do not have any interest in the donnee institution.34. TAXATION ====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Current taxation - Current year 22,573,243 10,048,531
Deferred taxation (10,669,284) (5,379,068)
11,903,959 4,669,463
====================================================================================34.1. RELATIONSHIP BETWEEN TAX EXPENSE AND ACCOUNTING PROFIT====================================================================================
2006 2005
Rupees Rupees
====================================================================================
Profit before tax 197,954,834 134,070,620
%
Applicable tax rate 35.00
Tax effect of:
- Inadmissible expenses 2.77
- Income chargeable at lower rate (13.59)
- Income exempt from tax (12.78)
Effective tax rate 11.40
====================================================================================In view of the available tax losses, provision for previous year taxation represented minimum tax payable, hence no reconciliation between the tax expense and the accounting profit has been given for 2005.35. EARNINGS PER SHARE BASIS AND DILUTED ====================================================================================
Note 2006 2005
====================================================================================
Profit for the year after taxation (Rupees) 186,050,875 129,401,157
Weighted average number of ordinary shares 35.1 41,861,956 34,361,074
Earnings per share (Rupees) 4.44 3.77
====================================================================================35.1. The comparative figure for weighted average number of ordinary shares has been adjusted for bonus shares issued and the bonus element of 40% right shares issued at Rs 10 per share.35.2. No figure for diluted earnings per share has been computed as the company has not issued any instrument, which would have an impact on its earnings per share. 36. TRANSACTIONS WITH RELATED PARTIES The related parties and associated undertakings comprise local associated companies, staff retirement funds, directors and key management personnel. Transactions with related parties and associated undertakings other than remuneration and benefits to key management personnel under the term of employment are as follows: ====================================================================================
2005 2006
Rupees Rupees
====================================================================================
ASSOCIATED COMPANIES
TRANSACTIONS DURING THE YEAR:
Return on finances received 1,800,411 594,359
Guarantee commission earned 789,400 726,900
Profit paid on certificates of deposit 5,069,496 2,363,307
Chairman's secretariat expenses 3,600,000 3,600,000
BALANCE AT YEAR'S END:
Advances outstanding 13,162,451 14,136,111
Letter of guarantee outstanding 78,940,000 78,940,000
Certificates of deposit outstanding 49,036,189 50,940,720
DIRECTORS
TRANSACTIONS DURING THE YEAR:
Guarantee commission earned - 225,000
Profit paid on certificates of deposit 13,281,723 6,853,953
Office rent - 7,063,662
Purchase of fixed assets - 86,190,000
BALANCE AT YEAR'S END:
Certificates of deposit outstanding 122,000,000 120,500,000
Rent and other receivables 2,366,568 -
EXECUTIVES
TRANSACTIONS DURING THE YEAR:
Return on finances received 1,071,836 550,389
Profit paid on certificates of deposit 1,169,135 758,621
Fixed assets sold 1,073,977 817,562
BALANCE AT YEAR'S END:
Advances outstanding 17,549,592 16,272,632
Certificates of deposit outstanding 16,985,504 15,512,750
OTHERS:
Transactions during the year
Contribution to staff retirement benefits plan 2,741,864 1,813,378
====================================================================================37. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND OTHER EXECUTIVES=======================================================================================================
Chief Executive Director Executives
2006 2005 2006 2005 2006 2005
Rupees Rupees Rupees Rupees Rupees Rupees
=======================================================================================================
Managerial remuneration 5,546,664 4,388,242 1,351,212 1,085,100 9,971,261 5,740,170
House rent allowance 270,000 270,000 270,000 270,000 2,547,946 1,360,922
Utilities 554,664 438,822 135,126 108,516 997,096 574,011
Bonus/commission - - - - 2,269,857 284,394
Leave encashment 786,584 - - - 563,764 109,918
Retirement benefits 554,664 436,380 - 994,442 521,306
Leave fare assistance 301,639 - - - - -
Special allowance 1,594,004 900,000 631,880 184,800 631,880 500,820
9,608,219 6,433,444 2,388,218 1,648,416 17,976,246 9,091,541
Number of persons 1 1 1 1 10 5
