cover annual report 2012
Arif Habib Corp
Promoting Investments
annual report 2012 who we are and what sustainability means to us?
Arif Habib Group is structured around Arif Habib Corporation Limited (AHCL), a holding company that primarily manages strategic investments of the company. Whatever we do, we do it with a clear intention to ensure that nature and environment is being taken care of; wherever we manoeuvre, we strive to help society achieve sustainable growth. Our definition of sustainability management is the integrated expansion and escalation of our economic, environmental, and social performance in a style that signifies value for all our stakeholders.
01 Arif Habib Corp Annual Report 2012 | Promoting Investments 02 how to read this report
This is the very first time that we have included a section for sustainability reporting in addition to financial
performance. We will continue to review the deliverables for our future sustainability reports on an annual
basis. Our sustainability reporting is steered by the issues that are more relevant to our Group Companies.
We are aware of the infinite dimensions of sustainability, and the fact that there is always much one can do
to participate in the sustainability of the society and environment. However, we believe in reporting on what
we have done, and in setting practical, attainable goals that we and our shareholders can achieve. That is
why we call this our sustainability report in addition to our annual report. In this report, along with the
financial information, we share with you our philosophy, guiding principles and initiatives to carry out our
corporate social responsibility. AHCL, being the holding company, plays a vital role in establishing extensive
CSR policies and guidelines for the whole group, and each Group Company implements CSR initiatives in a
manner that drives its business requirements and social needs simultaneously. This report mainly covers
the period from 1st July 2011 to 30th June 2012 and includes the initiatives by all our Group components,
whether located, in or outside Pakistan. The report encompasses the company's strategic objectives,
achievements and on-going activities towards sustainable social, economic and environmental
development.
03 Arif Habib Corp forward looking statements
Statements in this report that are not historical facts are futuristic plans based on the current beliefs, estimates and expectations of management, and includes risks and uncertainties coupled with variation in economic or market conditions, and amendments in laws, regulations and policies.
Annual Report 2012 | Promoting Investments 04 contents
Corporate Objectives 07 Overall Corporate Strategy 08 Vision 08 Mission 09 Core values and code of conduct / ethical principles
11 Company Information
13 Our Partners 15 Pakarab Fertilizers Limited 17 Fatima Fertilizer Company Limited 19 Arif Habib Limited 21 Arif Habib Investments Limited 23 Aisha Steel Mills Limited 25 Al Abbas Cement Industries Limited 27 Sweetwater Dairies Pakistan (Pvt.) Limited 29 Sachal Energy Development (Pvt.) Limited 31 Other Companies having Group’s Shareholding 31 Arif Habib REIT Management Limited 31 Dolmen City 32 Javedan Corporation Limited
Corporate Structure 33 Company Profile 35 Organization Chart 36 Profiles of Directors and Key Executives 37 Chairman’s Profile 39 Board of Directors 42 Other Management Heads 43 Board & Management Committees 45 Criteria to Evaluate Board‘s Performance 46 Chief Executive’s Performance Review
05 Arif Habib Corp 47 Notice of Eighteenth Annual General Meeting 100 Audited Financial Statements 101 Auditors‘ Report to the Members Information to Stakeholders 103 Balance Sheet 49 Key Figures and Highlights 105 Profit and Loss Account 51 Arif Habib Corp. at a glance 106 Statement of Comprehensive Income 53 Financial & Business Highlights 107 Cash Flow Statement 55 Graphical Representation 108 Statement of Changes in Equity 57 Horizontal Analysis of Financial Statements 109 Notes to the Financial Statements 59 Vertical Analysis of Financial Statements 61 Summary of Cash Flow Statement 143 Audited Consolidated Financial Statements 62 Statement of Value Added and its Distribution 144 Auditors’ Report to the Members 63 Share Price / Volume Analysis 145 Consolidated Balance Sheet 65 Shareholders‘ Information 147 Consolidated Profit and Loss Account 67 Corporate Memberships 148 Consolidated Statement of Comprehensive Income 149 Consolidated Cash Flow Statement 69 Directors’ Report 150 Consolidated Statement of Changes in Equity 75 Statement showing shares bought and sold 151 Notes to the Consolidated Financial Statements 76 Statement showing attendance at Board Meetings 77 Pattern of Shareholding 198 Corporate Calendar of Major Events
81 Sustainability Report 199 Statement under section (160)(1)(b) of the 82 Message from Chairman Companies Ordinance, 1984 83 Vision for Sustainability 84 Corporate Social Responsibility Form of Proxy 93 Sustainability target
95 Report of the Audit Committee
97 Statement of Compliance with Code of Corporate Governance
99 Auditors’ Review Report to the Members on Statement of Compliance
Annual Report 2012 | Promoting Investments 06 overall corporate strategy
We have a Corporate Strategy to adapt to the revolutionary changes that are taking place across the globe by making strategic adjustments to better serve our stakeholders. We have extended the reach of its innovative offerings from the financial services to the fertilizer, real estate, construction materials, energy and the steel businesses. We strive to achieve profitable market share growth, to offer sustainable returns to shareholders; and to be regarded as a blue chip investment by the investment community. Towards this end, we make profitable use of financial and human capital and seek businesses with strong management teams to create and expand viable business enterprises.
07 Arif Habib Corp vision
To be the leading investment company and to achieve excellence in every aspect of its business while discharging its obligations as a good corporate citizen to the satisfaction of all the stakeholders. mission
To excel in conceiving, developing and executing exclusive and exciting projects across business sectors with a focus on chemical & fertilizers, financial services, construction materials, energy, steel and other sectors, with the aim of maximizing returns for shareholders, while playing a significant role in developing Pakistan’s economy and its integration into the world markets.
Annual Report 2012 | Promoting Investments 08 core values and code of conduct / ethics
The code of conduct provides the guidelines to the decisions, procedures and systems of the
Company in a way that it contributes to the welfare of all the stakeholders and fulfill their objectives.
The summary of the Code of Conduct is as follows:
• Respect for the Individual: • Financial and Operational Integrity: We are an equal opportunity employer. Compliance with the accepted accounting Discrimination on any grounds is principles and procedures is required at all fundamentally unacceptable. times.
• Conflict of Interest: • Regulatory Compliance and Corporate The employees are required to act in the Governance: Company’s best interest. The Company has The Company endeavors to comply with all developed policies in a way that the interests the applicable requirements of Laws and of all the stakeholders, including the Regulations. The Company is committed to employees, coincide with the objectives of high standards of corporate governance. the Company.
09 Arif Habib Corp • Bribery • Growth and Development All kinds of bribes or facilitation payments or The Company’s social responsibility and its receipt in cash or in kind are strictly intended role in the growth and development prohibited. of economy of the country must always be kept in mind in selecting the projects and • High Standards businesses offered by the market Voluntarily sets, and adhere to, the highest opportunity. Being a leading player in the standards of professional conduct: this will economy which has grown quickly, its stature assure peace of mind and fair treatment for presents challenges and the company's all stakeholders. approach to ethics guides its continued growth. Ethics are central to the company's • Efficiency progress. Efficiencies, appropriate risk management measures and pricing strategies should enable profitable operations and good shareholder return in all market scenarios.
Annual Report 2012 | Promoting Investments 10 company information
Board of Directors Audit Committee
Arif Habib Kashif A. Habib Chairman & Chief Executive Chairman
Asadullah Khawaja Muhammad Ejaz Non-executive Director Member
Nasim Beg Kashif Shah Non-executive Director Member
Samad A. Habib Management Non-executive Director Arif Habib Kashif A. Habib Chief Executive Officer Non-executive Director Basit Habib Muhammad Ejaz Chief Financial Officer Non-executive Director Zeshan Afzal Kashif Shah Group Head - Strategic Investments Non-executive Director
Chief Financial Officer & Company Secretary Basit Habib
11 Arif Habib Corp Bankers Registered & Corporate Office
Allied Bank Limited Arif Habib Centre Askari Bank Limited 23, M.T. Khan Road Bank Al Falah Limited Karachi-74000 Bank Al-Habib Limited Phone: (021)32460717-9 Bank of Khyber Fax: (021)32429653, 32468117 Barclays Bank (Pakistan) Limited Email: [email protected] Faysal Bank Limited Company website: www.arifhabibcorp.com First Women Bank Limited Group website: www.arifhabib.com.pk Habib Bank Limited Habib Metropolitan Bank Limited Registrar & Share Transfer Agent KASB Bank Limited MCB Bank Limited Central Depository Company of Pakistan National Bank of Pakistan Limited NIB Bank Limited Standard Chartered Bank (Pakistan) Limited Share Registrar Department Soneri Bank Limited Summit Bank Limited CDC House, 99-B, Block-B, S.M.C.H.S, Main The Bank of Punjab Shahrah-e-Faisal, Karachi United Bank Limited Phone: (021) 111-111-500 Toll Free:0800-23275 Auditors Fax: (021)34326053 URL: www.cdcpakistan.com KPMG Taseer Hadi & Co., Chartered Email: [email protected] Accountants
Legal Advisors
Bawaney & Partners
Annual Report 2012 | Promoting Investments 12 ARIF HABIB REIT MANGEMENT Fatima Fertilizer Company Limited
SKM LANKA HOLDINGS (PVT) LTD
Arif Habib Investments Limited A subsidiary of MCB Bank Limited
Our Partners
Pakarab Fertilizers Limited PAKISTAN PRIVATE Fatima Fertilizer Company Limited EQUITY MANAGEMENT Arif Habib Limited Arif Habib Investments Limited Aisha Steel Mills Limited Al Abbas Cement Industries Limited Sweetwater Dairies Pakistan (Pvt.) Limited Sachal Energy Development (Pvt.) Limited Arif Habib REIT Management Limited Dolmen City Javedan Corporation Limited
13 Arif Habib Corp Al Abbas Cement Industries Limited
ARIF HABIB DMCC
Annual Report 2012 | Promoting Investments 14 Pakarab Fertilizers Limited For thhe lastt 38 yey arrs,s Pakkarabb Fertilizerss Limitted has beeen thhe ono lyy fertilizez r coc mmpanny in Pakistatan produccing coc mpouundd fertilizeerrs, CCalcciuum AAmmoonin umm Nitrratee (CANN) andd Nitro Phospphate (NP).. The Plantn allsso producese UrU eea. Unndeer thhe privi aattissation prp ogramme fromm Govveernmn ent oof Pakistaan and Abu Dhabbi Naatiioonall Oiil Comompap ny LLimmiteed in thee yeae r 200055, PaPakaaraab FeF rtililizzers Limim teed waas privatatiized at a coostt of RsR .114..12125 bib llionn.. It was aaccqquiirred by a coc nssoorttiumu of Arrif Habbibb Grroup andn Fatiima GrG ouup.p
Tootal Assseets 65,341 Shareholo dderss’ eqe uity Tootal liabilitiees
15 Arif Habib Corp Rupees in million
Pakarab Fertilizers Limited having rated capacity of 0.9 million tons of fertilizers, is located in Multan. The site area comprises 302 acres, which includes area for the factory Turnover and the housing colony with all amenities including medical centre, school, management and staff clubs for recreation of employees and their families. 4,590 Pakarab Fertilizers Limited has Profit after tax undergone extensive modernization and new improved processes have been introduced to maximize the output while minimizing the negative impacts on the environment. A Clean Development Mechanism 65,341 (CDM) plant has also been installed which is the first project of this kind Total Assets in Pakistan, making the company the first Pakistani company to earn and sell Carbon Credits in the international market. Basic aim of this project is the abatement of N2O and NOX emissions from the stack 22,356 gases of Nitric Acid plant. The reduction of green house effect of Shareholders’ equity these gases shows the management's commitment towards a cleaner environment. 900,000 Production capacity (M. Tons)
Annual Report 2012 | Promoting Investments 16 Fatima Fertilizer Company Limited
Fatima Fertilizer Company Limited was incorporated on December 24, 2003. The project subsequently became collaboration between two major business group namely Arif Habib Group & Fatima Group.
Total Assets 76,347 Shareholders’ equity Total liabilities
17 Arif Habib Corp Rupees in million
The fertilizer complex is a fully integrated production facility with rated capacity of 1.5 million tons, is capable of producing two 14,833 intermediate products i.e., Ammonia and Turnover Nitric Acid and four final products which are Urea, Calcium Ammonium Nitrate (CAN), Nitro Phosphate (NP) and Nitrogen Phosphorous Potassium (NPK) at Sadiqabad, Rahim Yar Khan. Fatima Fertilizer Company Limited (FFCL) has 4,116 started “Commercial Operations” from 1st July 2011 after a successful trial run. Profit after tax
The Complex has a 56MW captive power plant and has been allocated 110 MMCFD of gas from the dedicated Mari Gas fields. The Complex provides modern housing for its employees with all necessary facilities. 76,347 This includes a school for children of employees and the local community, a Total Assets medical centre and sports facilities.
The Company is listed at all stock exchanges of Pakistan, through a successful initial public offering (IPO) in February 2010. Fatima Fertilizer 28,054 Company Limited holds the distinction of Shareholders’ equity being the only Pakistani Company which has become eligible for Level One ADRs to be traded at the OTCQX in New York. The company has CDM plant duly approved by United Nations. 1,500,000 Production capacity (M. Tons)
Annual Report 2012 | Promoting Investments 18 Arif Habib Limited
AArif Habib Group started its equity brokerage services in 1970. This service is currently being provided by Arif Habib Limited (AHL), a subsidiary of Arif Habib Corporation Limited. AHL is listed at the Karachi Stock exchange and has a significant market share in the corporate finance services business.
Total Assets
3,258 Shareholders’ equity Total liabilities
19 Arif Habbib Coro p Rupees in million
AHL provides equity brokerage and corporate finance services to 689 numerous institutional, corporate, Total operating revenue high net worth individuals and retail clients. As a step towards expansion of its horizon, AHL has recently started Commodity Brokerage services through its wholly owned subsidiary Arif Habib Commodities 366 (Pvt.) Limited. The company Profit after tax provides financing and investment solutions related to raising of equity and debt through the market, Mergers and Acquisitions, Financial Advisory and Structured Finance. 3,258 Some of the achievements that speak for the company’s par Total Assets excellence performance are: "Top 25 companies of Pakistan award" of the Karachi Stock Exchange in 2007, 2008 and 2009, CFA awards for “The Best Equity Trader of the 1,096 year 2011” (Runner up) and “Best Shareholdershareholders equity Corporate Finance House of 2011” Shareholders’ equity (Runner up).
Annual Report 2012 | Promoting Investments 20 Arif Habib Investments Limited
Arif Habib Investments Limited (AHI)) is an Asset Management, Investmennt Advisory and Pene ssioonn Fund Management Company, managing Open-end Mutual Funds, Pension Funds and disscrrete ionary and non-disccrreetioi nary poro tfolioss. The Company is registtered with the SECP and regulated undeer the NNBFC Rules 2003, NBFC and Nootit fied Entities Regulations 2008 and Voluntary Pension System Rules 20050 . DuD ring 2008, AHI waas listed on the Karaachhi Stock Exchange by way of offer for sale of shares by a few of the existing shareholders of the Commpany to the genere al puubbllic.
Total Assets
1,410 Shareholders’ equity Total liabilities
21 ArA if Habbibb Corrp Rupees in million
As of 30th June 2012, AHI manages the most diverse fund slate in the industry with over Rs.45 billion in 16 529 Mutual Funds, 2 Pension Funds and Revenue various Investments Plans in its product portfolio to meet the investment needs of its growing clientele. The company holds ‘AM2’ (AM Two) asset manager rating which reflects company's strong 145 capacity to manage risks inherent in the asset management business and Profit after tax the asset manager meets very high investment management industry standards and benchmarks.
AHI is the industry leader in developing and embracing best 1,410 practices setting international standards. Similarly, it has been the Total Assets leader in product innovation, including automated asset allocation plans and pensions structure, which too has been the basic structure on which the country’s first defined contribution Voluntary Pension 1,272 System is designed. Shareholders’ equity
45,248 Funds under management
Annual Report 2012 | Promoting Investments 22 Aisha Steel Mills Limited
Aisha Steel Mills Limited (ASML) is a joint venture of Arif Habib Group, Metal One (subsidiary of Mitsubishi Japan) and Universal Metal Corporation – Japan . ASML was incorporated in 2005 to set up a state-of-the-art cold Rolling Mills in the Down-stream Industrial estate of Pakistan Steel, Bin Qasim, Karachi at a cost of US $105 million.
Total Assets
10,947 Shareholders’ equity Total liabilities
23 Arif Habib Corp Rupees in million
As a state of the art cold rolling complex with a nameplate capacity (104) of 220,000 metric tons per year, ASML is the most recent and the EBITDA largest Cold Rolled Coil (“CRC”) manufacturer in the country. During the year under review, ASML successfully completed the construction phase of the Project, and commenced trial operations in (86) June 2012. Loss after tax ASML was listed at the Karachi Stock Exchange through an Offer for Sale transaction (OFS). The public subscription was scheduled on 3rd and 4th July, 2012 and the subscription has been 10,947 oversubscribed by 2.7 times making Total Assets it the most successful public offering of the past three financial years. The ordinary and preference shares of ASML are formally listed and quoted on Karachi Stock Exchange with effect from 6th August 2012. 2,997 Shareholders’ equity
220,000 Production capacity (M. Tons)
Annual Report 2012 | Promoting Investments 24 Al Abbbas Cememennt InIndudusttrir ess Limmitede (AACIL)) wasa inccoro pporaratet d onn Decembeer 011, 191981 andnd its conntrt ol was acquq ireded by a consn oro tium of Arif Hababib Grooupp andnd Al-l Abbas GrG oup.p Preesentlyy, iti is a suubsb iiddiaryy of AHA CLL. ThT e plplant sis te of AACIC L iss situated at Deh Kallo,o Nooo riiabbadd Inddustrt iaal EsE taatete, Disttrir ctt Dada uu, Sindhd .
Total Assets
5,183 Shareholders’ equity Total liabilities
25 AArriiff Hababibib Cororp Rupees in million
The Company is listed on Karachi and Lahore stock exchanges of Pakistan and 2,930 deals in manufacturing, selling and marketing of its products with a brand Turnover name of ‘Power Cement’.
Presently, the Company has a Dry Process Cement Plant with a rated production capacity of 3,000 M.T per day. Key emphasis is always given to 153 manufacturing high quality cement through stringent quality control Profit after tax techniques (ISO 9001:2008 certified) and computerized control systems using sophisticated equipments like Distributed Control System (DCS), Programmable Logic Controllers (PLCs) and on line X-Ray Analyzers. Use of 5,183 such technology ensures low fuel consumption, better product quality and Total Assets negligible dust emission for better environmental impact. AACIL also produce cement on an advanced VR7 technology.
The Company has got laboratories 1,125 which are fully equipped and are being Shareholders’ equity managed by qualified and expert field specialists, with proper technology transfer to junior engineers and workmen. 900,000 Production capacity (M. Tons)
Annual Report 2012 | Promoting Investments 26 Sweetwater Dairies Pakistan (Pvt.) Limited
Sweetwater Dairies Pakistan (Pvt.) Limited (SDPL) has set up an exciting and a distinguished dairy project in Renala Khurd, District Okara in Punjab.
Total Assets
136 Shareholders’ equity Total liabilities
27 Arif Habib Corp Rupees in million
The project has been set up on 28 acres of land with a dairy shed 22 designed by 5G International, USA and is at par with the most Turnover advanced dairies in the world. Milk production has already been started. The Company is in midst of the turnaround phase and structural changes are expected to make it a profitable venture. (479) Loss after tax
13 6 Total Assets
12 9 Shareholders’ equity
Annual Report 2012 | Promoting Investments 28 Sachal Energy Development (Pvt.) Limited
Arif Habib Group believes that renewable energy is the answer to the ever increasing energy needs of this country and around the world.
Total Assets
146 Shareholders’ equity Total liabilities
29 Arif Habib Corp Rupees in million
(SEDL) is a special-purpose company that has been acquired 1 to commission and operate a 50 Other Income MW wind farm at Jhimpir, Sind on a build, own & operate basis. SEDL is the wholly owned subsidiary of AHCL. The Group expects to contribute to the national endeavour of achieving (10) self sufficiency in power and to the world by reducing Loss after tax dependence on fossil fuels. We believe that alternate sources of energy are the way forward. 146 Total Assets
140 Shareholders’ equity
Annual Report 2012 | Promoting Investments 30 other companies having group’s shareholding
Arif Habib REIT Management Limited
Arif Habib Group has formally entered the Real Estate Investment business by becoming the first to incorporate a Company under the NBFC Rules to provide REIT Management Services and float REIT Schemes in Pakistan. Arif Habib REIT Management Limited has been formed with the primary objective of managing the Real Estate Investments of the Group and converting these assets into equity by launching either Rental or Developmental REIT Schemes and offering the units to the general public. The Regulations approved by the SECP require that each REIT scheme must have a minimum size of Rs. 2 billion and that the RMC must hold a minimum of 20% in each REIT Scheme. This would require the Group to make substantial investments in Real Estate for which the Group is firmly committed. In line with global practice, Arif Habib Group will further form companies to offer Property Management Services and other Real Estate services to augment its REIT Management business. A number of REIT schemes have been filed with SECP for its approval.
Dolmen City
Dolmen City, a project located at the beach front at Clifton, Karachi, is one of the largest and most prestigious mixed-use developments in Pakistan. Currently, two office towers of 450,000 sq. ft., and a shopping mall of 935,000 sq. ft. with leasable area of over 500,000 sq. ft. have been completed. Two proposed 40 storey building towers are structurally built upto 8 floors. Total covered area after completion of the project will be 3.9 million sq. ft. This is a joint venture between Dolmen and Arif Habib Groups on 80:20 basis, which is being developed to serve commercial and corporate clients in an ultra-modern business environment.
31 Arif Habib Corp Javedan Corporation Limited (JCL)
JCL is the owner of land measuring over 1300 acres at Manghopir, near SITE, North Nazimabad, North Karachi and New Karachi. Arif Habib Group has 48.4% equity in the project and is developing a housing scheme, Naya Nazimabad, on this land. It is a joint venture with AKD and Ghani Osman, Hum Group. The project will accommodate the housing demand of the middle income families and is an endeavour to reduce the housing problem of the country.
Naya Nazimabad Project is based on a live, work & play concept and will contribute to the society by providing education, healthcare, family entertainment and commercial facilities, parks, sports facilities, fitness centre and employment opportunities to its habitants along with security and peace-of-mind. The project is envisioned as the largest private sector development initiative in Karachi. Upon completion, it would have upto 30,000 housing units accommodating a population of over 100,000 people.
Naya Nazimabad was successfully launched in Karachi in November 2011. An overwhelming response was received from customers for the launch of Phase 1 at Naya Nazimabad. Presently, infrastructure work of the project including construction of boundary wall is in progress whereas construction of gate house and an international county standard cricket stadium has been completed. The Company is in the process of finalizing pre-qualification of contractors and the tendering process for initiating the large scale infrastructure development as well as construction of Bungalows of the Phase I. The appointment of Project Managers and Contractors for internal and external development and construction is in progress. The company is motivated to provide its customers the best value for their money and an ideal place they can call home.
Annual Report 2012 | Promoting Investments 32 company profile
Arif Habib Corporation Limited (AHCL) is a holding company of one of the leading business groups of Pakistan. The
Company has a well diversified portfolio across sectors including Fertilizers, Financial Services, Construction Materials,
Industrial Metals, Dairy Farming, Energy and others. AHCL endeavours to be known as a leader in diversification and,
as a company that values and leverages diversity and inclusion for business needs. The richness of our diversity
enhances our capacity to accomplish our vision and augment AHCL work environment.
AHCL has, over time, won several prestigious national and stakeholders. The Company has a strong record of quality regional awards in recognition of its consistently strong financial asset selection and decisive market timing but above all, performance, sound corporate governance practices and adherence to high standards of best practices. Group transparent comprehensive financial reporting through its companies own and manage assets of several hundred millions reliable and experienced management team. AHCL’s brand of US dollars. name is built on years of commitment to the best interest of all
33 Arif Habib Corp The success of AHCL and its group companies is driven by the in 2001 on all three bourses of the Country by offering one quality management and their commitment to get results the million shares to the general public at a price of Rs. 80 per right way—by working responsibly, executing with excellence, share (being the Book Value at that time) raising Rs. 80 million. applying revolutionary ideas and capturing new opportunities Since its listing in 2001, the Company has distributed Rs. 4.69 for profitable growth. In order to further capitalise on this billion as dividend (including specie dividend) and Rs. 720 strength, the Company is constantly improving the work area million by buying back 2 million shares of Rs. 10 each at a price environment and with emphasis on strong commitment to a of Rs. 360 per share from its shareholders. Currently the dynamic and energetic culture that encourages innovation. The Company has equity of Rs. 24 billion built through retained management team is responsible to protect the stakeholders’ earnings. interest in a manner that their interests are aligned with the Company’s objectives. The Company has had the distinction of being the winner of the prestigious “KSE Top 25 Companies Award” for several years AHCL is the flagship company of the Arif Habib Group. The since its listing. AHCL, over the years, has distinguished itself Company was incorporated on 14th November 1994 as a as a superior asset manager while keeping the risks at an public limited company under the Companies Ordinance, 1984 acceptable level. with a paid up capital of Rs. 40 million. The Company was listed
Annual Report 2012 | Promoting Investments 34 organization chart
35 Arif Habib Corp profile of directors and key executives
Annual Report 2012 | Promoting Investments 36 Mr. Arif Habib Chairman & Chief Executive Date of Appointment: September 25, 2010
Mr. Arif Habib is the Chairman & Chief Executive of Arif Habib Corporation Limited. He is also the
Chairman of Pakarab Fertilizers Limited, Fatima Fertilizer Company Limited, Javedan Corporation Limited
and Memon Health and Education Foundation.
Mr. Arif Habib has remained the elected President/Chairman He has participated in a number of professional of Karachi Stock Exchange six times in the past. He is the advancement courses including a course on Development Founding Member and Former Chairman of the Central of Securities Markets organized by the SEC, USA at Depository Company of Pakistan Limited. He has served as Washington, D.C. in 1992. He has visited over a dozen of a Member of the Privatization Commission, Board of stock exchanges in different countries for exchange of views. Investment, Tariff Reforms Commission and Securities & Exchange Ordinance Review Committee. Over the years he On the social services front, Mr. Arif Habib is a significant has been nominated on the Board of Directors of a number participant in welfare activities of different organizations. He of companies by the Government of Pakistan. Presently he is the trustee of Fatimid Foundation and Memon Health & is a director of Sui Northern Gas Pipelines Company Limited Education Foundation and a director of Pakistan Centre for (SNGPL). Philanthropy and Karachi Education Initiative (Karachi School for Business and Leadership).
37 Arif Habib Corp Corporate Responsibilities As Director As Chairman Pakistan Engineering Company Limited Arif Habib Foundation Aisha Steel Mills Limited Pakistan Private Equity Management Limited Pakistan Centre for Philanthropy Arif Habib DMCC International Complex Projects Limited Safemix Concrete Product Limited Sui Northern Gas Pipelines Limited Real Estate Modaraba Management Company Limited Thatta Cement Company Limited As Honorary Trustee / Director Sachal Energy Development (Pvt.) Limited Fatimid Foundation Karachi Education Initiative Pakistan Veterans Cricket Association
Annual Report 2012 | Promoting Investments 38 board of directors
Mr. Nasim Beg Mr. Asadullah Khawaja Non–Executive Director Non-Executive Director Date of Appointment: Date of Appointment: September 25, 2010 September 25,2010
Mr. Nasim Beg, a Fellow Member of the Mr. Khawaja has served on the board of Institute of Chartered Accountants of directors of prestigious institutions of Pakistan, is the Executive Vice Chairman domestic and international nature and of Arif Habib Investments Limited, an list of companies can be termed Asset Management Company that was impressive. conceived and set up by him and which Mr. Khawaja completed his Bachelor of Arts in 1964 from he headed as Chief Executive till June Forman Christian College, Lahore. Subsequently, he 2011. With over forty years of experience completed several local and foreign courses on banking, in the business world including industry securities, industries management, investment analysis and and the financial services (in and outside portfolio management. Moreover, he has participated in various international seminars and workshops on investment the country), Mr. Nasim Beg is one of the oriented issues. highly respected professionals of the country and was appointed founder He started his professional career with United Bank Limited in Chairman of the Institute of Capital 1965 and only after a year switched to Investment Corporation of Pakistan. From 1966 till 1995 he rose through the ranks from markets by the SECP. OG-III to the post of Managing Director. During this long career he rendered his services in different capacities and in different Before joining the Arif Habib Group, Mr. Beg served as the departments. Deputy Chief Executive of NIT, which he joined during its
troubled period and played an instrumental role in its Mr. Khawaja also held the additional charge as Chief Executive modernization and turn around. He also served as the acting of Bankers Equity Limited (BEL) and National Investment Trust Chief Executive of NIT for a few months. He has also been Limited (NITL). His foreign assignments include five years at associated at top-level positions with other asset management Pakistan Embassy in London as Investment Counselor. During and investment advisory companies. his professional career he has served as Chairman Packages Ltd., Chairman Pakistan Industrial Credit and Investment Mr. Beg has also held senior level responsibilities in the Corporation (PICIC) and also the Executive Director of automobile industry. During his tenure as the Chief Executive Pakistan Credit Rating Agency. Mr. Khawaja has also served of Allied Precision (a subsidiary of the Allied Engineering on the board of directors of prestigious institutions of domestic Group), he set up a green field project for the manufacture of and international standings and the list of companies can be sophisticated indigenous components for the automotive termed impressive. industry under transfer of technology licenses with Japanese
and European manufacturers. His initiation to the financial services business was with the Abu Dubai Investment Corporate Responsibilities Company, UAE, where he was a part of the team that set up the company in 1977. As Chairman PICIC Asset Management Company Limited Corporate Responsibilities Arif Habib Investments Limited (Executive Vice Chairman) As Director Arif Habib Consultancy (Pvt.) Limited (Chief Executive) • Summit Bank Limited • Pakistan Private Equity Management Limited As Director and other responsibilities • Arif Habib REIT Management Limited • Summit Bank Limited • WorldCall Telecom Ltd. • Pakarab Fertilizers Limited • Arif Habib REIT Management Limited • Pakistan Private Equity Management Limited • Safemix Concrete Products Limited • Thatta Cement Company Limited • Al-Abbas Cement Industries Limited • Thatta Power (Pvt.) Limited • SKM Lanka Holdings (Pvt.) Limited • Member, the Prime Minister’s Economic Advisory Council (EAC)
39 Arif Habib Corp Mr. Samad A. Habib Mr. Kashif A. Habib, ACA Non–Executive Director Non-Executive Director Date of Appointment: Date of Appointment: February 25, 2011 September 25, 2010
Mr. Samad A. Habib is leading Javedan Mr. Kashif A. Habib is the Chief Corporation Limited as Chief Executive Executive of Al-Abbas Cement Industries of the company. Limited.
Mr. Samad A. Habib has earned his Master’s degree in Mr. Kashif Habib is a member of the Institute of Chartered Business Administration in 2001. Mr. Samad A. Habib has Accountants of Pakistan (ICAP). He has completed his more than 15 years of experience, including 9 years working in Articleship from A.F. Ferguson & Co. (a member firm of the financial services industry at various senior level positions. PriceWaterhouseCoopers), where he gained experience of a He began his career with Arif Habib Corporation Limited (the diverse set of clients spanning the Financial, Manufacturing holding company of Arif Habib group) as an Investment and Services sectors. He has at his credit experience of three Analyst, then served the company at various executive years Internship in Arif Habib Corporation Limited and three positions including Executive Sales and Business Promotions, years experience of Executive Director in cement and fertilizer Company Secretary, Head of Marketing, etc. Subsequently he companies of the group. was appointed as a Director of Arif Habib Corporation Limited. On September 2004, he was appointed as the Chairman and Corporate Responsibilities Chief Executive of Arif Habib Limited. As Chairman he was responsible for the strategic direction of the company and was As Chief Executive actively involved in capital market operations and corporate Al-Abbas Cement Industries Limited finance activities such as serving corporate clients, institutional clients, high net worth individuals, and raising funds for clients As Director through IPO’s, private placements etc. He resigned from that • Pakarab Fertilizers Limited position in January 2011. Presently, he is leading Javedan • Fatima Fertilizer Company Limited Corporation Limited as Chief Executive of the company. • Javedan Corporation Limited • Arif Habib REIT Management Limited Corporate Responsibilities • Rotocast Engineering Company (Pvt.) Limited • Memon Health and Education Foundation As Chief Executive • Arif Habib Foundation Javedan Corporation Limited • Arif Habib Real Estate Services (Pvt.) Limited • Real Estate Modaraba Management Co. Limited As Director • Arif Habib Investments Limited • Pakistan Private Equity Management Limited • Pakarab Fertilizers Limited • International Complex Projects Limited • Real Estate Modaraba Management Company Limited • Arif Habib Equity (Pvt.) Limited • Rotocast Engineering (Pvt.) Limited • Nooriabad Spinning Mills (Pvt.) Limited
Annual Report 2012 | Promoting Investments 40 Mr. Muhammad Ejaz Mr. Kashif Shah Non–Executive Director Non–Executive Director Date of Appointment: Date of Appointment: September 14, 2011 September 14, 2011
Mr. Ejaz is a certified Financial Risk Mr. Kashif has a unique experience of Manager having over 18 years of working in the leading local & experience in the fields of Treasury, international institutions, both related to Corporate Finance and Investment industry and finance. Banking. Mr. Kashif Shah completed his Bachelor of Science Mr. Ejaz is a certified Financial Risk Manager and holds an (Mathematics, Statistics & Economics) in 1989 from MBA from IBA. He has over 18 years of experience in the fields Government College University, Lahore. Subsequently, he of Treasury, Corporate Finance and Investment Banking. Mr. earned his Master’s degree in Business Administration in 1994 Ejaz has served in senior positions at leading local and from Lahore University of Management Sciences. international banks including Faysal Bank, Union Bank and Emirates NBD Bank. He is also a regular visiting faculty Mr. Shah is a seasoned professional with a successful track member at IBA, Karachi. record of working with top tier institutions in Pakistan and abroad. He started his professional career with Packages Presently Mr. Muhammad Ejaz is the Chief Executive of Arif Limited and after MBA worked in a number of premier Habib REIT Management Limited. institutions such as JP Morgan in Hong Kong, where he was over-seeing Mergers & Acquisition for a number of South Corporate Responsibilities Eastern countries. Upon his return to Pakistan, he worked in UBL and under his leadership a number of innovative transactions were executed. He then went on to become the As Chief Executive first Group Executive/Head of Investment Banking at HBL and Arif Habib REIT Management Limited established HBL as a leader in corporate finance in Pakistan and earned record fees in the history of Pakistan. After HBL, As Director he worked for over two years in mid-stream & down-stream • Aisha Steel Mills Limited integrated oil business as Advisor to the Sponsors. He has • Sachal Energy Development (Private) Limited more than 20 years of experience, including 16 years working • Javedan Corporation Limited in the financial services industry at various senior level • Arif Habib Real Estate Services (Private) Limited positions. • Al Abbas Cement Industries Limited Mr. Kashif joined Arif Habib Group from mid-2011 and apart from his position as Director, Arif Habib Corporation, he is Chief Executive of Aisha Steel Mills Limited.
Corporate Responsibilities
As Chief Executive • Aisha Steel Mills Limited
41 Arif Habib Corp other management heads
Zeshan Afzal Basit Habib
Group Head Chief Financial Officer Strategic Investments and Company Secretary
Mr. Zeshan is working as a Group Head - Mr. Basit Habib is working as a CFO and Strategic Investments and is responsible Company Secretary. His role for overall planning, monitoring and encompasses a wide range of matters evaluation of the Strategic Investments of ranging from finance and audit function, to the Group. He is also serving as a corporate law, compliance and taxation. In Director on the Board of Crescent Textile addition, he is also CFO and Company Mills Limited and Reliance Sacks Limited. Secretary of a subsidiary company, Al He also handles some of the Group’s Abbas Cement Industries Limited. Marketing and Investor Relation matters. Mr. Basit Habib is a member of the Institute of Chartered Zeshan is a fellow member of the Association of Chartered Accountants of Pakistan (ICAP) having qualified in 2010. He Certified Accountants, a member of Pakistan Institute of Public completed his Articleship from A.F. Ferguson & Co. (a member Finance Accountants, a member of Institute of Internal firm of PriceWaterhouseCoopers), where he gained experience Auditors, a member of the Institute of Financial Consultants and of a diverse set of clients spanning the Financial, Manufacturing a member of the Institute of Internal Controls. and Services sectors. Mr. Basit Habib has previously worked at Hascol Petroleum Limited as Finance Manager of the Company. His last major assignment was with KPMG in New York - He later joined Arif Habib Corporation Limited as Manager Financial Services where he worked on leading Financial Finance where his responsibilities included financial reporting and Institutions in various financial and risk advisory roles and advising management on all financial and tax matters etc. consultancy assignments. In addition to working in New York, Currently Mr. Basit Habib is serving in the capacity of Chief he has also worked for KPMG Saudi Arabia, and has also been Financial Officer & Company Secretary of Arif Habib Corporation part of various technical trainings conducted by KPMG in Dubai Limited and is one of those young and vibrant individuals who, in and Sri Lanka. a short time span, have contributed to the Group tremendously.
Zeshan has also worked for three years in the field of marketing Corporate Responsibilities: working on various business solutions for multi-national and local companies. As Chief Financial Officer & Company Secretary:
Zeshan joined the Group in 2011 and brings along a diversified • Al-Abbas Cement Industries Limited experience in the field of Advisory, Financial services and Marketing including Business and project evaluations, Internal Controls, Internal Audit and Process re-engineering.
Corporate Responsibilities:
As Director: • Director - Crescent Textile Mills Limited • Director - Reliance Sacks Limited (a Subsidiary of Pakarab Fertilizers)
As Member and Group Representative: • Group Representative - Audit Committee - Al-Abbas Cement Industries Limited • Member - Financial Advisory Committee - Arif Habib Limited • Member - Board of Studies - Institute of Business Management • Member - Integrated Reporting Committee - ACCA • Member - Public Interest Law Association of Pakistan • Member - Management Association of Pakistan
Annual Report 2012 | Promoting Investments 42 board and management committees
Keeping in view the reporting requirements of a listed entity, the Board of Directors of the Company have constituted committees both at the Board and Management levels. Majority members of the Board Committees are non-executive directors.
Board Committees The Board Committees assist the Board of Directors in performing their duties including the appropriate level of oversight. These Committees provide valuable input and suggestions to the Directors, enabling the Board to take accurate, informed and timely business decisions based on identified Business Risks. Following are the Board Committees:
Board Audit Committee (AC) The committee is responsible for assisting the Board of Directors in discharging its responsibilities primarily in:
- evaluating and reporting financial and non-financial information to shareholders; - reviewing the system of internal controls and risk management; and - reviewing the business plan and to ensure that it reconciles with the Company’s mission, vision, corporate strategy & objectives and standard of conduct.
Additionally, the committee has the authority to require any information from the management and to meet directly with external auditors.
The Board of Directors has determined the terms of reference of the Audit Committee. The Board also provides adequate resources and authority to enable the Audit Committee to carry out its responsibilities effectively. The Board gives due consideration to the recommendations of the Audit Committee. Among other responsibilities, the terms of reference of the Audit Committee includes the following:
- determination of appropriate measures to safeguard the listed company’s assets; - review of quarterly, half-yearly and annual financial statements of the listed company; - ensuring coordination between the internal and external auditors of the listed company; - review of the scope and extent of internal audit and ensuring that the internal audit function has adequate resources and is appropriately placed within the listed company; - consideration of major findings of internal investigations of activities characterized by fraud, corruption and abuse of power and management's response thereto; - ascertaining that the internal control systems are adequate and effective; - determination of compliance with relevant statutory requirements; and - monitoring compliance with the best practices of corporate governance and identification of significant violations thereof.
The Chief Financial Officer of the Company regularly attends the Audit Committee meetings to present the financial information and other information specifically addressed by the Internal Audit Department (IAD). After each meeting, the Chairman of the Committee reports to the Board. During the financial year 2012, the Committee met 4 times. During the year, following attended the audit committee meetings :
S. No. Name Designation No. of Meetings attended
1. Mr. Kashif A. Habib Chairman 4 2. Mr. Muhammad Ejaz Member 3 3. Mr.Kashif Shah Member 3 4. Muhammad Akmal Jameel Ex-member 1 5. Tahir Iqbal Ex-member 1 6. Mr. Navid Farooq Secretary 4
The Internal Audit Department is currently headed by Mr. Navid Farooq, who has the requisite qualification and the relevant experience to perform the duties of the department in line with the Internal Audit Charter. Human Resource and Remuneration Committee (HR&RC)
During the year, a new committee namely Executive Committee on Human Resource (ECHR) has been formed in accordance with the requirements of Code of Corporate Governance 2012. The responsibilities of the Committee includes recommendation of human resource management policies to the board, recommending the selection, evaluation, compensation (including retirement benefits) and succession planning of the CEO, CFO, Company Secretary and Head of Internal Audit to the board; and to consider and approve on recommendations of CEO on such matters for key management positions who report directly to CEO. HR&RC meets at least once in every six months. The HR&RC is committed to develop and make decisions on Human Resource strategy and policy. HR&RC comprises of the following members:
43 Arif Habib Corp S. No. Name Designation Meetings attended during the year
No meeting of HR&RC was held as 1. Mr. Asadullah Khawaja Chairman the Committee was established in the 2. Mr. Nasim Beg Member last quarter of the financial year 3. Mr. Arif Habib Member pursuant to the compliance of Code 4. Mr. Basit Habib Secretary of Corporate Governance, 2012.
The terms of reference of HR&RC provides an overview of the Committee and outlines the Committees' composition and responsibilities. The document also includes recommendation on human resource management, organizational development, training and development matters, management succession, and continuous review of compensation and benefit policies and assessment of corporate culture.
Investments & Projects Diversification Committee (IPDC)
The committee is responsible for assisting the Board of Directors in discharging its responsibilities primarily with regard to:
- Reviewing new investment opportunities keeping in view various factors including risk, return, diversification and growth; - Continuous monitoring of the investments already made and recommending corrective strategies, if required; and - Reviewing the key assumptions used by the management of investee companies to determine fair values of strategic investments.
The Committee meets on a required / directed basis to discharge its responsibilities and regularly reports to the Board. During the financial year 2012, 2 meetings were held. Currently, the committee comprises of the following members:
S. No. Name Designation Meetings attended during the year
1. Mr. Arif Habib Chairman 2 2. Mr. Nasim Beg Member 2 3. Mr. Samad A. Habib Member 2 4. Mr. Zeshan Afzal Group Head – Strategic Investments 2 5. Mr. Basit Habib CFO & Secretary 2
The Strategic Investments Department, headed by Mr. Zeshan Afzal, assists the Committee in discharging its responsibility in line with the Investment Policy Manual.
Management Committees
Management committees are constituted to provide an advisory input to the Chief Executive Officer and to perform a SWOT analysis on businesses and employment related issues that require collective wisdom for timely decision making. The purpose of these committees is to improve performance and efficiency of the Company.
Executive Committee on Risk Management (ECRM)
ECRM is headed by the Chairman and Chief Executive of the Company and includes Group executives. The purpose of the committee is to assist the Board of Directors in developing and continuous monitoring of risk management policies and other business related matters. The members of the committees include:
S. No. Name Designation
1. Mr. Arif Habib Chairman 2. Mr. Zeshan Afzal Member 3. Mr. Basit Habib Member
The terms of reference of ECRM is to assist Board of Directors in developing, reviewing and approving risk management policies, instituting special projects and reviewing the adequacy of operational, administration and financial controls. ECRM meets on required/directed basis.
Executive Committee on Human Resource (ECHR)
The objective of ECHR is to review, monitor and make recommendations to the Board through Executive Committee on Human Resource for overseeing the Company's compensation and benefits policies generally, evaluate executive officer performance and review the Company's management succession plan and set compensation for the Company's executive officers. ECHR meets at least once every quarter. The ECHR is committed to develop and make decisions on Human Resource strategy and policy. ECHR comprises of the following members:
S. No. Name Designation
1. Mr. Arif Habib Chairman 2. Mr. Zeshan Afzal Member 3. Mr. Basit Habib Member
Annual Report 2012 | Promoting Investments 44 criteria to evaluate board’s performance
The success of a company eventually depends upon the capacity of its directors to provide the vision and direction required not only to survive, but to expand and flourish. Therefore, the company endeavors to develop the capacity of the board of directors to improve both their personal and collective contributions to the overall development of the company.
