ANNUAL REPORT 2019 Annual Report 2019
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ANNUAL REPORT 2019 Annual Report 2019 HabibMetro 1 Modaraba Management First Habib Modaraba ( A n I s l a m i c F i n a n c i a l I n s t i t u t i o n ) 2 HabibMetro Modaraba Management Annual Report 2019 A Progressive Partnership Based on True Sharing and Equality At FHM we believe that to be successful in the long term we must continually reassess our competencies, business strategies and risk management approaches in order to cope up with day to day business challenges. The Relationships that exceed beyond normal business this is how we have acquired the standing we possess today as most progressive Modaraba holding the loyalty and trust of all stakeholders across the country. Our achievements are evidence to the solid business fundamentals and consistent financial management policies practiced across the Modaraba. Our focused business strategy keeps us firmly on path of sustainable growth and profitability. Islamic finance is a financial system operates in accordance with Islamic principle of finance. This system encourages economic activities and proper distribution of wealth which ultimately lead to promote social justice which is the key theory of Islamic economic financial system. Consistency in distribution of dividends among the certificate holders along with increase in certificate holders' equity has made FHM a sound and well performing Modaraba within the sector. By the grace of Allah (SWT), FHM has been maintaining its history of continuous payment of profits to its Certificate Holders and never skipped the same in any single year. Modaraba concept is based on Shirkat. It is a kind of partnership wherein one party provides financing to other for the purpose of carrying business and sharing profits earned through mixture of investment and expertise which is truly based on sharing and equality. HabibMetro 3 Modaraba Management First Habib Modaraba ( A n I s l a m i c F i n a n c i a l I n s t i t u t i o n ) Vision To be the leading Islamic Financial Institution within Modaraba sector by providing the best innovative Sharia’h Compliant financial solutions at maximum satisfaction of customers. 4 HabibMetro Modaraba Management Annual Report 2019 Mission An institution built on Trust, Integrity, Good Governance with Commitment to add value to all stakeholders through an effective human resource management in a modern and progressive organizational culture, maintaining high ethical and professional standards. HabibMetro 5 Modaraba Management First Habib Modaraba ( A n I s l a m i c F i n a n c i a l I n s t i t u t i o n ) DIT RATI E NG CR S - B Y P A + C R LAAONG TERM A + SHORA1T TERM 6 HabibMetro Modaraba Management Contents Annual Report 2019 Vision and Mission 4 Notice of Annual Review Meeting 77 Credit Rating 6 Proceedings of Annual Review Meeting 78 About First Habib Modaraba 9 Business Strategy and Status on Implementation 78 Corporate Information 10 Customer Satisfaction 79 Core Values 11 Code of Business Conduct and Ethics 12 Corporate Governance Strategic Corporate Objectives 13 Directors’ Profile 80 Awards & Recognitions 14 Certificate Holders’ Information 81 Pattern of Certificate Holding 82 Management Review and Representations Statement of Compliance 84 Chairmans’ Message 29 Review Report to the Certificate Holders 86 Chairmans’ Message (Urdu)) 30 Board Committees 87 Directors’ Report 31 Organizational Structure 89 Economic Review 32 Role of Chairman and Chief Executive Officer 90 Business Review of FHM 33 Performance Evaluation of the Board 91 Business Outlook & Future Strategy 34 Performance Evaluation of the Chief Exec. Officer 91 Directors’ Report (Urdu) 42 Report of the Audit Committee 92 Risk Management Framework 44 Actual and Perceived Conflicts of Interest 93 Internal Control 46 Policy for Protection of Data of the Company 94 Our Corporate Approach 48 IT Governance Policy 95 Management Objectives & Strategies 49 Environment and Social Responsibilities 96 Key Performance Indicators 50 Human Resource 97 Strategy & Resource Allocation 52 Investors’ Grievance Policy 98 Resource Allocation Plan 53 Stakeholders Engagement 99 Targets for Financials and Non-Financial Measures 54 Whistle Blowing Policy 100 Strategy To Overcome Liquidity Problem 55 Associated Companies & Undertakings 101 Business Continuity Plan & DRP 56 Segment-Wise Review 57 Other Supplementary Information Energy Saving Measures 58 FHM Events Calendar 102 Quality Assurance 58 FHM Awards Calendar 103 Forward Looking Statement 59 Local & International Memberships 105 Risk and Opportunity Report 60 Products Detail 107 Sustainability 62 Shariah Advisor’s Profile 109 Corporate Social Responsibility 62 Shariah Advisor’s Review Report 110 Energy Conservation and Energy Saving Measures 62 Customer Protection Measures 62 Financial Statements Environment protection measures 63 Auditors’ Report to the Certificate Holders 113 Mitigating the adverse impact of industrial effluents 63 Balance Sheet 114 Complaint Management & Handling 63 Profit & Loss Account 115 