======================================================================================================= (i) In addition to above the Chief Executive, Executive Director and Executives were provided with use of Company maintained cars and reimbursement of medical expenses.(ii) Fee of Rs 12,000 (2005: 13,000) was paid to one Director for attending the board meetings. (iii) Chairman secretariat expenses have been reimbursed. 38. LIQUIDITY RISKS Liquidity risk is the risk that the Company will encounter difficulties in raising funds to meet commitments associated with financial instruments. The company has diversified its funding sources and assets are managed with liquidity in mind, maintaining a healthy balance of cash and cash equivalents and readily marketable securities. The maturity profile is monitored on regular basis at ALCO to ensure that adequate liquidity is maintained. The table below summaries the maturity profile of the company's assets and liabilities: =======================================================================================================================================================
More than
one year and Above
Total Written one year upto five years five years
Description Rupees Rupees Rupees Rupees
=======================================================================================================================================================
2006
ASSETS:
Fixed capital expenditure 136,310,773 667,421 40,627,381 95,015,971
Cards and rooms 45,405,000 - - 45,405,000
Deferred tax asset 15,715,126 - 15,715,126 -
Net investment in lease finance 30,947,661 4,386,428 26,561,233 -
Investments 1,440,160,920 859,029,305 12,350,150 568,781,465
Finances 342,732,514 307,437,579 35,294,935 -
Loan, advances, deposits, prepayments
and other receivables 424,643,068 415,448,260 7,251,858 1,942,950
Placements 2,270,121,900 2,270,121,900 - -
Cash and bank balances 169,720,022 169,720,022 - -
4,875,756,984 4,026,810,915 137,800,683 711,145,386
LIABILITIES:
Term finance certificates 274,835,000 45,851,658 228,983,342 -
Obligation under finance lease 8,184,466 655,092 7,529,374 -
Short term borrowings 1,145,000,000 1,145,000,000 - -
Running finance under mark up arrangements 778,338,739 778,338,739 - -
Certificates of deposit 1,480,152,821 1,082,837,203 397,315,618 -
Long term security deposit 9,138,301 - 9,138,301 -
Trade and other payables 406,525,439 406,525,439 - -
Provision for taxation 28,715,531 28,715,531 - -
4,130,890,297 3,487,923,662 642,966,635
Net assets 744,866,688 538,887,253 (505,165,952) 711,145,386
REPRESENTED BY:
Share capital and reserves 760,269,018
Deficit on revaluation of in vestments (15,402,330)
744,866,688
2005
ASSETS:
Fixed capital expenditure 123,898,000 5,688,008 28,898,082 89,311,910
Cards and rooms 44,105,000 - - 44,105,000
Deferred tax asset 5,045,842 - 5,045,842 -
Investments 1,524,468,578 927,922,294 18,683,433 577,862,851
Finances 746,859,937 627,359,512 119,500,425 -
Loan, advances, deposits, prepayments and
other receivables 320,009,779 312,543,574 4,989,055 2,477,150
Placements 742,095,424 742,095,424 - -
Cash and bank balances 671,204,063 671,204,063 - -
4,177,686,623 3,286,812,875 177,116,837 713,756,911
LIABILITIES:
Term finance certificates 274,945,000 110,000 274,835,000
Short term borrowings 1,660,000,000 1,660,000,000 - -
Running finance under mark up arrangements 372,498,355 372,498,355 - -
Certificates of deposit 1,099,509,683 794,045,737 305,463,946 -
Trade and other payables 241,518,195 241,518,195 - -
Provision for taxation 12,548,611 12,548,611 - -
3,661,019,844 3,080,720,898 580,298,946 -
Net assets 516,666,779 206,091,977 (403,182,109) 713,756,911
REPRESENTED BY:
Share capital and reserves 540,013,133
Deficit on revaluation of in vestments (23,346,354)
516,666,779
=======================================================================================================================================================39. CREDIT RISK AND CONCENTRATIONS OF CREDIT RISKSCredit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The management attempts to control credit risk through monitoring credit exposures, limiting transactions with specific counterparties, and continuous assessing of the credit worthiness of counterparties. Concentration of credit risk arises when a number of counterparties are engaged in similar business activities, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations of credit risk indicate the relative sensitivity of a company's performance to developments affecting a particular industry. 39.1. SEGMENT INFORMATION =============================================================================================================================
Class of business Morabaha financing Certificates of deposits Letter of guarantee
2006 2005 2006 2005 2006 2005
Percentage Percentage Percentage Percentage Percentage Percentage
=============================================================================================================================
Chemical and Pharmaceuticals 3.00 2.35 - - - -
Agribusiness - - - - - -
Textile 6.41 9.62 - - - -
Sugar - 8.53 - 0.45 25.20 -
Financial - 1.21 36.94 33.65 - -
Insurance - - 0.18 0.27 - -
Electronics and electrical appliances 5.18 2.82 2.42 3.64 39.78 85.41
Production and transmission of energy 13.32 7.59 1.21 17.70 - -
Steel and allied products - - - - - -
Individuals 44.00 43.72 32.32 26.52 13.35 11.34
Engineering and Construction 9.78 15.64 0.03 - 20.16 -