A quality board that really adds value is not just a panel of • Compliance with the legislative system in which Company high performing individuals but a balanced team with operates, including Companies Ordinance, 1984, Listing harmonizing skill-sets and a culture that allows them to Regulations of Stock Exchanges, the Memorandum and perform together to make the most effective decisions for the Articles of Association of the Company. company. While the guidance from the chair is the key, the participation of every board member is also vital for • Active participation in strategic planning process, effectiveness. enterprise risk management system, policy development, financial structure, monitoring and approval. Performance evaluation continues to gain profile and momentum within boardrooms. Regulators and institutional • Appropriate constitution of Board Committees with investors increasingly endorse performance evaluation as a members possessing adequate technical knowhow and prerequisite for good corporate governance. The Board of experience. Directors acts as a guardian of the shareholders money and translates the same into the Company’s mission and goals. • Establishing adequate system of internal controls in the In order to uphold the trust of stakeholders, the Board Company and its regular assessment through self of Directors’ performance warrants assessment. assessment mechanism or/and internal audit activities.
The evaluation of the performance will examine those • Ensuring presence of required quorum in Board and key areas where the Board requires clarity in order to Committees’ meeting. provide high level oversight, including: the strategic process; key business drivers and performance milestones; the global • Ensuring orientation and training of Board of Directors to economic environment and competitive context in which enable them to perform their duties in an effective the Company operates; the risks faced by the business; manner. board dynamics; capability and alignment; reputation; and information flows.
The Board of Directors has set the following evaluation criteria to judge its performance.
45 Arif Habib Corp chief executive’s performance review
One of the significant responsibilities of the Board of Directors is to ensure that the company is led well and has effective executive management. The board establishes policies of the company and delegates authority and responsibility to manage and run the organization to the CEO.
Successful companies depend on outstanding CEO the company. The Board Members, despite their relationship leadership. Outstanding CEO leadership depends on with Mr. Arif Habib are committed to carrying out an excellent board/CEO relations which in turn depend on objective assessment of his performance as the Chief clear expectations and open communication. Regular Executive. review of CEO performance fosters open communication and clarifies expectations, roles and responsibilities. The Board wishes to report that Mr. Arif Habib is committed Effective boards and CEOs embrace the review process, to following best practices and the Code of Corporate which is considered as good corporate governance. Governance in true spirit. All Board meetings are attended by Mr. Arif Habib, where he provides details and The main objective of a review is to bring the CEO and the explanations for each agenda item. The Board meetings board together to discuss how their performance and have free and open discussion and Mr. Arif Habib acts on priorities add to the effectiveness of the company. The focus consensus and despite his tremendous convincing ability; remains on identifying what works well, and what needs he abides by the consensus even where the decision goes improvement. Given the unique nature of the partnership against his original proposal. Based on the Board’s between the board and CEO, assessing CEO performance recommendations, Mr. Arif Habib has embarked on a is, in many ways, assessing the performance of the board programme of further strengthening the professional team as well. at the Company and the Group. The board believes that this will further strengthen the Company. Mr Arif Habib continues Mr. Arif Habib is the Chief Executive as well as the to play the leadership role at the Company and the Group Chairman of the Board and the primary shareholder of the level to the entire satisfaction of the Board. Company. He has, given his position as primary shareholder, sought out and requested professionals of high standing to join the Board. These include business acquaintances and some executives working for group companies none of whom have any conflicts of interest with
Annual Report 2012 | Promoting Investments 46 notice of eighteenth annual general meeting
Notice is hereby given that the Eighteenth Annual General Meeting of the Shareholders of Arif Habib
Corporation Limited (“the Company”) will be held on Saturday, 29th September, 2012 at 10.30 a.m. at
the Beach Luxury Hotel, Moulvi Tamizuddin Khan Road, Karachi to transact the following business:
Ordinary Business
1) To confirm minutes of the Seventeenth Annual General Meeting held on 22nd October 2011.
2) To receive, consider and adopt annual audited financial statements of the Company together with the Directors' and the Auditors’ Reports thereon for the year ended 30th June 2012 together with the Audited Consolidated Financial Statements of the Company and the Auditors’ Reports thereon for the year ended 30th June 2012.
3) To appoint the Auditors for the year ending 30th June 2013 and fix their remuneration. The Board of Directors have recommended for reappointment of M/s. KPMG Taseer Hadi & Co., Chartered Accountants as external auditors.
4) To consider and approve final Cash Dividend for the year ended 30th June 2012 at Rs. 2 per share i.e. 20% as recommended by the Board of Directors. This is in addition to the distribution of 41.25 million convertible preference shares of Aisha Steel Mills Limited by the company as Interim Specie Dividend.
5) To consider and approve bonus issue for the year ended 30th June 2012 at the rate of 10%, i.e. one share for every ten shares held, as recommended by the Board of Directors. Special Business
6) To pass the following resolutions as ordinary resolutions to give effect to the bonus issue:
“RESOLVED THAT a sum of Rs. 412,500,000/- out of company’s free reserves and unappropriated profits be capitalized for issuing 41,250,000 fully paid ordinary shares of Rs. 10/- each as bonus shares to be allotted to those shareholders whose names will appear on the members’ register and the entitlement list to be provided by CDC at the close of business on Thursday, 20th September 2012 in the proportion of one share for every ten shares held i.e. 10%. These shares shall be treated for all purposes as an increase in paid-up capital of the company and shall rank pari passu in future with existing shares in all respect except that they shall not qualify for the entitlement of the final dividend declared & being paid simultaneously.”
“FURTHER RESOLVED THAT the fractional entitlements of less than one share be consolidated and disposed off through a member of stock exchange. The proceeds shall be distributed amongst the shareholders according to their entitlements.”
7) To consider and if deemed fit to pass the following Special Resolutions with or without modification(s): Investment in Associated Companies & Associated Undertakings
“RESOLVED THAT the consent and approval be and is hereby accorded under Section 208 of the Companies Ordinance, 1984 and “Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2012 ” for the following limit of additional investment in associated companies and associated undertakings subject to the terms and conditions mentioned in the annexed statement under Section 160(1)(b).” Rupees in million
Proposed Proposed Name of Company & Undertaking amount for amount for Equity Loan / Advance
1. Javedan Corporation Ltd. - 900 2. Al-Abbas Cement Industries Ltd. 500 500 3. Thatta Power (Pvt.) Ltd. 150 -
47 Arif Habib Corp “FURTHER RESOLVED THAT the consent and approval be and is hereby accorded under Section 208 of the Companies Ordinance, 1984 and “Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2012” for renewal of equity investments limit upto unutilized portion for which approval has been sought in previous general meeting, in associated companies and associated undertakings as mentioned in the annexed statement under Section 160(1)(b).”
“FURTHER RESOLVED THAT the consent and approval be and is hereby accorded under Section 208 of the Companies Ordinance, 1984 and “Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2012” for renewal of sanctioned limits of loans and advances for which approval has been sought in previous general meeting, in associated companies and associated undertakings as mentioned in the annexed statement under Section 160(1)(b), whereas the renewal of limits will be in the nature of running finance for a period of one year and shall be renewable in next general meeting(s) for further period(s) of one year.”
“FURTHER RESOLVED THAT the Chief Executive and/or the Company Secretary be and are hereby authorized to take and do and/or cause to be taken or done any/all necessary actions, deeds and things which are or may be necessary for giving effect to the aforesaid resolutions and to do all acts, matters, deeds, and things which are necessary, incidental and/or consequential to the investment of the Company’s funds as above as and when required at the time of investment.”
Any Other Business
8) To consider any other business with the permission of the Chair.
A Statement under Section 160(1)(b) of the Companies Ordinance 1984 pertaining to the special business is given from page No. 199 to 216. By order of the Board
Karachi; 8th September 2012 Basit Habib Company Secretary
Notes:
1. Share transfer books of the company will remain closed from 21st September, 2012 to 29th September, 2012 (both days inclusive). Transfers received in order at the office of our registrar: M/s. Central Depository Company of Pakistan Limited, CDC House, 99-B, Block-B, S.M.C.H.S, Main Shahrah-e-Faisal, Karachi, by the close of business on Thursday, 20th September, 2012 will be treated in time for the determination of entitlement of shareholders to cash dividend, bonus and to attend and vote at the meeting.
2. A member entitled to attend and vote at the meeting may appoint another member as his / her proxy who shall have such rights as respects attending, speaking and voting at the meeting as are available to a member.
3. Procedure including the guidelines as laid down in Circular No. I- Reference No. 3(5-A) Misc/ARO/LES/96 dated 26th January 2000 issued by Securities & Exchange Commission of Pakistan:
(i) Members, proxies or nominees shall authenticate their identity by showing their original national identity card or original passport and bring their folio numbers at the time of attending the meeting.
(ii) In the case of corporate entity, Board of Directors’ resolution/power of attorney and attested copy of the CNIC or passport of the nominee shall also be produced (unless provided earlier) at the time of meeting.
(iii) In order to be effective, the proxy forms must be received at the office of our registrar not later than 48 hours before the meeting, duly signed and stamped and witnessed by two persons with their names, address, NIC numbers and signatures.
(iv) In the case of individuals, attested copies of CNIC or passport of the beneficial owners and the proxy shall be furnished with the proxy form.
(v) In the case of proxy by a corporate entity, Board of Directors resolution/power of attorney and attested copy of the CNIC or passport of the proxy shall be submitted alongwith proxy form.
4. Members are requested to promptly notify any change in address by writing to the office of the registrar.
Annual Report 2012 | Promoting Investments 48 key figures and highlights
Total revenue Profit after tax Rs. in million Rs. in million
2012 2011 2012 2011
EBITDA Total assets RsR . in million Rs. in million
20122 22011 2012 2011
Total Equity Net assets per share Rs. inn million RsR .
2012 20011 2012 2011
49 Arif Habib Corp ReR turn on equiu ty DDividend payouut raatio % %
2012 20011 2012 20011
Market capitaliizattion NuN mber of shareholders Year-end - Rs. in million No. of individuaalss
2012 200111 2012 2011
Market price per shahare (yey ar end) Eaarnings per shah re Rs. Rs.
2012 2011 2012 20111
Annual Report 2012 | Promoting Investments 50 arif habib corp at a glance
Operating Revenue Operating and administrative expensesexpenses 3%3% 3%
32%
44% 4,417 85 million million
% 46% 46% 48%48
15% 9%9% DiDividendvidend iincomencome Salaries and benefits Unrealized gain on securities Rent, rates and taxes Capital gain Depreciation Others Others
51 Arif Habib Corp Equity and Liabilities Assets
8% 14% 3% 3% 5%5% % 2 112%
30,070 30,070 million million
% 67%67 88%
Paid-uPaid-upp capitalcapital LongLong termterm investments Reserves Short term investments Non-current liabilities Loans and advances Current liabilities Other assets
Annual Report 2012 | Promoting Investments 52 financial & business highlights six years at a glance
Year ended June 30 2012 2011 2010 2009 2008 2007
Rupees in million
Profit and Loss Account Total revenue 4,417.37 4,318.49 4,189.37 (498.42) 9,678.94 4,062.85 Operating & administrative expenses (122.38) (993.30) (129.99) (1,180.05) (93.31) (73.57) Finance cost (300.76) (177.12) (229.46) (456.11) (71.41) (54.39) Operating profit / (loss) 4,295.00 3,303.12 3,961.96 (1,678.47) 9,585.64 3,989.27 Profit / (loss) before tax 3,994.23 3,148.07 3,732.50 (2,134.59) 9,514.23 3,934.88 Profit / (loss) after tax 4,254.31 2,840.48 3,798.47 (2,768.93) 7,970.82 3,682.33 EBITDA 4,302.87 3,334.17 3,972.39 (1,676.73) 9,586.85 3,990.72
Balance Sheet Share capital 4,125.00 3,750.00 3,750.00 3,750.00 3,000.00 3,000.00 Reserves 20,120.02 17,361.65 16,034.15 12,385.32 16,049.92 15,074.59 Property and equipment 46.21 53.33 61.15 72.16 28.30 5.40 Long term investments 26,596.46 23,840.73 19,535.27 16,544.54 17,343.81 14,508.84 Net current assets 3,424.82 1,787.87 3,791.01 5,302.27 5,905.42 5,534.93 Net current liabilities 2,336.02 1,480.77 720.69 2,833.46 1,917.48 140.84 Deferred liabilities 2,832.88 3,092.02 2,883.40 2,950.23 2,310.18 1,833.79 Total assets 30,070.46 25,684.45 23,388.23 21,919.00 23,277.58 20,049.22 Total liabilities 5,825.44 4,572.80 3,604.08 5,783.69 4,227.65 1,974.64
Ratios Performance Return on equity (%) 18.76% 13.89% 21.15% (15.74%) 42.94% 25.60% Return on Assets (%) 15.26% 11.58% 16.77% (12.25%) 36.79% 22.94% Return on capital employed (%) 15.49% 13.74% 17.48% (13.57%) 44.88% 20.04% Income/ expense ratio (PKR) (36.093) (1.922) (12.593) (1.877) (5.607) (4.901) Earning Asset/Total Asset Ratio (PKR) 0.97 0.97 0.98 0.88 0.81 0.99 Net assets per share (PKR) 58.78 56.30 52.76 43.03 63.50 60.25
Leverage Debt:Equity ratio (PKR) 0.24 0.22 0.18 0.36 0.22 0.11 Interest cover ratio (PKR) 14.28 18.77 17.27 (3.68) 134.23 73.34 Dividend cover ratio (PKR) 2.58 2.52 3.38 - 11.06 1.64
53 Arif Habib Corp Year ended June 30 2012 2011 2010 2009 2008 2007
Liquidity Current ratio (PKR) 1.466 1.207 5.260 1.871 3.080 39.299 Cash to current liabilities (PKR) 0.65 0.64 4.64 0.90 3.02 38.51
Valuation Price earning ratio (PKR) 3.00 3.47 3.28 (3.64) 5.84 9.50 Break-up value per share (PKR) 58.78 56.30 52.76 43.03 63.50 60.25 Cash dividend per share (PKR) 2.0 * 2.0 - - 1.50 7.50 Specie dividend per share (PKR) 1.0 - 3.00 - 1.00 - Dividend Declared (%) 40% 30% 30% - 25% 75% Dividend yield (%) 12.93% 11.41% 9.02% 0.00% 1.55% 6.43% Dividend payout ratio (%) 38.78% 39.61% 29.62% 0.00% 9.04% 61.12% Bonus shares issued (%) 10.00%* 10.00% 0.00% 0.00% 25.00% 322.22% Market value per share (end of year) (PKR) 30.93 26.30 33.27 26.88 161.48 116.60 High (during the year) (PKR) 36.09 35.65 54.80 160.40 201.40 605.00 Low (during the year) (PKR) 20.72 18.84 26.01 17.64 112.70 107.90 Earnings Per Share (PKR) 10.31 6.89 10.13 (7.38) 27.66 12.27 * Proposed Dividend
Shareholders' Return Arif Habib Corporation Limited - annual total return (%) 36.43% (10.15%) 20.15% (78.27%) 39.00% 65.00% Karachi Stock Exchange 100 Index - annual return (%) 22.41% 28.53% 35.74% (37.97%) (10.00%) 39.00% Shareholders' return differential: AHCL-KSE-100 Index (%) 14.02% (38.68%) (15.59%) (40.30%) 49.00% 26.00%
Graph for the year ended on 30 June 2012 KSE - 100 AHCL 1.6
1.5
1.4
1.3
1.2
1.1
1.0
0.9
0.8 11 11 11 11 11 11 12 12 12 12 12 12 Jul Oct Apr Jan Jun Feb Sep Dec Mar Nov Aug May
Source: Bloomberg, Arif Habib Limited, Equity Research Division
Annual Report 2012 | Promoting Investments 54 graphical representation
Share holders equity Rupees in million Total assets Rupees in million 30000000000 35000000000
25000000000 30000000000
25000000000 20000000000 20000000000 15000000000 15000000000 10000000000 10000000000 5000000000 5000000000
0 0 2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012
Total liabilities Rupees in million Net turnover Rupees in million 7000000000 12000000000
6000000000 10000000000
5000000000 8000000000
4000000000 6000000000
3000000000 4000000000
2000000000 2000000000
1000000000 0
0 -2000000000 2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012
Earnings per share Rupees in million et margin Percentage 30 200%
25 100%
20 0%
15 100%-
10 200%-
5 300%-
0 400%-
- 5 500%-
-10 600%- 2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012
55 Arif Habib Corp Rupees Profit after tax Rupees in million 70 12000000000
60 10000000000 8000000000 50 6000000000 40 4000000000 30 2000000000 20 0
10 -2000000000
0 -4000000000 2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012
Return on equity Percentage Debt:Equity ratio Rupees 50% 0.4
40% 0.3 30%
20% 0.2 10%
0% 0.1 -10%
-20% 0.0 2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012
Return on capital employed Percentage Interest cover ratio 50% 160 140 40% 120 30% 100
20% 80
60 10% 40 0% 20
-10% 0
-20 -20% 2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012
Annual Report 2012 | Promoting Investments 56 horizontal analysis of financial statements
2012 2011 2010 2009 2008 2007
Rupees in million
Balance Sheet
Total equity 24,245.02 21,112 19,784 16,135 19,050 18,075 Total non-current liabilities 3,489.43 3,092 2,883 2,950 2,310 1,834 Total current liabilities 2,336.02 1,481 721 2,833 1,917 141 Total equity and liabilities 30,070.46 25,685 23,388 21,919 23,278 20,049 Total non-current assets 26,645.64 23,897 19,597 16,617 17,372 14,514 Total current assets 3,424.82 1,788 3,791 5,302 5,905 5,535 Total assets 30,070.46 25,685 23,388 21,919 23,278 20,049 - - - Profit and Loss Account
Total revenue 4,416.97 4,368 4,189 (498) 9,679 4,063 Operating and administrative expenses (85.33) (69) (130) (169) (93) (74) Impairment loss on investments - (996) - (1,011) - - Operating profit / (loss) 4,331.64 3,303 4,059 (1,678) 9,586 3,989 Other incomes / (charges) - net (36.64) 22 - - - - Finance cost (300.76) (177) (229) (456) (71) (54) Profit / (loss) before tax 3,994.23 3,148 3,830 (2,135) 9,514 3,935 Taxation 260.07 (308) 66 (634) (1,543) (253) Profit / (loss) after tax 4,254.31 2,840 3,896 (2,769) 7,971 3,682
57 Arif Habib Corp w.r.t. 2011 w.r.t. 2010 w.r.t. 2009 w.r.t. 2008 w.r.t. 2007 w.r.t. 2006
Percentage change
Balance Sheet
Total equity 14.8 6.7 22.6 3.9 9.5 85.1 Total non-current liabilities 12.9 7.2 (2.3) 24.8 57.2 130.4 Total current liabilities 57.7 105.5 (74.6) (62.4) 411.7 513.3 Total equity and liabilities 17.1 9.8 6.7 0.5 16.7 93.9 Total non-current assets 11.5 21.9 17.9 12.8 35.0 188.2 Total current assets 91.5 (52.8) (28.5) (35.8) (31.5) (27.9) Total assets 17.1 9.8 6.7 0.5 16.7 93.9
Profit and Loss Account
Total revenue 1.1 4.3 (940.5) (105.1) 138.2 (19.6) Operating and administrative expenses 22.9 (46.6) (23.0) 81.0 26.8 (15.7) Impairment loss on investments - 100.0 (100.0) 100.0 - - Operating profit / (loss) 31.1 (18.6) (341.8) (117.5) 140.3 (19.6) Other incomes / (charges) - net (266.0) - - - - - Finance cost 69.8 (22.8) (49.7) 538.7 31.3 (72.2) Profit / (loss) before tax 26.9 (17.8) (279.4) (122.4) 141.8 (17.5) Taxation (184.6) (566.3) (110.4) (58.9) 511.1 (58.7) Profit / (loss) after tax 49.8 (27.1) (240.7) (134.7) 116.5 (11.4)
Annual Report 2012 | Promoting Investments 58 vertical analysis of financial statements
2012 2011 2010
Rupees in % Rupees in % Rupees in % million million million
Balance Sheet
Total equity 24,245.02 80.6 21,112.00 82.2 19,784.15 84.6 Total non-current liabilities 3,489.43 11.6 3,092.00 12.0 2,883.40 12.3 Total current liabilities 2,336.02 7.8 1,481.00 5.8 720.69 3.1 Total equity and liabilities 30,070.46 100.0 25,685.00 100.0 23,388.24 100.0 Total non-current assets 26,645.64 88.6 23,897.00 93.0 19,597.22 83.8 Total current assets 3,424.82 11.4 1,788.00 7.0 3,791.01 16.2 Total assets 30,070.46 100.0 25,685.00 100.0 23,388.23 100.0
Profit and Loss Accounts
Total revenue 4,416.97 100.0 4,368.07 100.0 4,189.37 100.0 Operating and administrative expenses (85.33) (1.9) (69.40) (1.6) (129.99) (3.1) Impairment loss on asset classified as held for sale - - (995.55) (22.8) - - Operating profit / (loss) 4,331.64 98.1 3,303.12 75.6 4,059.38 96.9 Other incomes / (charges) - net (36.64) (0.8) 22.07 0.5 - - Finance cost (300.76) (6.8) (177.12) (4.1) (229.46) (5.5) Profit / (loss) before tax 3,994.23 90.4 3,148.07 72.1 3,829.92 91.4 Taxation 260.07 5.9 (307.59) (7.0) 65.97 1.6 Profit / (loss) after tax 4,254.31 96.3 2,840.48 65.0 3,895.89 93.0
59 Arif Habib Corp 2009 2008 2007
Rupees in % Rupees in % Rupees in % million million million
Balance Sheet
Total equity 16,135.3 73.6 19,049.9 81.8 18,074.6 90.2 Total non-current liabilities 2,950.2 13.5 2,310.2 9.9 1,833.8 9.1 Total current liabilities 2,833.5 12.9 1,917.5 8.2 140.8 0.7 Total equity and liabilities 21,919.0 100.0 23,277.6 100.0 20,049.2 100.0 Total non-current assets 16,616.7 75.8 17,372.2 74.6 14,514.3 72.4 Total current assets 5,302.3 24.2 5,905.4 25.4 5,534.9 27.6 Total assets 21,919.0 100.0 23,277.6 100.0 20,049.2 100.0
Profit and Loss Accounts
Total revenue (498.4) (100) 9,678.9 100.0 4,062.8 100.0 Operating and administrative expenses (168.9) 33.9 (93.3) (1.0) (73.6) (1.8) Impairment loss on asset classified as held for sale (1,011.2) 202.9 - - - - Operating profit / (loss) (1,678.5) 336.8 9,585.6 99.0 3,989.39 8.2 Other incomes / (charges) - net ------Finance cost (456.1) 91.5 (71.4) (0.7) (54.4) (1.3) Profit / (loss) before tax (2,134.6) 428 9,514.2 98.3 3,934.9 96.9 Taxation (634.3) 127.3 (1,543.4) (15.9) (252.5) (6.2) Profit / (loss) after tax (2,768.9) 555.5 7,970.8 82.4 3,682.3 90.6
Annual Report 2012 | Promoting Investments 60 summary of cashflow statement year ended june 30
Rupees in million 6,000.00 Net cashflows from operating activities Net cashflows from investing activities 4,000.00 Net cashflows from financing activities Net change in cash and cash equivalents Cash and cash equivalents at beginning of the year 2,000.00 Cash and cash equivalents at end of the year
0
(2,000.00)
(4,000.00)
(6,000.00) 2012 2011 2010 2009 2008 2007
2012 2011 2010 2009 2008 2007
Rupees in million
Net cashflows from operating activities (464.90) 1,963.26 (588.84) (763.37) 2,482.02 3,318.20
Net cashflows from investing activities 202.74 (2,669.35) 2,589.89 (223.84) (4,287.02) (2,146.00)
Net cashflows from financing activities (93.45) - - (110.21) - (202.50)
Net change in cash and cash equivalents (355.61) (706.08) 2,001.05 (1,097.43) (1,805.00) 969.70
Cash and cash equivalents at beginning of the year (1,318.89) (612.81) (2,613.86) (1,516.43) 288.57 4,453.70
Cash and cash equivalents at end of the year (1,674.50) (1,318.89) (612.81) (2,613.86) (1,516.43) 5,423.40
61 Arif Habib Corp statement of value added and its distribution
7% 4% 1% 1% 0% 1% 0% 2% 1% 1% 0% 0%
Employees' remuneration Operating and other costs Finance costs Government taxes To Society % % Depreciation 90%90 91%91 Net earnings
20122012 2011
2012 2011
Rupees in % Rupees in % million million
Value Added
Operating revenue 4,416.97 100.00 4,240.94 95.40 Gain on distribution of shares - - 127.13 2.86 Other income - - 77.5 1.74 4,416.97 100.00 4,445.61 100.00
Distributed As Follows Employees' remuneration 27.46 0.62 18.84 0.42 Operating and other costs 50.00 1.13 41.57 0.94 Finance costs 300.76 6.81 177.12 3.98 Government taxes 8.66 0.20 99.83 2.25 To Society 37.05 0.84 55.48 1.25
Retained within the business: Depreciation 7.87 0.18 8.99 0.20 Net earnings 3,985.16 90.22 4,043.79 90.96 3,993.03 90.40 4,052.77 91.16 4,416.97 100.00 4,445.61 100.00
Annual Report 2012 | Promoting Investments 62 share price / volume analysis
Month Highest Lowest Volume
AHCL Share Price on the KSE July-11 25.92 22.82 36,962,832 August-11 24.65 20.72 29,574,649 September-11 26.59 22.27 69,953,113 October-11 32.77 27.33 74,355,752 November-11 31.51 28.05 23,889,878 December-11 28.84 25.91 17,449,132 January-12 29.26 26.89 40,053,328 February-12 31.00 28.02 82,905,633 March-12 33.99 29.24 206,497,024 April-12 36.09 32.42 155,304,291 May-12 35.95 31.90 95,248,140 June-12 32.43 30.77 27,312,927
Share price movement at KSE during FY2012 Highest Lowest Volme 40.00 250,000,000 35.00 200,000,000 30.00 volume 25.00 150,000,000 20.00
price 15.00 100,000,000 10.00 50,000,000 5.00 - -
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
63 Arif Habib Corp Month Highest Lowest Volume
AHCL Share Price on the LSE July-11 28.50 25.11 1,030,900 August-11 27.05 22.63 746,394 September-11 29.37 24.62 2,012,117 October-11 33.14 29.05 3,763,523 November-11 31.50 28.00 552,365 December-11 29.25 26.10 287,360 January-12 29.22 26.92 364,337 February-12 31.03 28.08 771,108 March-12 34.04 29.41 1,931,230 April-12 36.06 32.40 1,553,344 May-12 36.00 32.05 661,780 June-12 32.50 30.74 177,380
Share price movement at LSE during FY2012 Highest Lowest Volme 40.00 4,000,000 35.00 3,500,000
30.00 3,000,000 volume 25.00 2,500,000 20.00 2,000,000 price 15.00 1,500,000 10.00 1,000,000 5.00 500,000 - -
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Annual Report 2012 | Promoting Investments 64 shareholders’ information
Registered & Corporate Office
Arif Habib Centre 23, M.T. Khan Road Karachi-74000 Tel: (021)32460717-9 Fax No: (021)32429653, 32468117 Email: [email protected] Website: www.arifhabibcorp.com
Share Registrar Office
Central Depository Company of Pakistan Share Registrar Department CDC House, 99-B, Block-B, S.M.C.H.S, Main Shahrah-e-Faisal, Karachi Tel: (021) 111-111-500 Toll Free: 0800-23275 Fax: (021)34326053 URL: www.cdcpakistan.com Email: [email protected] Listing on Stock Exchanges
AHCL equity shares are listed on all stock exchanges of Pakistan i.e. Karachi Stock Exchange (KSE), Lahore Stock Exchange (LSE) and Islamabad Stock Exchange (ISE). Stock Code
The stock code for dealing in equity shares of the Company at the stock exchanges is AHCL. Investor Service Centre
AHCL share department is operated by Central Depository Company of Pakistan (CDC) Registrar Services. It also functions as an Investor Service Centre and has been servicing nearly 7,500 shareholders. The Investor Service Centre is managed by a well-experienced team of professionals and is equipped with the necessary infrastructure in terms of computer facilities and comprehensive set of systems and procedures for conducting the Registration function. Team is headed by Mr. Abdus Samad at Registrar Office and Company Secretary at AHCL Registered Office.
For assistance, shareholders may contact either the Registered Office or the Share Registrar Office. Contact Persons:
Mr. Manzoor Raza Tel:(021)32467456 Email: [email protected]
Mr. Hasnain Ather Tel: (021) 111-111-500 Email: [email protected] Statutory Compliance
During the year the Company has complied with all applicable provisions, filed all returns/forms and furnished all the relevant information as required under the Companies Ordinance, 1984 and allied laws and rules, the Securities and Exchange Commission of Pakistan (SECP) Regulations and the Listing Regulations. Cash Dividend Announcement
A final Cash Dividend for the year ended 30th June 2012 at Rs. 2 per share i.e. 20% has been recommended by the Board of Directors.
65 Arif Habib Corp Bonus Shares Announcement
The Board of Directors have recommended a bonus issue for the year ended 30th June 2012 at the rate of 10%, i.e. one share for every ten shares held. Bonus shares will not be entitled for the final cash dividend for the year ended 30th June 2012.
Interim Specie dividend
The Company has distributed 41.25 million convertible preference shares of Aisha Steel Mills Limited (ASML) having the face value of Rs.10/- each, to the shareholders of the company as interim specie dividend in the ratio of 1:10 (1 preference share of ASML for every 10 shares held of AHCL). Book Closure Dates
The Share Transfer Books of the Company will be closed from 21st September, 2012 to 29th September, 2012 (both days inclusive). Transfers received in order at the office of our Share Registrar M/s. Central Depository Company of Pakistan Limited, CDC House, 99-B, Block-B, S.M.C.H.S, Main Shahrah-e-Faisal, Karachi at the close of the business on Thursday, 20th September, 2012, will be considered in time for the determination of entitlement of shareholders to cash dividend, bonus and to attend and vote at the meeting Dispatch of dividend warrants / Allotment of bonus shares
Subject to the approval by members in the AGM, the company expects to dispatch the final dividend warrants on or before 29th October 2012, being the statutory limit of 30 days from the date of General Meeting in which the dividend is approved.
Subject to the approval by members in the AGM, the company expects the bonus shares to be issued on or before 29th October 2012, being the statutory limit of 30 days from the date of re-opening of the share transfer register closed for the purpose of determining the entitlement. Legal Proceedings
No case has ever been filed by shareholders against the Company for non-receipt of share / dividend. General Meetings & Voting Rights
Pursuant to Section 158 of the Companies Ordinance, 1984, AHCL holds a General Meeting of Shareholders at least once a year. Every shareholder has a right to attend the General Meeting. The notice of such meeting is sent to all the shareholders at least 21 days before the meeting and also published in at least one English and one Urdu newspaper having circulation in all provinces. Proxies
Pursuant to Section 161 of the Companies Ordinance, 1984 and according to the Memorandum and Articles of Association of the Company, every shareholder of the Company who is entitled to attend and vote at General Meeting of the Company can appoint another member as his / her proxy to attend and vote at the meeting. Every notice calling a General Meeting of the Company contains a statement that shareholder entitled to attend and vote is entitled to appoint a proxy.
The instrument appointing proxy, duly signed by the shareholder should be deposited at the office of the Share Registrar of the Company not less than 48 hours before the meeting. Web Presence
During the year the website of the company has been redesigned to give an investor friendly look. Further, the website has been updated in accordance with SRO 25(I)/2012 of SECP dated 16th January 2012. Updated information about the Company and its affiliates can be accessed at AHCL web site, www.arifhabibcorp.com Shareholding Pattern
The shareholding pattern of the equity share capital of the Company as on 30th June 2012 alongwith categories of shareholders are given on page No. 77 to 80 of this report.
Annual Report 2012 | Promoting Investments 66 corporate memberships
Enjoying the status of being one of the most diversified Corporate entities, AHCL has associated itself with some of the well-reputed professional bodies to further strengthen its management practices. These institutions include:
Pakistan Institute of Corporate Governance quality of corporate governance in Pakistan that are comparable with the best global practices in good governance. PICG is Good corporate governance is an essential pre-requisite for the involved in training and education, creating awareness, integrity and credibility of any company. It builds greater undertaking research, publishing guidelines and other resource confidence and trust by ensuring transparency, fairness and material. It also serves as a platform to provide value-added accountability with respect to shareholders and other services and regular activities that in addition to other benefits stakeholders. Giving due importance to this objective, AHCL has also offer networking opportunities. obtained corporate membership of the Pakistan Institute of Corporate Governance (PICG). The PICG aims to become the Being an associate member of the PICG, AHCL aims to take full leading provider of knowledge about best practices in corporate advantage of these resources at PICG to implement best governance to all key stakeholders involved in or affected by practices and good corporate governance throughout the corporate governance with the objective of bringing about Company. national economic and social transformations by improving the
67 Arif Habib Corp Management Association of Pakistan resources at MAP to implement best practices of corporate excellence and good corporate governance throughout the Management Association of Pakistan (MAP) was formed in Company. 1964 by a small group of dedicated entrepreneurs and senior professional managers, who were keenly aware of the demands Pakistan Centre for Philanthropy that were likely to be made on managerial talent within the country, as a result of the rapid increase in the tempo of Pakistan Centre for Philanthropy (PCP) is an independent industrial activity. nonprofit support organization registered under the Companies Ordinance, 1984 with a vision “to link the three sectors of society MAP offers the opportunity to network, learn and get involved i.e government, business and civil society organizations in a with an objective to improve the effectiveness of individuals and synergistic partnership for development” and mission “to organizations in product development and management. Since promote the volume and effectiveness of philanthropy for social its inception the Association has established itself as a major development in Pakistan”. PCP is led by an active and effective forum for training and communication of ideas in the field of Board, comprising of eminent citizens, representatives of civil management in Pakistan. Its status and contribution are widely society organizations and business leaders. recognized. Giving due importance to this objective, AHCL has obtained corporate membership of the Pakistan Centre for Philanthropy The Association organizes programmes covering a wide range (PCP). Furthermore, the Board of Directors of PCP has invited of management principles and practices. Being an associate the Chairman of AHCL to be part of their Board. member of the MAP, AHCL aims to take full advantage of these
Annual Report 2012 | Promoting Investments 68 directors’ report
Dear Fellow Shareholders
It is with great pleasure that the Directors present the Annual Report of your Company and the audited financial statements for the financial year ended 30th June 2012 together with auditors’ report thereon.
Principal activities Arif Habib Corporation Limited (AHCL) is the Group’s holding company which has investments across a broad range of financial services and industries. The company owns significant interest in securities and commodities brokerage, asset management, fertilizers, cement and steel industries, wind power and dairies. Additionally, it continues to manage securities market portfolio earning remarkable returns.
Best Corporate Report Award During the current financial year, your company has been declared as an award winner in the SAFA Best Presented Accounts and Corporate Governance Disclosure Awards 2010 competition on the basis of evaluation of annual report for 2010. Your company has also been adjudged as Joint 1st Runner-up in the Financial Services Sector.
Economy The fiscal year under review proved to be a mixed year for Pakistan’s economy. On the positive side home remittances and FBR revenue grew at the healthy rate of 17.7% and 17.8% respectively. Inflation declined to 11% and SBP policy rate came down to 12% from 14%. On the negative side, trade deficit increased to US $ 21 billion as compared to US $ 15 billion in previous year recording a current account deficit of US $ 4.5 billion as compared to surplus of US $ 0.2 billion in previous year. Fiscal deficit was higher mainly due to higher than budgeted subsidies on power and fertilizers. Foreign investment was dismal with a net inflow of US $ 742 million for FDI and portfolio. Higher international oil prices, lower cotton prices and excessive subsidies incurred by the Government on Power and Fertilizers were major factors for negatives in Pakistan economy.
Financial Results The year under review has been a year of significant achievement for your company. The company has earned an after-tax profit of Rs.4.3 billion as compared to Rs.2.84 billion in 2010-11. This translates to an earning of Rs.10.31 per share as compared to Rs. 6.89 per share in previous year. A notable contribution towards this performance came from good dividends and growth delivered by our strategic investee companies as well as unrealized gains on investments both on trading and strategic portfolios.
Based on the profit during the year under review, the Board has recommended declaration of a final Cash Dividend for the year ended 30th June, 2012 at Rs. 2 per share i.e. 20% and issue Bonus shares in the proportion of one share for every ten shares held i.e. 10 %. Bonus shares will not be entitled for the final cash dividend for the year ended 30th June, 2012. This entitlement shall be available to those shareholders whose name(s) appear on the shareholders’ register at the close of business on Thursday, 20th September, 2012. This distribution is in addition to the interim distribution of 41.25 million preference shares of Aisha Steel Mills Limited in the proportion of one share for every ten shares held.
69 Arif Habib Corp The Summary of Financial Results is as follows:-
2012 2011
Profit after tax 4,254,306,077 2,840,479,564 Profit available for appropriation 20,927,000,020 17,797,693,943
Appropriations:
Interim distribution of 41.25 million preference shares of Aisha Steel Mills Limited for the year ended 30th June 412,500,000 -
* Final Cash Dividend at Rs.2 per share i.e. 20% for the year ended 30th June as recommended by the Board of Directors 825,000,000 750,000,000 * Bonus issue at the rate of 10% for the year ended 30th June, i.e. one share for every ten shares held, as recommended by the Board of Directors 412,500,000 375,000,000
* Un-appropriated profit carried forward 19,277,000,020 16,672,693,943
Earnings per share – basic & diluted 10.31 6.89
* Subject to the approval by members in the AGM to be held on Saturday, 29th September, 2012
Emphasis of matter paragraphs included in the amendments made to the Workers' Welfare Ordinance 1971, Auditors’ Report vide Finance Act 2008. The management of the Company is “We draw attention to note 10.2 to the financial statements contesting the case vigorously. As per the legal counsel, the which describes the basis on which the Company has not Company has a reasonable case and expects that the recognized provision for Workers’ Welfare Fund. constitution petition pending in the Honourable High Court of Sindh on the subject as referred above will be decided in the We also draw attention to note 12.2.1 to the financial statements favour of the Company. Accordingly, the management has not which describes the uncertainty related to the outcome of the recorded any liability towards Worker's Welfare Fund. constitutional petition filed by Arif Habib Investments Limited against Securities and Exchange Commission of Pakistan in Note 12.2.1 to the financial statements is the case of merger of Arif Habib Investments Limited with MCB reproduced as under: Asset Management Company Limited. Investment in AHIL (quoted) represents 21.664 million (2011: 21.664 million) fully paid ordinary shares of Rs. 10 each, Our opinion is not qualified in respect of above-mentioned representing 30.09% (2011: 30.09%) of AHIL’s paid up share matters.” capital as at 30 June 2012, having historical cost of Rs. 81.95 million (2011: Rs. 81.95 million). However, during 2011, the Note 10.2 to the financial statements is reproduced company lost control over AHIL and designated the investment as under: ‘at fair value through profit or loss’ and accordingly fair value on During the year ended 30 June 2011, the Honourable High the date of loss of control was considered as deemed cost. Fair Court of Lahore vide their order in respect of writ petition No. value per share as at 30 June 2012 was Rs. 15.88 (2011: Rs. 8763/2011, has declared amendments introduced through 21.59), whereas book value based on net assets, as per Finance Acts 2006 and 2008 in Workers' Welfare Ordinance, unaudited financial statements, as at 30 June 2012 is Rs. 17.80 1971 as unconstitutional. Further, the Company has also filed a per share (2011: Rs. 16.22 per share). writ petition in the High Court of Sindh at Karachi to impugn the
Annual Report 2012 | Promoting Investments 70 During the year ended 30 June 2011, the shareholders of Arif Arif Habib DMCC, a member of Dubai Gold and Commodities Habib Investments Limited (AHIL) and MCB Asset Exchange (DGCX), and recently incorporated Arif Habib Management Company Limited (MCB-AMC) approved merger Commodities are under development stage and are expected to of these two entities under the scheme of amalgamation (“the contribute to the revenues of the company next year. scheme”). The scheme was sanctioned by Securities and Exchange Commission of Pakistan (SECP) through its order Asset Management dated 10 June 2011 with effect from 27 June 2011. Arif Habib Investments Limited has grown well over the past Subsequently SECP through its order dated 27 June 2011 year post-merger. The company was managing over Rs.45 extended the effective date of merger from 27 June 2011 to 30 billion as of 30th June 2012 in 16 mutual funds, 2 pension funds July 2011. The company in reply to the SECP order filed the and various investments plans – capturing a market share of petition in the Honourable Sindh High Court claiming that the around 11.5% in the open end fund industry. In line with the same is a past and closed transaction. In view of this, the industry trend, the major growth segments for the company Honourable Sindh High Court through its interim order dated 28 continued to be money market funds, which posted a September 2011 suspended the SECP order for extension of staggering YoY growth of 74% to reach to a size of around the effective date of merger. The hearing of this case is in Rs.23 billion. Conventional fixed income funds also performed progress. well and posted a growth of 35% YoY to cross Rs.15 billion. Shariah compliant fixed income fund also worth mentioning with Performance of Subsidiaries and a 7.5x growth YoY to reach a size of over Rs.1.5 billion. Equity Associates funds, on the other hand, witnessed significant redemption Your company has a diversified revenue stream, with major pressures during the year under review and their size went portion of revenue coming from the investment in the fertilizer down to around Rs.2.6 billion – 23% lower on a YoY basis. After business. The Cement has started making profit whereas Dairy the announcement of tax incentives in the Finance Bill 2012, businesses faced challenges during the year under review. pension schemes have started performing well and they have Steel business has commissioned all its major machines and posted a growth of 29% YoY to reach around Rs.0.45 billion. has commenced producing saleable CRC on trial basis. The company has registered an after tax profit of Rs. 144.58 Greenfield project in Energy is progressing satisfactorily. million for the year ended on 30th June 2012. Financial services businesses of securities brokerage and asset management companies’ financial performance have Fertilizers significantly improved. Pakarab Fertilizers Limited (PAFL) has earned a net profit after tax of Rs.4.6 billion for the year ended 31st December 2011 and Segments at a Glance has distributed shares of Fatima Fertilizer Company Limited as Specie Dividend for an amount of Rs.3.755 billion. Gas curtailment continued to remain a performance barrier for the Brokerage Fertilizer industry during the year under review which affected Arif Habib Limited (AHL) is the brokerage unit of the group. AHL the production and sales of all the companies on the SNGPL is known for the quality of services, for the reputation of network and Pak Arab Fertilizer (PAFL) was no exception. research, for the value of investment products, for the capacity Besides the efforts of Government, PAFL is also considering of public and private placements and, above all, for the various alternatives which once implemented would improve expertise of Investment Advisors. gas supply situation. First half year period from January 2012 to June 2012 remained difficult, however, despite the adverse During the year, AHL has earned a profit after tax of Rs.365.91 business conditions PAFL managed to register an after tax profit million with an EPS of Rs.8.13 on the back of prudent of Rs. 1.1 billion by streamlining the internal processes and investment management and better market conditions. It is strictly monitoring outlays. On positive note, financial cost has expected that going forward, the core business of AHL will be reduced by Rs.392 million as compared to corresponding marching better which will result in increase in its market share, period last year due to effective management of funds and profitability and value of investment. spread re-negotiation with the lenders.
During the year, SKM Lanka Holdings (Pvt.) Limited, a Fatima Fertilizer Company Limited (FFCL) has started subsidiary operating in Colombo has incurred a loss after tax of “Commercial Operations” from 1st July 2011 and earned a net Rs.41.89 million (Pak Rupee equivalent) during the year ended profit after tax of Rs.4.1 billion for the year ended 31st 31st March 2012. Action is underway to improve the December 2011. FFCL has distributed Cash Dividend of Rs.3 performance of the company, to diversify the portfolio of billion during 2012. During the first half year period, FFCL has financial services and strengthening the management. This will performed well despite the problems. FFCL has also paid off require injection of additional capital for which various options loans amounting to Rs.10 billion in May-12. are being evaluated.