Business ethics and anti-corruption measures 63 Statement of Comprehensive Income 116 Occupational Safety and Health 63 Cash Flow Statement 117 Contribution to National Exchequer 63 Statement of Changes in Equity 118 Notes to the Financial Statements 119 Stakeholder's Information Key Financial Data for Six Years 64 Free Cash Flows to Equity 65 Summary of Cash Flow 65 Graphical Presentation of Financial Summary 66 Balance Sheet Composition 67 Horizontal Analysis 68 Vertical Analysis 69 Comments on Financial Ratios 70 Statement of Value Addition 72 Share Price Sensitivity Analysis 73 Variance in Quarterly Report 73 Analysis of Variation in Quarterly Results 74 Rationale for major Capital Expenditure 74 Dupont Analysis 75 Cash Flow - Direct Method 76 HabibMetro 7 Modaraba Management First Habib Modaraba ( A n I s l a m i c F i n a n c i a l I n s t i t u t i o n ) 8 HabibMetro Modaraba Management Annual Report 2019 Ownership and Operating Structure First Habib Modaraba (FHM) is managed by Habib Metropolitan Modaraba Management Company (Private) Limited which is the fully owned subsidiary of Habib Metropolitan Bank Limited. Habib Metropolitan Bank Limited is having high reputation within the banking sector of Pakistan operating since 1992 having total assets size of Rs. 839 billion and having a network of 354 Branches. Profile of First Habib Modaraba First Habib Modaraba (FHM) is operating in Pakistan’s financial market as Non-Bank Islamic Financial Institution as one of the pioneers within Modaraba sector. With a track record of excellent performance of more than 3 decades is the success story of dedication and commitment to provide the investors a sound and continuous return. Consistency in distribution of dividends among the certificate holders along with increase in certificate holders’ equity has made FHM a top performing Modaraba within Modaraba sector. Over the years FHM has been continuously recognizing for its satisfactory results, good corporate governance, best report culture and sound and stable credit rating. With a thrust to achieve operational excellence, FHM continue to improve operational processes, infrastructure and professional grooming of human resource in order to provide quality and reliable customer services including compliance of all regulatory and Shariah requirements. Since inception FHM has been a story of success and growth built on the trust and respect it has earned on the back of high level of corporate governance and best business practices. However, it has never been about achievement in isolation – rather we go along with an aim for inclusive growth as we believes for betterment of lives of the people whom we have been privileged to come across. Our constant commitment for corporate excellence have not only kept us as leading Modaraba within the sector but also earned us recognition at national and international level. So far, FHM has secured several awards/accolades on best performance, best corporate report, best corporate disclosure and corporate excellence from reputable bodies, such as NBFI and Modaraba Association, ICAP and ICMAP, Management Association of Pakistan, and SAFA an apex body of SAARC. Furthermore, since last several years FHM has been securing AA+ rating as long term rating from Pakistan Credit Rating Agency Ltd., (PACRA) which depict soundness of the entity and also matter of great satisfaction for our investors. As one of leading non-banking Islamic financial institutions, our core corporate objective always drive to create value for the society at large. Our financial strength, risk management protocols, governance framework and aspirations for sustainable growth are directly attributable to a discipline that regularly brings prosperity to our all stakeholders particularly our worthy investors and customers. Ambition, discipline and corporate excellence always motivate us for even better results. It is the combination of these key elements that frame our optimistic outlook for the future as well. We sincerely believe that above all success and achievements are due to Blessing Allah (SWT) and hard dedicate work of entire staff members through excellent team work across all levels of the organization. We thank Almighty Allah and bow our head for His blessing and bestowing upon us of journey of continuous success. HabibMetro 9 Modaraba Management First Habib Modaraba ( A n I s l a m i c F i n a n c i a l I n s t i t u t i o n ) Corporate Information BOARD OF DIRECTORS Mr. Wazir Mumtaz Ahmed - Chairman (Non-Executive Director) Mr. Muhammad Shoaib Ibrahim - Chief Executive Officer Syed Rasheed Akhtar - Non-Executive Independent Director Mr. Saeed Uddin Khan - Non-Executive Independent Director Mr. Mohammad Shams Izhar - Non-Executive Director BANKERS LEGAL ADVISOR Mohsin Tayebaly & Company Habib Metropolitan Bank Limited (Islamic Banking) Ahmed & Qazi Advocates & Legal Consultants Meezan Bank Limited Al Baraka Bank Pakistan Limited AUDIT COMMITTEE Bankislami Pakistan Limited Dubai Islamic Bank Pakistan Limited Mr. Syed Rasheed Akhtar - Chairman Soneri Bank Limited (Islamic Banking) Mr.