Sports - - 2.20 5.58 - -
Communications - - - - - -
Non-Government Organisations - 0.27 2.72 - - -
Others 18.31 8.25 21.98 12.19 1.51 3.25
100.00 100.00 100.00 100.00 100.00 100.00
=============================================================================================================================39.2. GEOGRAPHICAL SEGMENTThese financial statements represent operations of the Company in Pakistan only. 40. INTEREST RATE RISK Interest rate risk arises from the possibility that changes in interest will affect the value of financial instruments. Company is exposed to interest rate risk as a result of mismatches or gaps in the amounts of financial assets and liabilities that mature or reprise in a given period. The company's exposure to interest rate risk and the effective rates on its financial assets and financial liabilities are summarised as follows: =============================================================================================================================================================================================================
More than Not exposed
Within one year and Above to interest
Total one year upto five years five years rate risk
Rupees Rupees Rupees Rupees Rupees
=============================================================================================================================================================================================================
2006
FINANCIAL ASSETS:
Investments 1,440,160,920 90,611,572 12,350,150 568,781,465 768,417,733
Net investment in lease finance 21,809,360 4,386,428 17,422,932 - -
Finances 342,732,514 307,437,579 35,294,935 - -
Loan, advances, deposits, prepayments
and other receivables 264,403,938 14,752,731 - - 249,651,207
Placements 2,270,121,900 2,270,121,900 - - -
Cash and bank balances 169,720,022 147,055,421 - - 22,664,601
4,508,948,654 2,834,365,631 65,068,017 568,781,465 1,040,733,541
FINANCIAL LIABILITIES:
Term finance certificates 274,835,000 45,851,658 228,983,342
Obligation under finance lease 3,565,166 655,092 2,910,074 - -
Short term borrowings 1,145,000,000 1,145,000,000 - - -
Running finance under mark up Arrangements 778,338,739 778,338,739 - - -
Certificates of deposit 1,480,152,821 1,082,837,203 397,315,618 - -
Trade and other payables 405,449,389 57,415,067 - - 348,034,322
4,087,341,115 3,110,097,759 629,209,034 - 348,034,322
Total Interest rate sensitivity gap (275,732,128) (564,141,017) 568,781,465
Cumulative interest rate sensitivity gap (275,732,128) (839,873,145) (271,091,680)
2005
2005
FINANCIAL ASSETS:
Investments 1,524,468,578 128,386,954 18,683,433 577,862,851 799,535,340
Finances 746,859,937 627,359,512 119,500,425 - -
Loan, advances, deposits, prepayments
and other receivables 203,132,343 17,756,754 - - 185,375,589
Placements 742,095,424 742,095,424 - - -
Cash and bank balances 671,204,063 554,338,650 - - 116,865,413
3,887,760,345 2,069,937,294 138,183,858 577,862,851 1,101,776,342
FINANCIAL LIABILITIES:
Term finance certificates 274,945,000 110,000 274,835,000 - -
Short term borrowings 1,660,000,000 1,660,000,000 - - -
Running finance under mark up Arrangements 372,498,355 372,498,355 - - -
Certificates of deposit 1,099,509,683 794,045,737 305,463,946 - -
Trade and other payables 238,648,594 33,366,096 - - 205,282,498
3,645,601,632 2,860,020,188 580,298,946 - 205,282,498
Total Interest rate sensitivity gap (790,082,894) (442,115,088) 577,862,851
Cumulative interest rate sensitivity gap (790,082,894) (1,232,197,982) (654,335,131)
=============================================================================================================================================================================================================Mark-up rates are mentioned in the respective notes to the accounts.41. FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is an amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm's length transaction. Consequently, differences may arise between the carrying values and the fair value estimates. The carrying value of financial assets and financial liabilities approximate their fair values as reflected in the financial statements. 42. NUMBER OF EMPLOYEES The total number of employees at year's end was 135 (2005: 98). 43. FINANCIAL RELIEF AND PROVISION AGAINST NON-PERFORMING ADVANCES As no relief was given or loan written off during the year under review, the information for Statements required to be filed under Section 33A of the Banking Companies Ordinance, 1962 is "Nil". 44. DATE OF AUTHORISATION FOR ISSUE These financial statements were authorised for issue on September 15, 2006 by the Board of Directors of the Company. 45. DIVIDEND The Board of Directors at their meeting held on 15 September 2006 has proposed cash dividend @ 20% i.e. Rs 2 per ordinary share for the year ended June 30, 2006 for approval of the members at the Annual General Meeting to be held on October 31, 2006. The financial statements do not reflect this proposed dividend. 46. GENERAL Figures have been rounded off to the nearest rupee. |