71 Arif Habib Corp Steel the year, SDPL has suffered a loss after tax of Rs. 479.4 million. Aisha Steel Mills Limited (ASML) is a joint venture of Arif Habib We are in midst of the turnaround phase and expect more Group and Metal One (subsidiary of Mitsubishi Japan), structural changes in SDPL to make it a profitable company. Universal Metal Corporation-Japan. During the year under SDPL is expected to contribute to revenues of your company review, ASML has successfully completed the construction going forward. phase of the Project, and commenced trial operations in June 2012. Wind power During the year Sachal Energy Development (Pvt.) Ltd. ASML is in the process of being listed at the Karachi Stock (SEDPL) has suffered a loss after tax of Rs.9.6 million. SEDPL Exchange through an Offer for Sale transaction (OFS). The has made certain advancements during the year including public subscription was scheduled on 3rd and 4th July, 2012 obtaining approval from Alternative Energy Development Board and the subscription has been oversubscribed by 2.7 times for various studies conducted; signing contracts for making it the most successful public offering of the past three Engineering, Procurement & Construction and Operations & financial years. The pre-IPO portion of this transaction Maintenance; and locking the Wind Turbine Technology with amounting to Rs.234 million achieved a successful financial world’s second largest Wind Turbine Manufacturer. It is close in April 2012 following an overwhelming response from expected that the company will manage to get the Generation the financial sector in the country. ASML’s OFS also has the License and a Good Tariff Figure during the next year. privilege of being the first public offering using online subscription, as well as subscription using mobile phones. Future Outlook Your company has substantial stake in fertilizer sector and this Your company has also distributed 41.25 million convertible sector is facing challenges due to Governments’ policy of gas preference shares of ASML having a face value of Rs. 412.5 curtailment and excessive imports of urea. The fertilizer group is million as interim specie dividend to its shareholders for the 9 constantly engaged with the government to arrive at a policy months period ended 31st March 2012. which could be a win win for all stakeholders. Upon reaching a viable understanding, this investment promises even higher Cement return for shareholders. The Company’s investments in cement Year under review turned out to be one of the good years for and steel are expected to yield valuation growth due to cement sector, where demand and prices improved by 9% and Al-Abbas Cement’s commencing profitable operations and 18%, respectively. The industry achieved highest ever domestic Aisha Steel generating cash flows due to commencement of its demand of 24 million tons during the year. In addition to this, commercial operations. Sachal Energy is expected to be in coal prices in the international market went down by 26% in market during current year for its financial close and Dairies FY12. However majority of this fall came in 4QFY12; thus on business is under restructuring phase for turning it around. average FY12 witnessed a modest drop of 2% YoY in coal Financial services, particularly securities brokerage and asset prices. However rising electricity and other input costs are still management are on sound footings whereas commodities adding cost pressures for the cement sector. brokerage is being developed. Portfolio investment is expected to continue producing good financial results. Overall, company Al-Abbas Cement Industries Limited has recorded a profit of is expected to produce reasonable return for its shareholders. Rs.153.43 million as per the audited accounts for the financial year ended 30th June 2012 as compared to loss of Rs. 926.67 Risk Management million in previous financial year. The management of the The risk management system of company established by the investee company is constantly making efforts to improve plant Board comprises of a wide range of finely tuned organizational efficiency and consistency and to adopt cost cutting measures. and procedural components and is capable of identifying events The management is well aware of the challenges ahead and is and developments impairing the going-concern status of the devising strategies to overcome them. Company. The risk management system is designed to promote a balanced approach to risks at all organizational Thatta Cement Company Limited (TCCL) is making constant levels, identify and analyse the opportunities and risks at an efforts in improving efficiencies and adopting cost cutting early stage, their measurement and the use of suitable measures and to improve profitability of the company. Further, instruments to manage and monitor risks. by adjusting the sales mix from export to local, the Company is mitigating the risk to the maximum extent. The company is also With the Company’s key business being that of investing, it has setting a power project through a subsidiary so as to improve its evolved its risk management system as its investment strategy operating efficiency. The Company has recorded a loss of Rs. has evolved. Starting with secondary market investments, the 43.88 million as per the accounts for the financial year ended Company has always followed a policy of diversification 30th June 2012. between sectors and companies and at the same time basing individual investment decisions on fundamental analysis and Dairy following the golden rule of value investing. The Company Sweetwater Dairies Pakistan (Pvt.) Limited (SDPL) was a joint manages its risk by applying caution with respect to the stock venture of AHCL, Sweetwater U.S.A, Habib Bank Limited, selection; avoiding concentration risk, ensuring adequate Unicorn Investment Bank and Gatron group. During the year, on underlying collateral and assessing the capacity of the the back of compelling fundamentals of dairy sector, your counterparty. In addition, the Company has played a continuing company has enhanced its stake in SDPL to 85.2% by taking role through its representatives in the development of basic up respective holdings of existing investors of SDPL. Remaining capital market infrastructure. 14.8% shares are held by Sweetwater Inc. (SWI) USA. During
Annual Report 2012 | Promoting Investments 72 Once the Company started making strategic investments, it has Employees are rewarded based on performance, resulting in developed risk management systems suited to such investing. enhanced retention and motivation at all levels. All our Business decisions are reached after deliberation of operational activities are carried out in a transparent manner comprehensive project analyses which identifies both potential following our code of ethics, on which there can be no risks and opportunities. To manage the risk, company focuses compromise. on core areas like governance by Board and senior management, preparation and implementation of policies and Our continuous improvement philosophy and benchmarking procedures, risk monitoring and management information with the best in class will help in making AHCL a high system, and internal controls. performance organization.
The company goes through a systematic process of identifying Corporate Social Responsibility and evaluating risks and controls and, where necessary, In keeping with the glorious tradition, your company continued improving the way in which risks are managed. Each year, the its contribution to the society as a socially responsive management reviews the financial reporting statements and organization through various initiatives. AHCL is committed also statements regarding risk management, corporate social towards fulfilling its Corporate Social Responsibility and has responsibility, integrity and compliance with the code of been actively discharging its Corporate Social Responsibility conduct, the accounting manual, statutory provisions and with special focus on healthcare, education, environment, compliance with other rules and regulations. community welfare, sports and relief work and aims to enhance its scope and contribution in the future. For operational risk management, the starting point has always been carrying out an in depth analysis before making the We at AHCL are conscious of the well being of our employees investment, and supplementing that with hiring of qualified and as well as community at large. The Company focuses on energy experienced professionals to represent it on the Boards of conservation and all departments and employees adhere to the investee companies, applying budgetary and other internal power conservation measures. controls on such companies through the Board members, continuing review of performance of the investee companies Your Company takes its contribution towards national economy and taking corrective measures as and when needed, including seriously and has always discharged its obligations in a the dis-investment from businesses if that became the right transparent, accurate and timely manner. Details of the option. contributions are presented on page No. 84. Furthermore, Arif Habib Corporation Limited has contributed an amount of Rs.8.7 The Board has set up an Investment Committee and this million towards tax. Committee has the responsibility of vetting and continuous monitoring of all strategic investments. In turn, the Company’s Corporate Governance management staff responsible for the strategic investments AHCL is listed at the Karachi, Lahore and Islamabad Stock provides the Committee with timely reports. Exchanges. The Company’s Board and management are committed to observe the Code of Corporate Governance The detailed qualitative reports and quantitative analysis on risk prescribed for listed companies and are familiar with their management is presented in note 29 to the financial responsibilities and monitor the operations and performance to statements. enhance the accuracy, comprehensiveness and transparency of financial and non-financial information. Capital Management and Liquidity The Company has a policy to maintain a strong capital base so The Board would like to state that proper books of accounts of as to maintain investor, creditor and market confidence, sustain the Company have been maintained and appropriate future development of the business, safeguard the Company's accounting policies have been adopted and consistently ability to continue as a going concern in order to provide returns applied. Preparation of accounts and accounting estimates are for shareholders and benefit for other stakeholders and to based on reasonable and prudent judgment. International maintain an optimal capital structure to reduce the cost of Financial Reporting Standards, as applicable in Pakistan, are capital. The Board of Directors monitors the return on capital, followed. The system of internal controls is sound in design and which the Company defines as net profit after taxation divided has been effectively implemented and monitored. The financial by total shareholders' equity. There were no changes in statements of the Company present fairly its state of affairs, the Company's approach to capital management during the year result of its operations, cash flows and changes in equity. No and the Company is not subject to externally imposed capital material payment has remained outstanding on account of any requirements. taxes, duties, levies or charges. The company has no outstanding obligations under gratuity, pension or provident Human Resource fund. Your company takes great pride in the commitment, competence and vigour shown by its workforce in all realms of In compliance with the Code, the Board hereby reaffirm that business. The Company continues to take new initiatives to there is no doubt whatsoever about the Company’s ability to further align its HR policies to meet the growing needs of its continue as a going concern and that there has been no business. People development continues to be a key focus area material departure from the best practices of corporate in your company. governance as detailed in the listing regulations and transfer pricing. At AHCL Human Resources, in its business partner role, enacts strategies to raise the performance of each team member to its During the year under review, the Board has arranged one maximum potential. The primary reason for our success is that training session for its directors. Further, one director has our organization is built around people. participated in four parts of Corporate Governance Leadership Skills Program during the year. It has always been the
73 Arif Habib Corp Company’s endeavor to excel through better Corporate shareholders at the forthcoming annual general meeting Governance and fair and transparent practices, many of which scheduled on 29th September 2012. have already been in place even before they were mandated by law. Compliance with Secretarial Practices The Company Secretary furnished a Secretarial Compliance Trading in Company’s Share by Directors Certificate, in the prescribed form, as required under prevalent and Executives listing regulation 35(xxv) of Karachi Stock Exchange, as part of All Directors including the Chief Executive, Chief Financial the annual return filed with the Registrar of Companies to certify Officer, and Executives of the Company were delivered written the secretarial and corporate requirements of the Companies notices by the Company Secretary to immediately inform in Ordinance, 1984 and listing regulations have been duly writing any trading in the Company’s shares by themselves or complied with. by their spouses and to deliver a written record of the price, number of shares and CDC statement within 4 days of such Election of Directors transaction to the Company Secretary. A statement showing the In accordance with the provisions of Section 180 of the Company’s shares bought and sold by its Directors, Chief Companies Ordinance, 1984 the three years term of seven Executive Officer, Chief Financial Officer, Company Secretary directors elected in the annual general meeting of 2010 will be and their minor family members is annexed as Annexure-I. completed in September 2013. Attendance at Board Meetings Post Balance Sheet Events A statement showing attendance at Board meetings is annexed There have been no material changes since 30th June 2012 to as Annexure-II. the date of this report except the declaration of a final Cash Dividend @ 20% and issue of Bonus shares @ 10% which is Pattern of Shareholding subject to the approval of the Members at the 18th Annual The shares of the Company are listed on Karachi, Lahore and General Meeting to be held on 29th September 2012. The effect Islamabad Stock Exchanges. There were 7,581 shareholders of such declaration shall be reflected in the next year’s financial of the Company as of 30th June 2012. The detailed pattern of statements. shareholding and categories of shareholding of the Company including shares held by directors and executives, if any, are Related Party Transactions annexed as Annexure-III. In order to comply with the requirements of listing regulations, the Company presented all related party transactions before the Financial and Business Highlights Audit Committee and Board for their review and approval. These The key operating and financial data has been given in transactions have been approved by the Audit Committee and summarized form under the caption “Financial & Business Board of Directors in their respective meetings. The details of Highlights – Six years at a glance” (Page No. 53) and graphical related party transactions have been provided in note 31 of the representation of the important statistics is presented on (Page annexed audited financial statements. No. 55). Acknowledgement Investment in Retirement Benefits The Directors are grateful to the Company’s stakeholders for The value of investment, made by the staff Provident Fund their continuing confidence and patronage. We wish to place on operated by the Company as per their respective audited record our appreciation and thanks for the faith and trust financial statements as of 30th June 2011 amounts to Rs.4.27 reposed by our Business Partners, Bankers & Financial million. Institutions. We thank the Ministry of Finance, the Securities & Exchange Commission of Pakistan, the State Bank of Pakistan, Audit Committee the Competition Commission of Pakistan, Central Depository As required under the Code of Corporate Governance, the Company of Pakistan and the Managements of Karachi, Audit Committee continued to perform as per its terms of Lahore, and Islamabad Stock Exchanges for their continued reference duly approved by the Board. The Committee support and guidance which has gone a long way in giving composition and its terms of reference are also attached with present shape to the company. this report. The composition of Audit Committee will be made in line with requirements of ‘Code of Corporate Governance 2012’ The results of an organization are greatly reflective of the efforts at the time of next election of directors in accordance with the put in by the people who work for and with the company. The ‘Implementation deadlines of Code of Corporate Governance Directors fully recognize the collective contribution made by the 2012’. employees of the company for successful operations of the company. We also appreciate the valuable contribution and Auditors active role of the members of the audit and other committees in The present external auditors M/s.KPMG Taseer Hadi & Co., supporting and guiding the management on matters of great shall retire at the conclusion of annual general meeting on 29th importance. September 2012 and being eligible, have offered themselves for reappointment for the year ending on 30th June 2013. The For and on behalf of the Board external auditors hold satisfactory rating by the Institute of Chartered Accountants of Pakistan (ICAP) as required under their Quality Control Review Program. As suggested by the Audit Committee, the Board recommends reappointment of Arif Habib M/s.KPMG Taseer Hadi & Co., as auditors of the Company for Karachi: 3rd September 2012 Chairman & Chief Executive the financial year ending on 30th June 2013 at a fee to be mutually agreed. Approval to this effect will be sought from the
Annual Report 2012 | Promoting Investments 74 Annexure I
Statement showing shares bought and sold by Directors, CEO, CFO, Company Secretary and their Spouses and Minor Children From 1st July 2011 to 30th June 2012
Name Designation Shares Bought Shares Sold Remarks
Mr. Arif Habib Chairman & Chief Executive 6,635,899 - -
Mr. Nasim Beg Director - -
Mr. Asadullah Khawaja Director 4,000 - -
Mr. Samad Habib Director - - -
Mr. Kashif Habib Director - -
Mr. Muhammad Ejaz Director 100 - -
Mr. Kashif Shah Director 100 - -
Mr. Muhammad Akmal Jameel Director - - -
Mr. Tahir Iqbal Director - - -
Mr. Basit CFO & Company Secretary - - -
Mr. Zeeshan CFO & Company Secretary - - -
Mrs. Zetun Arif Spouse of Mr. Arif Habib - - -
Minor children - - - -
75 Arif Habib Corp Annexure II
Statement showing attendance at Board Meetings From 1st July 2011 to 30th June 2012
Name Designation Attended Leave Granted Remarks
Mr. Arif Habib "Chairman & Chief Executive" 4 - -
Mr. Nasim Beg Director 4 - -
Mr. Asadullah Khawaja Director 4 - -
Mr. Samad Habib Director 4 - -
Mr. Kashif Habib Director 4 - -
Mr. Muhammad Ejaz Director 4 - -
Mr. Kashif Shah Director 4 - -
Mr. Muhammad Akmal Jameel Director 1 - -
Mr. Tahir Iqbal Director 1 - -
Annual Report 2012 | Promoting Investments 76 Annexure III
Pattern of Shareholding Categories of Shareholders as at 30th June 2012
Number of Number of Category shareholders shares held Holding %
Directors, Chief Executive, and their Spouses and minor children 8 302,119,629 73.24
Executives - - -
Associated Companies, Undertakings and Related Parties 2 6,340,857 1.54
NIT and ICP 1 1,212,084 0.29
Public Sector Companies and Corporatons 4 4,316,418 1.05
Bank, Development Finance Institutions, Non-Banking Finance Institutions 11 4,653,609 1.13
Insurance Companies 9 3,659,710 0.89
Modaraba 3 127,187 0.03
Mutual Funds 12 10,502,549 2.55
Others 132 14,887,208 3.61
General Public - Local 7,386 55,426,080 13.44 General Public - Foreign 13 9,254,669 2.24
7,581 412,500,000 100.00
77 Arif Habib Corp Pattern of Shareholding Categories of Shareholders as at 30th June 2012
Category Number of Number of Holding % shareholders shares held
Directors, Chief Executive, and their Spouses and minor children Mr. Arif Habib 1 237,975,425 57.69 Mr. Asadullah Khawaja 1 15,915 0.00 Mr. Nasim Beg 1 20,072 0.00 Mr. Samad A. Habib 1 915 0.00 Mr. Kashif A. Habib 1 32,082 0.01 Mr. Muhammad Ejaz 1 110 0.00 Mr. Kashif Shah 1 110 0.00 Mrs. Zetun Arif 1 64,075,000 15.53 8 302,119,629 73.24 Executives - - -
Associated Companies, Undertakings and Related Parties Summit Bank Limited 1 4,220,633 1.02 Rotocast Engineering Company (Pvt.) Limited 1 2,120,224 0.51 2 6,340,857 1.54
NIT and ICP National Bank of Pakistan - Trustee Department NI(U)T Fund 1 1,212,084 0.29
Joint Stock Companies Public Sector Companies and Corporatons 4 4,316,418 1.05 Bank, Development Finance Institutions, Non-Banking Finance Institutions 11 4,653,609 1.13 Insurance Companies 9 3,659,710 0.89 Modarabas 3 127,187 0.03
Mutual Funds CDC - Trustee PICIC Investment Fund 1 2,865,000 0.69 CDC - Trustee PICIC Growth Fund 1 5,708,271 1.38 CDC - Trustee First Dawood Mutual Fund 1 50,000 0.01 CDC - Trustee Alfalah GHP Value Fund 1 200,000 0.05 CDC - Trustee AKD Index Tracker Fund 1 24,034 0.01 MCFSL - Trustee JS Kse-30 Index Fund 1 10,364 0.00 CDC - Trustee NAFA Stock Fund 1 5,500 0.00 First Capital Mutual Fund Limited 1 95,000 0.02 CDC - Trustee Alfalah GHP Alpha Fund 1 199,908 0.05 CDC - Trustee KASB Asset Allocation Fund - Mt 1 68,964 0.02 CDC - Trustee PICIC Stock Fund 1 235,000 0.06 MCBFSL - Trustee Namco Balanced Fund - Mt 1 1,040,508 0.25 12 10,502,549 2.55
Others 132 14,887,208 3.61 Genral Public Local 7,386 55,426,080 13.44 Foreign 13 9,254,669 2.24 7,399 64,680,749 15.68 7,581 412,500,000 100.00 Share holders holding 5% or more
Mr. Arif Habib 1 237,975,425 57.69 Mrs. Zetun Arif 1 64,075,000 15.53
Annual Report 2012 | Promoting Investments 78 Pattern of Shareholding Categories of Shareholders as at 30th June 2012
Number of Shareholdings’ slab Total Shares held shareholders
874 1 to 100 33,047 1473 101 to 500 408,803 1256 501 to 1,000 931,942 2525 1,001 to 5,000 5,916,153 571 5,001 to 10,000 4,173,628 237 10,001 to 15,000 2,945,497 124 15,001 to 20,000 2,205,803 86 20,001 to 25,000 1,945,885 62 25,001 to 30,000 1,745,093 39 30,001 to 35,000 1,284,662 31 35,001 to 40,000 1,183,820 28 40,001 to 45,000 1,189,602 38 45,001 to 50,000 1,852,461 14 50,001 to 55,000 742,958 19 55,001 to 60,000 1,110,996 4 60,001 to 65,000 247,906 12 65,001 to 70,000 813,755 13 70,001 to 75,000 956,137 7 75,001 to 80,000 550,314 6 80,001 to 85,000 496,415 5 85,001 to 90,000 440,450 8 90,001 to 95,000 743,740 16 95,001 to 100,000 1,595,950 5 100,001 to 105,000 514,589 8 105,001 to 110,000 867,731 3 110,001 to 115,000 336,760 4 115,001 to 120,000 473,087 4 120,001 to 125,000 489,464 4 125,001 to 130,000 516,000 2 130,001 to 135,000 265,500 3 135,001 to 140,000 414,248 3 140,001 to 145,000 430,380 7 145,001 to 150,000 1,045,845 2 150,001 to 160,000 316,600 3 160,001 to 165,000 494,775 1 165,001 to 170,000 166,894 1 170,001 to 175,000 173,327 2 175,001 to 180,000 357,050 1 180,001 to 190,000 187,005 5 190,001 to 200,000 999,908 1 200,001 to 205,000 202,400 2 205,001 to 210,000 415,500 2 210,001 to 215,000 424,500 3 215,001 to 220,000 655,213 2 220,001 to 230,000 456,000 1 230,001 to 235,000 235,000 2 235,001 to 240,000 472,243 1 240,001 to 245,000 245,000 1 245,001 to 250,000 250,000 2 250,001 to 275,000 545,189 1 275,001 to 300,000 300,000 1 300,001 to 305,000 300,630 1 305,001 to 310,000 305,930 1 310,001 to 320,000 320,000 1 320,001 to 330,000 327,317
79 Arif Habib Corp Pattern of Shareholding Categories of Shareholders as at 30th June 2012
Number of Shareholdings’ slab Total Shares held shareholders
1 330,001 to 350,000 346,450 1 350,001 to 355,000 352,900 1 355,001 to 360,000 356,400 1 360,001 to 375,000 374,443 1 375,001 to 400,000 400,000 1 400,001 to 420,000 420,000 1 420,001 to 445,000 444,825 1 445,001 to 455,000 454,500 1 455,001 to 460,000 458,332 2 460,001 to 485,000 967,118 2 485,001 to 500,000 999,620 1 500,001 to 525,000 524,744 1 525,001 to 550,000 547,850 2 550,001 to 605,000 1,208,200 2 605,001 to 690,000 1,377,100 1 690,001 to 695,000 694,760 1 695,001 to 715,000 715,000 1 715,001 to 745,000 745,000 1 745,001 to 765,000 760,445 1 765,001 to 770,000 770,000 1 770,001 to 805,000 803,100 1 805,001 to 865,000 864,425 1 865,001 to 880,000 880,000 1 880,001 to 930,000 928,000 1 930,001 to 995,000 990,415 1 995,001 to 1,045,000 1,040,508 1 1,045,001 to 1,050,000 1,048,566 1 1,050,001 to 1,190,000 1,189,858 1 1,190,001 to 1,200,000 1,200,000 1 1,200,001 to 1,215,000 1,212,084 1 1,215,001 to 1,225,000 1,223,150 1 1,225,001 to 1,240,000 1,238,000 1 1,240,001 to 1,250,000 1,250,000 1 1,250,001 to 1,410,000 1,405,153 1 1,410,001 to 1,460,000 1,457,725 1 1,460,001 to 1,685,000 1,682,862 1 1,685,001 to 2,025,000 2,022,000 1 2,025,001 to 2,065,000 2,061,000 1 2,065,001 to 2,125,000 2,120,224 1 2,125,001 to 2,200,000 2,200,000 1 2,200,001 to 2,355,000 2,353,384 1 2,355,001 to 2,500,000 2,500,000 1 2,500,001 to 2,760,000 2,756,093 1 2,760,001 to 2,865,000 2,865,000 1 2,865,001 to 3,295,000 3,292,275 1 3,295,001 to 4,225,000 4,220,633 1 4,225,001 to 5,710,000 5,708,271 1 5,710,001 to 64,075,000 64,075,000 1 64,075,001 to 237,980,000 237,975,425
7,581 412,500,000
Annual Report 2012 | Promoting Investments 80 Sustainability Report
81 Arif Habib Corp message from
Mr. Arif Habib The Chairman & Chief Executive
Sustainability is swiftly becoming the cornerstone of the future of all growing businesses. At AHCL, we are striving to improve people’s lives by changing society for the better, through the value of investments. We have founded our philosophy on the three dimensions, i.e. economic, environmental and social performance and we conduct our activities in a manner that navigates advantageously with the environment and with people.
As one of the country’s largest business groups, and as a company that is reaching out, we have an exclusive opportunity to fashion a constructive impact on the society we move in. We take this prospect seriously and feel an obligation to contribute towards it. We rate our sustainability efforts as an extension of responsible corporate citizenship that started in our initial days as a company. Accordingly, we believe that sustainability is also a business imperative: that is to say; our company can only be as dynamic as the masses and society we are working for. If we intend to move forward to accomplish our mission, we have to make progress in a manner that maintains to improve the world around us.
Due to the proliferation of economic, environmental and social challenges to our planet, a greater urgency has arisen regarding the need to address these risks. It is for this very reason that we, as one of Pakistan’s premier business-houses, consider it our duty of making sustainability a high priority issue. Our commitment to sustainability is reflected in the power of our brand, the energy and passion of its employees and the ability of its various businesses to effect meaningful change.
We at Arif Habib Group take a holistic view of sustainability, which to us translates into fulfilling the requirements of various stakeholders, while simultaneously achieving bigger efficiencies i.e. a reduced carbon footprint, streamlined manufacturing processes and making a difference to the lives of others. Therefore, rather than looking upon this exercise as a drag on business performance, we view sustainability as a great innovating tool meant to trigger an advance in company profitability.
Now, it is about time that we use sustainability as a way to achieve various objectives like business growth and greater customer satisfaction, as it will allow us to create a positive social and environmental impact, by enabling a greater and wholesome business purpose.
Through this report, we share our dedication and progress in meeting our commitment towards sustainability, and it is one episode of an on-going process. In the pages of this report you will see our sustainability strategy, goals, progress and areas for improvement. We have a firm belief that good governance, accountability and sustainable business practices are keys to accomplish these goals. Arif Habib Group is well poised not only to play a critical role in the private sector in this endeavour, but more importantly to do so responsibly, balancing the interests of all our stakeholders. We are always dedicated to meet our commitments.
Annual Report 2012 | Promoting Investments 82 vision for sustainability
Our vision is to become Pakistan’s leading investment company; to achieve excellence in every aspect of our business while discharging our obligations as a good corporate citizen in ways that are economically, environmentally and socially responsible. At the heart of our vision, there is a philosophy of paying back to our community, to spread our wealth for the improvement of this country and contribute towards a better tomorrow. With this ideology, we aim to continue making investments in businesses with a social conscience, enterprises that go beyond a mere pursuit of financial success to embrace bigger environmental and social causes that affects us and the world we live in.
We recognize the value of Corporate Social Responsibility and the effect that this value brings to the community. We believe that the private sector and civil society must engage with government and national authorities to overcome social and economic challenges. A country’s welfare is not solely the responsibility of the government; it is rather a shared responsibility by all segments of the society. Modern corporates will have to realize the importance of identifying the right mix of weightage between needs of society and its stakeholders. Sustainable business is the need of the hour and the only way forward.
Corporate Purpose society cannot continue its business, however as a matter of To excel in conceiving, developing and executing exclusive and fact; a business cannot conduct CSR activities if it is unable to exciting projects across business sectors with a focus on generate profits. Hence, we believe in running a sustainable chemicals & fertilizers, financial services, construction business which generates profits for our shareholders, materials, energy, steel and other sectors with the aim of supported by good governance, enduring stakeholders’ maximizing returns for all our stakeholders, to enrich the lives of relationships, and committed workforce achieving the corporate our employees and customers while playing a significant role in purpose and managing the social and environmental impact of developing Pakistan’s economy and in its integration into the our business. By following the roadmap of this philosophy, we world markets. can provide shared value for the benefit of both; our shareholders and the wider economy, the environment and Sustainability Plan society. Arif Habib Group takes Corporate Social Responsibility (CSR) At AHCL, we firmly believe that CSR activities are meaningless very seriously. We are well aware of our social duty and have unless they are sustainable, so they must be grounded in the made CSR as one of our considered priorities for the coming company’s core business, while still remaining unique to the years. To us, CSR implies that we must be watchful of the company. This is why we are pursuing a CSR strategy that is in effects our business operations have on people, planet, profit, line with our core business philosophy. Our sustainability plan is and positioning. We regard CSR as an essential part of developed to achieve our Corporate Purpose, with which it is business operations and aspire to make a clear contribution to directly aligned. a responsible society. With this approach, programmes that have already started are sustained and, where suitable, - Making valuable additions to Pakistan’s education sector accentuated on the basis of CSR principles. The Group has a - Contributions towards the Health sector rich history of corporate social responsibility; a history that has - Initiatives during natural calamities e.g. floods and grown and evolved to meet the complexities of today’s business earthquakes etc. world and the challenges of a global society. Apart from the - Taking appropriate steps to ensure employee health and Group’s own charitable foundation i.e. Arif Habib Foundation, safety including promotion of sustainable workplace AHCL also contributes by itself and through its affiliates for the practices welfare of the people and society at large. - Establish and follow standards of corporate governance and ethics We consider CSR and business as inseparable commodities. - Dealing with the impact of environmental externalities such Any company that does not discharge its obligation towards as carbon emissions etc.
83 Arif Habib Corp corporate social responsibility (CSR)
The attitude and commitment of our Group Chairman towards the CSR has guided our company and its people. At Arif
Habib Group, CSR is a way of life and that is why we care about our communities and believe in investing in them. We work with organizations and programs with established results, improving lives around the country. In line with the
Sustainability Plan, Arif Habib Group has supported several noble causes and some of them are mentioned here below:
Education Health
Natural Employees Calamities Safety
Corporate Environment Governance
Annual Report 2012 | Promoting Investments 84 MAKING VALUABLE ADDITIONS TO PAKISTAN’S EDUCATION SECTOR
We keep focus of our community investment on education because we believe it provides the fundamental building
blocks for the development of enlightened and civilized society.
During the year under review, Arif Habib Group has committed Prior to the current financial year, AHCL had contributed to a sum of Rs.100 million in six-monthly instalments of Rs.10 initiate the Karachi School for Business and Leadership (KSBL) million over a period of five years for the development of facilities project. This step was taken at a time when a group of Pakistani and infrastructure at Institute of Business Administration (IBA). business and corporate leaders recognized that Karachi, the IBA is the oldest business school outside North America. It was business and commercial hub of Pakistan, needed a established in 1955 with initial technical support provided by the world-class business institution. This dream started to evolve world famous Wharton School of Finance, University of into reality with the founding of the Karachi Education Initiative Pennsylvania. Later, the University of Southern California set up (KEI), a non-profit organization registered under Section 42 of various facilities at the Institute and several prominent American the Companies Ordinance, with the goal of establishing an professors were assigned to the IBA. In spite of a rapid increase top-class, international graduate business school i.e. KSBL, in the number of business schools, the IBA has maintained its which is envisioned to be a graduate management school that position as the premier institution of higher learning in the field would offer high quality leading-edge programs to the many of management and business administration. IBA programs are talented young men and women of this country as well as designed to provide world-class professional managers and accept graduates from abroad. KSBL is designed as a school entrepreneurs for the business and industry in Pakistan. Arif with a social conscience that will promote economic and social Habib Group has also offered to extend its assistance for change by developing leaders who will impact organizations administration and management of General Endowment Fund through their knowledge, skills and expertise as well as as Independent Friend of IBA Trust. contribute to business excellence by ensuring the application of highly professional and ethical practices in the national and During the year, AHCL has donated an amount of Rs.10 million, international marketplace. As a new institution, KSBL gained being the first instalment of the Groups’ committed contribution immediate credibility when it entered into a Strategic towards the cause of setting up an educational institution of Collaboration Agreement with the University of Cambridge international standard to Habib University Foundation (HUF). Judge Business School in the spring of 2009. Under this HUF is a not-for-profit organization which supports educational agreement, Cambridge will provide faculty to teach Executive initiatives, research and innovation and was established in Education programs for KSBL in Karachi. A University of October 2007 by the House of Habib. The foundation develops Cambridge certificate will also be awarded to those participants and supports a diverse portfolio of programs which aim at who successfully complete the programs. Cambridge is also establishing dynamic learning spaces. Some of HUF's major working with KSBL in formulating the curriculum for its graduate initiatives include; establishing a world-class Habib University, and executive education programs. For this notable cause, enhancing marketable skills for the youth (Institute for during 2011, AHCL’s Board of Directors approved a contribution Advancing Careers and Talents - iACT), and various other of Rs. 103 million from and on behalf of the Arif Habib Group philanthropic projects that facilitate in improving access to towards the construction of this institution. The full-time MBA quality education. program will commence in the fall of 2012, followed by the working professional MBA program in 2014. AHCL has also donated an amount of Rs. 1 million, Rs. 0.5 million and Rs. 0.25 million during the year to Lahore City University for building an Art Studio, Pakistan Memon Jamaat and Institute of Business Management respectively for educational purposes.
85 Arif Habib Corp Education
Furthermore, Fatima Fertilizer Education Society (FFES), a books on every subject, has been set up and funds provided for registered organization is effectively running an English a computer lab in order to further improve the school’s facilities. medium school to meet the educational needs of its employees’ children. This institution is being run by a top professional faculty A ‘Dastkari’ school is also functioning at PFL, where girls are of educationists and has given outstanding results during the taught skills such as hand-designing and embroidery. Efforts past three years. FFES has further started a comprehensive are currently underway to affiliate this school with a vocational program of adopting the neglected government schools of the institute so that the degree is recognized. area. Through this program, FFES will not only meet the deficiencies of the school building, staff and syllabus but will Javedan Corporation Limited (JCL), another group company, also devote attention to teacher training, talent scholarships and allocated a plot measuring 1 Acre at Naya Nazimabad Housing student nutrition. In addition, the Resident Manager of FFCL Project scheme to ‘The Citizens’ Foundation’ (TCF) for the has been appointed as a member to the Board of Governors of establishment of a school. The total establishment cost of this Danish Schools by the Government of Punjab for future venture has been committed by JCL. The operational cost per management purposes. FFCL has also contributed generously year from April 2012 will be Rs. 1.5 million. TCF will charge a towards Danish School Rahim Yar Khan, aimed at providing nominal tuition fee to its students. The actual cost incurred to run high-standard education to orphans and deprived children of the school will be far greater, the balance of which will be funded Rahim Yar Khan. by JCL on a continuous basis. During the year, JCL has donated an amount of Rs. 10.875 million to TCF. The Progressive Education Network (PEN) is an organization working to foster a wide network of schools across Pakistan, improving enrolment and providing quality education to unprivileged children. During 2011, both FFCL and PFL contributed Rs. 1 million each to PEN.
Several group companies also participated in the National Outreach Program at the Lahore University of Management Sciences (LUMS). This program is an initiative that was launched in 2001 with the objective of providing educational opportunities to bright students from small cities, villages and rural ‘backwaters’, who were unable to meet the regular fee requirements. Both FFCL and PFL participated by contributing Rs.4 million to the sponsoring of 8 deserving students from South Punjab through the four-year degree program. PFL also donated Rs.7 million for the construction of an auditorium at LUMS.
PFL has also opened a school, Pakarab Public School (PPS). PFL will provide free books and stationery to the children of staff employees enrolled at the school. A fully equipped library, with
Annual Report 2012 | Promoting Investments 86 Health CONTRIBUTIONS TOWARDS THE HEALTH SECTOR
Arif Habib Group is committed to ensure productivity via a healthy society. During the period under review, Arif
Habib Corporation has contributed an amount of Rs.1.8 million towards purchase of X-ray machines for Kharadar
General Hospital. In addition, AHCL has donated Rs.0.5 million to Shaukat Khanum Memorial Trust, Rs.0.5 million
to Fatimid Foundation and Rs.0.1 million to Bait-ul-Sukun Cancer Hospital during the year.
Memon Medical Institute (MMI) Hospital is a completely WWF and the remaining 50% will be contributed by PFL. The donor-funded project of the Memon Health and Education total project cost of Rs.2 billion does not include the cost of land, Committee (MHEF). MMI is a public welfare project of selfless which will be provided by PFL. So far, Rs. 98 million has been and compassionate individuals/bodies who have contributed contributed by PFL towards the project. Once completed, it will generously towards its creation both in terms of time and be a self-sustaining hospital which will provide free kidney and money. It is the vision of the community for the betterment of the psychiatric treatment to all workers registered with the EOBI or nation. It is one of the largest projects undertaken by the ESSI. This is the first Worker Welfare Board of its kind and only Memon community to provide accessible and affordable quality the fifth after the four provincial worker welfare funds. healthcare and education to all with dignity, respect and empathy. The project also included a 332 bed state of the art Both PFL and FFCL contributed Rs.500,000 each to the Sindh medical facility. Earlier, for this cause, AHCL’s Board of Directors Institute of Urology and Transplantation (SIUT). SIUT is a public has approved a generous allocation of Rs. 33 million on behalf health sector organization providing comprehensive and of the Group towards the construction and completion of this modern facilities free of cost to patients from predominantly institution. AHCL is also the corporate member of MMI and Mr. rural and urban strata with virtually no access to medical Kashif A. Habib, Director, has been designated as one of its facilities. trustees. Furthermore, Mr. Arif Habib is Honorary Chairman of the Board of Trustees of Memon Health & Education On May 15, 2011, a medical centre along with a vaccination Foundation, a parent body of Memon Medical Institute. centre started functioning at FFCL plant site to facilitate the neighbouring community and Company staff. This centre FFCL has established a Trust to construct and run a welfare provides hepatitis awareness, screening/diagnostic facility for hospital at Sadiqabad that will cost around Rs. 300 million. This Hepatitis B & C and vaccination for Hepatitis B. To date, more hospital will serve as a centre of quality treatment with than 50 people have been vaccinated through acquired specialized units for hepatitis treatment, trauma and vaccines on a temporary basis. To ensure regular operations, emergencies. the Company will invest Rs. 100,000 as a one-off non-operational expense and will provide Rs. 322,000 per PFL, on the other hand, has signed an agreement with the month as operational expenses. The treatment for the Governing Body of Worker Welfare Fund, Ministry of Labour neighbouring community would be free throughout the year. and Manpower for the construction of Mukhtar A. Sheikh Subsequently, the Company plans to undertake Fatima Memorial Hospital, a kidney and psychiatric treatment facility Fertilizer Welfare Hospital (FFWH), a modern welfare hospital in and other allied services at Multan. Under the agreement, the vicinity of the plant site, to cater to the needs of the Pakarab Workers Welfare Board is being established as a underprivileged of the area. Public-Private partnership between Worker Welfare Fund (WWF) and PFL for the efficient management and During the year, JCL has contributed Rs.1.2 million towards administration of the money to be allocated for the project. For Memon Medical Institute and Rs.0.05 million was donated to the establishment of the Hospital, 50% will be contributed by the Chipa Welfare.
87 Arif Habib Corp Natural Calamities INITIATIVES DURING NATURAL CALAMITIES E.G. FLOODS AND EARTHQUAKES ETC.
The Group companies have always been at the forefront in times of adversity and natural calamities. A case in
point being Pakistan’s floods during the past two years, which destroyed hundreds of thousands of homes, killed off
livestock and washed away swathes of cropland. During the year AHCL has contributed Rs.1 million to Utility
Stores Corporation in connection with supplies for flood victims.
PFL and FFCL alongwith other companies actively launched an which covered construction of 237 houses, purchase of land, effective rescue and rehabilitation program to provide relief construction and furniture for school and vocational centre goods to the flood-hit areas of Punjab. This program for the buildings, water filter plant, computers, overhead tank, tube well, flood-affected people was done in close liaison with the District dispensary equipment, landscaping, renovation of old mosque Government and military officials (51 Brigade). Support was and construction of new mosque and madrasah. JCL had made provided to around 14,000 flood victims in Muzzafargarh, a contribution of Rs.2.5 million through CPLC in connection with Rahim Yar Khan, Kot Addu, Bhong, Alipur, Sadiqabad and flood relief activities. Thatta Cement Company Limited (TCCL), Liaqatpur. The aid amounting to Rs. 12 million was dispatched a group company, had also played its role positively in relief and initially. Continuing its maximum support during the preliminary rescue activities. TCCL had opened up its premises to shelter stage of providing instant relief to the flood affectees, PFL plans flood affectees of local towns of Thatta district. In addition, TCCL to actively involve itself in the proceeding phase of rehabilitation had contributed to relief work by providing these Internally of the displaced persons. The rehabilitation process is being Displaced People food and safe drinking water and medical chalked out, in view of the damage assessment of the affected care as well. Besides, TCCL had fully cooperated and facilitated areas, and a plan to bring about massive infrastructure uplift will the District Government and National Armed Forces and be initiated simultaneously. coordinated with them for support of flood affectees.
For the rehabilitation of flood victims, a project worth Rs. 22 million has been undertaken to set up Fatima Model Village at Mehmood Kot District, Muzaffargarh and 50 houses are being built. The Floods in Sindh, in the South-East Pakistan impacted millions of people, leaving over 300 dead, over 550 injured, over a million homes affected, millions of acres of land has submerged in monsoon rains, which included cultivated areas leaving 80% of the cash crops damaged. Situation in 14 districts of Sindh is dire, with Badin, Naushero Feroz, Nawabshah and Mirpur Khas being the worst affected areas. A catastrophe required an immediate response. Given the devastation caused, PFL made significant contributions for the relief and rehabilitation of the victims.
During the previous year, Sukhchayn Gardens (Pvt.) Ltd., a group company had undertaken the construction of a model village for flood affectees at Basti Miani Mallah (Kot Mithan), Rajanpur. The cost of the project was around Rs.113 million
Annual Report 2012 | Promoting Investments 88 Employees Safety
TAKING APPROPRIATE STEPS TO ENSURE EMPLOYEE HEALTH AND SAFETY INCLUDING PROMOTION OF SUSTAINABLE WORKPLACE PRACTICES
resource. We believe that our employees are the decisive factor in achieving superior results. Employees are one of
the key pillars of strength upon which our efforts and accomplishments rest. AHCL continuously invests in
improving employees’ skill capacities to facilitate them in handling the challenging opportunities and thereby strive
for superior performance. Our success is the replica of our peoples’ success and we believe that the future of Arif
Habib Group is closely linked to the future of our people.
As a Group operating across the country, Arif Habib Group awarded the International Safety Award for 2010 to PFL, for its seeks to recruit the best employee for every position regardless demonstrated commitment and improvement in health and of gender, ethnic or national origin, religion, sexual orientation or safety management systems. This International Safety Award any personal characteristic not relevant to their work. The Group recognizes and rewards organizations that show real also seeks to ensure that fair consideration is given to commitment to improving corporate health and safety. One of applications for employment received from people with the safety engineers of PFL was also awarded the ‘Rising Star disabilities and we do offer employment, training and of Safety Award’ by the USA National Safety Council. advancement where possible to employees who are or become temporarily or permanently disabled.
As usual, this year too saw the Group placing a strong emphasis on Employee Health & Safety. At FFCL, considerable efforts were put in to complete the transition from construction to operational phase. In addition, accreditation to international safety and environmental standards, ISO – 14001 and ISO – 18000 is planned for calendar year 2012, for which extensive work is already in progress.
The year under review proved remarkably fruitful for PFL which saw no ‘lost work’ injury during the year, while, the total Recordable Injury Rate of the Company fell to 0.10 in the current year as compared to 0.33 for the previous year. PFL safely commissioned a new Ammonia storage tank (with double integrity double wall) and also introduced Safety Management Information System (SMIS) for the effective control and monitoring of safety KPIs during the year. 3 engineers of PFL presented papers in three national HSE seminars held in Karachi and Lahore. During the year, the British Safety Council
89 Arif Habib Corp Corporate Governance ESTABLISH AND FOLLOW STANDARDS OF CORPORATE GOVERNANCE AND ETHICS
AHCL is listed at the Karachi, Lahore and Islamabad Stock Exchanges. The Company’s Board and management
are committed to observe the Code of Corporate Governance prescribed for listed companies and are familiar with
their responsibilities and monitor the operations and performance to enhance the accuracy, comprehensiveness
and transparency of financial and non-financial information. The Statement of compliance with the code of
corporate governance is presented on Page No. 97 whereas Auditors’ Review Report on Statement of Compliance
is is presented on Page No. 99.
In addition, the Board and employees at AHCL are also guided by our own established Code of ethics and Professional Conduct. We review our systems on a continuous basis to ensure transparency and accountability. Our Board of Directors is elected by the shareholders to administer their interest and overall success of the Company. The Board acts as the eventual decision-making body of the Company, except for the matters reserved with the shareholders. A brief about the Committees of the Board is presented on Page No. 43.
The Code of ethics and Professional Conduct of the company sets the highest standards of business integrity, ethical values and professionalism for its directors and employees. The Company expects all employees to apply internationally accepted norms of professional conduct and wherever in doubt with regard to the interpretation of any rules or law, the more conservative view will be taken. It is essential that all employees adhere to a very strict Code of Professional Conduct. The Code is available at the website of the company.
To provide regular updates in connection with good corporate governance, the Group arranges orientation courses for Board and employees. Company also encourages the Board members and the employees to obtain relevant trainings at frequent intervals. The Code requires the employees to remain aligned with Company’s social responsibility and its intended role in the growth and development of economy of the country.
To follow the practices of good corporate governance, the Board of Directors of the Company has also set evaluation criteria to review its performance. The criteria encompass the monitoring of statutory compliances, strategic planning, risk management, policy development and active participation in Board Committees. Additionally, the Board is also well aware of the fact that regular review of CEO performance fosters open communication and clarifies expectations, roles and responsibilities. For this purpose, the Board is committed to carry out an objective assessment of his performance as the Chief Executive. The board believes that governance is the key to strengthen the Company.
Annual Report 2012 | Promoting Investments 90 DEALING WITH THE IMPACT OF ENVIRONMENTAL EXTERNALITIES SUCH AS CARBON EMISSIONS ETC.
Arif Habib Group is committed to encourage sound environmental practices within our key businesses.
Arif Habibb Group takes a holistic approach to environmental Other initiatives taken by PFL which shows the Group’s deep sustainability by taking into account the environmental impacts sense of responsibility and desire to contribute towards related with our group operations and then integrating those protection of the environment are : considerations into our sustainability planning and decision making processes. We consider a healthy environment, locally - Monthly reporting of analysis to EPA under smart program and globally, as vital to our commerce and to the communities where we operate. - PFL environment team is working to reduce its burden on the existing underground water sources by recycling Cooling Tower Blow down for horticulture purpose In recent years, PFL has undergone extensive modernization and new improved processes have been introduced to - Initiative has been taken for plantation maximize the output while minimizing the negative impacts on the environment. For this purpose, a Clean Development - CW Treatment system for Old Cooling Tower, switched Mechanism (CDM) plant was installed, which is the first project over to environment-friendly Phosphate-based system of its kind in Pakistan. Basic aim of this project is the abatement of N2O and NOX emissions from the stack gases of Nitric Acid - Lime slippage in drain channels was reduced by about plant. 40%.
The reduction of greenhouse effect of these gases shows the PFL has received Ecomagination Leadership Award from GE management’s commitment towards a cleaner environment. Water and Process Technology on reducing environmental PFL is located at Khanewal Road, Multan. The site area impact of cooling system treatment by investing in switching to comprises 302 acres, which includes area for the factory and environment-friendlier chemicals. To raise awareness among the housing colony with all amenities including medical centre, PFL employees and their families, Environmental day was also school, management and staff clubs for recreation of celebrated. Tree plantation was also done on this occasion. employees and their families, etc. In FFCL, following its hallmark of achieving excellence in all Environmental concerns linked with the business activities are fields as the aim of the company, accreditation to international among the core values of PFL which is an ISO-14001:2004 safety and environmental standards, ISO-14001 and certified company since 2008, which also advocates the ISO-18000 is planned within year 2012 for which extensive commitment of the Group in developing a robust Environmental work is in progress. Management System (EMS).
91 Arif Habib Corp Environment
In Al Abbas Cement Industries Limited (AACIL), another area is required for the wind turbines. The rest is available for subsidiary, key emphasis is given to manufacture high quality farming, livestock, and other uses. Ownership of wind turbine cement through stringent quality control techniques (ISO generators by individuals and the community allows people to 9001:2008 certified) and computerized control systems using participate directly in the preservation of our environment. Each sophisticated equipment like Distributed Control System (DCS), megawatt-hour of electricity that is generated by wind energy Programmable Logic Controllers (PLCs) and on line X-Ray helps to reduce 0.8 to 0.9 tones of greenhouse gas emissions Analysers. Use of such technology ensures low fuel that are produced by coal or diesel fuel generation each year. consumption, better product quality and negligible dust emission (upto 100mg/Nm³) for better environmental impact.
We, at Arif Habib Group, believe that renewable energy is the answer to the ever-increasing energy needs of this country and around the world; and that the alternate sources of energy are the way forward. Sachal Energy Development (Pvt.) Ltd. (SEDL), a wholly owned subsidiary of AHCL, is a special purpose company that has been acquired to commission and operate a 50 MW wind farm at Jhimpir, Sind on a build, own and operate basis. Thus, contributing to the national development by providing self-sufficiency in power and to the world by reducing dependence on fossil fuels.
Wind energy is an ideal renewable energy because: - It is a pollution-free, infinitely sustainable form of energy. - It does not require fuel. - No emission of Greenhouse gases and other toxic materials/compounds.
Wind energy is quiet and does not present any significant hazard to birds or other wildlife. When large arrays of wind turbines are installed on farmland, only about 2% of the land
Annual Report 2012 | Promoting Investments 92 our sustainability targets for the year ahead
- To bring tangible benefits to the markets in which we operate and making the most original contribution to the economy, the environment and society through delivering a robust business and sustainable revenues.
- To pay dividends to our shareholders, salaries to our employees, payments to our vendors, and tax revenues to national exchequer in the regions where we operate
- To increase the number of hours utilized for training by our group employees by further reinforcing the learning culture we foster at the Arif Habib Group
- To raise internal awareness of the AHCL core values and the Code of Conduct, and ensure that employees act in accordance with the code
- To improve on the current energy management practices of the Group and embrace emerging technologies in achieving a lower emission rate of greenhouse gases and a lower carbon foot print
- To continue to explore new opportunities to bring together community investment and engagement initiatives which are aligned with the Group’s focus areas, with the aim of strengthening the sustainability of the communities we engage with.
- To increase social commitment and creating opportunities for AHCL stakeholders
93 Arif Habib Corp statements and reports to folllow
95 Report of the Audit Committee
97 Statement of Compliance with Code of Corporate Governance
99 Auditors’ Review Report to the Members on Statement of Compliance
100 Audited Financial Statements 101 Auditors‘ Report to the Members 103 Balance Sheet 105 Profit and Loss Account 106 Statement of Comprehensive Income 107 Cash Flow Statement 108 Statement of Changes in Equity 109 Notes to the Financial Statements
143 Audited Consolidated Financial Statements 144 Auditors’ Report to the Members 145 Consolidated Balance Sheet 147 Consolidated Profit and Loss Account 148 Consolidated Statement of Comprehensive Income 149 Consolidated Cash Flow Statement 150 Consolidated Statement of Changes in Equity 151 Notes to the Consolidated Financial Statements
198 Corporate Calendar of Major Events
199 Statement under section (160)(1)(b) of the Companies Ordinance, 1984
Form of Proxy
Annual Report 2012 | Promoting Investments 94 Report of the Audit Committee on Adherence to the Best Practices of Code of Corporate Governance
The audit committee has concluded its annual review of the conduct and operations of the Company during financial year ended on 30th June 2012, and reports that:
• The Company has adhered in full, without any material departure, with both mandatory and voluntary provisions of the listing regulation of Karachi, Lahore and Islamabad Stock Exchanges of Pakistan, Company’s statement of ethics and values and the international best practices of Governance throughout the year.
• Compliance has been confirmed from the members of the Board, the Management and employees of the Company individually. Equitable treatment of shareholders has also been endured.
• The Company has issued a “Statement of Compliance with the Best Practices of Code of Corporate Governance” which has also been reviewed and certified by the auditors of the Company.
• Appropriate accounting policies have been consistently applied. Applicable accounting standards were followed in preparation of financial statements of the Company and consolidated financial statements on a going concern assumption basis, for the financial year ended 30th June 2012, which present fairly the state of affairs, results of operations, profits, cash flows and changes in equities of the Company and it’s subsidiaries for the year under review.
• The Chief Executive Officer and the Chief Financial Officer have reviewed the financial statements of the Company, consolidated financial statements and the Directors’ Report and presented the financial statements, duly endorsed under their respective signatures, for consideration and approval of the Board of Directors. They acknowledge their responsibility for true and fair presentation of the financial statements, compliance with regulations and applicable accounting standards and establishment and maintenance of internal controls and system of the Company.
• Accounting estimates are based on reasonable and prudent judgment. Proper and adequate accounting records have been maintained by the Company in accordance with Companies Ordinance, 1984.
• The financial statements comply with the requirements of the Fourth Schedule to the Companies Ordinance, 1984 and applicable “International Accounting Standards / International Financial Reporting Standards (IFRS)” notified by SECP.
• All direct and indirect trading and holdings of the Company’s shares by Directors & Executives or their spouses were notified in writing to the Company Secretary along with the price, number of shares, form of share certificate and nature of transaction which were notified by the Company Secretary to the Board with in the stipulated time. All such holdings have been disclosed in the pattern of Shareholdings.
INTERNAL AUDIT
• The internal control framework has been effectively implemented through an independent in-house Internal Audit function established by the Board.
• The Company’s system of internal control is sound in design and has been continually evaluated for effectiveness and adequacy.
95 Arif Habib Corp • The Audit Committee has ensured the achievements of operational, compliance and financial reporting objectives, safeguarding of the assets of the Company and the shareholders wealth through effective financial, operational and compliance controls and risk management at all levels within the Company.
• The Head of Internal Audit has direct access to the Chairman of the Audit Committee and the Committee has ensured staffing of personnel with sufficient internal audit acumen.
• Coordination between the External and Internal Auditors was facilitated to ensure efficiency and contribution to the Company’s objectives, including a reliable financial reporting system and compliance with laws and regulations.
EXTERNAL AUDITORS
• The statutory Auditors of the Company, M/s. KPMG Taseer Hadi & Co., Chartered Accountants, have completed their audit assignments of the “Company’s Separate Financial Statements”, the “Consolidated Financial Statements” and the “Statement of Compliance with the Code of Corporate Governance” for the financial year ended 30th June 2012 and shall retire on the conclusion of the 18th Annual General Meeting.
• The Audit Committee has reviewed and discussed Audit observations and Draft Audit Management Letter with the External Auditors. Final Management Letter is required to be submitted within 45 days of the date of Auditors’ Report on financial statements under the listing regulations and shall thereof accordingly be discussed in the next Audit Committee Meeting.
• The Audit Firm has been given a satisfactory rating under the Quality Control Review Program of the Institute of Chartered Accountants of Pakistan (ICAP) and the firm is fully compiled with the International Federation of Accountants (IFAC) Guidelines on Code of Ethics, as adopted by the ICAP. The Auditors attended the general meetings of the Company during the year and have confirmed attendance of the Annual General Meeting scheduled on 29th September 2012.
• Being eligible for re-appointment as Auditors of the Company, the Audit Committee recommends reappointment of M/s. KPMG Taseer Hadi & Co., Chartered Accountants for the financial year ending on 30th June 2013.
Karachi: 3rd September, 2012 Chairman – Audit Committee
Annual Report 2012 | Promoting Investments 96 statement of compliance with the code of corporate governance ARIF HABIB CORPORATION LIMITED FOR THE YEAR ENDED 30TH JUNE 2012
This statement is being presented to comply with the Code of Corporate Governance contained in Regulation No.35(xl) of listing regulations of Karachi, Lahore and Islamabad Stock Exchanges for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance.
The company has applied the principles contained in the CCG in the following manner:
1. The company encourages representation of independent non-executive directors and directors representing minority interests on its board of directors. At present the board includes:
Category Names Executive Director Mr. Arif Habib Mr. Nasim Beg Mr. Asadullah Khawaja Non-Executive Directors Mr. Samad A. Habib Mr. Kashif A. Habib Mr. Muhammad Ejaz Mr. Kashif Shah
2. The directors have confirmed that none except one of them is serving as a director on more than seven listed companies, including this company (excluding the listed subsidiaries of listed holding companies). Compliance will be made in line with requirements of CCG at the time of next election of directors in accordance with the ‘Implementation deadlines of Code of Corporate Governance 2012’.
3. All the resident directors of the company are registered as taxpayers and none of them have defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange.
4. A casual vacancy occurring on the board on 14th September 2011 and was filled up by the directors on the same day.
5. The company has prepared a “Code of Conduct” and has ensured that appropriate steps have been taken to disseminate it throughout the company along with its supporting policies and procedures.
6. The board has developed a vision/mission statement, overall corporate strategy and significant policies of the company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained.
7. All the powers of the board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO, other executive and non-executive directors, have been taken by the board.
8. The meetings of the board were presided over by the Chairman and, in his absence, by a director elected by the board for this purpose and the board met at least once in every quarter. Written notices of the board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated.
97 Arif Habib Corp 9. The board arranged 1 (One) training session for its directors during the year. Further, one director has participated in 4 (Four) parts of Corporate Governance Leadership Skills Program during the year.
10. No new appointment of CFO, Company Secretary and Head of Internal Audit has been made after the revised CCG has taken effect. However, the board has approved their remuneration and terms and conditions of employment.
11. The directors’ report for this year has been prepared in compliance with the requirements of the CCG and fully describes the salient matters required to be disclosed.
12. The financial statements of the company were duly endorsed by CEO and CFO before approval of the board.
13. The directors, CEO and executives do not hold any interest in the shares of the company other than that disclosed in the pattern of shareholding.
14. The company has complied with all the corporate and financial reporting requirements of the CCG.
15. The board has formed an Audit Committee. It comprises 3 members, of whom all are non-executive directors. Composition of the Audit Committee will be made in line with requirements of CCG at the time of next election of directors in accordance with the ‘Implementation deadlines of Code of Corporate Governance 2012’.
16. The meetings of the Audit Committee were held at least once every quarter prior to approval of interim and final results of the company and as required by the CCG. The terms of reference of the committee have been formed and advised to the committee for compliance.
17. The board has formed an HR and Remuneration Committee. It comprises 3 members, of whom 2 are non-executive directors and the chairman of the committee is a non-executive director.
18. The board has set up an effective internal audit function which is considered suitably qualified and experienced for the purpose and is conversant with the policies and procedures of the company.
19. The statutory auditors of the company have confirmed that they have been given a satisfactory rating under the quality control review program of the ICAP, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the ICAP.
20. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard.
21. The ‘closed period’, prior to the announcement of interim/final results, and business decisions, which may materially affect the market price of company’s securities, was determined and intimated to directors, employees and stock exchanges.
22. Material/price sensitive information has been disseminated among all market participants at once through stock exchanges.
23. We confirm that all other material principles enshrined in the CCG have been complied with except for the requirements pertaining to change in composition of Board of Directors or some of its committees which will be made in line with requirements of CCG at the time of next election of directors in accordance with the ‘Implementation deadlines of Code of Corporate Governance 2012’.
ARIF HABIB Karachi, 3rd September, 2012 Chairman & Chief Executive Officer
Annual Report 2012 | Promoting Investments 98 Review report to the Members on Statement of Compliance with Best Practices of Code of Corporate Governance
We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate Governance prepared by the Board of Directors of Arif Habib Corporation Limited (“the Company”) to comply with the Listing Regulations of Karachi, Lahore and Islamabad Stock Exchanges where the Company is listed.
The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Company’s compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the Company personnel and review of various documents prepared by the Company to comply with the Code.
As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board’s statement on internal control covers all risks and controls, or to form an opinion on the effectiveness of such internal controls, the Company’s corporate governance procedures and risks.
Further, the Listing Regulations of Karachi, Lahore and Islamabad Stock Exchanges require the Company to place before the Board of Directors for their consideration and approval of related party transactions distinguishing between transactions carried out on terms equivalent to those that prevailed in arm’s length transactions and transaction which are not executed at arm’s length price recording proper justification for using such alternate pricing mechanism. Further, all such transactions are also required to be separately placed before the audit committee. We are only required and have ensured compliance of requirement to the extent of approval of related party transactions by the Board of Directors and placement of such transactions before the audit committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arm’s length price or not.
Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the Company’s compliance, in all material respects, with the best practices contained in the Code of Corporate Governance as applicable to the Company for the year ended 30 June 2012.
99 Arif Habib Corp audited financial statements
Arif Habib Corporation Limited for the year ended June 30, 2012
Annual Report 2012 | Promoting Investments 100 101 Arif Habib Corp Annual Report 2012 | Promoting Investments 102 Balance Sheet As at 30 June 2012
Note 2012 2011
Rupees
EQUITY AND LIABILITIES
Share capital and reserves
Authorized share capital 10,000,000,000 10,000,000,000
Issued, subscribed and paid up share capital 4 4,125,000,000 3,750,000,000
Reserves 5 20,120,018,064 17,361,650,968 24,245,018,064 21,111,650,968
Non-current liabilities
Deferred taxation 6 2,832,876,106 3,092,023,908 Long term loan - secured 7 656,550,000 - 3,489,426,106 3,092,023,908
Current liabilities Trade and other payables 8 473,424,311 1,918,640 Interest / mark-up accrued on borrowings 77,088,375 51,570,250 Short term borrowings 9 1,685,677,935 1,327,457,775 Provision for taxation 99,826,284 99,826,284 2,336,016,905 1,480,772,949 30,070,461,075 25,684,447,825
Contingencies and commitments 10
103 Arif Habib Corp Annual Report 2012 | Promoting Investments 104 Balance Sheet As at 30 June 2012
Note 2012 2011
Rupees
ASSETS
Non-current assets
Property and equipment 11 46,214,078 53,333,298
Long term investments 12 26,596,464,379 23,840,733,981
Long term deposits 13 2,958,090 2,514,590 26,645,636,547 23,896,581,869
Current assets
Loans and advances 14 1,052,207,362 550,808,592 Prepayments 1,141,292 579,749 Advance tax 92,581,087 84,390,105 Other receivables 15 755,629,191 205,301,187 Short term investments 16 1,512,085,623 938,215,581 Cash and bank balances 17 11,179,973 8,570,742 3,424,824,528 1,787,865,956
30,070,461,075 25,684,447,825
The annexed notes from 1 to 33 form an integral part of these financial statements.
CHAIRMAN & CHIEF EXECUTIVE DIRECTOR CHIEF FINANCIAL OFFICER
103 Arif Habib Corp Annual Report 2012 | Promoting Investments 104 Profit & loss Accounts For the year ended 30 June 2012
Note 2012 2011
Rupees
Operating revenue 18 4,416,965,152 4,240,943,372
Gain on distribution of shares - 127,125,000 4,416,965,152 4,368,068,372
Impairment loss on investments - (995,547,974)
Operating and administrative expenses 19 (85,325,859) (69,403,580)
Other income 20 407,015 77,546,387
Finance cost 21 (300,761,625) (177,120,309)
Other charges 22 (37,050,000) (55,476,000)
Profit before tax 3,994,234,683 3,148,066,896
Taxation 23 260,071,394 (307,587,332) Profit after tax 4,254,306,077 2,840,479,564
Earnings per share - basic and diluted 24 10.31 6.89
The annexed notes from 1 to 33 form an integral part of these financial statements.
CHAIRMAN & CHIEF EXECUTIVE DIRECTOR CHIEF FINANCIAL OFFICER CHAIRMAN & CHIEF EXECUTIVE DIRECTOR CHIEF FINANCIAL OFFICER
105 Arif Habib Corp Annual Report 2012 | Promoting Investments 106 Statement of Comprehensive Income For the year ended 30 June 2012
Note 2012 2011
Rupees
Profit for the year 4,254,306,077 2,840,479,564
Other comprehensive income
Unrealized appreciation / (diminution) during the year on remeasurement of investments classified as ‘available for sale’ 42,957,493 (200,711,876)
Reclassification adjustments relating to loss realized on disposal of investments classified as ‘available for sale’ - 1,737,905
Effect of deferred taxation (1,396,474) -
Other comprehensive income / (loss) for the year 41,561,019 (198,973,971)
Total comprehensive income for the year 4,295,867,096 2,641,505,593
The annexed notes from 1 to 33 form an integral part of these financial statements.
CHAIRMAN & CHIEF EXECUTIVE DIRECTOR CHIEF FINANCIAL OFFICER CHAIRMAN & CHIEF EXECUTIVE DIRECTOR CHIEF FINANCIAL OFFICER
105 Arif Habib Corp Annual Report 2012 | Promoting Investments 106 Cash Flow Statement For the year ended 30 June 2012
Note 2012 2011
Rupees
CASH FLOWS FROM OPERATING ACTIVITIES Cash (used in) / generated from operations 26 (337,220,152) 1,916,048,091 Income tax paid (8,663,864) (21,611,578) Dividend received 79,876,258 187,375,426 Interest received 76,352,977 28,018,626 Finance cost paid (275,243,500) (146,561,681) Net cash (used in) / generated from operating activities (464,898,281) 1,963,268,884
CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditure incurred (984,469) (1,792,925) Proceeds from sale of property and equipment 231,374 1,229,000 Acquisition of long term investments (266,313,921) (2,676,860,965) Proceeds from sale of long term investments 470,247,868 9,798,843 Long term deposits (443,500) (1,724,400) Net cash generated from / (used in) investing activities 202,737,352 (2,669,350,447)
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long term loan 656,550,000 - Dividend paid (750,000,000) - Net cash used in financing activities (93,450,000) -
Net decrease in cash and cash equivalents (355,610,929) (706,081,563) Cash and cash equivalents at beginning of the year (1,318,887,033) (612,805,470) Cash and cash equivalents at end of the year 27 (1,674,497,962) (1,318,887,033)
The annexed notes from 1 to 33 form an integral part of these financial statements.
CHAIRMAN & CHIEF EXECUTIVE DIRECTOR CHIEF FINANCIAL OFFICER CHAIRMAN & CHIEF EXECUTIVE DIRECTOR CHIEF FINANCIAL OFFICER 107 Arif Habib Corp Annual Report 2012 | Promoting Investments 108 Statement of Changes in Equity For the year ended 30 June 2012
Share capital Reserves Total issued, Unrealized General Unappropriated Sub total subscribed diminution on reserve profit and paid up remeasurement of investment classified as ‘available for sale’ Balance as at 1 July 2010 3,750,000,000 (237,069,004) 4,000,000,000 12,271,214,379 16,034,145,375 19,784,145,375
Total comprehensive income for the year
Profit for the year - - - 2,840,479,564 2,840,479,564 2,840,479,564
Unrealized diminution during the period on remeasurement of investments classified as ‘available for sale’ - (200,711,876) - - (200,711,876) (200,711,876)
Reclassification adjustments relating to loss realized on disposal of investments classified as‘available for sale’ - 1,737,905 - - 1,737,905 1,737,905 - (198,973,971) - 2,840,479,564 2,641,505,593 2,641,505,593 Transactions with owners of the Company, recognised directly in equity
Distribution of 112.5 million (3 shares for every 10 shares held) shares of Fatima Fertilizer Company Limited for the year ended 30 June 2010 - - - (1,314,000,000) (1,314,000,000) (1,314,000,000) Balance as at 30 June 2011 Rupees 3,750,000,000 (436,042,975) 4,000,000,000 13,797,693,943 17,361,650,968 21,111,650,968
Total comprehensive income for the year
Profit for the year - - - 4,254,306,077 4,254,306,077 4,254,306,077
Unrealized appreciation during the year on remeasurement of investments classified as ‘available for sale’ - net of tax - 41,561,019 - - 41,561,019 41,561,019 - 41,561,019 - 4,254,306,077 4,295,867,096 4,295,867,096
Transactions with owners of the Company, recognised directly in equity
Issue of 37.5 million bonus shares (1 for every 10 shares held) for the year ended 30 June 2011 375,000,000 - - (375,000,000) (375,000,000) -
Final dividend for the year ended 30 June 2011 - Rs. 2.00 per share - - - (750,000,000) (750,000,000) (750,000,000)
Distribution of 41.250 million (1 preference share for every 10 shares held) preference shares of Aisha Steel Mills Limited as interim specie dividend for the year ended 30 June 2012 - - - (412,500,000) (412,500,000) (412,500,000) 375,000,000 - - (1,537,500,000) (1,537,500,000) (1,162,500,000)
Balance as at 30 June 2012 Rupees 4,125,000,000 (394,481,956) 4,000,000,000 16,514,500,020 20,120,018,064 24,245,018,064
The annexed notes from 1 to 33 form an integral part of these financial statements.
CHAIRMAN & CHIEF EXECUTIVE DIRECTOR CHIEF FINANCIAL OFFICER CHAIRMAN & CHIEF EXECUTIVE DIRECTOR CHIEF FINANCIAL OFFICER 107 Arif Habib Corp Annual Report 2012 | Promoting Investments 108 Notes to the Financial Statements For the year ended 30 June 2012
1. STATUS AND NATURE OF BUSINESS
Arif Habib Corporation Limited was incorporated in Pakistan on 14 November 1994 as a public limited company under the Companies Ordinance, 1984. The Company is listed on the Karachi, Lahore and Islamabad Stock Exchanges. The principal activity of the Company is to make strategic investments in subsidiary companies and associates engaged in Chemical / Fertilizer, Financial services, Construction materials, Industrial metal, Steel and other sectors including investments in listed securities. The registered office of the Company is situated at Arif Habib Centre, 2nd Floor, 23 M. T. Khan Road, Karachi, Pakistan. The Company is domiciled in the province of Sindh.
These financial statements are separate financial statements of the Company in which investments in subsidiaries and associates are accounted for on the basis of direct equity interest rather than on the basis of reported results. Consolidated financial statements are prepared separately.
The Company has following long term investments:
Name of Company Subsidiaries Shareholding
- Arif Habib Limited, a brokerage house 76.69% - Arif Habib DMCC, a UAE incorporated member company of Dubai Gold and Commodities Exchange 100.00% - SKM Lanka Holdings (Private) Limited, a Srilankan incorporated brokerage house at Colombo Stock Exchange 75.00% - Pakistan Private Equity Management Limited, a venture capital company 85.00% - Al-Abbas Cement Industries Limited, a cement manufacturing company 65.03% - Sachal Energy Development (Private) Limited, a wind power generation company 99.99% - Sweetwater Dairies Pakistan (Private) Limited, a dairy farming company 85.20%
Associates
- Pakarab Fertilizers Limited 30.00% - Aisha Steel Mills Limited 33.33% - Fatima Fertilizer Company Limited 18.53% - Arif Habib Investments Limited 30.09% - Thatta Cement Company Limited 9.06% - Crescent Textile Mills Limited, a textile manufacturing company 24.82%
Others - Takaful Pakistan Limited 10.00% - Sunbiz (Private) Limited 4.65% - Javedan Corporation Limited 8.53%
2. BASIS OF PREPARATION
2.1 Statement of compliance
These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail.
109 Arif Habib Corp Annual Report 2012 | Promoting Investments 110 Notes to the Financial Statements For the year ended 30 June 2012
2.2 Basis of measurement
These financial statements have been prepared under the historical cost convention, except for certain investments and assets held for sale, which are measured at their fair values (as disclosed in note 12 and 16).
2.3 Functional and presentation currency
These financial statements are presented in Pak Rupees, which is the Company’s functional and presentation currency. All financial information presented in Pak Rupees has been rounded to the nearest rupee.
2.4 Use of estimates and judgments
The preparation of financial statements in conformity with approved accounting standards, as applicable in Pakistan, requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Information about judgments made by management in the application of approved accounting standards, as applicable in Pakistan, that have significant effect on the financial statements and estimates and assumptions with a significant risk of material adjustment in the future periods are included in following notes:
- Provision for taxation (note 3.2) - Useful lives and residual values of property and equipment (note 3.3) - Impairment of investments (note 3.4) - Classification of investments (note 3.5 - 3.5.3) - Fair value of investments (note 3.5 - 3.5.3)
2.5 Amendments / interpretation to existing standard and forthcoming requirements
Standards, amendments or interpretations which became effective during the year
During the year certain amendments to Standards or new interpretations became effective, however, the amendments or interpretation were either not relevant to the Company’s operations or were not expected to have any significant impact on the Company’s financial statements.
New / revised accounting standards, amendments to published accounting standards and interpretations that are not yet effective
The following standards, amendments and interpretations of approved accounting standards are only effective for annual periods beginning from the dates specified below:
- Presentation of Items of Other Comprehensive Income (Amendments to IAS 1, ‘Presentation of Financial Statements’) effective for annual periods beginning on or after 1 July 2012.
- IAS 19, ‘Employee Benefits’ (Amended 2011) effective for annual periods on or after 1 January 2013. 109 Arif Habib Corp Annual Report 2012 | Promoting Investments 110 Notes to the Financial Statements For the year ended 30 June 2012
- IAS 27, ‘Separate Financial Statements’ (Revised 2011) effective for annual periods beginning on or after 1 January 2013. - IAS 28, ‘Investments in Associates and Joint Ventures (2011) effective for annual periods beginning on or after 1 January 2013.
- IFRS 10, ‘Consolidated Financial Statements’ effective for annual periods beginning on or after 1 January 2013
- IFRS 11, ‘Joint Arrangements’ effective for annual periods beginning on or after 1 January 2013
- IFRS 12, ‘Disclosure of Interest in Other Entities’ effective for annual periods beginning on or after 1 January 2013
- IFRS 13, ‘Fair Value Measurement’ effective for annual periods beginning on or after 1 January 2013
- Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) effective for annual periods beginning on or after 1 January 2014.
- IFRS 9, ‘Financial Instruments’ effective for annual periods beginning on or after 1 January 2015
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been applied consistently to all the years presented.
3.1 Staff retirement benefits
Defined contribution plan
The Company operates a recognized provident fund for all its eligible permanent employees. Equal monthly contributions are made by the Company and employees to the fund at the rate of 12.50% of basic salary.
3.2 Taxation
Income tax expense comprises of current, prior year and deferred tax. Income tax expense is recognized in profit and loss account except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.
Current
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date and any adjustments to tax payable in respect of prior years.
Deferred
Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences at the balance sheet date between the tax base and carrying amount of assets and liabilities for financial reporting purposes.
Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible temporary differences and carry forward of unused tax losses, to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and carry forward of unused tax losses can be utilized. 111 Arif Habib Corp Annual Report 2012 | Promoting Investments 112 Notes to the Financial Statements For the year ended 30 June 2012
Carrying amount of all deferred tax assets are reviewed at each balance sheet date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled.
3.3 Property and equipment
Owned
Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes expenditure that are directly attributable to the acquisition of the asset.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and its cost can be measured reliably. Cost incurred to replace a component of an item of property and equipment is capitalized, the asset so replaced is retired from use and its carrying amount is derecognized. Normal repairs and maintenance are charged to profit and loss account during the period in which they are incurred.
Depreciation on all property and equipment is charged to profit and loss account using the reducing balance method over the asset’s useful life at the rates stated in note 11.
The depreciation on property and equipment is charged full in the month of acquisition and no depreciation is charged in the month of disposal.
Further, when the written down value of the asset falls below Rs.10,000 the same is charged directly to profit and loss account.
Gains or losses on disposal of an item of property and equipment are recognized in the profit and loss account currently.
The assets’ residual value and useful life are reviewed at each financial year end and adjusted if impact on depreciation is significant. The Company’s estimate of residual value of property and equipment as at 30 June 2012 did not require any adjustment.
Leased
Leased assets which are obtained under Ijarah agreement are not recognized in the Company’s balance sheet and are treated as operating lease based on Islamic Financial Accounting Standard (IFAS) 2 issued by the Institute of Chartered Accountants of Pakistan and notified by Securities and Exchange Commission of Pakistan vide S.R.O. 43(1) / 2007 dated 22 May 2007. Payments made under operating lease are charged to profit and loss account on a straight line basis over the lease term.
3.4 Impairment
A financial asset, other than that carried at fair value through profit or loss, is assessed at each balance sheet date to determine whether there is any objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred and that the loss event has a negative effect on the estimated future cash flows of that asset.
111 Arif Habib Corp Annual Report 2012 | Promoting Investments 112 Notes to the Financial Statements For the year ended 30 June 2012
In case of investment in equity securities classified as available for sale and measured at fair value a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the assets are impaired. If any such evidence exists, the cumulative loss measured as a difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized, is transferred from other comprehensive income to profit and loss account. Such impairment losses are not subsequently reversed through the profit and loss account.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognized in profit and loss account.
The carrying amount of the Company’s non-financial assets and investment carried at cost are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such an indication exists, the recoverable amount of the asset is estimated in order to determine the extent of impairment loss, if any. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its estimated recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Impairment losses are recognized in profit and loss account.
3.5 Investments
All investments are initially recognized at fair value, being the cost of the consideration given including transaction costs associated with the investment, except for those classified as fair value through profit or loss, in which case the transaction costs are charged to the profit and loss account.
All “regular way” purchases and sales of financial assets are recognized on the trade date, that is the date on which the Company commits to purchase / sell an asset. Regular way purchases or sales of financial assets are the contracts which require delivery of assets within the time frame generally established by regulations or market convention.
The management determines appropriate classification of investment in accordance with the requirements of International Financial Reporting Standards (IFRS).
The Company classifies its investments in the following categories:
3.5.1 Subsidiaries and associates
The Company considers its subsidiary companies to be such enterprise in which the Company has control and / or ownership of more than half or fifty percent, of the voting power.
The Company considers its associates to be such entities in which the Company has ownership, of not less than twenty percent but not more than fifty percent, of the voting power and / or has significant influence through common directorship, but not control.
Investment in subsidiaries are carried at cost in accordance with IAS 27 - ‘Consolidated and Separate Financial Statements’.
Investments in associates are accounted for under ‘IAS 39 - Financial instruments Recognition and Measurement’ considering each investment individually.
Company manages its investment in associates classified at fair value through profit or loss upon initial recognition, with an intention to sell them in future upon receiving its fair value in accordance with the Company’s documented investment strategy.
113 Arif Habib Corp Annual Report 2012 | Promoting Investments 114 Notes to the Financial Statements For the year ended 30 June 2012
Associates classified as at fair value through profit or loss are measured at fair value and changes therein are recognized in profit and loss account. Whereas, in the case of available for sale, such gain or loss is recognized directly in equity. Where active market of the quoted investment exists, fair value is determined through Karachi Stock Exchange daily quotation. In case of unquoted investment, where active market does not exist fair value is determined using valuation techniques. The investments in equity instruments that do not have a market / quoted price in an active market and whose fair value cannot be reliably measured are carried at cost.
3.5.2 At fair value through profit or loss - held for trading
Investments which are acquired principally for the purpose of selling in the near term or the investments that are part of a portfolio of financial instruments exhibiting short term profit taking are classified as fair value through profit or loss - held for trading. These are stated at fair values with any resulting gains or losses recognized in the profit and loss account. The fair value of such investments, representing listed equity securities are determined on the basis of prevailing market prices at the Karachi Stock Exchange and on market based redemption / repurchase prices, whichever is applicable, in case of other securities.
3.5.3 Available for sale
Available for sale investments are those non-derivative investments that are designated as available for sale or are not classified in any other category. These are primarily those investments that are intended to be held for an undefined period of time or may be sold in response to the need for liquidity.
At each balance sheet date, these investments are remeasured at fair value and the resulting gains or losses are recognized directly in equity until the investment is disposed off or impaired at which time these are transferred to profit and loss account.
Where active market of the quoted investment exists, fair value of quoted investments is determined using quotations of Karachi Stock Exchange. The investments for which a quoted market price is not available, are measured at cost, unless fair value can be reliably measured. Such fair value estimates are subjective in nature, and therefore, cannot be determined with precision.
3.6 Trade and other receivables
Trade and other receivables are carried at cost, which is the fair value of the consideration to be received, less provision for doubtful debts, if any.
3.7 Trade and other payables
Trade and other payables are carried at cost, which is the fair value of the consideration to be paid, in the future for goods and services received.
3.8 Short term borrowings
Mark-up bearing borrowings are recognized initially at fair value, less any directly attributable transaction cost. Subsequent to initial recognition, mark-up bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognized in profit and loss account over the period of the borrowings on an effective interest basis.
3.9 Revenue recognition
- Gain / loss on sale of investments are recognized on the date of transaction and charged to profit and loss account in the period in which they arise.
113 Arif Habib Corp Annual Report 2012 | Promoting Investments 114 Notes to the Financial Statements For the year ended 30 June 2012
- Dividend income and entitlement of bonus shares are recognized when the Company’s right to receive such dividend or bonus is established.
- Underwriting commission is recognized when the agreement is executed.
- Interest income on bank deposits and loans are recognized on time proportion basis that takes into account the effective yield.
3.10 Provisions
Provision is recognized when, as a result of past event, the Company has a present legal or constructive obligation that can be estimated reliably and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. Subsequently, provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.
3.11 Financial instruments
Financial assets and financial liabilities are recognized when the company becomes a party to the contractual provisions of the instrument and are measured initially at fair value. Financial assets are derecognized when the contractual right to the cash flow from the financial assets expires or is transferred. Financial liabilities are derecognized when they are extinguished i.e. when the obligation specified in the contract is discharged or cancelled or expires. Financial instruments carried on the balance sheet include investments, trade debts and other receivables, loans and advances, cash and bank balances, deposits, borrowings, trade and other payables and accrued and other liabilities. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item.
Financial assets and financial liabilities are off set and the net amount is reported in the balance sheet only when the Company has a legally enforceable right to offset the recognized amount and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction on the measurement date.
When available, the Company measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm’s length basis.
If a market for financial instrument is not active, the Company establishes fair value using a valuation technique. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the Company, incorporates all factors that market participants would consider in setting a price and is consistent with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument. The Company calibrates valuation techniques and tests them for validity using prices from observable current market transactions in the same instrument or based on other available observable market data.
3.12 Foreign currency
Foreign currency transactions are translated into Pak Rupees using the exchange rates prevailing at the date of the transactions. All the monetary assets and liabilities in foreign currencies, at the balance sheet date, are translated into Pak Rupees at the exchange rates prevailing on that date. Foreign exchange gains and losses on translation are recognized in the profit and loss account. Non-monetary assets and liabilities, denominated in foreign currency that are measured at fair value are translated using exchange rate prevailing at the date the fair values are determined. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. 115 Arif Habib Corp Annual Report 2012 | Promoting Investments 116 Notes to the Financial Statements For the year ended 30 June 2012
3.13 Borrowing costs
Borrowing costs incurred on short term borrowings are recognized as an expense in the period in which these are incurred.
3.14 Cash and cash equivalents
Cash and cash equivalent for the purpose of cash flow statement comprises of cash in hand, share transfer stamps, cash at bank and short term running finance.
3.15 Dividend and appropriation to reserve
Dividend distribution to the Company’s shareholders and appropriation to reserves are recognized in the financial statements in the period in which these are approved.
The Company measures the liability to distribute non-cash assets as a dividend to the shareholders at the fair value of the assets to be distributed. The carrying amount of the dividend is remeasured at each reporting date and at the settlement date. On settlement of the transaction, the Company recognises the difference, if any, between the carrying amount of the assets distributed and the carrying amount of the liability in profit or loss.
3.16 Expenses
All expenses are recognized in the profit and loss account on an accrual basis.
4. SHARE CAPITAL
4.1 Authorized share capital
2012 2011 2012 2011 (Number of shares) Ordinary shares of 1,000,000,000 1,000,000,000 Rs. 10 each Rupees 10,000,000,000 10,000,000,000
4.2 Issued, subscribed and paid up share capital
2012 2011 (Number of shares)
5,000,000 5,000,000 Ordinary shares of Rs. 10 each fully paid in cash 50,000,000 50,000,000
Ordinary shares of Rs. 10 409,500,000 372,000,000 each issued as fully paid bonus shares 4,095,000,000 3,720,000,000 414,500,000 377,000,000 4,145,000,000 3,770,000,000 Ordinary shares of Rs. 10 (2,000,000) (2,000,000) each buy back at Rs. 360 per share 4.2.1 (20,000,000) (20,000,000) 412,500,000 375,000,000 Rupees 4,125,000,000 3,750,000,000
115 Arif Habib Corp Annual Report 2012 | Promoting Investments 116 Notes to the Financial Statements For the year ended 30 June 2012
4.2.1 During financial year 2005-2006, Company bought back two million shares of Rs. 10 each from its shareholders through tender notice at a price of Rs. 360 per share in accordance with section 95-A of the Companies Ordinance, 1984 and Companies (Buy-back of shares) Rules, 1999. The acquisition resulted in reduction of capital and unappropriated profit by Rs. 20 million and Rs. 700 million respectively, in the relevant year.
5. RESERVES
General reserve 4,000,000,000 4,000,000,000 Unappropriated profit 16,514,500,020 13,797,693,943 Deficit on remeasurement of ‘available for sale’ investments (394,481,956) (436,042,975) Rupees 20,120,018,064 17,361,650,968 6. DEFERRED TAXATION
The liability for deferred taxation comprises of temporary differences relating to: - Accelerated tax depreciation 4,369,659 9,957,212 - Investment in associates classified as at fair value through profit or loss 2,907,991,237 3,161,548,090 - Available for sale investments 1,396,474 - - Dividend receivable 11,281,026 -
Deferred tax asset comprises of temporary differences relating to: - Unrealized capital loss on short term investments (7,805,152) (15,143,009) - Investment in associates classified as at fair value through profit or loss (67,793,753) (52,500,000) - Impairment loss on long term investment - unquoted (16,563,385) (11,838,385) Rupees 2,832,876,106 3,092,023,908
7. LONG TERM LOAN - Secured
During the year, the Company obtained term finance facility from a commercial bank under mark-up arrangement at the rate of 3 month KIBOR+1% to be charged on quarterly basis. The loan is payable till 31 December 2013. The loan is secured against pledge of shares of associated company. The market value of pledged shares as collateral amounts to Rs. 1,272.972 million.
8. TRADE AND OTHER PAYABLES
Creditors 8.1 471,345,862 - Accrued liabilities 8.2 1,454,026 1,441,076 Other liabilities 624,423 477,564 Rupees 473,424,311 1,918,640
8.1 This represents amount payable to Arif Habib Limited, a subsidiary of the Company, for purchase of listed securities from stock exchange under T+2 settlement method.
8.2 This includes sum of Rs. 491,728 (2011: Rs. 205,675) accrued on account of utilities and maintenance and is payable to Rotocast Engineering Company (Pvt) Limited.
9. SHORT TERM BORROWINGS - Secured
From banking companies other than related parties - Short term running finance 9.1,9.2, 9.3 Rupees 1,685,677,935 1,327,457,775
117 Arif Habib Corp Annual Report 2012 | Promoting Investments 118 Notes to the Financial Statements For the year ended 30 June 2012
9.1 Short term running finance facilities are available from various commercial banks, under mark-up arrangements, amounting to Rs. 3,130 million (2011: Rs. 2,980 million) which represents the aggregate of sale prices of all mark- up agreements between the Company and the banks. These facilities have various maturity dates upto 30 June 2013. These arrangements are secured against pledge of marketable securities with minimum 30% margin (2011: 30% margin). These running finance facilities carry mark-up ranging from 1 month KIBOR+ 1% to 3 month KIBOR+ 2.5% per annum (2011: 3 month KIBOR+ 1% to 3 month KIBOR+ 2.5% per annum) calculated on a daily product basis, that is payable quarterly. The aggregate amount of these facilities which have not been availed as at the balance sheet date amounts to Rs. 1,444.322 million (2011: Rs. 1,652.542 million).
9.2 The carrying amount of securities pledged as collateral against outstanding liability amounts to Rs. 3,176.757 million (2011: Rs. 2,292.471 million).
9.3 This includes sum of Rs. 13.875 million (2011: 6.57 million) payable to Summit Bank Limited, an associated company.
10. CONTINGENCIES AND COMMITMENTS
10.1 The Company is contesting along with other defendants four suits filed by Diamond Industries Limited, Mr. Iftikhar Shafi, Shafi Chemicals Industries Limited and Mr. Nisar Elahi (The Plaintiffs) in the year 2002-2003, for damages jointly against Mr. Saleem Chamdia, Mr. Arif Habib, Mr. Aqeel Karim Dedhi, Mr. A. Ghaffar Usman Moosani, Mr. Shahid Ghaffar, the Karachi Stock Exchange (Guarantee) Limited (KSE), the Securities and Exchange Commission of Pakistan (SECP), the Central Depository Company of Pakistan Limited (CDC), Saleem Chamdia Securities (Private) Limited, Arif Habib Corporation Limited, Moosani Securities Limited and Aqeel Karim Dedhi Securities Limited.
The suits are for recovery of damages amounting to Rs. 10,989,948,199, Rs. 5,606,611,760, Rs.1,701,035,843 and Rs. 428,440,971 respectively against the decision of the Karachi Stock Exchange in respect of Risk Management System of its Clearing House during the year 2000. The Chairman and Chief Executive of the Company was the Chairman of the Board of Directors of KSE during 2000. The Company has been made party to the suits by the plaintiffs. All the suits at present are pending before the honorable Sindh High Court, Karachi. Individual liability of respective individuals and undertakings is not quantifiable.
The legal advisor of the Company is of the opinion that there are reasonable grounds for a favorable decision and that the suits are likely to be dismissed as these are not based on factual or legal basis and no financial liability is expected to accrue as a consequence of the said suits against the Company. Therefore, Company has not made any provision in this respect in the financial statements.
10.2 During the year ended 30 June 2011, the Honourable High Court of Lahore vide their order in respect of writ petition No. 8763/2011, has declared amendments introduced through Finance Acts 2006 and 2008 in Workers’ Welfare Ordinance, 1971 as unconstitutional. Further, the Company has also filed a writ petition in the High Court of Sindh at Karachi to impugn the amendments made to the Workers’ Welfare Ordinance 1971, vide Finance Act 2008. Management of the Company is contesting the case vigorously. As per the legal council, the Company has a reasonable case and expects that the constitution petition pending in the Honourable High Court of Sindh on the subject as referred above will be decided in the favour of the Company. Accordingly, the management has not recorded any liability towards Worker’s Welfare Fund.
117 Arif Habib Corp Annual Report 2012 | Promoting Investments 118 Notes to the Financial Statements For the year ended 30 June 2012
10.3 During the year, the Securities and Exchange Commission of Pakistan (“SECP”) issued an order u/s 22 of the Securities and Exchange Ordinance, 1969 (“the Ordinance”) regarding non compliance of orders passed by SECP u/s 18A of the Ordinance for depositing confiscated subscription money amounting to Rs. 3.14 million relating to fictitious applications received by the Company for subscription of shares of Summit Bank Limited that were offered to general public by the Company in 2007. The Company has appealed to the Appellate Bench of SECP against the said order of the Commission. The management is contesting the appeal vigorously and is confident that the appeal will be decided in the Company’s favour.
10.4 Income tax assessments of the Company have been finalised upto Tax Year 2005 (Accounting year 2005). However, deemed assessments made u/s 120 of the Income Tax Ordinance, 2001 relating to Tax Years 2006 to 2008 have been subsequently amended u/s 122 of the Income Tax Ordinance, 2001. The Company has filed appeals before the Appellate Tribunal Inland Revenue, in respect of each of the said amendments which are still pending. As per the management there is no potential financial exposure to the Company and does not expect unfavourable outcome for the Company. Income tax assessment for the Tax Year 2010, taken as deemed assessment u/s 120 of the Income Tax Ordinance, 2001 was subsequently amended twice u/s 122 (5A) of the Income Tax Ordinance, 2001. The appeals filed by the Company with Commissioner Inland Revenue (Appeals-1) against these amendments were decided in favor of the Company.
Income tax assessment for Tax Year 2011 is deemed to have been finalised u/s 120 of the Income Tax Ordinance, 2001.
10.5 There were no significant commitments at the balance sheet date.
11. PROPERTY AND EQUIPMENT Vehicles Furniture Computer Leasehold Total and office and allied improvements equipment equipment Cost Balance as at 01 July 2010 5,105,179 595,615 2,604,725 67,750,472 76,055,991 Additions during the year 1,070,000 149,170 573,755 - 1,792,925 Disposals (2,407,000) - (260,818) - (2,667,818) Balance as at 30 June 2011 Rupees 3,768,179 744,785 2,917,662 67,750,472 75,181,098
Balance as at 01 July 2011 3,768,179 744,785 2,917,662 67,750,472 75,181,098 Additions during the year 140,000 249,479 594,990 - 984,469 Disposals (700,000) - (56,927) - (756,927) Balance as at 30 June 2012 Rupees 3,208,179 994,264 3,455,725 67,750,472 75,408,640
Depreciation Balance as at 01 July 2010 2,577,180 206,026 1,901,312 10,220,431 14,904,949 Charge for the year 560,784 66,985 298,298 8,060,266 8,986,333 Disposals (1,782,664) - (260,818) - (2,043,482) Balance as at 30 June 2011 Rupees 1,355,300 273,011 1,938,792 18,280,697 21,847,800
Balance as at 01 July 2011 1,355,300 273,011 1,938,792 18,280,697 21,847,800 Charge for the year 408,583 88,430 444,322 6,930,980 7,872,315 Disposals (510,970) - (14,583) - (525,553) Balance as at 30 June 2012 Rupees 1,252,913 361,441 2,368,531 25,211,677 29,194,562
Written down value as at 30 June 2011 Rupees 2,412,879 471,774 978,870 49,469,775 53,333,298
Written down value as at 30 June 2012 Rupees 1,955,266 632,823 1,087,194 42,538,795 46,214,078
Annual rates of depreciation 20% 15% 33% 15% -
119 Arif Habib Corp Annual Report 2012 | Promoting Investments 120 Notes to the Financial Statements For the year ended 30 June 2012
11.1. Computer and allied equipments having an aggregate cost of Rs. 0.53 million (2011: Rs. 0.26 million) and accumulated depreciation of Rs. 0.53 million (2011: Rs. 0.26 million) and furniture and office equipment having an aggregate cost of Rs.0.04 million (2011: Nil) and accumulated depreciation of Rs. 0.04 million (2011: Nil) have been fully charged to profit and loss account as their written down value falls below Rs. 10,000 as per the Company’s accounting policy (refer note 3.3).
11.2. Disposal of vehicles
Particulars Sold to Cost Accumulated Book Sale Mode of of the assets depreciation value proceeds disposal ------(Rupees) ------Hyundai Santro Club Sajid Bhanji 700,000 510,970 189,030 189,030 Company policy
12. LONG TERM INVESTMENTS 2012 2011
Subsidiaries - at cost 12.1 2,943,048,831 2,747,513,215 At fair value through profit or loss 12.2 22,202,652,951 19,365,957,346 Available for sale 12.3 1,450,762,597 1,727,263,420 Rupees 26,596,464,379 23,840,733,981
12.1 Subsidiaries - at cost Cost Provision for Carrying amount impairment 2012 2011
Arif Habib Limited (AHL) 12.1.2 2,685,816,862 (950,449,366) 1,735,367,496 1,724,797,814 Arif Habib DMCC (AHD) 12.1.3 29,945,898 - 29,945,898 29,945,898 Pakistan Private Equity Management Limited (PPEML) 12.1.4 42,500,000 (25,500,000) 17,000,000 17,000,000 SKM Lanka Holdings (Private) Limited (SKML) 12.1.5 43,197,216 (21,598,608) 21,598,608 21,598,608 Al-Abbas Cement Industries Limited (AACIL) 12.1.6 869,663,101 - 869,663,101 824,170,835 Sachal Energy Development (Private) Limited (SEDPL) 12.1.7 185,000,060 - 185,000,060 130,000,060 Sweetwater Dairies Pakistan (Private) Limited (SDPL) 12.1.8 84,473,668 - 84,473,668 - Rupees 3,940,596,805 (997,547,974) 2,943,048,831 2,747,513,215
12.2 At fair value through profit or loss
Cost Unrealized Carrying amount appreciation / 2012 2011 (diminution) on remeasurement of investments Associates: Arif Habib Investments Limited (AHIL) 12.2.1 477,694,882 (133,667,910) 344,026,972 467,729,366 Pakarab Fertilizers Limited (PFL) 12.2.2 1,324,332,073 10,825,667,927 12,150,000,000 13,162,500,000 Fatima Fertilizer Company Limited (FFCL) 12.2.3 4,121,357,238 5,478,583,623 9,599,940,861 5,458,123,357 Sweetwater Dairies Pakistan (Private) Limited (SDPL) 12.1.8 - - - 87,539,905 Crescent Textile Mills Limited (CTML) 12.2.4 292,566,283 (183,881,165) 108,685,118 190,064,718 Rupees 6,215,950,476 15,986,702,475 22,202,652,951 19,365,957,346
119 Arif Habib Corp Annual Report 2012 | Promoting Investments 120 Notes to the Financial Statements For the year ended 30 June 2012
12.3 Available for sale
Cost Unrealized Provision for Carrying amount appreciation on impairment 2012 2011 remeasurement of investments
Associates: Thatta Cement Company Limited (THCCL) 12.3.1 188,370,257 1,609,506 - 189,979,763 144,250,920 Aisha Steel Mills Limited (ASML) 12.3.2 1,145,783,080 - - 1,145,783,080 1,554,712,500 Rozgar Microfinance Bank Limited (RMFBL) 16 - - - - 13,300,000 1,334,153,337 1,609,506 - 1,335,762,843 1,712,263,420 Other investments: Takaful Pakistan Limited (TPL) 12.3.3 30,000,000 - (15,000,000) 15,000,000 15,000,000 Javedan Corporation Limited (JCL) 12.3.4 99,999,754 - - 99,999,754 - Sun Biz (Private) Limited (SBL) 12.3.5 1,000,000 - (1,000,000) - - 130,999,754 - (16,000,000) 114,999,754 15,000,000 Rupees 1,465,153,091 1,609,506 (16,000,000) 1,450,762,597 1,727,263,420
12.1.1 Fair value of long term investments pledged with banking companies against various financing facilities amounts to Rs. 3,228.024 million (2011: Rs. 1,462.29 million).
12.1.2 Investment in AHL (quoted) represents 34.51 million (2011: 33.82 million) fully paid ordinary shares of Rs. 10 each, representing 76.69% (2011: 75.15%) of AHL’s paid up share capital as at 30 June 2012. During the year, the Company purchased 690,720 ordinary shares (2011: Nil) at an average price of Rs. 15.3 (2011: Nil) per share. Market value per share as at 30 June 2012 is Rs. 34.26 (2011: Rs. 19.67), whereas book value based on net assets, as per audited financial statements, as at 30 June 2012 is Rs. 24.35 per share (2011: Rs. 16.22 per share).
12.1.3 Investment in AHD (unquoted) represents 1,300 (2011: 1,300) fully paid ordinary shares of Rs. 23,035.31 (2011: Rs. 23,035.31) each (equivalent UAE Dirham 1,000 each), representing 100% (2011: 100%) of AHD’s paid up share capital as at 30 June 2012. Book value based on net assets, as per unaudited financial statements, as at 30 June 2012 is Rs. 29,082 per share (2011: Rs. 28,718 per share). The subsidiary is expected to start its commercial operations at the Dubai Gold and Commodities Exchange within next twelve months besides consultancy business which has already been started.
12.1.4 Investment in PPEML (unquoted) represents 4.25 million (2011: 4.25 million) fully paid ordinary shares of Rs. 10 each, representing 85% (2011: 85% ) of PPEML’s paid up share capital as at 30 June 2012. Book value based on net assets, as per unaudited financial statements, as at 30 June 2012 is Rs. 1.22 per share (2011: Rs. 1.75 per share).
12.1.5 Investment in SKML (unquoted) represents 7.50 million (2011: 7.50 million) fully paid ordinary shares of Rs. 5.76 (2011: Rs. 5.76 ) each (equivalent US$ 0.067 each), representing 75% (2011: 75% ) of SKML’s paid up share capital as at 30 June 2012. Book value based on net assets, as per audited financial statements, as at 31 March 2012 is Rs. (0.58) per share (2011: Rs. 4.45 per share).
12.1.6 Investment in AACIL (quoted) represents 237.792 million (2011: 223.552 million) fully paid ordinary shares of Rs. 10 each, representing 65.03% (2011: 61.13%) of AACIL’s share capital as at 30 June 2012, having historical cost of Rs. 1,428.272 million (2011: Rs. 1,382.78 million). Before acquisition of control, AACIL was classified as ‘available for sale’ category in accordance with IAS 39. On control acquisition date, previosuly held equity interest was remeasured and resulting fair value was made as deemed cost. During the year, the Company purchased 14.239 million (2011: 2.227 million) ordinary shares from market at an average cost of Rs. 3.19 (2011: Rs. 3.24)
121 Arif Habib Corp Annual Report 2012 | Promoting Investments 122 Notes to the Financial Statements For the year ended 30 June 2012
per share and subscribed nil (2011: 152.810 million) right shares. Market value per share as at 30 June 2012 is Rs. 4.8 (2011: Rs. 2.64), whereas book value based on net assets, as per unaudited financial statements, as at 30 June 2012 is Rs. 3.08 per share (2011: Rs. 3.02 per share).
12.1.7 Investment in SEDPL (unquoted) represents 18.5 million (2011: 13.00 million) fully paid ordinary shares of Rs. 10 each, representing 99.99% (2011: 99.99% ) of SEDPL’s paid up share capital as at 30 June 2012. Book value based on net assets, as per unaudited financial statements, as at 30 June 2012 is Rs. 7.56 per share (2011: Rs.10.12 per share). During the year Company subscribed 5.5 million (2011: 5 million) right shares of Rs. 10 (2011: Rs. 10) each.
12.1.8 Investment in SDPL (unquoted) represents 52.952 million (2011: 18.299 million) fully paid ordinary shares of Rs. 10 each, representing 85.2% (2011: 29.69%) of SDPL’s paid up share capital as at 30 June 2012, having an aggregate historical cost of Rs. 342.736 million (2011: Rs. 287.540 million). During the year, the Company purchased 34.654 million (2011: Nil) ordinary shares through a share purchase agreement at Rs. 1.6 per share. As a result, the Company has obtained control of SDPL. Before acquisition of control, SDPL was classified as ‘at fair value through profit or loss’ category in accordance with IAS 39. On control acquisition date, previously held equity interest was remeasured and resulting fair value was made as deemed cost. During the year, the book value based on net assets, as per unaudited financial statements, as at 30 June 2012 is Rs. 2.08 per share (2011: Rs. 9.92 per share).
12.2.1 Investment in AHIL (quoted) represents 21.664 million (2011: 21.664 million) fully paid ordinary shares of Rs. 10 each, representing 30.09% (2011: 30.09%) of AHIL’s paid up share capital as at 30 June 2012, having historical cost of Rs. 81.95 million (2011: Rs. 81.95 million). However, during 2011, the company lost control over AHIL and designated the investment ‘at fair value through profit or loss’ and accordingly fair value on the date of loss of control was considered as deemed cost. Fair value per share as at 30 June 2012 was Rs. 15.88 (2011: Rs. 21.59), whereas book value based on net assets, as per unaudited financial statements, as at 30 June 2012 is Rs. 17.80 per share (2011: Rs. 17.63 per share).
During the year ended 30 June 2011, the shareholders of Arif Habib Investments Limited (AHIL) and MCB Asset Management Company Limited (MCB-AMC) approved merger of these two entities under the scheme of amalgamation (“the scheme”). The scheme was sanctioned by Securities and Exchange Commission of Pakistan (SECP) through its order dated 10 June 2011 with effect from 27 June 2011. Subsequently SECP through its order dated 27 June 2011 extended the effective date of merger from 27 June 2011 to 30 July 2011. The company in reply to the SECP order filed the petition in the Honourable Sindh High Court claiming that the same is a past and closed transaction. In view of this, the Honourable Sindh High Court through its interim order dated 28 September 2011 suspended the SECP order for extension of the effective date of merger. The hearing of this case is in progress.
12.2.2 Investment in PFL (unquoted) represents 135 million (2011: 135 million) fully paid ordinary shares of Rs. 10 each, representing 30% (2011: 30%) of PFL’s paid up share capital as at 30 June 2012, having cost of Rs. 1,324.332 million (2011: Rs. 1,324.332 million). Fair value per share as at 30 June 2012 is Rs. 90 (2011: Rs. 97.50 ). Book value based on net assets, as per unaudited financial statements, as at 30 June 2012 is Rs. 49.24 per share (2011: Rs. 30.07 per share).
12.2.3 Investment in FFCL (quoted) represents 389.134 million (2011: 328.012 million) fully paid ordinary shares of Rs. 10 each, representing 18.53% (2011: 16.40%) of FFCL’s paid up share capital as at 30 June 2012. During the year, the Company has disposed off 20 million (2011: Nil) shares at an average price of Rs. 23.83. The Company has also received 81 million (2011: 135 million) shares as specie dividend from Pakarab Fertilizers Limited and 0.12 million (2011: 0.145 million) shares from Reliance Weaving Mills Limited. Fair value per share as at 30 June 2012 is Rs. 24.67 (2011: Rs. 16.64). Book value based on net assets as per unaudited financial statements as at 30 June 2012 is Rs. 12.11 per share (2011: Rs. 10.04 per share).
121 Arif Habib Corp Annual Report 2012 | Promoting Investments 122 Notes to the Financial Statements For the year ended 30 June 2012
12.2.4 Investment in CTML (quoted) represents 12.212 million (2011: 12.207 million) fully paid ordinary shares of Rs. 10 each, representing 24.82% (2011: 24.81%) of CTML’s paid up share capital as at 30 June 2012, having an aggregate cost of Rs. 292.566 million (2011: Rs. 292.510 million). During the year, the Company purchased 0.005 million (2011: Nil) shares from market at an average cost of Rs. 11.31 (2011: Nil) per share. Fair value per share as at 30 June 2012 is Rs. 8.90 (2011: Rs. 15.57). Book value based on net assets, as per unaudited financial statements, as at 31 March 2012 is Rs. 78.36 per share (2011: Rs. 56.31 per share).
12.3.1 Investment in THCCL (quoted) represents 9.034 million (2011: 7.227 million) fully paid ordinary shares of Rs. 10 each, representing 9.06% (2011: 9.06%) of THCCL’s share capital as at 30 June 2012, having cost of Rs. 188.370 million (2011: Rs. 161.269 million). During the year, the Company subscribed 1.807 million ordinary shares at Rs. 15 each. Fair value per share as at 30 June 2012 is Rs. 21.03 (2011: Rs. 19.96), whereas book value based on net assets, as per unaudited financial statements, as at 30 June 2012 is Rs. 9.61 per share (2011: Rs. 8.81 per share).
12.3.2 Investment in ASML (unquoted) represents 80.008 million (2011: 80.008 million) fully paid ordinary shares of Rs. 10 each and 34.570 million (2011: 75.463 million) irredeemable and convertible preference shares carrying preferential dividend at 6 month KIBOR + 3%, representing 33.33% (2011: 48.6%) of ASML’s total paid up share capital as at 30 June 2012. Book value based on net assets, as per unaudited financial statements, as at 30 June 2012 is Rs. 11.18 per share (2011: Rs. 8.33 per share). During the year, the Company distributed 41.25 million (2011: nil) irredeemable convertible preference shares of ASML to its shareholders as specie dividend and subscribed 0.357 million (2011: 105.746 million ) right shares of Rs.10 (2011: Rs. 10) each.
12.3.3 Investment in TPL (unquoted) represents 3 million (2011: 3 million) fully paid ordinary shares of Rs.10 each, representing 10% (2011: 10% ) of TPL’s paid up share capital as at 30 June 2012.
12.3.4 Investment in JCL represents 14.582 million (2011: Nil) non-voting, unlisted, cumulative, convertible, redeemable and non-participatory 12% preference shares of Rs. 6.86 (2011: Nil) each, representing 8.53% (2011: Nil) of JCL’s preference share capital as at 30 June 2012. Book value based on net assets, as per unaudited financial statements, as at 30 June 2012 is Rs. 26.48 per share (2011: Rs. 67.98 per share).
12.3.5 Investment in SBL (unquoted) represents 0.010 million (2011: 0.010 million) fully paid ordinary shares of Rs. 100 each, representing 4.65% (2011: 4.65% ) of SBL’s paid up share capital as at 30 June 2012.
12.4 Movement in provision for impairment 2012 2011
- Balance as at 1 July (1,032,557,974) (176,594,000) - Reversal / (provision) during the year 19,010,000 (995,547,974) - Provision reclassified during the year - 139,584,000 - Balance as at 30 June Rupees (1,013,547,974) (1,032,557,974)
12.4.1 Subsidiaries - at cost
- Balance as at 1 July (997,547,974) (17,000,000) - Reversal / (provision) during the year Arif Habib Limited (AHL) - (950,449,366) Pakistan Private Equity Management Limited (PPEML) - (8,500,000) SKM Lanka Holdings (Private) Limited (SKML) - (21,598,608) - Balance as at 30 June Rupees (997,547,974) (997,547,974)
123 Arif Habib Corp Annual Report 2012 | Promoting Investments 124 Notes to the Financial Statements For the year ended 30 June 2012
12.4.2 Available for sale
2012 2011 Associate: - Balance as at 1 July (19,010,000) (158,594,000) - Reversal during the year Rozgar Microfinance Bank Limited 19,010,000 - - Provision reclassified during the year Al-Abbas Cement Industries Limited (AACIL) - 139,584,000 - Balance as at 30 June - (19,010,000)
Other investments: - Balance as at 1 July (16,000,000) (1,000,000) - Provision during the year - TPL - (15,000,000) - Balance as at 30 June (16,000,000) (16,000,000) Total balance as at 30 June Rupees (16,000,000) (35,010,000)
12.5 The Company also measures unquoted equity instruments at fair value using valuation techniques under the guidelines of IAS 39 - “Financial Instruments: Recognition and Measurement”. The investments in other unquoted equity instruments that do not have a market/quoted price in an active market and whose fair value cannot be measured reliably, due to non availability of market specific inputs and other related factors are measured at cost.
These are Company’s strategic investments and Company does not intend to dispose them off in near future.
12.5.1 Valuation techniques and key assumptions used for the remeasurement of following unquoted investments at fair value are as under. Management estimates that changing any such assumptions to a reasonably possible alternative, would not result in significantly different fair values:
Name of Year Key assumptions Valuation Other investee company Long term Long term “Weighted Projection techniques assumptions growth rate return on equity average period (years) used cost of capital” Market base Pakarab 2012 5.00% 17.70% 13.62% 7 Discounted cash Operational Fertilizers flows (DCF) assumptions Limited 2011 5.00% 21.20% 16.00% 7 Discounted cash Market base flows (DCF) Opterational assumptions
13. LONG TERM DEPOSITS
2012 2011 Security deposit with Central Depository Company of Pakistan Limited 4,090 4,090 Security deposits with cellular phone companies 40,500 40,500 Security deposits with Pakistan State Oil - for fuel card 45,000 45,000 Security deposit for employees car 2,868,500 2,425,000 Rupees 2,958,090 2,514,590
123 Arif Habib Corp Annual Report 2012 | Promoting Investments 124 Notes to the Financial Statements For the year ended 30 June 2012
14. LOANS AND ADVANCES
2012 2011 Unsecured Considered good Advance for new investment 14.1 60,000,000 - Advance against expenses 635,000 635,000 Advance against salaries 1,301,000 1,052,011 To related parties: Aisha Steel Mills Limited -Advance against equity - 3,570,577 Thatta Cement Industries Limited - Advance against equity - 27,101,250 SKM Lanka Holdings (Private) Limited - Advance against equity 14.2 13,621,362 - Al-Abbas Cement Industries Limited 14.3 500,000,000 - 575,557,362 32,358,838 Secured To related parties: Aisha Steel Mills Limited 14.4 16,650,000 - Javedan Corporation Limited 14.5 460,000,000 518,449,754 476,650,000 518,449,754 Rupees 1,052,207,362 550,808,592
14.1 This represents amount paid as deposit money for acquisition of shares of a company in dairy farming industry.
14.2 The Company has given advance to subscribe for prospective right issue of shares of the subsidiary.
14.3 The Company has entered into a loan agreement with said subsidiary on 24 November 2011. The loan is repayable within 30 business days of notice of demand. The mark-up rate on the said loan is 3 month KIBOR prevailing on the base rate setting date plus 2.5% per annum. Mark-up is payable on quarterly basis. The effective mark-up charged during the year was 14.41% to 14.42% per annum.
14.4 The Company has entered into an agreement with said associate on 19 January 2011. Under the arrangement, the Company shall disburse loan to the associated company in one or more tranches. The loan is secured against first charge on all present and future fixed assets, accounts receivables and interest in any insurance claim and equitable mortgage of land and building. The mark-up rate in the said loan is 6 month KIBOR prevailing on the base rate setting date plus 3.25% per annum. Mark-up is payable on quarterly basis. The effective mark-up charged during the year ranged between 15.20% to 16.45% (2011: Nil) per annum.
14.5 The Company has entered into an arrangement with said associate on 20 November 2010. Under the arrangement, the Company shall disburse loan to the associate company in one or more tranches on a short term basis and is secured against REIT units to be issued by the borrower to the Company in the proposed REIT scheme of the borrower which is in the process of getting permissions from Securities and Exchange Commission of Pakistan (SECP). In case where REIT Scheme is not approved by the SECP, the borrower, as an alternate shall provide a registered mortgage deed in favour of the Company over its immovable property located in Deh Manghopir and Gadap Town, Karachi, totaling 166 acres. The loan is repayable on demand.
The mark-up rate on the said loan is three months KIBOR prevailing on the base rate setting date plus 3% per annum. Mark-up is payable on a quarterly basis. The effective mark-up charged during the year ranged between 14.91% to 16.54% (2011: 16.02% to 16.52%) per annum.
125 Arif Habib Corp Annual Report 2012 | Promoting Investments 126 Notes to the Financial Statements For the year ended 30 June 2012
14.6 Maximum balance due from related parties is Rs. 990.271 million (2011: Rs. 549.121 million).
15 OTHER RECEIVABLES 2012 2011
Considered good: Accrued markup on receivables from Suroor Investments Limited 15.1 108,244,291 108,244,291 Due from related parties 15.2 630,775,724 25,335,426 Receivable from Princely Jets (Private) Limited 14,289,176 70,000,000 Others 2,320,000 1,721,470 Rupees 755,629,191 205,301,187
15.1 The markup pertains to the amount that was due on disposal of the Company’s former subsidiary, Summit Bank Limited (formerly Arif Habib Bank Limited). The bank was sold to Suroor Investment Limited at Rs. 9 per share. The Company has received sales proceeds in full.
15.2 Due from related parties
Dividend receivable from FFCL 563,451,308 - Accrued markup on loan to JCL 14.5 36,101,837 24,394,584 Accrued markup on loan to AACIL 25,266,849 - Accrued markup on loan to ASML 5,955,730 - Receivable from SDPL - 698,264 Receivable from AHL - 77,078 Receivable from SKML - 158,500 Receivable from FFCL - 7,000 Rupees 630,775,724 25,335,426
16. SHORT TERM INVESTMENTS
At fair value through profit or loss - held for trading Investment in quoted equity securities 16.1 1,474,455,723 938,215,581 Available for sale Rozgar Microfinance Bank Limited 16.3 37,629,900 - Rupees 1,512,085,623 938,215,581
16.1 Fair value of these investments is determined using quoted market prices prevailing at the balance sheet date Short term investments include equity securities pledged with various banking companies against short term running finance facilities having a market value of Rs. 1,221.705 million (2011: Rs. 640.121 million).
16.2 Reconciliation of gain / (loss) on remeasurement of 2012 2011 investments at fair value through profit or loss - held for trading
Cost of investment 2,234,673,161 2,142,480,048 Unrealised (loss) / gain: Balance as at 1 July (1,204,264,467) (1,476,405,481) Reclassification adjustment - 29,202,362 Unrealised gain for the year 444,047,029 242,938,652 Balance as at 30 June (760,217,438) (1,204,264,467) Rupees 1,474,455,723 938,215,581 125 Arif Habib Corp Annual Report 2012 | Promoting Investments 126 Notes to the Financial Statements For the year ended 30 June 2012
16.3 Available for sale investment
In June 2012, the Company entered into an agreement (“agreement”) for the disposal of its entire shareholding in Rozgar Microfinance Bank Limited, an associate, for a consideration of Rs. 37.630 million. Accordingly, the said investment has been classified as ‘short term’. The transaction will close once the remaining formalities are completed.
17. CASH AND BANK BALANCES
2012 2011
With banks in: Current accounts - In local currency 2,800,848 3,071,832 - In foreign currency 3,851,181 3,446,216 6,652,029 6,518,048 Deposit accounts 17.1 4,522,894 2,019,349 11,174,923 8,537,397 Cash in hand 5,050 16,345 Share transfer stamps - 17,000 Rupees 11,179,973 8,570,742
17.1 The balance in deposit accounts carry markup ranging from 5% to 8% per annum (2011: 5% to 8% per annum).
18. OPERATING REVENUE 2012 2011
Dividend income 18.1 2,127,794,318 1,842,080,725 Mark-up on loans and advances 133,387,229 51,523,155 Mark-up on bank deposits 184,756 276,206 Underwriting commission 18.2 4,112,014 14,981,781 Gain / (loss) on sale of securities - net 18.3 114,795,858 (14,377,233) Gain on remeasurement of investments - net 18.4 2,036,690,977 2,346,458,738 Rupees 4,416,965,152 4,240,943,372
18.1 This includes dividends received from Pakarab Fertilizers Limited and Reliance Weaving Mills Limited, in the form of shares of Fatima Fertilizer Company Limited, amounting to Rs. 1,472.985 million (2011: Rs 1,653.075 million ) and Rs. 2.968 million (2011: 1.630 million) respectively.
18.2 The Company has underwritten various securities issue amounting to Rs. 274.134 million (2011: Rs. 2.465 billion) earning underwriting commission of 1.5% (2011: 0.4% to 1%) of the amount underwritten.
18.3 Loss on sale of securities - net 2012 2011
Gain on sale of securities 341,951,057 365,693,411 Loss on sale of securities (227,155,199) (380,070,644) Rupees 114,795,858 (14,377,233)
127 Arif Habib Corp Annual Report 2012 | Promoting Investments 128 Notes to the Financial Statements For the year ended 30 June 2012
18.4 Gain on remeasurement of 2012 2011 Investments - net
Gain on remeasurement of investment in associates - at fair value through profit or loss 1,592,643,948 2,103,520,086 Gain on remeasurement of investments - at fair value through profit or loss (held for trading) 16.2 444,047,029 242,938,652 Rupees 2,036,690,977 2,346,458,738
18.5 Operating revenue is not subject to trade or any other type of discount.
19. OPERATING AND ADMINISTRATIVE EXPENSES
2012 2011
Salaries and benefits 19.1 27,459,582 18,842,837 Custody and settlement charges 2,159,295 3,364,427 Advertisement and business promotion 2,748,660 1,985,719 Legal and professional charges 3,083,735 11,596,190 Rent, rates and taxes 12,455,005 7,495,518 Fees and subscription 2,131,550 1,595,277 Travel and conveyance 5,191,705 3,581,383 Depreciation 11 7,872,315 8,986,333 Printing and stationery 4,889,704 3,331,189 Auditors’ remuneration 19.2 1,164,500 1,065,050 Communication 1,291,251 450,647 Directors’ meeting fees 110,000 240,000 Insurance 1,032,324 708,883 Electricity 2,062,266 1,050,489 Entertainment 613,417 639,362 Repairs and maintenance 1,578,571 489,368 Ujrah payments 19.3 1,954,475 1,501,376 Others 7,527,504 2,479,532 Rupees 85,325,859 69,403,580
19.1 This includes Company’s contribution to defined contribution plan amounting to Rs. 2.115 million (2011: Rs. 1.079 million).
19.2 Auditors’ remuneration 2012 2011
Audit fee 825,000 750,000 Certification including interim review 300,000 272,500 Out of pocket 39,500 42,550 Rupees 1,164,500 1,065,050
19.3 Ujrah payments
The Company has entered into various Ijarah arrangements with First Habib Modaraba for lease of 3 vehicles having various monthly rentals for total period of 4 years. Following are the future ujrah payments under the agreement:
127 Arif Habib Corp Annual Report 2012 | Promoting Investments 128 Notes to the Financial Statements For the year ended 30 June 2012
Not later Later than one Later than five than one year but not later years year than five years Total of future ujrah payments under the agreement Rupees 1,056,156 1,182,666 -
20. OTHER INCOME 2012 2011
Gain on sale of fixed assets - 605,037 Exchange gain on foreign currency balances 407,015 14,499 Reversal of provision for Workers’ welfare fund - 76,173,396 Others - 753,455 Rupees 407,015 77,546,387
21. FINANCE COST
Mark-up on short term borrowings 246,962,405 176,824,807 Mark-up on long term loan 51,576,479 - Finance cost under marginal trading system 2,051,058 - Bank charges 171,683 295,502 Rupees 300,761,625 177,120,309
22. OTHER CHARGES
Donations 22.1 Rupees 37,050,000 55,476,000
22.1 Directors or their spouses had no interest in donees’ fund, except Mr. Arif Habib (CEO and Director of the Company). He is trustee in one of the donee institutions, Fatimid Foundation and director in the donee institutions, Pakistan Center of Philanthropy.
23. TAXATION
For the year - Current 23.1 472,882 99,826,284 - Deferred (260,544,276) 208,628,095 Prior year - (867,047) Rupees (260,071,394) 307,587,332
23.1 Minimum tax liability of Rs. 4.211 million has not been recorded as current tax expense due to future taxable profits which would result in enough tax liability to absorb this amount and accordingly reconcilliation between accounting profit and tax expense has not been presented.
129 Arif Habib Corp Annual Report 2012 | Promoting Investments 130 Notes to the Financial Statements For the year ended 30 June 2012
24. EARNINGS PER SHARE - BASIC AND DILUTED
24.1 Basic earnings per share
Profit after tax Rupees 4,254,306,077 2,840,479,564
Weighted average number of ordinary shares Number 412,500,000 412,500,000
Earnings per share - basic and diluted Rupees 10.31 6.89
24.2 Diluted earnings per share
Diluted earnings per share has not been presented as the Company does not have any convertible instruments in issue as at 30 June 2012 and 30 June 2011 which would have any effect on the earnings per share if the option to convert was exercised.
25. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND OTHER EXECUTIVES
25.1 For the purpose of disclosure those employees are considered as executives whose basic salary exceeds five hundred thousand rupees in a financial year.
25.2 The aggregate amounts charged in these financial statements in respect of remuneration including benefits to the Chief Executive, Directors and Executives of the Company are given below:
Chief Executive Other Executives 2012 2011 2012 2011
Managerial remuneration 8,400,000 8,400,000 8,256,006 5,506,742 Contribution to provident fund 677,419 754,548 581,732 188,556 Bonus 1,637,500 700,000 2,020,001 1,070,000 Other perquisites and benefits 960,000 960,000 444,072 552,585 Total Rupees 11,674,919 10,814,548 11,301,811 7,317,883
Number of person(s) 1 1 7 6
25.3 Besides the above, group insurance and medical facilities under insurance coverage were provided to the above mentioned personnel.
25.4 The aggregate amount charged to these financial statements in respect of directors’ fee paid to two directors (2011: two ) was Rs. 0.110 million (2011: Rs. 0.240 million). During the year, none of the directors except CEO was drawing any salary on account of managerial remuneration.
25.5 The Chief Executive and certain Executives have been provided with free use of Company maintained vehicles in accordance with the Company’s policy.
129 Arif Habib Corp Annual Report 2012 | Promoting Investments 130 Notes to the Financial Statements For the year ended 30 June 2012
26. CASH GENERATED FROM OPERATIONS 2012 2011
Profit before tax 3,994,234,683 3,148,066,896
Adjustments for: Depreciation 7,872,315 8,986,333 Dividend income (2,127,794,318) (1,842,080,725) Mark-up on bank balances and loans and advances (133,571,985) (51,799,361) Exchange gain on foreign currency bank balances (407,015) (14,499) Impairment loss on investments - 995,547,974 Gain on remeasurement of investment in associates (1,592,643,948) (2,103,520,086) Gain on distribution of shares - (127,125,000) Gain on sale of property and equipment - (605,037) Gain on remeasurement of short term investments (444,047,029) (242,938,652) Loss on disposal of short term investments 152,772,297 12,639,328 (Gain) / loss on disposal of long term investments (267,568,155) 1,737,905 Finance cost 300,761,625 177,120,309 (4,104,626,213) (3,172,051,511) (110,391,530) (23,984,615)
Changes in working capital
(Increase) / decrease in current assets Loans and advances (501,398,770) (282,056,092) Prepayments (561,543) (504,149) Other receivables 40,677,500 (67,583,893) Short term investments (237,051,480) 2,366,832,709 Increase / (decrease) in current liabilities Trade and other payables 471,505,671 (76,655,869) (226,828,622) 1,940,032,706 Cash (used in) / generated from operations Rupees (337,220,152) 1,916,048,091
27. CASH AND CASH EQUIVALENTS
Cash and bank balances 17 11,179,973 8,570,742 Short term borrowings 9 (1,685,677,935) (1,327,457,775) Rupees (1,674,497,962) (1,318,887,033)
28. OPERATING SEGMENTS
The financial statements have been prepared on the basis of a single reporting segment, segment information has been presented in the consolidated financial statements.
29. FINANCIAL INSTRUMENTS
The Company has exposures to the following risks from the use of financial instruments:
- Credit risk - Liquidity risk - Market risk
131 Arif Habib Corp Annual Report 2012 | Promoting Investments 132 Notes to the Financial Statements For the year ended 30 June 2012
The Board of Directors has overall responsibility for the establishment and oversight of Company’s risk management framework. The Board is also responsible for developing and monitoring the Company’s risk management policies.
29.1 Credit risk
Credit risk represents the accounting loss that would be recognized at the balance sheet date if counterparties fail completely to perform as contracted and arises principally from loans and advances and other receivables. Out of the total financial assets of Rs. 29,924 million (2011: Rs. 25,315.285 million), the financial assets which are subject to credit risk amounted to Rs. 1,815.445 million (2011: Rs. 761.328 million).
To manage exposure to credit risk in respect of loans and advances, management performs credit reviews taking into account the borrower’s financial position, past experience and other factors. Loans terms and conditions are approved by the competent authority.
Concentration of credit risk arises when a number of counter parties are engaged in similar business activities or have similar economic features that would cause their abilities to meet contractual obligation to be similarly effected by the changes in economic, political or other conditions. The Company believes that it is not exposed to major concentration of credit risk.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the balance sheet date is:
2012 2011
Long term deposits 89,590 89,590 Loans and advances 1,050,271,362 549,121,581 Other receivables 753,909,191 203,579,717 Cash and Bank balances 11,174,923 8,537,397 Rupees 1,815,445,066 761,328,285
All the loans, advances and other receivables at the balance sheet date represent domestic parties except a receivable of Rs. 108.244 million (2011: 108.244 million) and advance against equity of Rs. 13.621 million (2011: Nil).
The aging analysis of loans, advances and other receivables is as follows: 2012 2011
Not past due 1,695,936,262 574,457,007 Past due 1-30 days - - Past due 30-180 days - - Past due more than 180 days 108,244,291 178,244,291 Rupees 1,804,180,553 752,701,298
The credit quality of loans, advance and other receivable can be assessed with reference to external credit ratings as follows:
131 Arif Habib Corp Annual Report 2012 | Promoting Investments 132 Notes to the Financial Statements For the year ended 30 June 2012
Rating Rating Short term Long term agency 2012 2011 Al-Abbas Cement Industries Limited - - - 525,266,849 - Suroor Investment Limited - - - 108,244,291 108,244,291 Princely Jets (Private) Limited - - - 14,289,176 70,000,000 Thatta Cement Industries Limited - - - - 27,101,250 Arif Habib Limited - - - - 77,078 Aisha Steel Mills Limited - - - 22,605,730 3,570,577 Sweetwater Dairies Pakistan (Private) Limited - - - - 698,264 Javedan Corporation Limited - - - 496,101,837 542,844,338 SKM Lanka Holdings (Private) Limited - - - 13,621,362 158,500 Fatima Fertilizer Company Limited A-1 A PACRA 563,451,308 7,000 Others - - - 60,600,000 -
Receivable from Princely Jets (Private) Limited is secured by demand promissory note and is refundable as per Memorandum of Understanding signed on 24 May 2010. Loan to Javedan Corporation limited is secured as disclosed in note 14.5 of these financial statements. Further, Rs. 1,621.047 million (2011: 547.358 million) is due from group companies and management believes that the sum will be recovered in full as companies are under common management.
The credit quality of Company’s bank balances can be assessed with reference to external credit ratings as follows: Rating Rating Short term Long term agency 2012 2011
Allied Bank Limited A1+ AA PACRA 296,332 295,605 Summit Bank Limited A2 A-2 JCR-VIS 185,275 83,250 Askari Commercial Bank A1+ AA PACRA 3,459,985 1,055,805 Atlas Bank Limited A2 A- PACRA - 100,000 Bank Alfalah Limited A1+ AA PACRA 29,769 29,769 Bank AL-Habib Limited A1+ AA+ PACRA 379,902 376,642 Bank of Khyber A2 A- PACRA 153,567 572,490 Barclays Bank Ltd. A1+ AA- Standard & Poor’s 481,040 486,040 Faysal Bank Limited A1+ AA PACRA 23,475 23,475 First Women Bank A2 BBB+ PACRA 50,000 50,000 Habib Bank Limited A1+ AA+ JCR-VIS 182,827 175,248 Habib Metropolitan Bank Limited A1+ AA+ PACRA 2,710 2,585 KASB Bank Limited A3 BBB PACRA 63,907 63,870 MCB Bank Limited A1+ AA+ PACRA 3,939,630 4,149,801 National Bank of Pakistan A1+ AAA JCR-VIS 1,074,270 235,756 NIB Bank Limited A1+ AA- PACRA 43,400 40,984 Soneri Bank Limited A1+ AA- PACRA 99,730 99,800 Standard Chartered Bank Limited A1+ AAA PACRA 243,085 229,414 United Bank Limited A1+ AA+ JCR-VIS 466,019 466,863
Based on past experience, the management believes that no impairment allowance is necessary in respect of loans, advances and other receivables past due as some receivables have been recovered subsequent to the year end and for other balances, there are reasonable grounds to believe that the amounts will be recovered in due course.
29.2 Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations arising from its financial liabilities that are settled by delivering cash or another financial asset, or that such obligations will have to be settled in a manner disadvantageous to the Company. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of adequate funds through committed credit facilities. The Company finances its operations through equity, borrowings and working capital with a view of maintaining an appropriate mix between various sources of finance to minimize risk. The management aims to maintain flexibility in funding by keeping regular committed credit lines.
133 Arif Habib Corp Annual Report 2012 | Promoting Investments 134 Notes to the Financial Statements For the year ended 30 June 2012
On the balance sheet date, Company has cash and bank balance and unutilized credit lines of Rs. 11.180 million (2011: Rs. 8.571 million) and Rs. 1,444.322 million (2011: Rs. 1,652.542 million) as mentioned in note 17 & 9.
The following are the contractual maturities of financial liabilities, including estimated interest payments on an undiscounted cash flow basis: 2012 Carrying Contractual Upto one year More than one amount cash flows year Financial liabilities Long term loan - secured 656,550,000 656,550,000 21,074,358 635,475,642 Trade and other payables 473,424,311 475,663,133 474,480,467 1,182,666 Short term borrowings 1,685,677,935 1,741,691,952 1,741,691,952 - Rupees 2,815,652,246 2,873,905,085 2,237,246,777 636,658,308
2011 Carrying Contractual Upto one year More than one amount cash flows year Financial liabilities Trade and other payables 1,918,640 9,297,331 4,248,188 5,049,143 Short term borrowings 1,327,457,775 1,379,028,025 1,379,028,025 - Rupees 1,329,376,415 1,388,325,356 1,383,276,213 5,049,143
The future interest related cash flows depends on the extent of utilisation of running finance facilities and the interest rates applicable at that time.
29.3 Market risk
Market risk means that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The objective is to manage and control market risk exposures within acceptable parameters, while optimising the return. The market risks associated with the Company’s business activities are interest / mark-up rate risk and price risk. The Company is not exposed to material currency risk.
a) Foreign exchange risk management
Foreign currency risk arises mainly where receivables and payables exist due to transactions in foreign currencies. Currently, the Company’s foreign exchange risk exposure is restricted to long term equity investments and bank balances in foreign currency. As such the Company does not regularly deal in foreign currency transactions except for utilizing equity investment opportunities as and when it arises and maintenance of foreign currency bank accounts which currently are denominated in US Dollars and UAE Dirhams. The management believes that the Company’s exposure emanating from any fluctuations in the foreign currencies is not required to be hedged.
Financial assets and liabilities exposed to foreign exchange rate risk amounts to Rs. 69.017 million (2011: Rs. 76.589 million) and Rs. Nil (2011: Rs. Nil) respectively, at the year end.
133 Arif Habib Corp Annual Report 2012 | Promoting Investments 134 Notes to the Financial Statements For the year ended 30 June 2012
Sensitivity analysis
For the purpose of foreign exchange risk sensitivity analysis, it is observed that in the financial year the local currency has weakened against US Dollars and UAE Dirham by approximately 11.43% and 14.44% respectively. Subsequent to the balance sheet date and till the authorization of these financial statements an appreciation of 1.56% and 5.01% respectively, have been observed. During the year, the above decline has resulted in a gain on foreign currency translation of Rs. 0.407 million that is recognized in profit and loss account, therefore the Company is not significantly exposed to foreign currency risk. Further, there are no commitments or outstanding derivative contracts in foreign currency at the balance sheet date.
The following table summarizes the financial assets as of 30 June 2012 and 30 June 2011 that are subject to foreign currency risk and shows the estimated changes in the value of financial assets (and the resulting change in profit and loss account) assuming changes in the underlying exchange rates applied immediately and uniformly across all currencies. The changes in value do not necessarily reflect the best or worst case scenarios and actual results may differ. The analysis assumes that all other variables, in particular interest rate, remain constant.
Fair Estimated fair value assuming a hypothetical percentage increase / (decrease) in the value of foreign value of currencies versus Pak rupee (Rupees in million) net assets 20% -10% -1% 1% 10% 20%
30 June 2012 69.02 55.21 62.12 68.33 69.71 75.92 82.82
30 June 2011 76.59 61.27 68.93 75.82 77.36 84.25 91.91
b) Interest / mark-up rate risk
Interest / mark-up rate risk is the risk that value of a financial instrument or future cash flows of a financial instrument will fluctuate due to changes in the market interest / mark-up rates. Sensitivity to interest / mark-up rate risk arises from mismatches of financial assets and liabilities that mature or re-price in a given period. The Company manages these mismatches through risk management strategies where significant changes in gap position can be adjusted. The short term borrowings and loans and advances by the Company have variable rate pricing that is mostly dependent on the Karachi Inter Bank Offer Rate (KIBOR) as indicated in respective notes.
At the balance sheet date, the interest rate profile of the Company’s significant interest bearing financial instruments was as follows: 2012 2011 2012 2011 Effective interest rate (in %) Carrying amounts (in Rupees) Financial assets Loans and advances 14.42% to 15.23% 16.52% 976,650,000 518,449,754 Cash and bank balances 5% to 8% 5% to 8% 4,522,894 2,019,349
Financial liabilities Long term loan - secured 12.92% - 656,550,000 - Short term finance 12.92% to 14.42% 14.52% to 16.02% 1,685,677,935 1,327,457,775
Sensitivity analysis
The Company does not have any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rate will not effect fair value of any financial instrument. For cash flow sensitivity analysis of variable rate instruments a hypothetical change of 100 basis points in interest rates at the balance sheet date would have decreased / (increased) profit for the year by the amounts shown below.
135 Arif Habib Corp Annual Report 2012 | Promoting Investments 136 Notes to the Financial Statements For the year ended 30 June 2012
It is assumed that the changes occur immediately and uniformly to each category of instrument containing interest rate risk. Variations in market interest rates could produce significant changes at the time of early repayments. For these reasons, actual results might differ from those reflected in the details specified below. The analysis assumes that all other variables remain constant.
Profit and loss Increase Decrease As at 30 June 2012 100 bps 100 bps Cash flow sensitivity - Variable rate financial liabilities Rupees 5,855,570 (5,855,570) Cash flow sensitivity - Variable rate financial assets Rupees 3,563,764 (3,563,764)
As at 30 June 2011 Cash flow sensitivity-Variable rate financial liabilities Rupees 3,874,396 (3,874,396) Cash flow sensitivity-Variable rate financial assets Rupees 1,478,177 (1,478,177)
c) Price risk
Price risk represents the risk that the fair value of a financial instrument will fluctuate because of changes in the market prices (other than those arising from interest/mark-up rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all or similar financial instruments traded in the market. Company is exposed to equity price risk since it has investments in quoted equity securities amounting to Rs. 11,717.088 million (2011: Rs. 7,234.447 million) at the balance sheet date.
The Company’s strategy is to hold its strategic equity investments for a longer period of time. Thus, Company’s management is not concerned with short term price fluctuations with respect to its strategic investments provided that the underlying business, economic and management characteristics of the investee company remain viable. Company manages price risk by monitoring exposure in quoted equity securities and implementing the strict discipline in internal risk management and investment policies.
The carrying value of investments subject to equity price risk are, in almost all instances, based on quoted market prices as of the reporting date except for, unquoted associates which are carried at fair value determined through valuation techniques. Market prices are subject to fluctuation and consequently the amount realized in the subsequent sale of an investment may significantly differ from the reported market value. Fluctuation in the market price of a security may result from perceived changes in the underlying economic characteristics of the investee, the relative price of alternative investments and general market conditions.
Furthermore, amount realized in the sale of a particular security may be affected by the relative quantity of the security being sold.
Sensitivity analysis
For the purpose of price risk sensitivity analysis it is observed that the benchmark KSE 100 Index has increased by 10.26% during the financial year. Subsequent to the balance sheet date and till the date of authorization of these financial statements a further increase of 5.25% in the KSE 100 Index has been observed.
The table below summarizes the Company’s equity price risk as of 30 June 2012 and 2011 and shows the effects of a hypothetical 30% increase and a 30% decrease in market prices as at the year end. The selected hypothetical change does not reflect what could be considered to be the best or worst case scenarios. Indeed, results could be worse because of the nature of equity markets and the aforementioned concentrations existing in the Company’s equity investment portfolio. Rupees are in million.
135 Arif Habib Corp Annual Report 2012 | Promoting Investments 136 Notes to the Financial Statements For the year ended 30 June 2012
Fair value “Hypothetical “Estimated “Hypothetical “Hypothetical price change” fair value increase / increase after (decrease) in (decrease) in hypothetical shareholders’ profit / (loss) change in equity” before tax” prices”
30 June 2012 11,717.09 30% increase 15,232.21 56.99 3,458.13 30% decrease 8,201.96 (56.99) (3,458.13)
30 June 2011 7,198.38 30% increase 9,357.90 43.28 2,116.24 30% decrease 5,038.87 (43.28) (2,116.24) d) Other market risk
Management believes that unless more sophisticated and comprehensive disclosure of sensitivity analysis is given for each type of market risk to which the Company is exposed at the balance sheet date, the above mentioned sensitivity analysis in absence of availability of a large economic data with high accuracy and the present effects of unprecedented country’s political situation on economics, might remain unrepresentative to the financial statements readers for the risk inherent in the financial instruments.
29.4 Fair value of financial instruments
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. The carrying value of all financial assets and liabilities on the balance sheet approximate to their fair value.
a) Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows: 30 June 2012 30 June 2011 Carring Fair Carring Fair Amount Value Amount Value
Financial assets Long term investments 26,596,464,379 26,334,179,544 23,840,733,981 23,840,733,981 Short term investments 1,512,085,623 1,512,085,623 938,215,581 938,215,581 Long term deposits 89,590 89,590 89,590 89,590 Loans and advances 1,050,271,362 1,050,271,362 549,121,581 549,121,581 Other receivables 753,909,191 753,909,191 203,579,717 203,579,717 Cash and bank balances 11,179,973 11,179,973 8,553,742 8,553,742 Rupees 29,924,000,118 29,661,715,283 25,540,294,192 25,540,294,192
30 June 2012 30 June 2011 Carring Fair Carring Fair Amount Value Amount Value
Financial liabilities Long term loan - secured 656,550,000 656,550,000 - - Interest/mark-up accrued on short term borrowings 77,088,375 77,088,375 51,570,250 51,570,250 Trade and other payables 473,424,311 473,424,311 1,918,640 1,918,640 Short term borrowings 1,685,677,935 1,685,677,935 1,327,457,775 1,327,457,775 Rupees 2,892,740,621 2,892,740,621 1,380,946,665 1,380,946,665
137 Arif Habib Corp Annual Report 2012 | Promoting Investments 138 Notes to the Financial Statements For the year ended 30 June 2012
b) Valuation of financial instruments
In case of equity instruments, the Company measures fair value using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:
Level 1: Quoted market price (unadjusted) in an active market. Level 2: Valuation techniques based on observable inputs. Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data.
Fair values of financial assets that are traded in active markets are based on quoted market prices. For all other financial instruments the Company determines fair values using valuation techniques.
Valuation techniques used by the Company include discounted cash flow model. Assumptions and inputs used in valuation techniques include risk-free rates, bond and equity prices, foreign currency exchange rates, equity and equity index prices. The objective of valuation techniques is to arrive at a fair value determination that reflects the price of the financial instrument at the balance sheet date that would have been determined by market participants acting at arm’s length.
Valuation models for valuing securities for which there is no active market requires significant unobservable inputs and a higher degree of management judgement and estimation in the determination of fair value. Management judgement and estimation are usually required for selection of the appropriate valuation model to be used, determination of expected future cash flows on the financial instrument being valued and selection of appropriate discount rates, etc.
The table below analyses equity instruments measured at fair value at the end of the reporting period by the level in the fair value hierarchy into which the fair value measurement is categorised:
30 June 2012 Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss
Equity securities Rupees 6,403,704,026 - 12,150,000,000 18,553,704,026
Available-for-sale financial assets
Equity securities Rupees 189,979,763 - - 189,979,763
30 June 2011
Financial assets at fair value through profit or loss
Equity securities Rupees 7,054,133,022 - 13,250,039,905 20,304,172,927
Available-for-sale financial assets
Equity securities Rupees 144,250,920 - - 144,250,920
137 Arif Habib Corp Annual Report 2012 | Promoting Investments 138 Notes to the Financial Statements For the year ended 30 June 2012
The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy:
Unlisted equity instruments 2012 2011
Balance at 1 July 13,250,039,905 12,630,050,855 Total gains and losses recognized in profit or loss: - included within gain on remeasurement of investment (1,070,761,917) 601,900,000 Purchases - 18,089,050 Sale - - Transfer out of level 3 (29,277,988) -
Balance at 30 June Rupees 12,150,000,000 13,250,039,905
Unlisted equity 30 June 2012 investment
Total gains or losses recognized in profit or loss for assets and liabilities held at the end of the reporting period:
- included within gain on remeasurement of financial instruments at fair value through profit or loss Rupees (1,070,761,917)
During the year ended 30 June 2012, the Company did not acquire shares of any new entity in level 3.
Although the Company believes that its estimates of fair value are appropriate, the use of different methodologies or assumptions could lead to different measurements of fair value. For fair value measurements in Level 3, changing one or more of the assumptions used to reasonably possible alternative assumptions would have the following effects:
Effect on profit or loss favourable (unfavourable) 30 June 2012 Equity securities Rupees 67,382,850 (67,382,850)
30 June 2011 Equity securities Rupees 380,339,085 (380,339,085)
c) Accounting classifications and fair values
The table below provides reconciliation of the line items in the Company’s statement of financial position to the categories of financial instruments.
139 Arif Habib Corp Annual Report 2012 | Promoting Investments 140 Notes to the Financial Statements For the year ended 30 June 2012
Designated at fair value Cost Total through Loans and Available / amortized carrying 30 June 2012 Trading profit or loss receivables for sale cost amount
Financial assets Cash and bank balances - - - - 11,179,973 11,179,973 Pledged investments 1,221,705,079 3,038,044,445 - 189,979,763 - 4,449,729,287 Non-pledged investments 290,380,544 19,164,608,506 - 1,260,782,834 2,943,048,831 23,658,820,715 Long term deposits - - - - 89,590 89,590 Loans and advances - - 1,050,271,362 - - 1,050,271,362 Other receivables - - 192,218,707 - 561,690,484 753,909,191 Rupees 1,512,085,623 22,202,652,951 1,242,490,069 1,450,762,597 3,516,008,878 29,924,000,118
Financial liabilities Long term loan - secured - - - - 656,550,000 656,550,000 Trade and other payables - - - - 473,424,311 473,424,311 Interest/mark-up accrued on short term borrowings - - - - 77,088,375 77,088,375 Short term borrowings - - - - 1,685,677,935 1,685,677,935 Rupees - - - - 2,892,740,621 2,892,740,621
30 June 2011
Financial assets Cash and cash equivalents - - - - 8,553,742 8,553,742 Pledged investments 640,121,104 1,178,645,390 - 473,705,460 - 2,292,471,954 Non-pledged investments 298,094,477 18,187,311,956 - 1,253,557,960 2,747,513,215 22,486,477,608 Long term deposits - - - - 89,590 89,590 Loans and advances - - 549,121,581 - - 549,121,581 Other receivables - - 203,579,717 - - 203,579,717 Rupees 938,215,581 19,365,957,346 752,701,298 1,727,263,420 2,756,156,547 25,540,294,192
Financial liabilities Trade and other payables - - - - 1,918,640 1,918,640 Interest/mark-up accrued on short term borrowings - - - - 51,570,250 51,570,250 Short term borrowings - - - - 1,327,457,775 1,327,457,775 Rupees - - - - 1,380,946,665 1,380,946,665
The financial instruments not accounted for at fair value are those financial assets and liabilities whose carrying amounts approximate at fair value.
30. CAPITAL MANAGEMENT
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence, sustain future development of the business, safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefit for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Board of Directors monitors the return on capital, which the Company defines as net profit after taxation divided by total shareholders’ equity. The Board of Directors also monitors the level of dividend to ordinary shareholders. There were no changes in Company’s approach to capital management during the year and the Company is not subject to externally imposed capital requirements.
31. TRANSACTIONS WITH RELATED PARTIES
Related parties comprise of group companies (subsidiaries and associates), directors and their close family members, major shareholders of the Company, key management personnel and staff provident fund. Transactions with related parties are on arm’s length. Remuneration and benefits to executives of the Company are in accordance with the terms of the employment while contribution to the provident fund is in accordance with staff service rules. Remuneration of chief executive, directors and executives is disclosed in note 25 to the financial statements. Transactions with related parties during the year other than those disclosed elsewhere in the financial statements are given below:
139 Arif Habib Corp Annual Report 2012 | Promoting Investments 140 Notes to the Financial Statements For the year ended 30 June 2012
Name of the related party Nature of transaction Year ended and relationship with the 30 June 30 June Company 2012 2011
Subsidiaries
Arif Habib Limited - Services availed Rupees 8,387,280 15,182,665 - Number of bonus shares received Rupees - 5,636,595 - Loan / advance given Rupees - 235,000,000 - Loan / advance recovered Rupees - 235,000,000 - Mark-up income Rupees - 3,219,674 - Mark up received Rupees - 3,219,674 - Lease Rental Rupees 318,956 276,944 - Postage Rupees - 785 - Lease rentals received Rupees 396,034 - - Disposal of computer and allied items Rupees 29,543 -
Sachal Energy Development - Purchase of Shares Rupees 35,000,000 - (Private) Limited - Loan given Rupees 20,000,000 - - Loan adjusted against equity Rupees 20,000,000 - - Mark-up income accrued and received Rupees 155,227 -
Al-Abbas Cement Industries - Advance against equity Rupees - 591,051,585 Limited - Advance adjusted against shares issued Rupees - 764,051,585 - Loan given Rupees 500,000,000 25,000,000 - Loan recovered Rupees - 25,000,000 - Mark-up income Rupees 25,266,849 1,087,449 - Mark up received Rupees - 1,087,449
Sweetwater Dairies Pakistan - Expenses paid on behalf of SWDL Rupees - 221,916 (Private) Limited - Loan given Rupees 3,000,000 - - Loan recovered Rupees 3,000,000 - - Mark-up income Rupees 112,071 - - Mark up received Rupees 112,071 -
SKM Lanka Holdings (Private) Limited - Advance against equity Rupees 13,621,362 -
Associates
Aisha Steel Mills Limited - Advance adjusted against shares issued Rupees 3,570,580 - - Loan / advance given Rupees 436,938,464 180,444,931 - Loan / advance recovered Rupees 420,288,464 190,444,931 - Mark-up income Rupees 9,269,684 2,044,658 - Mark up received Rupees 3,313,953 2,056,987 - Advance against equity Rupees - 3,570,577
Fatima Fertilizers Company - Dividend income Rupees 563,451,309 - - Expense recovered Rupees 7,000 -
Arif Habib Investment Limited - Loan / advance given Rupees - 20,000,000 - Loan / advance recovered Rupees - 35,000,000 - Mark-up income Rupees - 2,326,986 - Mark up received Rupees - 2,928,506 - Number of bonus shares received Rupees - 3,610,694 - Dividend received Rupees 48,744,376 -
Thatta Cement Company - Advance adjusted against shares Limited issued Rupees 27,101,250 -
141 Arif Habib Corp Annual Report 2012 | Promoting Investments 142 Notes to the Financial Statements For the year ended 30 June 2012
Name of the related party Nature of transaction Year ended and relationship with the 30 June 30 June Company 2012 2011
Other related parties
Javedan Corporation Limited - Loan recovered Rupees 140,000,000 97,550,244 - Loan given Rupees 81,550,245 616,000,000 - Mark-up income Rupees 84,274,615 42,844,340 - Mark up received Rupees 72,567,361 18,449,756
AHSL Provident Fund - Contribution paid during the year Rupees 2,114,646 1,078,968
Arif Habib Real Estate Services (Pvt) Limited - Amount recovered against expenses Rupees - 2,903,070
Rotocast Engineering Company - Loan paid Rupees 400,000,000 - (Pvt) Limited - Loan received Rupees 400,000,000 - - Mark-up expense Rupees 12,829,807 - - Mark up paid Rupees 12,829,807 - - Payment on account of rent Rupees 11,749,886 9,199,940 - Payment on account of maintenance Rupees 3,565,219 -
Summit Bank Limited - Mark-up on short term running finance Rupees 1,609,470 - - Mark-up accrued short term running finance Rupees 313,936 -
Mr. Arif Habib (CEO) - Expenses incurred Rupees 27,446 548,084 - Amount recovered against expenses Rupees 27,446 548,084 - Purchase of shares Rupees - 80,000,060
Mr. Nasim Beg - Commission paid Rupees 6,602,932 -
32. DATE OF AUTHORIZATION FOR ISSUE
These financial statements have been authorized for issue on 30 July 2012 by the Board of Directors of the Company.
32.1 EVENTS AFTER BALANCE SHEET DATE
The Board of Directors has proposed a cash dividend of Rs. 2 per share amounting to Rs. 825 million and bonus shares in the proportion of 1 ordinary share per 10 ordinary shares held amounting to Rs. 412.5 million at it meeting held on 30 July 2012 for the approval of the members at the annual general meeting to be held on 29 September 2012. These financial statements do not reflect this appropriation as explained in note 3.15.
33. GENERAL
Corresponding figures have been re-arranged and/or re-classified, wherever necessary, for the purposes of comparison and better presentation, including ‘gain / (loss) on sale of securities - net’ and ‘gain on remeasurement of investments - net’ which have been reclassified to operating revenue in profit or loss.
CHAIRMAN & CHIEF EXECUTIVE DIRECTOR CHIEF FINANCIAL OFFICER
141 Arif Habib Corp Annual Report 2012 | Promoting Investments 142 audited consolidated financial statements
Arif Habib Corporation Limited for the year ended June 30, 2012
143 Arif Habib Corp Auditors’ Report to the Members
We have audited the annexed consolidated financial statements comprising consolidated balance sheet of Arif Habib Corporation Limited (“the Parent Company”) and its subsidiary companies, Arif Habib Limited (AHL), Al-Abbas Cement Industries Limited (AACIL), Arif Habib DMCC (AHD), SKM Lanka Holdings (Private) Limited (SKML), Pakistan Private Equity Management Limited (PPEML), Sachal Energy Development (Private) Limited (SEDPL), Sweetwater Dairies Pakistan (Private) Limited (SDPL) and Arif Habib Commodities (Private) Limited (AHC) (“the Group”) as at 30 June 2012 and the related consolidated profit and loss account, consolidated statements of comprehensive income, consolidated cash flow statement and consolidated statement of changes in equity together with the notes forming part thereof, for the year then ended. We have expressed separate opinions on the financial statements of Arif Habib Corporation Limited, Al-Abbas Cement Industries Limited and Pakistan Private Equity Management Limited. The subsidiaries, Arif Habib Limited and Sachal Energy Development (Private) Limited were audited by other firms of chartered accountants, whose reports have been furnished to us and our opinion, in so far as it relates to the amounts included for such companies, is based solely on the reports of such other auditors. These consolidated financial statements are the responsibility of the Parent Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
Our audit was conducted in accordance with the International Standards on Auditing and accordingly included such tests of accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the consolidated financial statements present fairly the financial position of the Group as at 30 June 2012 and the results of its operations, its cash flows, comprehensive income and changes in equity for the year then ended in accordance with the approved accounting standards as applicable in Pakistan.
We draw attention to note 1.5 to the consolidated financial statements which more fully explains the factors that indicate the existence of a material uncertainty which may cast significant doubt on Al-Abbas Cement Industries Limited’s ability to continue as a going concern. However, its financial statements have been prepared on going concern basis, based on the financial and operational measures taken by the management.
We also draw attention to note 3.1 to the consolidated financial statements which describes that the financial information of certain subsidiaries and associates were unaudited.
We also draw attention to note 12.1.2 to the consolidated financial statements which describes the basis on which the Parent Company has not recognized provision for Workers’ Welfare Fund.
We also draw attention to note 17.1.5 to the consolidated financial statements which describes the uncertainty related to the outcome of the constitutional petition filed by Arif Habib Investments Limited against Securities and Exchange Commission of Pakistan in the case of merger of Arif Habib Investments Limited with MCB Asset Management Company Limited.
Our opinion is not qualified in respect of above mentioned matters.
Annual Report 2012 | Promoting Investments 144 Consolidated Balance Sheet As at 30 June 2012
Note 2012 2011 (Restated) Rupees EQUITY AND LIABILITIES
Equity
Authorised share capital 10,000,000,000 10,000,000,000
Issued, subscribed and paid-up share capital 4 4,125,000,000 3,750,000,000 Reserves 5 10,407,237,257 9,424,152,468 Equity attributable to owners of the Parent 14,532,237,257 13,174,152,468 Non-controlling interests 551,489,629 549,198,456 15,083,726,886 13,723,350,924 Non-current liabilities Long term loans 6 2,645,978,686 2,836,644,192 Liabilities against assets subject to finance lease 7 2,497,747 3,467,065 Deferred liability 121,470,185 115,927,000 Deferred taxation -net 8 400,164,556 130,273,212 3,170,111,174 3,086,311,469 Current liabilities Trade and other payables 9 1,284,566,638 951,234,686 Interest / mark-up accrued 10 139,775,482 436,599,682 Short term borrowings - secured 11 3,943,892,456 2,020,683,059 Current portion of long term loans 6 251,838,000 - Current portion of liabilities against assets subject to finance lease 7 3,544,570 880,428 Provision for taxation 102,000,328 99,826,284 5,725,617,474 3,509,224,139
23,979,455,534 20,318,886,532
Contingencies and commitments 12
145 Arif Habib Corp Annual Report 2012 | Promoting Investments 146 Consolidated Balance Sheet As at 30 June 2012
Note 2012 2011 (Restated) Rupees ASSETS
Non-current assets
Property, plant and equipment 13 4,584,688,321 4,475,330,502 Intangible assets -others 14 32,827,376 28,186,194 Biological assets 4,654,000 - Goodwill 15 1,244,928,814 1,515,042,410 Membership cards and licenses 16 68,655,000 68,655,000 Long term investments 17 11,524,620,559 10,505,544,974 Investment property 18 53,000,000 126,000,000 Long term loans and advances - considered good 19 154,428,115 - Long term deposits and prepayments 20 32,895,771 38,613,563 17,700,697,956 16,757,372,643
Current assets Stock in trade 21 219,062,000 120,422,000 Stores, spares and loose tools 22 517,179,832 326,642,000 Trade debts 23 329,173,031 481,606,595 Loans and advances - considered good 24 654,583,733 647,202,095 Deposits and prepayments 25 36,866,882 42,174,165 Receivable against sale of investment 529,534,120 - Advance tax 138,489,636 157,124,792 Other receivables - considered good 26 814,044,612 226,229,603 Short term investments 27 2,934,387,278 1,470,284,734 Cash and bank balances 28 105,436,454 89,827,905 6,278,757,578 3,561,513,889
23,979,455,534 20,318,886,532
The annexed notes from 1 to 45 form an integral part of these consolidated financial statements.
CHAIRMAN & CHIEF EXECUTIVE DIRECTOR CHIEF FINANCIAL OFFICER
145 Arif Habib Corp Annual Report 2012 | Promoting Investments 146 Consolidated Profit & loss Accounts For the year ended 30 June 2012
Note 2012 2011
Rupees
Operating revenue 29 1,343,590,973 1,280,674,868 Unrealised gain on re-measurement of investment property - 11,916,000 1,343,590,973 1,292,590,868 Gain on distribution of shares - 127,125,000 Loss on loss of control of subsidiary - (293,142,614) Bargain purchase gain on acquisition of subsidiary 125,896,168 - Operating, administrative and other expenses 30 (516,646,923) (1,356,776,764) Impairment of goodwill 15 (270,113,596) (984,280,458) Impairment loss on investment - net (100,972,605) (190,632,555) Other income 31 714,260,485 388,613,491 Finance cost 32 (868,104,078) (272,823,709) Other charges 33 (43,909,143) (58,700,853) 384,001,281 (1,348,027,594) Share of profit of equity-accounted associates - net of tax 2,535,683,205 558,973,994 Profit / (loss) before tax 2,919,684,486 (789,053,600) Taxation 34 (331,020,771) (192,785,444) Profit / (loss) after tax 2,588,663,715 (981,839,044)
Profit / (loss) attributable to: Equity holders of Arif Habib Corporation Limited 2,523,861,433 (872,915,569) Non-controlling interests 64,802,282 (108,923,475) 2,588,663,715 (981,839,044)
Earnings / (loss) per share - basic and diluted 35 6.12 (2.12)
The annexed notes from 1 to 45 form an integral part of these consolidated financial statements.
CHAIRMAN & CHIEF EXECUTIVE DIRECTOR CHIEF FINANCIAL OFFICER
147 Arif Habib Corp Annual Report 2012 | Promoting Investments 148 Consolidated Statement of Comprehensive Income For the year ended 30 June 2012
Note 2012 2011
Rupees
Profit / (loss) after tax 2,588,663,715 (981,839,044)
Other comprehensive income
Net change in fair value of investments classified as ‘available-for-sale’ 5,319,900 (14,432,074)
Net change in fair value of investments classified as ‘available-for-sale’ reclassified to profit and loss account - 433,506,172
Effect of translation of net assets of foreign subsidiary to presentation currency - net 13,790,191 855,855
Share of other comprehensive income / (loss) of equity-accounted associates 7,200,583 (2,165,158)
Effect of deferred taxation (1,396,474) 216,516
Other comprehensive income for the year 24,914,200 417,981,311
Total comprehensive income / (loss) for the year 2,613,577,915 (563,857,733)
Total comprehensive income / (loss) attributable to: Equity holders of Arif Habib Corporation Limited 2,546,052,346 (449,339,293) Non-controlling interests 67,525,569 (114,518,440) 2,613,577,915 (563,857,733)
The annexed notes from 1 to 45 form an integral part of these consolidated financial statements.
CHAIRMAN & CHIEF EXECUTIVE DIRECTOR CHIEF FINANCIAL OFFICER
147 Arif Habib Corp Annual Report 2012 | Promoting Investments 148 Consolidated Cash Flow Statement For the year ended 30 June 2012
Note 2012 2011
Rupees
CASH FLOWS FROM OPERATING ACTIVITIES Cash (used in) / generated from operations 37 (9,571,043) 3,319,457,021 Income tax paid (37,404,639) (55,931,072) Finance cost paid (1,170,577,277) (257,489,466) Dividend and interest received 364,289,889 305,081,852 Net cash (used in) / generated from operating activities (853,263,070) 3,311,118,335
CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment (245,426,700) (406,437,186) Acquisition of intangible assets (10,875,438) (20,903,107) Acquisition of subsidiary (82,353,502) - Investment property 73,000,000 (14,984,000) Long term investments (466,313,921) (3,538,051,178) Proceeds from sale of property, plant and equipments & intangibles 56,703,355 403,430,218 Long term loans and advances (154,428,115) (306,706,896) Long term deposits 5,939,992 27,804,812 Proceeds from sale of long term investment 470,247,868 - Net cash used in investing activities (353,506,461) (3,855,847,337)
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long term financing 50,863,507 (294,897,077) Liability against assets subject to finance lease (1,694,824) - Dividend paid (750,000,000) - Net cash used in financing activities (700,831,317) (294,897,077)
Net decrease in cash and cash equivalents (1,907,600,848) (839,626,079) Cash and cash equivalents at beginning of the year (1,930,855,154) (1,091,229,075) Cash and cash equivalents at end of the year 37.1 (3,838,456,002) (1,930,855,154)
The annexed notes from 1 to 45 form an integral part of these consolidated financial statements.
CHAIRMAN & CHIEF EXECUTIVE DIRECTOR CHIEF FINANCIAL OFFICER
149 Arif Habib Corp Annual Report 2012 | Promoting Investments 150 Consolidated Statement of Changes in Equity For the year ended 30 June 2012
Equity attributable to owners of the Parent Non-Controlling Total issued, Unrealized Exchange General Unappropriated Total Interests equity (diminution) / subscribed difference on reserve profit appreciation on and paid up remeasurement translation to share capital of ‘available for presentation sale investment’ currency Rupees
Balance as at 1 July 2010 3,750,000,000 (424,820,983) 29,325,287 4,019,567,665 7,563,434,173 14,937,506,142 524,255,736 15,461,761,878
Total comprehensive income / (loss) for the year Loss for the year - - - - (872,915,569) (872,915,569) (108,923,475) (981,839,044)
Other comprehensive income
Net change in fair value of investments classified as ‘available-for-sale’ - (8,685,189) - - - (8,685,189) (5,746,885) (14,432,074)
Net change in fair value of investments classified as ‘available-for-sale’ reclassified to profit and loss account - 433,506,172 - - - 433,506,172 - 433,506,172
Share of other comprhensive loss of equity-accounted associates - net of tax - (1,948,642) - - - (1,948,642) - (1,948,642)
Net effect of translation of net assets of foreign subsidiary to presentation currency - - 703,935 - - 703,935 151,920 855,855 - 422,872,341 703,935 - (872,915,569) (449,339,293) (114,518,440) (563,857,733)
Transactions with owners recorded directly in equity
Distribution of 112.5 million (3 shares for every 10 shares held) shares of Fatima Fertilizer Company Limited for the year ended 30 June 2010 - - - - (1,314,000,000) (1,314,000,000) - (1,314,000,000) - Acquisition of non-controlling interests with change in control of AACIL and SEDPL - - - - (14,381) (14,381) 362,669,447 362,655,066
Disposal of non-controlling interests with a change in control of AHIL ------(223,208,287) (223,208,287)
Balance as at 30 June 2011 3,750,000,000 (1,948,642) 30,029,222 4,019,567,665 5,376,504,223 13,174,152,468 549,198,456 13,723,350,924
Total comprehensive income / (loss) for the year Profit for the year - - - - 2,523,861,433 2,523,861,433 64,802,282 2,588,663,715
Other comprehensive income Net change in the value of available for sale investments - 5,319,900 - - - 5,319,900 - 5,319,900
Share of other comprhensive income of equity-accounted associates - net of tax - 5,804,109 - - - 5,804,109 - 5,804,109
Net effect of translation of net assets of foreign subsidiary to presentation currency - net - - 11,066,904 - - 11,066,904 2,723,287 13,790,191 - 11,124,009 11,066,904 - 2,523,861,433 2,546,052,346 67,525,569 2,613,577,915 Transactions with owners recorded directly in equity
Issue of 37.5 million bonus shares (1 for every 10 shares held) for the year ended 30 June 2011 375,000,000 - - - (375,000,000) - - -
Final dividend for the year ended 30 June 2011 - Rs. 2.00 per share - - - - (750,000,000) (750,000,000) - (750,000,000)
Distribution of 41.250 million (1 preference share for every 10 shares held) preference shares of Aisha Steel Mills Limited as interim specie dividend for the year ended 30 June 2012 - - - - (412,500,000) (412,500,000) - (412,500,000)
Acquisition of non-controlling interests with acquisition of control of SDPL ------36,543,226 36,543,226
Decrease in non-contolling intersets on further acquisition of AHL and AACIL - - - - (25,467,557) (25,467,557) (101,777,622) (127,245,179)
Balance as at 30 June 2012 4,125,000,000 9,175,367 41,096,126 4,019,567,665 6,337,398,099 14,532,237,257 551,489,629 15,083,726,886
The annexed notes from 1 to 45 form an integral part of these consolidated financial statements.
CHAIRMAN & CHIEF EXECUTIVE DIRECTOR CHIEF FINANCIAL OFFICER
149 Arif Habib Corp Annual Report 2012 | Promoting Investments 150 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
1. STATUS AND NATURE OF BUSINESS
Arif Habib Corporation Limited, “the Parent”, was incorporated in Pakistan on 14 November 1994 as a public limited company under the Companies Ordinance, 1984. The Company is listed on the Karachi, Lahore and Islamabad Stock Exchanges. The principal activity of the Company is to make strategic investments in subsidiary companies and associates engaged in Chemical / Fertilizer, Financial services, Construction materials, Industrial metal, Steel and other sectors including investments in securities. The registered office of the Company is situated at Arif Habib Centre, 2nd Floor, 23 M. T. Khan Road, Karachi, Pakistan. The Company is domiciled in the province of Sindh.
These consolidated financial statements of Arif Habib Corporation Limited for the year ended 30 June 2012 comprise of the Parent and following subsidiary companies (here-in-after referred to as “the Group”).
Name of Company Effective holding
- Arif Habib Limited, a brokerage house 76.69% - Arif Habib Commodities (Private) Limited, investment management of commodities, 76.69% wholly owned subsidiary of Arif Habib Limited - Arif Habib DMCC, a UAE incorporated member company of Dubai Gold and Commodities Exchange 100.00% - SKM Lanka Holdings (Private) Limited, a Srilankan incorporated brokerage house at Colombo Stock Exchange 75.00% - Pakistan Private Equity Management Limited, a fund management company 85.00% - Al-Abbas Cement Industries Limited, a cement manufacturing company 69.08% - Sachal Energy Development (Private) Limited, a wind power generation company 99.99% - Sweetwater Dairies Pakistan (Private) Limited, a dairy farming company 85.20%
Additionally, the Parent has long term investments in following associates:
- Pakarab Fertilizers Limited 30.00% - Aisha Steel Mills Limited 33.33% - Fatima Fertilizer Company Limited 18.53% - Arif Habib Investments Limited 30.09% - Thatta Cement Company Limited 9.06% - Crescent Textile Mills Limited 24.82%
Others - Takaful Pakistan Limited 10.00% - Sun Biz (Private) Limited 4.65% - Javedan Corporation Limited 8.53%
1.1 Arif Habib Limited (AHL) was incorporated in Pakistan on 07 September 2004 under the Companies Ordinance, 1984, as a public limited company. The registered office of AHL is situated at Arif Habib Centre, 23 M.T. Khan Road, Karachi, Pakistan. It is domiciled in the province of Sindh. AHL is a corporate member of Karachi, Lahore, Islamabad Stock Exchanges. It is registered with SECP as securities brokerage house and principally engaged in the business of securities brokerage, commodities brokerage, IPO underwriting, advisory and consultancy services. The shares of AHL are listed at the Karachi Stock Exchange since 31 January 2007.
During the year, AHL incorporated a wholly owned subsidiary namely, Arif Habib Commodities (Private) Limited (AHCPL). The business of subsidiary comprises of commodity brokerage and commodity investments in Commodity exchanges.
151 Arif Habib Corp Annual Report 2012 | Promoting Investments 152 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
1.2 Arif Habib DMCC (AHD) was incorporated in Dubai, U.A.E. on 24 October 2005 as a limited liability company. Its registered office is situated at Dubai Metals and Commodities Center, Dubai, U.A.E. AHD is a wholly owned subsidiary of AHCL and was granted registration and trading license by the Registrar of Companies of the Dubai Multi Commodities Center (DMCC) Authority on 26 October 2005. AHD is expected to start its commercial operations at the Dubai Gold and Commodities Exchange within next twelve months besides consultancy business which has already been started.
1.3 SKM Lanka Holdings (Private) Limited (SKML) was incorporated in Colombo, Sri Lanka on 15 February 2007 as a limited liability company. Its registered office is situated at 86/1, Dawson Street, Colombo 02, Sri Lanka. It is domiciled in the province of Colombo and is registered with Securities and Exchange Commission of Sri Lanka as securities brokerage house.
1.4 Pakistan Private Equity Management Limited (PPEML) was incorporated in Pakistan on 06 September 2006 as a public limited company under the Companies Ordinance, 1984. The registered office of PPEML is situated at Arif Habib Centre, 23 M.T. Khan Road, Karachi, Pakistan. It is domiciled in the province of Sindh. PPEML is a fund management company (FMC) registered, under the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 as amended through SRO 113(I)2007 and SRO 271(I)/2010, with the Securities and Exchange Commission of Pakistan and licensed to carry out private equity and venture capital fund management services.
1.5 Al-Abbas Cement Industries Limited (AACIL) was established as private limited company on 01 December 1981 and was converted into public limited company on 09 July 1987 and is listed on Karachi and Lahore Stock Exchanges. The company’s principal activity is manufacturing, selling and marketing of cement. Registered office of the company is situated at the Arif Habib Centre, 23 M.T Khan Road, Karachi and its undertaking is situated at Deh Kalo Kohar, Nooriabad Industrial Estate, District Dadu (Sindh).
The accumulated losses of AACIL as at 30 June 2012 stand at Rs. 1,617.265 million (2011: Rs.1850.696 million) and as of that date, its current liabilities exceed its current assets by Rs. 1,299.297 million (2011: Rs. 648.758 million). These factors may cast significant doubt about the subsidiary’s ability to continue as going concern and it may not be able to realize its assets and discharge the liabilities at the stated amounts.
During the year, AACIL entered into a revised restructuring agreement in respect of its long term financing of Rs. 2,500 million obtained from a consortium of commercial banks. Although the revised restructuring terms, as mentioned in note 6.1 have expedited the repayment of principal. However, the interest expense over the tenure of the financing, has reduced from approximately Rs. 2,494 million to approximately Rs. 1,493 million resulting in a approximate saving of Rs. 1,001 million. In addition to the aforesaid the operational and administrative measures taken by the its management has also resulted in a gross profit of Rs. 296.942 million as against a gross loss of Rs. 57.944 million incurred last year.
Based on the above mentioned financial measures and the concerted operational measures being taken by AACIL, its management is confident of the profitable operations in the foreseeable future and therefore has prepared its financial statements on going concern basis.
1.6 Sachal Energy Development (Private) Limited (SEDPL) is a company incorporated in Pakistan under the Companies Ordinance 1984 on 20 November 2006.The company’s registered office is located in Islamabad, Pakistan. The company plans to carry out the business of purchasing, importing, transforming, converting, distributing, supplying and dealing in electricity and all other form of energy and the related services.
151 Arif Habib Corp Annual Report 2012 | Promoting Investments 152 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
1.7 Sweetwater Dairies Pakistan (Private) Limited (SDPL) was incorporated in Pakistan on 29 March 2007 as a private limited company under the Companies Ordinance, 1984. The registered office of the company is situated at 24 - Q, Shibley Road, Gulberg II, Lahore. The Principal activity of the company is to setup cattle rearing / raising facilities and to buy, sell, pasteurize, prepare, bottle or otherwise pack milk in its natural form or otherwise and to develop farmlands and to cultivate, grow and produce fodder with heavy nutritional contents required for better generation of milk. On 22 March 2012, the Parent obtained control of SDPL by acquiring 34,653,550 ordinary shares of Rs. 10 each. As a result, the Parent now has 85.20% equity interest in SDPL.
At the date of acquisition, the recognised amounts of net assets acquired and liabilities assumed were Rs. 246.913 million, resulting a gain on recognition of bargain gain amounting to Rs. 125.896 million.
2. BASIS OF PREPARATION
2.1 Statement of compliance
These consolidated financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail.
2.2 Basis of measurement
These consolidated financial statements have been prepared under the historical cost convention unless otherwise disclosed.
2.3 Functional and presentation currency
These consolidated financial statements are presented in Pak Rupees, which is the Group’s functional and presentation currency. The financial statements of two foreign incorporated subsidiaries have been translated into Pak Rupees for the purpose of these consolidated financial statements. All financial information has been rounded to the nearest rupee.
2.4 Use of estimates and judgments
The preparation of these consolidated financial statements in conformity with approved accounting standards, as applicable in Pakistan, requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Information about judgments made by management in the application of approved accounting standards, as applicable in Pakistan, that have significant effect on the financial statements and estimates and assumptions with a significant risk of material adjustment in the future periods are included in following notes:
153 Arif Habib Corp Annual Report 2012 | Promoting Investments 154 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
■ Useful lives and residual values of property and equipment (note 3.4) ■ Provision for taxation (note 3.3) ■ Classification of investments (note 3.8 - 3.8.3) ■ Fair value of investments (note 3.8 - 3.8.3) ■ Impairment (note 3.7) ■ Fair value of investment property (note 3.5) ■ Staff retirement benefits (note 3.2.3)
2.5 Amendments / interpretation to existing standards and forthcoming requirements
Standards, amendments or interpretations which became effective during the year
During the year, certain amendments to Standards or new interpretations became effective, however, the amendments or interpretation were either not relevant to the Group’s operations or were not expected to have any significant impact on the Group’s consolidated financial statements.
New / revised accounting standards, amendments to published accounting standards, and interpretations that are not yet effective
The following standards, amendments and interpretations of approved accounting standards are only effective for annual periods beginning from the dates specified below:
- Presentation of Items of Other Comprehensive Income (Amendments to IAS 1, ‘Presentation of Financial Statements’) effective for annual periods beginning on or after 1 July 2012.
- IAS 19, ‘Employee Benefits’ (Amended 2011) effective for annual periods on or after 1 January, 2013.
- IAS 28, ‘Investments in Associates and Joint Ventures (2011) effective for annual periods beginning on or after 1 January 2013.
- IFRS 10, ‘Consolidated Financial Statements’ effective for annual periods beginning on or after 1 January 2013.
- IFRS 11, ‘Joint Arrangements’ effective for annual periods beginning on or after 1 January 2013
- IFRS 12, ‘Disclosure of Interest in Other Entities’ effective for annual periods beginning on or after 1 January 2013
- IFRS 13, ‘Fair Value Measurement’ effective for annual periods beginning on or after 1 January 2013
- Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) effective for annual periods beginning on or after 1 January 2014.
- IFRS 9, ‘Financial Instruments’ effective for annual periods beginning on or after 1 January 2015.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been applied consistently to all years presented.
153 Arif Habib Corp Annual Report 2012 | Promoting Investments 154 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
3.1 Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities in which the Parent has control and / or ownership of more than half or fifty percent, of the voting power. Control exists when the Parent has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable are taken into account. Business combinations are accounted for using the acquisition method at acquisition date. Goodwill arising on acquisition date is measured as the excess of the purchase consideration, including the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree in case of step acquisition, over the fair value of the identifiable assets acquired and liabilities assumed including contingent liabilities less impairment losses, if any. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Parent. The assets and liabilities of subsidiary companies have been consolidated on a line-by-line basis. The carrying value of investments held by the Parent is eliminated against the subsidiary’s shareholders’ equity in the consolidated financial statements.
Material intra-group balances and transactions have been eliminated.
Non-controlling interest is that portion of equity in a subsidiary that is not attributable, directly or indirectly, to the Parent. Non-controlling interests are presented as a separate item in the consolidated financial statements.
Upon the loss of control, the Group derecognizes the assets and liabilities of the subsidiary, any non-controlling interests and other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognized in profit or loss account.
The financial year of the Parent and its subsidiaries are the same except for SKML and AHD. Financial years of the said subsidiaries are 31 March and 31 December, respectively. AHD has however prepared, for consolidation purposes, interim financial statements as of the same date as the financial statements of the Parent. These consolidated financial statements have been prepared using uniform accounting policies for like transactions and other events in similar circumstances.
The financial statements of Arif Habib Limited, Al-Abbas Cement Industries Limited, Sachal energy development (Private) Limited and Pakistan Private Equity Management Limited as of 30 June 2012 and financial statements of SKM Lanka Holdings (Private) Limited as of 31 March 2012 are audited. However, the financial results of Arif Habib Commodities (Private) Limited, Arif Habib DMCC and Sweetwater dairies (Private) Limited consolidated in these consolidated financial statements are unaudited.
(ii) Associates
The Parent considers its associates to be such entities in which the Group has ownership, of not less than twenty percent but not more than fifty percent, of the voting power and / or has significant influence through common directorship, but not control.
Investment in associates are accounted for under the equity method, less impairment losses, if any. Such investments are carried in the balance sheet at cost, plus post-acquisition changes in the Group’s share of net assets of the associate, less any impairment in value. The profit and loss account reflects the Group’s share of the results of its associates. The equity method for investments in associates is applied from the date when significant influence commence until the date that significant influence ceases. The Group’s share of results of associate Arif Habib Investments Limited is based on audited financial statements of the associate, whereas the financial statements of Pakarab Fertilizers Limited and Fatima Fertilizer Company Limited have been reviewed by the auditors. Financial statements of other associates are unaudited. 155 Arif Habib Corp Annual Report 2012 | Promoting Investments 156 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
3.2 Staff retirement benefits
The Group companies operate the following retirement and other benefit schemes:
3.2.1 Defined contribution plan
AHCL and AHL operate recognized provident fund schemes for all eligible permanent employees for which their contributions are charged to profit and loss account.
3.2.2 Voluntary pension scheme
PPEML operates a voluntary pension scheme for all its permanent employees. Equal monthly contributions are made both by the company and the employees.
3.2.3 Defined benefit plan
AACIL operates an approved funded gratuity plan for all its employees who have completed the qualifying period under the scheme. Contributions are made to the fund in accordance with actuarial recommendations. The most recent valuation in this regard was carried out as at 30 June 2012 by using Projected Credit Unit Method for valuation of the scheme. The actuarial gains/losses are recognized as income or expense in the year in which they arise. Certain actuarial assumptions have been adopted as disclosed in these consolidated financial statements for actuarial valuations of present value of defined benefit obligations. Change in these assumption in future years may affect the liability under the scheme for those years.
3.3 Taxation
Income tax expense comprises of current, prior year and deferred tax. Income tax expense is recognized in profit and loss account except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. However, in case of PPEML and SDPL a fund management company and a wind power generation company, no tax is payable in accordance with clause 101 of part I of second schedule and section 132 of second schedule to the Income Tax Ordinance, 2001 respectively.
Current
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustments to tax payable in respect of prior years.
Deferred
Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences at the balance sheet date between the tax base and carrying amount of assets and liabilities for financial reporting purposes.
Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible temporary differences and carry forward of unused tax losses, to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and carry forward of unused tax losses can be utilized. Carrying amount of all deferred tax assets are reviewed at each balance sheet date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. 155 Arif Habib Corp Annual Report 2012 | Promoting Investments 156 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
3.4 Property, plant and equipment
Owned
Property, plant and equipment, except capital work-in-progress, are stated at cost less accumulated depreciation and impairment losses, if any. Cost includes expenditure that are directly attributable to the acquisition of the asset.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and its cost can be measured reliably. Cost incurred to replace a component of an item of property, plant and equipment is capitalized, the asset so replaced is retired from use and its carrying amount is derecognized. Normal repairs and maintenance are charged to consolidated profit and loss account during the period in which they are incurred
Depreciation on plant and machinery is charged using units of production method. The unit of production method resulted in depreciation charge based in the actual use or output.
Depreciation on assets other than plant and machinery is charged to profit and loss account using the reducing balance method over the asset’s useful life at the rates stated in note 13.
The depreciation on property, plant and equipment is charged full in the month of acquisition and no depreciation is charged in the month of disposal.
Gains or losses on disposal of an item of property, plant and equipment are recognized in the profit and loss account currently.
The assets’ residual value and useful life are reviewed at reporting date, and adjusted if impact on depreciation is significant.
Capital work in progress is stated at cost and consists of expenditure incurred and advances made in respect of property, plant and equipment in the course of their construction and installation. Transfers are made to relevant asset’s category as and when assets are available for intended use.
Leased
Leases in terms of which the Group companies assumes substantially all the risks and rewards of ownership are classified as finance lease. Asset acquired by way of finance lease is stated at an amount equal to the lower of its fair value and the present value of minimum lease payments at the inception of the lease less accumulated depreciation and impairment losses, if any. The corresponding liability to the lessor is included in the balance sheet as liabilities against assets subject to finance lease.
Leased assets which are obtained under Ijarah agreement are not recognized in the balance sheet and are treated as operating lease based on Islamic Financial Accounting Standard (IFAS) 2 issued by the Institute of Chartered Accountants of Pakistan and notified by Securities and Exchange Commission of Pakistan vide S.R.O. 43(1) / 2007 dated 22 May 2007. Payments made under operating lease are charged to profit and loss account on a straight line basis over the lease term.
157 Arif Habib Corp Annual Report 2012 | Promoting Investments 158 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
3.5 Investment property
Property that is held for long-term rental yields or for capital appreciation or both is classified as investment property. Investment property is initially measured at its cost, including related transaction costs and borrowing costs, if any.
Subsequent expenditure is capitalized to the asset’s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognized.
For the purpose of subsequent measurement, the fair value of the investment property is determined with sufficient regularity based on available active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. Valuations wherever needed are performed as of the reporting date by professional valuers who hold recognized and relevant professional qualifications and have recent experience in the location and category of the investment property being valued. These valuations form the basis for the carrying amounts in the financial statements.
Changes in fair values are recognized in the consolidated profit and loss account. An item of investment property is derecognized either when disposed of or permanently withdrawn from use and no future economic benefits is expected from its disposal.
3.6 Intangible assets
3.6.1 Membership cards and offices
These are held by AHL and AHCPL are stated at cost less impairment losses, if any. The carrying amount is reviewed at each balance sheet date to assess whether it is in excess of its recoverable amount, and where the carrying value exceeds estimated recoverable amount, it is written down to its estimated recoverable amount.
3.6.2 Others
Intangible assets, other than goodwill, are stated at cost less accumulated amortization and accumulated impairment losses, if any. Intangibles are amortised over their estimated useful lives.
3.7 Impairment
A financial asset, other than that carried at fair value through profit or loss, is assessed at each balance sheet date to determine whether there is any objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred and that the loss event has a negative effect on the estimated future cash flows of that asset.
In case of investment in equity securities classified as available for sale and measured at fair value, a significant or prolonged declined in the fair value of the security below its cost is considered in determining whether the assets are impaired. If any such evidence exists, the cumulative loss measured as a difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized is transferred from equity and recognized in the profit and loss account. Such impairment losses are not subsequently reversed through the profit and loss account.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognized in profit and loss account.
157 Arif Habib Corp Annual Report 2012 | Promoting Investments 158 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
The carrying amount of the Group’s non-financial assets and investment carried at cost are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such an indication exists, the recoverable amount of the asset is estimated in order to determine the extent of impairment loss, if any. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its estimated recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Impairment losses are recognized in profit and loss account.
3.8 Investments
The management determines the appropriate classification of its investments at the time of purchase or increase in holding and classifies / reclassifies its investment as subsidiaries, associates and joint ventures, at fair value through profit or loss, available for sale and held-to-maturity.
All investments are initially recognized at fair value, being the cost of the consideration given including transaction costs associated with the investment, except for those classified as at fair value through profit or loss, in which case the transaction costs are charged to the profit and loss account.
All “regular way” purchases and sales of financial assets are recognized on the trade date, that is the date on which the Group commits to purchase / sell an asset. Regular way purchases or sales of financial assets are the contracts which require delivery of assets within the time frame generally established by regulations or market convention.
Where active market of the quoted investment exists, fair value is determined through Karachi Stock Exchange daily quotation. In case of unquoted investment, where active market does not exists, fair value is determined using valuation techniques. The investments in equity instruments that do not have a market / quoted price in an active market and whose fair value cannot be reliably measured are carried at cost.
The Group classifies its investments in the following categories:
3.8.1 At fair value through profit or loss - held for trading
Investments which are acquired principally for the purpose of selling in the near term or the investments that are part of a portfolio of financial instruments exhibiting short term profit taking are classified as at fair value through profit or loss - held for trading. These are stated at fair values with any resulting gains or losses recognized in the profit and loss account. The fair value of such investments, representing listed equity securities are determined on the basis of prevailing market prices at the respective stock exchange and on market based redemption / repurchase prices, whichever is applicable, in case of other securities.
3.8.2 Available for sale
Available for sale investments are those non-derivative investments that are designated as available for sale or are not classified in any other category. These are primarily those investments that are intended to be held for an undefined period of time or may be sold in response to the need for liquidity.
At subsequent balance sheet dates, these investments are remeasured at fair values and the resulting gains or losses are recognized directly in equity until the investment is disposed off or impaired at which time these are transferred to profit and loss account.
Where active market of the quoted investment exists, fair value of quoted investments is determined using quotations of the respective stock exchange. The investments for which a quoted market price is not available, are measured at cost, unless fair value can be reliably measured. Such fair value estimates are subjective in nature and involve some uncertainties and matters of judgment (e.g. valuation, interest rate etc.) and therefore, cannot be determined with precision.
159 Arif Habib Corp Annual Report 2012 | Promoting Investments 160 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
3.8.3 Held-to-maturity investments
Investments with a fixed maturity where the company has the intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are carried at amortized cost using the effective interest rate method, less any impairment losses.
3.9 Sale and repurchase agreements
Transactions of purchase under resale (reverse-repo) of marketable securities including the securities purchased under continuous funding system are entered into at contracted rates for specified periods of time. Securities purchased with a corresponding commitment to resale at a specified future date (reverse-repo) are not recognized in the balance sheet. Amounts paid under these agreements in respect of reverse repurchase transactions are included in assets. The difference between purchase and resale price is treated as income from reverse repurchase transactions in marketable transactions / continuous funding system and accrued over the life of the reverse repo agreement.
Transactions of sale under repurchase (repo) of marketable securities are entered into at contracted rates for specified periods of time. Securities sold with a simultaneous commitment to repurchase at a specified future date (repos) continue to be recognized in the balance sheet and are measured in accordance with accounting policies for investments. The counterparty liabilities for amounts received under these transactions are recorded as liabilities. The difference between sale and repurchase price is treated as borrowing charges and accrued over the life of the repo agreement.
3.10 Trade and other receivables
Trade and other receivables are carried at cost, which is the fair value of the consideration to be received, less provision for doubtful debts.
3.11 Trade and other payables
Trade and other payables are carried at cost, which is the fair value of the consideration to be paid, in the future for goods and services received.
3.12 Short term borrowings
Mark-up bearing borrowings are recognized initially at fair value, less attributable transaction cost. Subsequent to initial recognition, mark-up bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognized in the income statement over the period of the borrowings on an effective interest basis.
3.13 Revenue recognition
■ Gain / loss on sale of investments are recognized on the date of transaction and charged to profit and loss account in the period in which they arise. ■ Brokerage, consultancy and advisory fee, commission etc. are recognized as and when such services are provided. ■ Rental income from investment properties is recognized on accrual basis. ■ Dividend income is recognized when the Group’s right to receive such dividend is established. ■ Mark-up income is recognized on a time proportion basis that takes into account the effective yield. ■ Revenue from sale of goods is measured at fair value of the consideration received or receivable. Domestic sales are recognised as revenue on dispatch of goods to customers. Export sales are recognised as revenue on the basis of goods shipped to customers. ■ Rebate on export is recognized after finalization of export documents. 159 Arif Habib Corp Annual Report 2012 | Promoting Investments 160 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
3.14 Provisions
Provision is recognized when, as a result of past event, the companies have a present legal orconstructive obligation that can be estimated reliably and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. Subsequently, provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.
3.15 Financial instruments
Financial assets and financial liabilities are recognized when the Group company becomes a party to the contractual provisions of the instrument. These are measured initially at fair value. Financial assets are derecognized when the contractual right to the cash flow from the financial assets expires or is transferred. Financial liabilities are derecognized when they are extinguished i.e. when the obligation specified in the contract is discharged or cancelled or expires. Financial instruments carried on the statement of financial position include investments, trade debts and other receivables, loans and advances, cash and bank balances, deposits, borrowings, trade and other payables and accrued and other liabilities. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item.
Financial assets and financial liabilities are off set and the net amount is reported in the balance sheet only when the Group has a legally enforceable right to offset the recognized amount and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction on the measurement date.
When available, the Group measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm’s length basis.
If a market for financial instrument is not active, the Group establishes fair value using a valuation technique. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the company, incorporates all factors that market participants would consider in setting a price, and is consistent with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument. The Group calibrates valuation techniques and tests them for validity using prices from observable current market transactions in the same instrument or based on other available observable market data.
3.16 Foreign currency translation
Foreign currency transactions are translated into Pak Rupees using the exchange rates prevailing at the date of the transactions. All the monetary assets and liabilities in foreign currencies, at the balance sheet date, are translated into Pak Rupees at the exchange rates prevailing on that date. Foreign exchange gains and losses on translation are recognized in the profit and loss account. Non-monetary assets and liabilities, denominated in foreign currency that are measured at fair value are translated using exchange rate at the date the fair values are determined. Non- monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
The assets and liabilities of foreign operations, are translated to Pak Rupees at exchange rates at the reporting date. The income and expenses of foreign operations, are translated to Pak Rupees at exchange rates at the dates of the transactions. Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve (translation reserve) in equity.
3.17 Borrowing costs
Borrowing costs incurred on short term and long term borrowings are recognized as an expense in the period in which these are incurred 161 Arif Habib Corp Annual Report 2012 | Promoting Investments 162 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
3.18 Cash and cash equivalents
Cash and cash equivalent for the purpose of cash flow statement comprises of cash in hand, share transfer stamps, banking instruments, cash at bank and short term running finance.
3.19 Segment reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Group’s management to make decisions about resources to be allocated to the segment and to assess its performance.
Segment results that are reported to the Group’s management include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets.
3.20 Dividend and appropriation to reserve
Dividend distribution to the shareholders and appropriation to reserves are recognized in the financial statements in the period in which these are approved.
The Company measures the liability to distribute non-cash assets as a dividend to the shareholders at the fair value of the assets to be distributed. The carrying amount of the dividend is remeasured at each reporting date and at the settlement date. On settlement of the transaction, the Company recognises the difference, if any, between the carrying amount of the assets distributed and the carrying amount of the liability in profit or loss.
4. SHARE CAPITAL
4.1 Authorised share capital
2012 2011 2012 2011 (Number of shares)
1,000,000,000 1,000,000,000 Ordinary shares of Rs. 10 each Rupees 10,000,000,000 10,000,000,000
4.2 Issued, subscribed and paid-up share capital
5,000,000 5,000,000 Ordinary shares of Rs. 10 each fully paid in cash 50,000,000 50,000,000
409,500,000 372,000,000 Ordinary shares of Rs. 10 each issued as fully paid bonus shares 4,095,000,000 3,720,000,000 414,500,000 377,000,000 4,145,000,000 3,770,000,000
(2,000,000) (2,000,000) Ordinary shares of Rs. 10 each bought back at Rs. 360 per share (20,000,000) (20,000,000) 412,500,000 375,000,000 Rupees 4,125,000,000 3,750,000,000
161 Arif Habib Corp Annual Report 2012 | Promoting Investments 162 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
4.3 During the financial year 2005-2006, the Parent Company bought back two million shares of Rs. 10 each from its shareholders through tender notice at a price of Rs. 360 per share in accordance with section 95-A of the Companies Ordinance, 1984 and Companies (Buy-back of shares) Rules, 1999. The acquisition resulted in reduction of capital and unappropriated profit by Rs. 20 million and Rs. 700 million respectively, in the relevant year.
5. RESERVES 2012 2011
General reserve 4,019,567,665 4,019,567,665 Unappropriated profit 6,337,398,099 5,376,504,223 Exchange difference on translation to presentation currency - net 41,096,126 30,029,222 Unrealised appreciation / (diminution) on remeasurement of available for sale investments 9,175,367 (1,948,642) Rupees 10,407,237,257 9,424,152,468
6. LONG TERM LOANS
From banking companies - secured Musharaka - 500,000,000 Term finance 6.1 & 6.2 2,582,432,000 2,000,000,000 2,582,432,000 2,500,000,000 From related parties - unsecured 6.3 315,384,686 336,644,192 Less: Current portion of long term loan (251,838,000) - Rupees 2,645,978,686 2,836,644,192
6.1 During the year, AACIL has entered into a restructuring agreement for long term finances effective from 23 December 2011. The terms of the agreement are as under:
Tenor 6.5 years Maturity date 23 June 2018
Principal 09 Half - yearly installments. First two principal repayments amounting to Rs. repayments 625 million due immediately and Rs.125 million due on 23 June 2012 were paid accordingly. Other installments, amounting to Rs. 250 million each, fall due commencing from 23 December 2012 till 23 December 2015.
Markup pricing For first 3.5 years (23 June 2010 - 22 December 2013): 6 month KIBOR + 0%. After 3.5 years (23 December 2013 onwards): 6 month KIBOR + 1.75%.
Markup payment Markup accrued from 23 June 2010 till the date of final settlement of principal will be paid in half yearly installments of Rs. 250 million each commencing from 23 June 2016
Security - Mortgage over property worth Rs. 3.33 billion: and - Hypothecation charge over assets worth Rs. 3.33 billion.
6.2 During the year, the Parent obtained term finance facility from a commercial bank under mark-up arrangement at the rate of 3 month KIBOR+1% to be charged on quarterly basis. The loan is payable till 31 December 2013. The loan is secured against pledge of shares of associated company. The market value of pledged shares as collateral amounts to Rs. 1,272.972 million.
163 Arif Habib Corp Annual Report 2012 | Promoting Investments 164 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
6.3 From related parties - unsecured 2012 2011
Interest bearing 6.4 - 107,486,981 Non interest bearing 503,114,257 450,000,000 Imputed income on remeasurement of loan liability at fair value (220,842,789) (220,842,789 Unwinding of imputed interest 33,113,218 - 6.5 315,384,686 229,157,211 Rupees 315,384,686 336,644,192
6.4 This represents an unsecured interest bearing loan given by Mr. Arif Habib to SKML.
6.5 This represents an unsecured non interest bearing loan received by AHL on 27 June 2011 from a related party. The loan is repayable at the end of five years from date of receipt and therefore has been re-measured using effective interest rate for financial instruments carrying same terms of repayment.
7. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE
2012 2011
Present value of minimum lease payments 6,042,317 4,347,493 Less: Current portion shown under current liabilities (3,544,570) (880,428) Rupees 2,497,747 3,467,065
The minimum lease payments have been discounted at an implicit interest rate of 14.02% reset at the beginning of every six months. The implicit interest rate used during the year to arrive at the present value of minimum lease payment is 16% since the implicit interest rate is linked with KIBOR so the amount of minimum lease payments and finance charge may vary from period to period. The lessee has an option to purchase the assets after expiry of the lease term.
Taxes, repairs and insurance costs are borne by the lessee. In case of early termination of lease, the lessee is required to pay entire amount of rentals for the unexpired period of lease agreement.
The amount of future payments of the lease and the periods in which these payments become due are as follows:
Minimum Future Present value of lease liability lease finance 2012 2011 payments cost
Not later than one year 3,791,717 247,147 3,544,570 880,428 Later than one year and not later than five year 2,647,819 150,072 2,497,747 3,467,035 Rupees 6,439,536 397,219 6,042,317 4,347,463
163 Arif Habib Corp Annual Report 2012 | Promoting Investments 164 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
8. DEFERRED TAXATION - net 2012 2011
The liability for deferred taxation comprises of temporary differences relating to:
- Accelerated tax depreciation 4,369,659 246,408,212 - Available for sale investment 1,396,474 - - Dividend receivable 11,281,026 - - Investment in equity accounted associates 396,892,008 390,784,009 413,939,167 637,192,221 Deferred tax asset comprises of temporary differences relating to:
- Unrealized capital loss on short term investments (13,774,611) (15,143,009) - Liabilities against assets subject to finance leases - (678,000) - Carry forward of losses - (489,112,000) - Gratuity - (1,986,000) (13,774,611) (506,919,009) Rupees 400,164,556 130,273,212
9. TRADE AND OTHER PAYABLES
Creditors 342,447,886 393,783,420 Bills payable 365,559,000 132,953,000 Accrued liabilities 76,468,615 91,257,444 Withholding tax payable 2,409,487 307,000 Advance from customers 146,144,000 64,951,000 Provision for Workers’ Welfare Fund - 3,499,555 Provision for gratuity 9.1 25,924,000 20,276,000 Other liabilities 9.2 325,613,650 244,207,267 Rupees 1,284,566,638 951,234,686
9.1 Provision for gratuity
a) Reconciliation of balance due to defined benefit plan Present value of defined benefit obligation 26,007,000 20,835,000 Fair value of plan assets (83,000) (559,000) Rupees 25,924,000 20,276,000
b) Movement of the liability recognized in the balance sheet
Present value of defined benefit obligations 20,276,000 18,495,000 Expenses for the period 10,569,000 7,450,000 Liability transferred - 264,000 Less: Payment made during the period (4,921,000) (5,933,000) Liability recognized in the balance sheet Rupees 25,924,000 20,276,000
165 Arif Habib Corp Annual Report 2012 | Promoting Investments 166 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
c) Change in present value of defined benefits obligations 2012 2011
Present value of defined benefits obligation as on 1 July 20,835,000 18,627,000 Current service cost for the year 7,738,000 6,650,000 Interest cost for the year 2,917,000 2,235,000 Benefits paid during the year (5,234,000) (5,784,000) Liability transferred -in from other Group Company - 264,000 Actuarial loss on present value of defined benefit obligation (249,000) (1,157,000) Rupees 26,007,000 20,835,000
d) Changes in fair value of plan assets
Total contribution made in the year 559,000 600,000 Expected return on plan assets 78,000 72,000 Contribution during the year 4,921,000 5,933,000 Benefits paid / discharged during the year (5,234,000) (6,252,000) Actuarial gain / (loss) on plan assets (241,000) 206,000 Fair value of plan assets Rupees 83,000 559,000
e) Expenses recognized in the profit and loss account
Current service cost 7,738,000 6,650,000 Interest cost 2,917,000 2,235,000 Net actuarial loss recognized in the period (8,000) (1,363,000) Expected return on plan assets (78,000) (72,000) Rupees 10,569,000 7,450,000
f) Change in actuarial gains / (losses) Net gains / (losses) arising during the year 8,000 1,363,000 Charged to the profit and loss account (8,000) (1,363,000) Rupees - -
g) Principle actuarial assumptions
Discount rate 13% 14% Expected rate of eligible salary increase in future years 12% 13% Average expected remaining working life time of employees 10 Years 11 Years
h) Expected charge for the year ending 30 June 2013 is Rs. 11.996 million.
i) Present value of defined benefits obligations
Present value of defined obligations at the end of the year Rupees 20,276,000 18,495,000
j) Experience adjustments
Experience adjustment arising on plan liabilities Rupees (8,000) (1,363,000)
165 Arif Habib Corp Annual Report 2012 | Promoting Investments 166 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
9.2 This includes Rs. 193.474 million (2011: Rs. 180.175 million) representing recognised contingent liabilities of acquired subsidiaries as follows:
Al-Abbas Cement Industries Limited
The company received an order from Central Excise and Land Custom on 28 October 1992 allegating that the Sales tax and CED amounting to Rs. 15.210 and Rs. 30.312 million respectively, were not paid on certain sales. An order was received demanding the recovery of the above amounts along with penalty amounting in aggregate to Rs. 91.046 million. The company has however disputed the same on grounds of lack of jurisdiction as well as on the merits, the matter is subjudice. The stay order was granted by the Honourable High Court of Sindh against the said order and the case is currently pending with the Appellate Tribunal Inland Revenue, Karachi. The management is confident that the outcome of the case would be in favor of the Company and hence no provision is made in these financial statements.
The Competition Commission of Pakistan (the CCP) took Suo Moto action under Competition Commission Ordinance, 2007 and issued a Show Cause Notice on 28 October 2008 for increase in prices of cement across the country. Similar notices were also issued to All Pakistan Cement manufacturers Association (APCMA) and its member cement manufacturers. The company filed a writ petition before the Honourable Lahore High Court (LHC), the LHC wide its order dated 24 August 2009 allowed the CCP to issue its final order. The CCP accordingly passed an order on 27 August 2009 and imposed a penalty of Rs. 87 million on the company. The Lahore High Court vide its order dated 31 August 2009 restrained the CCP from enforcing its order against the company for the time being.
During the financial year ended 30 June 2009, the company has filed an appeal before the Honourable Supreme Court of Pakistan and Lahore High Court against the Order of the CCP dated 27 August 2009. The petition filed by the company and other cement manufacturers before the Lahore High Court are also pending for adjudication meanwhile order passed by the Lahore High Court on 31 August 2009 is still operative.
Sachal Energy Development (Private) Limited
Faysal Bank Limited has issued guarantee during the year 2010 amounting to US$ 25,000 equals to Rs. 2,128,750 on behalf of the company in the ordinary course of business.
Sweetwater Dairies Pakistan (Private) Limited
Mines and minerals department Sahiwal has sent a show cause notice dated 04 July 2009 requiring payment of Rs. 519,065 for sand as minor minerals. SDPL has made representations to the secretary mines and minerals Punjab, that it is not engaged in any business of mines and minerals and from its owned land of 28 acres, a portion was dig out to use such mud for raising foundation of the sheds. The management is of the firm view that this notice is defective and will not be maintainable under the law.
M/S Noor Durrani Associates (NDA) has filed suit for Rs. 12,780,173 for Value Engineering Services. The company has not executed any contract with M/s NDA for such services and as such their amount is not payable. The management is of the view that this suit will be quashed by the Court being devoid of merit.
10. INTEREST / MARK-UP ACCRUED 2012 2011
On long term financing 26,723,358 333,097,000 On short term borrowings 113,052,124 103,502,682 Rupees 139,775,482 436,599,682
167 Arif Habib Corp Annual Report 2012 | Promoting Investments 168 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
11. SHORT TERM BORROWINGS - secured
From banking companies 2012 2011
- Short term running finance from banks 11.1 3,833,222,987 1,918,516,404 - Murabaha finance 11.2 110,667,000 72,500,000 - Borrowings in foreign currency by SKML 2,469 29,666,655 Rupees 3,943,892,456 2,020,683,059
11.1 Short term running finance facilities are available from various commercial banks, under mark-up arrangements, amounting to Rs. 5,480 million (2011: Rs. 4380 million) which represents the aggregate of sale prices of all mark-up agreements between the Company and the banks with minimum 30% margin (2011: 30% margin). These facilities have various maturity dates upto June 2013. These arrangements are secured against pledge of marketable securities,first charge ranking pari passu against current and fixed assets, and personal guarrantees of members. These running finance facilities carry mark-up ranging from 1 month KIBOR+ 1% to 3 month KIBOR+ 2.5% per annum (2011: 3 month KIBOR+ 1% to 3 month KIBOR+ 2.5% per annum) calculated on a daily product basis, that is payable quarterly. The carrying amount of securities pledged as collateral against outstanding liability amounts to Rs.6418.392 million (2011: Rs. 2,292.471 million). The aggregate amount of these facilities which have not been availed as at the balance sheet date amounts to Rs. 1,666.106 million (2011: Rs. 2,489.317 million). 11.2 Murabaha facility is obtained on mark-up basis to the extent of Rs. 130 million (2011: Rs.130 million). It carry mark up at the rate of 6 month KIBOR plus 3 % (2011: 1 month KIBOR plus 3% ) per annum. 12. CONTINGENCIES AND COMMITMENTS 12.1 Contingencies Arif Habib Corporation Limited 12.1.1 The Company is contesting alongwith other defendants four suits filed by Diamond Industries Limited, Mr. Iftikhar Shafi, Shafi Chemicals Industries Limited and Mr. Nisar Elahi (The Plaintiffs) in the year 2002-2003, for damages jointly against Mr. Saleem Chamdia, Mr. Arif Habib, Mr. Aqeel Karim Dedhi, Mr. A. Ghaffar Usman Moosani, Mr. Shahid Ghaffar, the Karachi Stock Exchange (Guarantee) Limited (KSE), the Securities and Exchange Commission of Pakistan (SECP), the Central Depository Company of Pakistan Limited (CDC), Saleem Chamdia Securities (Private) Limited, Arif Habib Securities Limited, Moosani Securities Limited and Aqeel Karim Dedhi Securities Limited. The suits are for recovery of damages amounting to Rs. 10,989,948,199, Rs. 5,606,611,760, Rs.1,701,035,843 and Rs. 428,440,971 respectively against the decision of the Karachi Stock Exchange in respect of Risk Management System of its Clearing House during the year 2000. The Chairman and Chief Executive of the Company was the Chairman of the Board of Directors of KSE for the year 2000, the Company has been made party to the suits by the plaintiffs. All the suits at present are pending before the honorable Sindh High Court, Karachi. Individual liability of respective individuals and undertakings is not quantifiable. The legal advisor of the Company is of the opinion that there are reasonable grounds for a favorable decision and that the suits are likely to be dismissed as these are not based on factual or legal basis and no financial liability is expected to accrue as a consequence of the said suits against the Company. Therefore, Company has not made any provision in this respect in the financial statements. 12.1.2 During the year ended 30 June 2011, the Honourable High Court of Lahore vide their order in respect of writ petition No. 8763/2011, has declared amendments introduced through Finance Acts 2006 and 2008 in Workers’ Welfare Ordinance, 1971 as unconstitutional. Further, the Company has also filed a writ petition in the High Court of Sindh at Karachi to impugn the amendments made to the Workers’ Welfare Ordinance 1971, vide Finance Act 2008. Management of the Company is contesting the case vigorously. As per the legal council, the Company has a reasonable case and expects that the constitution petition pending in the Honourable High Court of Sindh on the subject as referred above will be decided in the favour of the Company. Accordingly, the management has not recorded any liability towards Worker’s Welfare Fund.
167 Arif Habib Corp Annual Report 2012 | Promoting Investments 168 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
12.1.3 During the year, the Securities and Exchange Commission of Pakistan (“SECP”) issued an order u/s 22 of the Securities and Exchange Ordinance, 1969 (“the Ordinance”) regarding non compliance of orders passed by SECP u/s 18A of the Ordinance for depositing confiscated subscription money amounting to Rs. 3.14 million relating to fictitious applications received by the Company for subscription of shares of Summit Bank Limited that were offered to general public by the Company in 2007. The Company has appealed to the Appellate Bench of SECP against the said order of the Commission. The management is contesting the appeal vigorously and is confident that the appeal will be decided in the Company’s favour. 12.1.4 Income tax assessments of the Company have been finalised upto Tax Year 2005 (Accounting year 2005). However, deemed assessments made u/s 120 of the Income Tax Ordinance, 2001 relating to Tax Years 2006 to 2008 have been subsequently amended u/s 122 of the Income Tax Ordinance, 2001. The Company has filed appeals before the Appellate Tribunal Inland Revenue, in respect of each of the said amendments which are still pending. As per the management there is no potential financial exposure to the Company and does not expect unfavourable outcome for the Company. Income tax assessment for the Tax Year 2010, taken as deemed assessment u/s 120 of the Income Tax Ordinance, 2001 was subsequently amended twice u/s 122 (5A) of the Income Tax Ordinance, 2001. The appeals filed by the Company with Commissioner Inland Revenue (Appeals-1) against these amendments were decided in favor of the Company. Income tax assessment for Tax Year 2011 is deemed to have been finalised u/s 120 of the Income Tax Ordinance, 2001. Al Abbas Cement Industries Limited 12.1.5 From 1993-94 to 1998-99 the excise duty was levied and recovered from the company being wrongly worked out on retail price based on the misinterpretation of sub section 2 of section 4 of the Central Excise Act, 1944 by Central Board of Revenue. Such erroneous basis of working of excise duty has been held, being without lawful authority, by the Honourable Supreme Court of Pakistan as per its judgment dated 15 February 2007 in the civil appeal Nos. 1388 & 1389 of 2002, civil appeal Nos. 410 to 418 of 2005, civil appeal No. 266 of 2006, civil appeal No. 267 of 2006 and civil appeal No. 395 of 2006. Accordingly, the Company has filed an application to the Collector of Federal Excise and Sales Tax to refund the excess excise duty amounting to Rs. 182.604 million. The case is pending before Collector. 12.1.6 Claim of Rs. 1.197 million filed under Appeal No. 278 of 2006 for recovery of sub-standard supply of cement bags before the Court of District & Session Judge Karachi (East) and allowed same for the payment, has been filed by the company against the said order under Revision Application No. 61 of 2008.
Based on the lawyers opinion that outcome is likely to be in favour of the company no provision has been made.
12.2 Commitments
Arif Habib Corporation Limited
There were no significant commitments at the balance sheet date.
Al Abbas Cement Industries Limited
Commitment against open letter of credit amounting to Rs. 31.124 million (2011: Rs. 326.83 million).
12.3 In case of all other subsidiaries, there were no significant contingencies and commitments at the balance sheet date.
13. PROPERTY, PLANT AND EQUIPMENT 2012 2011
Assets owned by the Group 13.1 4,581,358,889 4,471,257,065 Assets subject to finance lease 13.2 3,329,432 4,073,437 Rupees 4,584,688,321 4,475,330,502
169 Arif Habib Corp Annual Report 2012 | Promoting Investments 170 169 Arif HabibCorp Arif
13.1 Assets owned by the Group Financial Statements Notes to the Consolidated For the year ended 30 June 2012 Leasehold Buildings on Leasehold Furniture, Vehicles Plant and Office Computer Capital Total land freehold Buildings and fixtures machinery equipment and allied work in land Improvements and fittings equipment progress COST
Balance as at 01 July 2010 128,575,529 33,142,031 99,202,396 18,858,105 19,922,945 - 76,753,393 39,103,763 - 415,558,162 Additions during the year 3,025,000 35,853,360 748,446,500 30,479,096 17,547,003 3,666,066,000 20,988,041 26,533,143 5,270,000 4,554,208,143 Disposals / transfers (126,460,529) - (131,690,475) (31,412,832) (11,874,888) - (76,499,076) (37,745,573) (5,270,000) (420,953,373) Balance as at 30 June 2011 5,140,000 68,995,391 715,958,421 17,924,369 25,595,060 3,666,066,000 21,242,358 27,891,333 - 4,548,812,932
Balance as at 01 July 2011 5,140,000 68,995,391 - 715,958,421 - 17,924,369 - 25,595,060 - 3,666,066,000 - 21,242,358 - 27,891,333 - - 4,548,812,932 Additions during the year - - - 10,955,863 31,660,099 68,811,000 878,510 5,707,174 128,414,054 246,426,700 Acquired through business combination 10,472,284 - 1,573,319 9,159,906 1,522,040 - 47,555,056 455,168 6,000,000 76,737,773 Disposals / transfers (2,115,000) (44,435,148) - (1,443,251) (3,490,000) - (12,245,093) (615,652) - (64,344,144) Balance as at 30 June 2012 13,497,284 24,560,243 717,531,740 36,596,887 55,287,199 3,734,877,000 57,430,831 33,438,023 134,414,054 4,807,633,261
DEPRECIATION
Balance as at 01 July 2010 - 14,705,912 19,149,914 6,194,043 9,125,007 - 6,279,768 19,163,129 - 74,617,773 Charge for the year - 2,575,168 24,661,221 2,816,728 3,143,596 640,000 3,948,519 9,021,324 - 46,806,556 Disposals / transfers - - (8,882,668) (5,549,512) (6,570,397) - (8,652,917) (13,462,560) - (43,118,054) Balance as at 30 June 2011 - 17,281,080 34,928,467 3,461,259 5,698,206 640,000 1,575,370 14,721,893 - 78,306,275
Balance as at 01 July 2011 - 17,281,080 34,928,467 3,461,259 5,698,206 640,000 1,575,370 14,721,893 - 78,306,275 Charge for the year - 3,083,288 53,431,852 10,567,702 20,407,370 65,387,594 6,961,232 8,297,139 - 168,136,177
Annual Report 2012 Annual Report Acquired through business combination - - - 1,949,976 512,492 - 1,105,850 221,885 - 3,790,203 Disposals / transfers - (17,717,325) - (1,424,270) (1,488,066) (187,500) (13,716) (405,658) - (21,236,535) Balance as at 30 June 2012 - 2,647,043 88,360,319 14,554,667 25,130,002 65,840,094 9,628,736 22,835,259 - 228,996,120
Exchange adjustment for 2011 - 590,800 15,234 41,853 - - 8,876 93,645 - 750,408
Written down value as at 30 June 2011 Rupees 5,140,000 52,305,111 681,045,188 14,504,963 19,896,854 3,665,426,000 19,675,864 13,263,085 - 4,471,257,065
|Promoting Investments
Exchange adjustment for 2012 - 3,296,002 (97,167) (953,113) (1,139,547) - 1,017,323 598,250 - 2,721,748
Written down value as at 30 June 2012 Rupees 13,497,284 25,209,202 629,074,254 21,089,107 29,017,650 3,669,036,906 48,819,418 11,201,014 134,414,054 4,581,358,889
Rates of depreciation (%) - 5 5 - 15 5 - 20 20 10 3 - 33 33 - - 170 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
13.1.1 Depreciation charge has been allocated as follows: 2012 2011
Net sales 91,238,000 - Operating, administrative and other expenses 76,898,177 46,806,556 Rupees 168,136,177 46,806,556
13.2 Assets subject to finance lease
COST Balance as at 01 July 2011 5,246,000 Additions during the year - Disposals / transfers - Balance as at 30 June 2012 5,246,000
DEPRECIATION
Balance as at 01 July 2011 (1,172,563) Charge for the year (744,005) Disposals / transfers - Balance as at 30 June 2012 (1,916,568)
Written down value as at 30 June 2012 Rupees 3,329,432 Written down value as at 30 June 2011 Rupees 4,073,437
13.3 Disposals of property, plant and equipment
The major disposals during the year are as follows:
Description Cost Book Sale value proceeds ------Rupees------Vehicles
To employees as per Group Companies’ policies Sajid bhanji (Employee, Hyundai Santro) 700,000 189,030 189,030 Salman Haider (Employee, Cuore) 468,000 190,039 190,039 Kashif Sohail (Employee, Cuore) 400,000 129,865 138,895 EFU Insurance (Outsider, Corolla) 1,499,000 1,246,000 1,500,000 M. Muzammil (Outsider, Bolan) 382,000 238,000 485,000
171 Arif Habib Corp Annual Report 2012 | Promoting Investments 172 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
14. INTANGIBLE ASSETS - OTHERS Software and other intangibles COST Balance as at 01 July 2010 46,439,016 Additions during the year 20,365,650 Disposal - Transfers / adjustments (35,449,498) Balance as at 30 June 2011 Rupees 31,355,168
Balance as at 01 July 2011 31,355,168 Additions during the year 9,875,438 Acquired through business combination 400,000 Transfers / adjustments (3,332,700) Balance as at 30 June 2012 Rupees 38,297,906
AMORTIZATION Balance as at 01 July 2010 11,757,668 Amortization for the year 1,803,363 Transfers / adjustments (9,854,600) Balance as at 30 June 2011 Rupees 3,706,431
Balance as at 01 July 2011 3,706,431 Amortization for the year 3,891,371 Acquired through business combination 58,881 Transfers / adjustments (3,332,700) Balance as at 30 June 2012 Rupees 4,323,983
Exchange adjustment for 2012 Rupees (1,146,547)
Written down value as at 30 June 2012 Rupees 32,827,376
Exchange adjustment for 2011 Rupees 537,457
Written down value as at 30 June 2011 Rupees 28,186,194
15. GOODWILL 2012 2011
Opening balance 1,515,042,410 2,160,310,718 Add: Addition - 339,012,150 Less: Impairement (270,113,596) (984,280,458) Rupees 1,244,928,814 1,515,042,410
171 Arif Habib Corp Annual Report 2012 | Promoting Investments 172 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
16. MEMBERSHIP CARDS AND LICENSES 2012 2011
Membership cards - Karachi Stock Exchange (Guarantee) Limited 16.1 15,000,000 15,000,000 - Islamabad Stock Exchange (Guarantee) Limited 16.1 4,000,000 4,000,000 - Lahore Stock Exchange (Guarantee) Limited 16.1 7,000,000 7,000,000 - National Commodities Exchange of Pakistan Limited 16.1 1,000,000 1,000,000 27,000,000 27,000,000 Rooms - Islamabad Stock Exchange (Guarantee) Limited 22,005,000 22,005,000 - Lahore Stock Exchange (Guarantee) Limited 17,550,000 17,550,000 39,555,000 39,555,000 Booths - Karachi Stock Exchange (Guarantee) Limited - three booths 2,100,000 2,100,000 Rupees 68,655,000 68,655,000
16.1 This represents cost of membership card of Stock and Commodities Exchanges of Pakistan with indefinite useful life.
17. LONG TERM INVESTMENTS
Investments in equity accounted associates 17.1 11,409,620,805 10,490,544,974 Investment in other related parties - available for sale 17.2 114,999,754 15,000,000 Rupees 11,524,620,559 10,505,544,974
17.1 Investment in associates
Pakarab Fertilizers Limited (PFL) 17.1.1 4,177,379,982 4,483,321,482 Fatima Fertilizer Company Limited (FFCL) 17.1.2 5,533,251,148 3,608,234,427 Sweetwater Dairies Pakistan (Private) Limited (SDPL) - 211,962,684 Aisha Steel Mills Limited (ASML) 17.1.3 1,079,165,606 1,505,445,251 Rozgar Microfinance Bank Limited (RMFBL) 27.1 - 32,310,000 Crescent Textile Mills Limited (CTML) 17.1.4 108,761,043 183,106,665 Arif Habib Investments Limited (AHIL) 17.1.5 464,009,577 465,346,324 Thatta Cement Company Limited (THCCL) 17.1.6 213,725,726 190,940,592 11,576,293,082 10,680,667,425 Less: Provision for impairment in SDPL - (124,422,779 AHIL (119,982,605) - RMFBL - (19,010,000) THCCL (46,689,672) (46,689,672) (166,672,277) (190,122,451) Rupees 11,409,620,805 10,490,544,974
173 Arif Habib Corp Annual Report 2012 | Promoting Investments 174 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
17.2 Investment in other related parties - available for sale
2012 2011
Takaful Pakistan Limited (TPL) - at cost 17.2.1 30,000,000 30,000,000 Javedan Corporation Limited (JCL) 17.2.2 99,999,754 - Sun Biz (Private) Limited (SBL) - at cost 17.2.3 1,000,000 1,000,000 130,999,754 31,000,000 Provision for impairment in TPL and SBL (16,000,000) (16,000,000) Rupees 114,999,754 15,000,000
17.1.1 Investment in PFL (unquoted) represents 135 million (2011: 135 million) fully paid ordinary shares of Rs. 10 each, representing 30% (2011: 30%) of PFL’s paid up share capital as at 30 June 2012, having cost of Rs. 1,324.332 million (2011: Rs. 1,324.332 million). Fair value per share as at 30 June 2012 is Rs. 90 (2011: Rs. 97.50 ). Book value based on net assets, as per unaudited financial statements, as at 30 June 2012 is Rs. 49.24 per share (2011: Rs. 30.07 per share).
17.1.2 Investment in FFCL (quoted) represents 389.134 million (2011: 328.012 million) fully paid ordinary shares of Rs. 10 each, representing 18.53% (2011: 16.40%) of FFCL’s paid up share capital as at 30 June 2012. During the year, the Company has disposed off 20 million (2011: Nil) shares at an average price of Rs. 23.83. The Company has also received 81 million (2011: 135 million) shares as specie dividend from Pakarab Fertilizers Limited and 0.12 million (2011: 0.145 million) shares from Reliance Weaving Mills Limited. Fair value per share as at 30 June 2012 is Rs. 24.67 (2011: Rs. 16.64). Book value based on net assets as per unaudited financial statements as at 30 June 2012 is Rs. 12.11 per share (2011: Rs. 10.04 per share).
17.1.3 Investment in ASML (unquoted) represents 80.008 million (2011: 80.008 million) fully paid ordinary shares of Rs. 10 each and 34.570 million (2011: 75.463 million) irredeemable and convertible preference shares carrying preferential dividend at 6 month KIBOR + 3%, representing 33.33% (2011: 48.6%) of ASML’s total paid up share capital as at 30 June 2012. Book value based on net assets, as per unaudited financial statements, as at 30 June 2012 is Rs. 8.72 per share (2011: Rs. 8.33 per share). During the year, the Company distributed 41.25 million (2011: Nil) irredeemable convertible preference shares of ASML to its shareholders as specie dividend and subscribed 0.357 million (2011: 105.746 million ) right shares of Rs.10 (2011: Rs. 10) each.
17.1.4 Investment in CTML (quoted) represents 12.212 million (2011: 12.207 million) fully paid ordinary shares of Rs. 10 each, representing 24.82% (2011: 24.81%) of CTML’s paid up share capital as at 30 June 2012, having an aggregate cost of Rs. 292.566 million (2011: Rs. 292.510 million). During the year, the Company purchased 0.005 million (2011: Nil) shares from market at an average cost of Rs. 11.31 (2011: Nil) per share. Fair value per share as at 30 June 2012 is Rs. 8.90 (2011: Rs. 15.57). Book value based on net assets, as per unaudited financial statements, as at 31 March 2012 is Rs. 78.36 per share (Audited 31 March 2011: Rs. 56.31 per share).
17.1.5 Investment in AHIL (quoted) represents 21.664 million (2011: 21.664 million) fully paid ordinary shares of Rs. 10 each, representing 30.09% (2011: 30.09%) of AHIL’s paid up share capital as at 30 June 2012, having historical cost of Rs. 81.95 million (2011: Rs. 81.95 million). However, during 2011, the company lost control over AHIL and designated the investment ‘at fair value through profit or loss’ and accordingly fair value on the date of loss of control was considered as deemed cost. Fair value per share as at 30 June 2012 was Rs. 15.88 (2011: Rs. 21.59), whereas book value based on net assets, as per unaudited financial statements, as at 30 June 2012 is Rs. 17.80 per share (2011: Rs. 17.63 per share).
173 Arif Habib Corp Annual Report 2012 | Promoting Investments 174 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
During the year ended 30 June 2011, the shareholders of Arif Habib Investments Limited (AHIL) and MCB Asset Management Company Limited (MCB-AMC) approved merger of these two entities under the scheme of amalgamation (“the scheme”). The scheme was sanctioned by Securities and Exchange Commission of Pakistan (SECP) through its order dated 10 June 2011 with effect from 27 June 2011. Subsequently SECP through its order dated 27 June 2011 extended the effective date of merger from 27 June 2011 to 30 July 2011. The Company in reply to the SECP order filed the petition in the Honorable Sindh High Court claiming that the same is a past and closed transaction. In view of this, the Honorable Sindh High Court through its interim order dated 28 September 2011 suspended the SECP order for extension of the effective date of merger. The hearing of this case is in progress.
17.1.6 Investment in THCCL (quoted) represents 9.034 million (2011: 7.227 million) fully paid ordinary shares of Rs. 10 each, representing 9.06% (2011: 9.06%) of THCCL’s share capital as at 30 June 2012, having cost of Rs. 188.370 million (2011: Rs. 161.269 million). Fair value per share as at 30 June 2012 is Rs. 21.03 (2011: Rs. 19.96), whereas book value based on net assets, as per unaudited financial statements, as at 30 June 2012 is Rs. 9.61 per share (2011: Rs. 8.81 per share).
17.1.7 Summarized financial information of the associates of the Group is as follows.
Financial Revenue Total Total Net assets information assets liabilities as of ------Rupees in ‘000------
Quoted Thatta Cement Company Limited 30 June 2012 2,314,211 2,149,270 1,167,791 981,479 Fatima Fertilizer Company Limited 30 June 2012 12,608,427 75,900,237 50,467,236 25,433,001 Arif Habib Investments Limited 30 June 2012 529,168 1,410,024 128,097 1,281,927 Crescent Textile Mills Limited 31 March 2012 8,995,288 12,374,976 8,518,684 3,856,292
Unquoted
Pakarab Fertilizers Limited 30 June 2012 5,968,809 61,333,709 39,387,140 21,946,569 Aisha Steel Mills Limited 30 June 2012 - 10,947,074 7,949,537 2,997,537
Interim financial statements of Pakarab Fertilizers Limited and Fatima Fertilizer Company Limited for the period ended 30 June 2012 have been reviewed by independent auditors and financial statements of Arif Habib Investments Limited have been audited by their independent auditors. Financial Statements of other associates are unaudited.
The financial statements of Crescent Textile Mills Limited as of 30 June 2012 were not available.
175 Arif Habib Corp Annual Report 2012 | Promoting Investments 176 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
17.2.1 Investment in TPL (unquoted) represents 3 million (2011: 3 million) fully paid ordinary shares of Rs.10 each, representing 10% (2011: 10% ) of TPL’s paid up share capital as at 30 June 2012.
17.2.2 Investment in JCL represents 14.582 million (2011: Nil) non-voting, unlisted, cumulative, convertible, redeemable and non-participatory 12% preference shares of Rs. 6.86 (2011: Nil) each, representing 8.53% (2011: Nil) of JCL’s share capital as at 30 June 2012. Book value based on net assets, as per unaudited financial statements, as at 30 June 2012 is Rs. 26.48 per share (2011: Rs. 67.98 per share).
17.2.3 Investment in SBL (unquoted) represents 0.010 million (2011: 0.010 million) fully paid ordinary shares of Rs. 100 each, representing 4.65% (2011: 4.65% ) of SBL’s paid up share capital as at 30 June 2012.
18. INVESTMENT PROPERTY 2012 2011
Acquisition cost - opening balance 76,879,000 61,895,000 Acquisition during the year - 14,500,000 Disposal during the year (73,000,000) - Expenditure incurred on acquisition and transfer of investment property - 484,000 (73,000,000) 484,000 Acquisition cost - closing balance 3,879,000 76,879,000 Fair value adjustment 49,121,000 49,121,000 Rupees 53,000,000 126,000,000
19. LONG TERM LOANS AND ADVANCES - considered good
Advance against investment 19.1 Rupees 154,428,115 -
19.1 This represent investment made by a subsidiary during the year in real estate of associate concern, as the documentation are under process and expected to be completed in near future. As soon, the documentation is completed the same will be accordingly transferred to investment property.
20 LONG TERM DEPOSITS AND PREPAYMENTS 2012 2011
Karachi Stock Exchange (Guarantee) Limited 610,000 610,000 Lahore Stock Exchange (Guarantee) Limited 1,480,000 1,480,000 Pakistan Mercantile Exchange Limited - 9,513,204 National Clearing Company of Pakistan Limited 750,000 750,000 Dubai Gold and Commodity Exchange - clearing house DMCC - 14,122,111 Security deposits of leased assets 1,573,800 1,573,800 Security deposit for employees car 2,868,500 2,425,000 Others 25,613,471 8,139,448 Rupees 32,895,771 38,613,563
175 Arif Habib Corp Annual Report 2012 | Promoting Investments 176 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
21 STOCK-IN-TRADE 2012 2011
Raw material 37,157,000 28,312,000 Packing material 49,310,000 41,068,000 Work-in-process 117,901,000 22,912,000 Finished goods 14,694,000 28,130,000 Rupees 219,062,000 120,422,000
22 STORES, SPARES AND LOOSE TOOLS (Restated) Stores 157,798,611 157,201,000 Coal 22.1 225,096,000 77,683,000 Spare parts 143,110,221 101,553,000 Loose tools 4,694,000 3,724,000 530,698,832 340,161,000 Provision for slow moving / obsolete stock (13,519,000) (13,519,000) Rupees 517,179,832 326,642,000
22.1 This includes coal in-transit amounting to Rs. 107.28 million (2011: Rs. Nil).
23. TRADE DEBTS 2012 2011 Considered good
- Secured - 6,297,271 - Unsecured 23.1 329,173,031 475,309,324 329,173,031 481,606,595 Considered doubtful 465,871,380 823,869,020 795,044,411 1,305,475,615 Provision for doubtful debts - Opening provision (823,869,020) - - Reversal / (charge) for the year 357,997,640 (823,869,020) - Provision as at 30 June (465,871,380) (823,869,020) Rupees 329,173,031 481,606,595
23.1 This includes Rs. 10.823 million (2011: Rs. 37.087 million) due from related parties.
177 Arif Habib Corp Annual Report 2012 | Promoting Investments 178 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
24. LOANS AND ADVANCES - considered good 2012 2011
Unsecured Considered good Advance for new investment 24.1 60,000,000 - Advance against expenses 635,000 635,000 Advance against letter of credit 21,308,000 10,972,000 Advances to suppliers and contractors 73,340,685 69,588,657 Lendings to financial institutions 6,388,205 701,792 To executives and employees - unsecured, considered good 4,689,843 1,052,011
To related parties:
Aisha Steel Mills Limited -advance against equity - 3,570,577 Thatta Cement Industries Limited - advance against equity - 42,232,304
Secured To related parties: Aisha Steel Mills Limited 24.2 16,650,000 - Javedan Corporation Limited 24.3 460,000,000 518,449,754
Others 11,572,000 - Rupees 654,583,733 647,202,095
24.1 This represents amount paid as deposit money for acquisition of shares of a company in dairy farming industry.
24.2 The Parent has entered into an agreement with said associate on 19 January 2011. Under the arrangement, the Company shall disburse loan to the associated company in one or more tranches. The loan is secured against first charge on all present and future fixed assets, accounts receivables and interest in any insurance claim and equitable mortgage of land and building. The mark-up rate in the said loan is 6 month KIBOR prevailing on the base rate setting date plus 3.25% per annum. Mark-up is payable on quarterly basis. The effective mark-up charged during the year ranged between 15.20% to 16.45% (2011: Nil) per annum.
24.3 The Parent has entered into an arrangement with the said associate on 20 November 2010. Under the arrangement, the parent shall disburse loan to the associate company in one or more tranches on a short term basis and is secured against REIT units to be issued by the borrower to the Parent in the proposed REIT scheme of the borrower which is in the process of getting permissions from Securities and Exchange Commission of Pakistan (SECP). In case where REIT Scheme is not approved by the SECP, the borrower, as an alternate shall provide a registered mortgage deed in favour of the Parent over its immovable property located in Deh Manghopir and Gadap Town, Karachi, totaling 166 acres. The loan is repayable on demand. The mark-up rate on the said loan is three months KIBOR prevailing on the base rate setting date plus 3% per annum. Mark-up is payable on a quarterly basis. The effective mark-up charged during the year ranged between 14.91% to 16.54% (2011: 16.02% to 16.52%) per annum.
24.4 Maximum balance due from related parties is Rs. 480.392 million (2011: Rs. 549.121 million).
177 Arif Habib Corp Annual Report 2012 | Promoting Investments 178 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
25. DEPOSITS AND PREPAYMENTS 2012 2011
Deposits - future clearing 3,108,594 28,058,000 Prepayments 5,874,717 732,762 Advance for software - 1,626,513 MTS Exposure deposit 12,025,363 - Others 15,858,208 11,756,890 Rupees 36,866,882 42,174,165
26. OTHER RECEIVABLES - considered good
Accrued income 26.1 108,244,291 108,244,291 Profit accrued on bank deposit accounts - 112,954 Receivable from related parties 26.2 612,674,873 30,095,522 Receivable from Princely Jets (Private) Limited 14,289,176 70,000,000 Others 78,836,272 17,776,836 Rupees 814,044,612 226,229,603
26.1 This pertains to the amount that was due to be received on disposal of the Parent’s former subsidiary, Summit Bank Limited. The bank was sold to Suroor Investment Limited at Rs. 9 per share. The Parent has received sales proceeds in full.
26.2 Due from related parties 2012 2011
Accrued markup on loan to JCL 36,101,836 24,394,584 Accrued markup on loan to ASML 5,955,731 - Receivable from SDPL - 698,264 Receivable from FFCL 563,451,308 7,000 Others 7,165,998 4,995,674 Rupees 612,674,873 30,095,522
27. SHORT TERM INVESTMENTS
Available for sale investment 27.1 37,629,900 - At fair value through profit or loss - held for trading 27.2 2,896,757,378 1,470,284,734 Rupees 2,934,387,278 1,470,284,734
27.1 In June 2012, the Parent entered into an agreement (“agreement”) for the disposal of its entire shareholding in Rozgar Microfinance Bank Limited, an associate, for a consideration of Rs. 37.630 million. Accordingly, the said investment has been classified as ‘short term’. The transaction will close once the remaining formalities are completed.
27.2 At fair value through profit or loss - held for trading 2012 2011
Investments in quoted equity securities 2,886,557,536 1,466,095,076 Investments in mutual funds 10,199,842 - Investments in Srilankan unquoted equity securities - 4,189,658 Rupees 2,896,757,378 1,470,284,734 179 Arif Habib Corp Annual Report 2012 | Promoting Investments 180 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
27.2.1 Fair value of these investments is determined using quoted market prices and repurchase prices prevailing at the balance sheet date. Short term investments include equity securities pledged with various banking companies against short term running finance facilities having a market value of Rs.1,221.705 million (2011: Rs. 640.121 million).
Reconciliation of (loss) on remeasurement of investments at fair value through profit or loss - held for trading
2012 2011
Cost of investment 3,188,972,072 2,438,544,512 Unrealised (loss): - Balance as at 1 July (968,259,778) (1,476,629,880) - Unrealised gain / (loss) for the year 676,045,084 508,370,102 - Balance as at 30 June (292,214,694) (968,259,778) Rupees 2,896,757,378 1,470,284,734
28. CASH AND BANK BALANCES
With banks in: Current accounts - In local currency 39,548,730 23,584,592 - In foreign currency 9,128,977 27,897,067 48,677,707 51,481,659 Deposit accounts 28.1 56,037,385 37,907,144 104,715,092 89,388,803 Share transfer stamps - 17,000 Cash in hand 721,362 422,102 Rupees 105,436,454 89,827,905
28.1 The balance in deposit accounts carry markup ranging from 5% to 11% per annum (2011: 5% to 8% per annum).
29. OPERATING REVENUE 2012 2011
Dividend income 103,449,210 255,919,225 Mark-up on income on loans and advances 109,092,827 49,275,581 Brokerage income 118,549,776 97,898,363 Mark-up on bank deposits 4,169,411 4,490,213 Underwriting, consultancy and placement commission 17,589,296 36,565,027 Management fees - 226,119,677 Net sales 171,686,781 - Processing and other related income 38,208,037 12,254,701 Gain on remeasurement of investments - net 676,045,084 508,370,102 Gain on sale of investments - net 104,800,551 89,781,979 Rupees 1,343,590,973 1,280,674,868
179 Arif Habib Corp Annual Report 2012 | Promoting Investments 180 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
30. OPERATING, ADMINISTRATIVE AND OTHER EXPENSES 2012 2011
Salaries and benefits 30.1 95,247,680 216,425,244 Printing and stationery 8,132,535 8,165,262 Communication 8,057,798 7,881,947 Rent, rates and taxes 44,817,689 52,397,102 Utilities 14,659,327 11,926,308 Legal and professional charges 6,557,320 29,747,515 C.D.C. and clearing house charges 7,660,304 15,978,236 Entertainment 1,823,965 4,114,074 Travel and conveyance 16,535,242 13,350,699 Depreciation 77,642,182 47,716,818 Repairs and maintenance 8,169,915 13,341,005 Insurance 2,765,417 3,103,748 Fees and subscription 6,179,074 8,968,940 Advertisement, business promotion and research 7,363,069 39,245,311 Meeting expenses 719,700 4,591,459 Auditors’ remuneration 30.2 3,550,243 2,030,385 Technical assistance / commission and advisory fee 9,208,539 19,101,058 Registrar fee - 4,299,545 Sales commission 2,076,375 - General expenses - 1,500,157 Bad debts expenses 116,517,766 826,195,520 Amortization charges 3,891,371 1,803,363 Ujrah payments 30.3 2,273,475 1,501,376 Others 72,797,937 23,391,692 Rupees 516,646,923 1,356,776,764
30.1 This includes the Group’s contribution to staff retirement benefits amounting to Rs.7.183 million (2011: Rs. 1.976 million).
30.2 Auditors’ remuneration 2012 2011
Audit fee 2,338,233 1,471,935 Certifications including half yearly review 741,080 400,900 Other certifications 140,250 49,550 Out of pocket 330,680 108,000 Rupees 3,550,243 2,030,385
30.3 Ujrah payments
The Group has entered into various Ijarah arrangements with various financial institutions for lease of 5 vehicles having various monthly rentals for total period of 4- 5 years. Following are the future ujrah payments under the ujrah agreement:
181 Arif Habib Corp Annual Report 2012 | Promoting Investments 182 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
Not later Later than one Later than than one year but not later five years year than five years Total of future ujrah payments under the agreements Rupees 2,366,156 5,073,666 -
31. OTHER INCOME 2012 2011
Income from financial instruments: Profit on exposure deposit with KSE 743,346 3,318 Late payment charges 96,593,189 78,173,553 Imputed interest on loan from related party - 220,842,789 Gain on derecognition of financial liability 449,401,000 -
Income from non-financial instruments: Rental income 2,551,642 9,027,256 Exchange gain on foreign currency balance 407,015 14,499 Reversal of provision for Workers’ Welfare Fund 3,499,555 76,173,396 Gain on sale of fixed assets 13,595,746 598,922 Others 147,468,992 3,779,758 Rupees 714,260,485 388,613,491
32. FINANCE COST
Mark-up on long term financing 324,149,841 4,737,927 Mark-up on short term borrowings 534,973,139 256,781,832 Mark-up on finance lease 1,658,661 408,291 Bank charges 5,266,831 2,772,227 Others 2,055,606 8,123,432 Rupees 868,104,078 272,823,709
33. OTHER CHARGES
Donations Rupees 43,909,143 58,700,853
33.1 Directors or their spouses had no interest in donees’ fund, except Mr. Arif Habib (CEO and Director of the Parent). He is trustee in one of the donee institutions, Fatimid Foundation and director in two of the donee institutions, Karachi Education Initiative and Pakistan Center of Philanthropy.
34. TAXATION 2012 2011 For the year - Current 58,372,845 117,949,524 - Deferred 268,494,870 75,683,127 Prior year 4,153,056 (847,207) Rupees 331,020,771 192,785,444
181 Arif Habib Corp Annual Report 2012 | Promoting Investments 182 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
35. EARNINGS / (LOSS) PER SHARE - BASIC AND DILUTED
35.1 Basic earnings / (loss) per share 2012 2011
Profit / (loss) after tax Rupees 2,523,861,433 (872,915,569) Weighted average number of ordinary shares Number 412,500,000 412,500,000 Earnings / (loss) per share Rupees 6.12 (2.12)
35.2 Diluted earnings per share
Diluted earnings per share has not been presented as there is no convertible instruments in issue as at 30 June 2012 and 30 June 2011 which would have any effect on the earnings / (Loss) per share if the option to convert is exercised.
36. REMUNERATION OF CHIEF EXECUTIVES, DIRECTORS AND OTHER EXECUTIVES
36.1 For the purpose of disclosure, those employees are considered as executives whose basic salary exceeds five hundred thousand rupees in a financial year.
36.2 The aggregate amounts charged in these consolidated financial statements in respect of remuneration including benefits to the Chief Executives, Directors and other Executives of the Group are given below:
Chief Executives Other Executives 2012 2011 2012 2011
Managerial remuneration 36,588,221 17,515,200 51,004,025 34,069,797 Retirement benefits 350,000 1,254,564 2,576,000 3,315,304 Bonus 2,607,438 1,613,229 3,530,192 2,049,208 Other allowance 7,536,886 3,719,410 8,110,079 9,347,345 Total Rupees 47,082,545 24,102,403 65,220,296 48,781,654
Number of persons 5 4 63 57
36.3 The aggregate amount charged to these consolidated financial statements in respect of directors’ fee is Rs. 0.110 million (2011: Rs. 0.34 million).
36.4 Besides above, group insurance and medical facilities under insurance coverage were provided to the above mentioned personnel.
36.5 Certain key management personnel have also been provided with free use of company-maintained vehicles in accordance with the Group’s policy.
183 Arif Habib Corp Annual Report 2012 | Promoting Investments 184 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
37. CASH (USED IN) / GENERATED FROM OPERATIONS 2012 2011
Profit / (loss) before tax 2,919,684,486 (789,053,600)
Adjustments for: Depreciation and amortization 172,771,553 49,520,181 Dividend income (103,449,210) (255,919,225)
Mark-up on bank balances, loans and advances and term finance certificates (113,262,238) (49,275,581) Share of profit of equity-accounted investees - net of tax (2,535,683,205) (558,973,994) Impairment loss on investments 100,972,605 190,632,555 Goodwill impairment 270,113,596 984,280,458 Unrealized gain on investment property - (11,916,000) Loss on disposal of subsidiary - 285,739,413 Remeasurement of short term investments (676,045,084) (178,153,373) Gain on sale of investment (104,800,551) - Bad debt expense 116,517,766 826,195,520 Gain on sale of property and equipment (13,595,746) - Finance cost 868,104,078 272,823,709 (2,018,356,436) 1,554,953,663 Operating profit before working capital changes 901,328,050 765,900,063
Changes in working capital:
(Increase) / decrease in current assets Trade debts 35,997,049 490,022,073 Stock in trade (98,640,000) - Stores, spares and loose tools (71,419,000) - Loans and advances (6,653,117) - Deposits and prepayments 5,307,283 - Receivable against sale of investment (529,534,120) - Other receivables (568,187,791) (30,418,425) Short term investments (761,101,349) 1,999,251,572 Other assets - (1,456,764) Increase in current liabilities Trade and other payables 1,083,331,952 96,158,502 (910,899,093) 2,553,556,958 Cash (used in) / generated from operations Rupees (9,571,043) 3,319,457,021
37.1 CASH AND CASH EQUIVALENTS
Cash and bank balances 28 105,436,454 89,827,905 Short term running finance 11 (3,943,892,456) (2,020,683,059) Rupees (3,838,456,002) (1,930,855,154)
183 Arif Habib Corp Annual Report 2012 | Promoting Investments 184 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
38. FINANCIAL INSTRUMENTS
The Group has exposure to the following risks from its use of financial instruments:
-Credit risk -Liquidity risk -Market risk
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board is also responsible for developing and monitoring the Group’s risk management policies.
38.1 Credit risk
Credit risk represents the accounting loss that would be recognized at the balance sheet date if counterparties fail completely to perform as contracted and arises principally from loans and advances, trade debts, deposits and other receivables. Out of the total financial assets of Rs. 16,351.436 million (2011: Rs. 13,416.746 million), the financial assets which are subject to credit risk amounted to Rs. 1,831.816 million (2011: Rs. 1,400.679 million).
To manage exposure to credit risk in respect of loans and advances, management performs credit reviews taking into account the borrower’s financial position, past experience and other factors. Loan terms and conditions are approved by a competent authority.
Concentration of credit risk arises when a number of counter parties are engaged in similar business activities or have similar economic features that would cause their abilities to meet contractual obligation to be similarly affected by the changes in economic, political or other conditions. The Group believes that it is not exposed to major concentration of credit risk.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the balance sheet date is: 2012 2011
Trade debts - net of provision 329,173,031 481,606,595 Long term deposits 30,055,771 26,475,315 Loans and advances 553,827,843 576,978,438 Other receivables 814,044,612 226,229,603 Bank balances 104,715,092 89,388,803 Rupees 1,831,816,349 1,400,678,754
All the loans and advances at the balance sheet date represent domestic parties except a receivable of Rs. 108.244 million (2011: Rs. 108.244 million).
The age analysis of trade debts, loans and advances and other receivables is as follows:
2012 2011
Not past due 905,509,758 553,394,988 Past due 1-30 days 172,943,775 63,807,654 Past due 30-180 days 463,721,324 7,761,108 Past due 180 days 154,870,629 178,244,291 Rupees 1,697,045,486 803,208,041
185 Arif Habib Corp Annual Report 2012 | Promoting Investments 186 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
Receivable from Princely Jets (Private) Limited is secured by demand promissory note and is refundable as per Memorandum of Understanding signed on 24 May 2010. Loan to Javedan Corporation limited is secured as disclosed in note 24.3 of these consolidated financial statements. Further, Rs. 583.843 million (2011: 547.358 million) is due from the Group companies and management believes that the sum will be recovered in full as companies are under common management.
The credit quality of Group’s bank balances can be assessed with reference to external credit ratings as follows:
Rating Short term 2012 2011 Rupees AAA - 4,690,880 AA+ - 386,290 AA- - 71,430 A - 9,103,340 A+ - 295,605 A1 + 8,378,489 1,811,060 A1 61,066,050 730,931 A1+ - 41,718,087 A2 1,904,281 1,271,337 A-1+ 11,016,717 1,355,727 A-2 6,091,801 19,532,243 A-3 63,906 - AA 14,164,131 325,070 P-1 2,029,717 -
Based on past experience, the management believes that no impairment allowance is necessary in respect of loans, advances and other receivables past due as some receivables have been recovered subsequent to the year end and for other balances, there are reasonable grounds to believe that the amounts will be recovered in short course of time.
38.2 Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations arising from its financial liabilities that are settled by delivering cash or another financial asset, or that such obligations will have to be settled in a manner unfavourable to the Group. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of adequate funds through committed credit facilities. The Group finances its operations through equity, borrowings and working capital with a view to maintaining an appropriate mix between various sources of finance to minimize risk. The management aims to maintain flexibility in funding by keeping regular committed credit lines.
At balance sheet date, the Group has cash and bank balance and unutilized credit lines of Rs. 105.436 million (2011: Rs. 89.811 million) and Rs. 1,666.106 million (2011: Rs. 2,489.317 million) as mentioned in note 28 and 11.
The following are the contractual maturities of financial liabilities, including estimated interest payments on an undiscounted cash flow basis:
185 Arif Habib Corp Annual Report 2012 | Promoting Investments 186 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
2012 Carrying Contractual Upto one More than amount cash flows year one year Financial liabilities Trade and other payables 1,136,013,151 1,137,195,817 1,137,195,817 - Short term borrowings 3,943,892,456 4,153,511,473 4,153,511,473 - Long term loan 2,897,816,686 3,781,301,044 2,672,457,113 1,108,843,931 Rupees 7,977,722,293 9,072,008,334 7,963,164,403 1,108,843,931
2011 Carrying Contractual Upto one More than amount cash flows year one year Financial liabilities Trade and other payables 883,357,559 804,866,902 795,937,897 8,929,005 Short term borrowings 2,020,683,059 2,124,185,741 2,124,185,741 - Long term loan 2,836,644,192 3,390,583,981 440,583,981 2,950,000,000 Rupees 5,740,684,810 6,319,636,624 3,360,707,619 2,958,929,005
The future interest-related cash flows depend on the extent of utilization of running finance facilities and the interest rates applicable at that time.
38.3 Market risk
Market risk means that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The objective is to manage and control market risk exposures within acceptable parameters, while optimising the return. The market risks associated with the Group’s business activities are interest / mark-up rate risk and price risk. The Group is not exposed to material currency risk.
a) Foreign exchange risk management
Foreign currency risk arises mainly where receivables and payables exist due to transactions in foreign currencies. Currently, the Group’s foreign exchange risk exposure is restricted to long term equity investments and bank balances in foreign currency. As such the Group does not regularly deal in foreign currency transactions except for utilizing equity investment opportunities as and when it arises and maintenance of foreign currency bank accounts which currently are denominated in US Dollars and UAE Dirham. The management believes that the Group’s exposure emanating from any fluctuations in the foreign currencies does not require to be hedged.
Financial assets and liabilities exposed to foreign exchange rate risk amounts to Rs. 35.137 million (2011: Rs. 24.451 million) and Rs. Nil (2011: Nil) respectively, at the year end.
Sensitivity analysis
For the purpose of foreign exchange risk sensitivity analysis, it is observed that in the financial year the local currency has weakened against US Dollars and UAE Dirham by approximately 11.43% and 14.44% respectively. Subsequent to the balance sheet date and till the authorization of these financial statements a further decline of USD 0.99% and UAE Dirham 3.90% respectively, have been observed. During the year, the above decline has resulted in a gain on foreign currency translation of Rs. 0.407 million that is recognized in profit and loss account, therefore the Group is not significantly exposed to foreign currency risk. Further, there are no commitments or outstanding derivative contracts in foreign currency at the balance sheet date.
187 Arif Habib Corp Annual Report 2012 | Promoting Investments 188 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
The following table summarizes the financial assets as at 30 June 2012 and 30 June 2011 that are subject to foreign currency risk and shows the estimated changes in the value of financial assets (and the resulting change in profit and loss account) assuming changes in the underlying exchange rates applied immediately and uniformly across all currencies. The changes in value do not necessarily reflect the best or worst case scenarios and actual results may differ. The analysis assumes that all other variables, in particular interest rate, remain constant. Rupees are in million.
As at Fair Estimated fair value assuming a hypothetical percentage increase / (decrease) in the value of foreign value of currencies versus Pak Rupee net assets -20% -10% -1% 1% 10% 20%
30 June 2012 35.14 28.11 31.62 34.79 35.49 38.65 42.16
30 June 2011 24.45 19.56 22.01 24.21 24.70 26.90 29.34
b) Interest / mark-up rate risk
Interest / mark-up rate risk is the risk that value of a financial instrument or future cash flows of a financial instrument will fluctuate due to changes in the market interest / mark-up rates. Sensitivity to interest / mark-up rate risk arises from mismatches of financial assets and liabilities that mature or re-price in a given period. The Group manages these mismatches through risk management strategies where significant changes in gap position can be adjusted. The short term borrowing and loans and advances by the Group have variable rate pricing that is mostly dependent on the Karachi Inter Bank Offer Rate (KIBOR) as indicated in respective notes.
At the balance sheet date, the interest rate profile of the Group’s significant interest-bearing financial instruments was as follows:
2012 2011 2012 2011 Effective interest rate (in %) Carrying amounts (in Rupees)
Financial assets Deposit to KSE against future clearing - 7% to 8.5% - 900,000 Loans and advances 14.42% to 15.23% 16.52% 484,480,000 518,449,754 Trade debts - 18% - 77,500,398 Cash and bank balances 5% to 11.5% 5% to 11% 56,037,385 37,907,144
Financial liabilities Short term finance 13.3% to 15.5% 13.29% to 16.54% 3,943,892,456 2,020,683,059 Long term finance 11.99% to 13.78% 12.37% to 13.78% 2,582,432,000 2,607,486,981
Sensitivity analysis The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rate will not effect fair value of any financial instrument. For cash flow sensitivity analysis of variable rate instruments a hypothetical change of 100 bps in interest rates at the balance sheet date would have decreased / (increased) profit for the year by the amounts shown below.
It is assumed that the changes occur immediately and uniformly to each category of instrument containing interest rate risk. Variations in market interest rates could produce significant changes at the time of early repayments. For these reasons, actual results might differ from those reflected in the details specified below. The analysis assumes that all other variables remain constant.
187 Arif Habib Corp Annual Report 2012 | Promoting Investments 188 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
Profit and loss 100 bps Increase Decrease As at 30 June 2012 Cash flow sensitivity-Variable rate financial liabilities Rupees (156,250,160) 156,250,160
Cash flow sensitivity-Variable rate financial assets Rupees 1,805,393 (1,805,393)
As at 30 June 2011 Cash flow sensitivity-Variable rate financial liabilities Rupees (36,251,538) 36,251,538
Cash flow sensitivity-Variable rate financial assets Rupees - -
c) Price risk
Price risk represents the risk that the fair value of a financial instrument will fluctuate because of changes in the market prices (other than those arising from interest/mark-up rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all or similar financial instruments traded in the market. The Group is exposed to equity price risk since it has investments in quoted equity securities, amounting to Rs. 2,886.557 million (2011: Rs. 1,470.285 million) at the balance sheet date.
The Group’s strategy is to hold its strategic equity investments for a long period of time. Thus, the Group’s management is not concerned with short term price fluctuations with respect to its strategic investments provided that the underlying business, economic and management characteristics of the investee remain favorable. The Group strives to maintain above average levels of shareholders’ capital to provide a margin of safety against short term equity price volatility. The Group manages price risk by monitoring exposure in quoted equity securities and implementing the strict discipline in internal risk management and investment policies.
The carrying value of investments subject to equity price risk are, in almost all instances, based on quoted market prices as of the reporting date except for, unquoted associates which are carried at fair value determined through valuation techniques. Market prices are subject to fluctuation and consequently the amount realized in the subsequent sale of an investment may significantly differ from the reported market value. Fluctuation in the market price of a security may result from perceived changes in the underlying economic characteristics of the investee, the relative price of alternative investments and general market conditions. Furthermore, the amount realized from the sale of a particular security may be affected by the relative quantity of the security being sold.
Sensitivity analysis
For the purpose of price risk sensitivity analysis it is observed that the benchmark KSE 100 Index has increased by 10.26% during the financial year. Subsequent to the balance sheet date and till the date of authorization of these financial statements a further increase of 9.78% in the KSE 100 Index has been observed.
The table below summarizes the Group’s equity price risk as of 30 June 2012 and 2011 and shows the effects of a hypothetical 30% increase and a 30% decrease in market prices as at the year end. The selected hypothetical change does not reflect what could be considered to be the best or worst case scenarios. Indeed, results could be worse because of the nature of equity markets and the aforementioned concentrations existing in the Group’s equity investment portfolio. Rupees are in million.
189 Arif Habib Corp Annual Report 2012 | Promoting Investments 190 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
Estimated Hypothetical Hypothetical fair value increase / increase Fair Hypothetical after (decrease) in (decrease) in Value prices Change hypothetical shareholders’ profit / (loss) change in equity before tax
30 June 2012 3,026.50 30% increase 3,934.45 - 907.95 30% decrease 2,118.55 - (907.95) 30 June 2011 1,470.28 30% increase 1,911.37 174.59 1,911.37 30% decrease 1,029.20 (174.59) (1,911.37)
d) Other market risk
Management believes that unless more sophisticated and comprehensive disclosure of sensitivity analysis is given for each type of market risk to which the Group is exposed at the balance sheet date, the above mentioned sensitivity analysis in absence of availability of a large economic data with high accuracy and the present effects of unprecedented country’s political situation on economics, might remain unrepresentative to the financial statements readers for the risk inherent in the financial instruments.
38.4 Fair value of financial instruments
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. The carrying value of all financial assets and liabilities on the balance sheet, excluding some long term investments, approximate to their fair value.
a) Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the consolidated balance sheet, are as follows: 30 June 2012 30 June 2011 Carrying Fair Carrying Fair Amount Value Amount Value
Financial Assets Long term investments 11,524,620,559 23,653,415,548 10,505,544,974 21,086,262,713 Short term investments 2,934,387,278 2,934,387,278 1,470,284,734 1,470,284,734 Long term deposits 32,895,771 32,895,771 26,475,315 26,475,315 Loans and advances 580,608,048 580,608,048 576,978,438 576,978,438 Other receivables 814,044,612 814,044,612 226,229,603 226,229,603 Deposits 30,992,165 30,992,165 39,814,890 39,814,890 Trade debts 329,173,031 329,173,031 481,606,595 481,606,595 Cash and bank balances 104,715,092 104,715,092 89,810,905 89,810,905 Rupees 16,351,436,556 28,480,231,545 13,416,745,454 23,997,463,193
Financial liabilities Long term loan 2,897,816,666 2,897,816,666 2,836,644,192 2,836,644,192 Interest / mark-up accrued on borrowings 139,775,482 139,775,482 436,599,682 436,599,682 Trade and other payables 1,136,013,151 1,136,013,151 883,357,559 799,049,042 Short term borrowings 3,943,892,456 3,943,892,456 2,020,683,059 2,020,683,059 Rupees 8,117,497,775 8,117,497,775 6,177,284,492 6,092,975,975
189 Arif Habib Corp Annual Report 2012 | Promoting Investments 190 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
b) Valuation of financial instruments
In case of equity instruments, the Group measures fair value using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:
Level 1 : Quoted market price (unadjusted) in an active market. Level 2 : Valuation techniques based on observable inputs. Level 3 : Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data.
Fair values of financial assets that are traded in active markets are based on quoted market prices. For all other financial instruments the Group determines fair values using valuation techniques.
Valuation techniques used by the Group include discounted cash flow model. Assumptions and inputs used in valuation techniques include risk-free rates, bond and equity prices, foreign currency exchange rates, equity and equity index prices. The objective of valuation techniques is to arrive at a fair value determination that reflects the price of the financial instrument at the balance sheet date that would have been determined by market participants acting at arm’s length.
Valuation models for valuing securities for which there is no active market requires significant unobservable inputs and a higher degree of management judgement and estimation in the determination of fair value. Management judgement and estimation are usually required for selection of the appropriate valuation model to be used, determination of expected future cash flows on the financial instrument being valued and selection of appropriate discount rates, etc.
The table below analyses equity instruments measured at fair value at the end of the reporting period by the level in the fair value hierarchy into which the fair value measurement is categorised:
30 June 2012 Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss
Equity securities Rupees 2,896,757,378 - - 2,896,757,378
Available-for-sale financial assets
Equity securities Rupees - - 37,629,900 37,629,900
30 June 2011 Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss
Equity securities Rupees 1,470,284,734 - - 1,470,284,734
Available-for-sale financial assets
Equity securities Rupees - - - -
191 Arif Habib Corp Annual Report 2012 | Promoting Investments 192 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
c) Accounting classifications and fair values
The table below provides reconciliation of the line items in the Group’s statement of financial position to the categories of financial instruments.
Loans and Available Cost / Total 30 June 2012 Trading receivables for Sale amortized cost carrying amount
Financial Assets
Cash and bank balances - - - 104,715,092 104,715,092 Investments 2,896,757,378 - 152,629,654 - 3,049,387,032 Long term deposits - 32,895,771 - - 32,895,771 Loans and advances - 580,608,048 - - 580,608,048 Other receivables - 814,044,612 - - 814,044,612 Trade debts - 329,173,031 - - 329,173,031 Deposits - 30,993,165 - - 30,993,165 Rupees 2,896,757,378 1,787,713,627 152,629,654 104,715,092 4,941,815,751
Financial Liabilities
Long term loan - - - 2,897,816,686 2,897,816,686 Trade and other payables - - - 1,136,013,151 1,136,013,151 Interest / mark-up accrued on short term borrowings - - - 139,775,482 139,775,482 Short term borrowings - - - 3,943,892,456 3,943,892,456 Rupees - - - 8,117,497,775 8,117,497,775
Loans and Available Cost / Total 30 June 2011 Trading receivables for Sale amortized cost carrying amount
Financial Assets
Cash and bank balances - - - 89,810,905 89,810,905 Investments 1,470,284,734 - - 15,000,000 1,485,284,734 Long term deposits - 26,475,315 - - 26,475,315 Loans and advances - 576,978,438 - - 576,978,438 Other receivables - 226,229,603 - - 226,229,603 Trade debts - 481,606,595 - - 481,606,595 Deposits - 39,814,890 - - 39,814,890 Rupees 1,470,284,734 1,351,104,841 - 104,810,905 2,926,200,480
Financial Liabilities
Long term loan - - - 2,836,644,192 2,836,644,192 Trade and other payables - - - 799,049,042 799,049,042 Interest / mark-up accrued on short term borrowings - - - 436,599,682 436,599,682 Short term borrowings - - - 2,020,683,059 2,020,683,059 Rupees - - - 6,092,975,975 6,092,975,975
d) Other market risk
Management believes that unless more sophisticated and comprehensive disclosure of sensitivity analysis is given for each type of market risk to which the Group companies are exposed at the balance sheet date, the above mentioned sensitivity analysis in absence of availability of a large economic data with high accuracy and the present effects of unprecedented country’s political situation on economics, might remain unrepresentative to the financial statements readers for the risk inherent in the financial instruments.
39. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
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.
Underlying the definition of fair value is the presumption that the Group is a going concern, without any intention or requirement to curtail materially the scale of its operations or to undertake a transaction on adverse terms. The carrying value of all financial assets and liabilities on the consolidated balance sheet approximate to their fair value. 191 Arif Habib Corp Annual Report 2012 | Promoting Investments 192 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
40. CAPITAL MANAGEMENT
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence, sustain future development of the business, safeguard the Group’s ability to continue as a going concern in order to provide returns to shareholders and benefit for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Board of Directors monitors the return on capital, which the Group defines as net profit after taxation divided by total shareholders’ equity. The Board of Directors also monitors the level of dividend to ordinary shareholders. There were no changes in the Group’s approach to capital management during the year.
41. TRANSACTIONS WITH RELATED PARTIES
Related parties comprise of the Group companies, directors and their close family members, major shareholders of the Group, key management personnel and staff provident fund. Transactions with related parties are on arm’s length. Remuneration and benefits to executives of the Group are in accordance with the terms of the employment while contribution to the provident fund is in accordance with staff service rules. Remuneration of chief executive, directors and executives is disclosed in note 36 to these consolidated financial statements. Transactions with related parties during the year other than those disclosed elsewhere in the consolidated financial statements are given below:
2012 2011 Transactions with associates
- Purchase of shares Rupees - 4,471,760 - Subscription of right shares Rupees 241,140 - - Advance against shares Rupees - 367,874,595 - Loan advanced and repaid Rupees - 113,428,328 - Loans and advances Rupees 154,428,115 108,285,328 - Mark-up on loans and advances Rupees - 1,725,025 - Sale of goods Rupees 145,456,000 - - Markup received Rupees - 1,731,365 - Shared expenses Rupees - 162,687 - Dividend income Rupees - 1,157,152,500 - Capital gain earned on related parties securities Rupees 128,995,042 - - Capital loss incurred on related parties securities Rupees 15,777 - - Brokerage commission from associates Rupees 1,806,791 - - Brokerage commission paid Rupees - 2,817,192
Transaction with employees and key management personnel
- Brokerage commission to key management personnel Rupees 8,647,455 2,911,905 - Expenses incurred on behalf of Mr. Arif Habib Rupees - 548,084 - Amount repaid by Mr. Arif Habib Rupees - 548,084 - Purchase of shares from Mr. Arif Habib Rupees - 80,000,060 - Loan from Mr. Arif Habib Rupees - 450,000,000
Transaction with other related parties
- Payment to employees’ provident fund / voluntary pension scheme Rupees 3,747,725 3,934,622 - Advance against investment property Rupees 154,428,115 - - Purchase of shares Rupees 73,471,500 - - Capital gain on other related parties Rupees 12,996 - - Sale of goods Rupees 12,511,000 - - Rent received Rupees 2,395,800 - - Payment of rent and maintenance to Rotocast Engineering (Pvt) Limited Rupees 22,988,064 50,996,420 - Brokerage commission charged to related parties Rupees 5,010,592 2,534,423 - Amount recovered from Arif Habib Real Estate Services (Pvt) Limited against sharing of expenses Rupees - 2,903,070 - Loan to Javedan Corporation Limited Rupees - 616,000,000 - Repayment of loan from Javedan Corporation Limited - 97,550,244 - Mark-up on loans and advances Rupees 9,409,669 - - Interest income earned on advance to related party Rupees - 42,844,340 - Markup received from related party Rupees - 18,449,756
193 Arif Habib Corp Annual Report 2012 | Promoting Investments 194 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
2012 2011
- Bank balance at Summit Bank Limited Rupees 4,224,040 514,357 - Accrued markup on cash and term deposit at Summit Bank Limited Rupees 645,303 994,510 - Bank charges paid to Summit Bank Limited Rupees - 300 - Purchase of goods from Javedan Corporation Limited Rupees 591,000 6,488,589
42. SEGMENT INFORMATION
For management purposes the Group is organized into following major business segments:
Capital market operations Principally engaged in trading of equity securities and maintaining strategic and trading portfolios.
Investment advisory / assets manager Principally providing investment advisory and asset management services to different mutual funds and unit trusts.
Brokerage This comprise brokerage, underwriting, corporate consultancy, research and corporate finance services. Material and Construction This comprise sales less cost of sales of the segment.
Others Others includes assets of dairy farming and energy development entities
2012 Capital Investment Brokerage Material and Others Consolidated market advisory / constructions operations assets manager
Revenues
Operating revenue 598,810,514 - 409,279,103 193,542,000 37,158,805 1,238,790,422 (Loss) / gain on sale of securities - net (152,772,297) - 257,572,848 - - 104,800,551 446,038,217 - 666,851,951 193,542,000 37,158,805 1,343,590,973
Gain on distribution of shares ------Loss on loss of control of subsidiary ------Operating, administrative and other expenses (66,997,859) - (209,271,775) (13,937,000) (226,440,289) (516,646,923) Impairment of goodwill - - (270,113,596) - - (270,113,596) Impairment loss on investment (100,972,605) - - - - (100,972,605) Operating profit 278,067,753 - 187,466,580 179,605,000 (189,900,590) 455,857,849
Other income 80,374,172 - 103,231,890 515,345,000 15,309,423 714,260,485 358,441,925 - 290,698,470 694,950,000 (173,972,061) 1,170,118,334 Bargain gain - - - - 125,896,168 125,896,168 Finance cost & other charges (312,277,478) - (192,303,119) (402,278,000) (5,154,624) (912,013,221) 46,164,447 - 98,395,351 292,672,000 (53,230,517) 384,001,281
Share of profit from equity accounted associates 2,535,683,205 - - - - 2,535,683,205 Segment results 2,581,847,652 - 98,395,351 292,672,000 (53,230,517) 2,919,684,486
Unallocated expenditures ------Profit / (loss) before tax 2,581,847,652 - 98,395,351 292,672,000 (53,230,517) 2,919,684,486 Taxation (153,689,787) - (29,454,230) (139,241,000) (8,635,754) (331,020,771) Profit / (loss) after tax Rupees 2,428,157,865 - 68,941,121 153,431,000 (61,866,271) 2,588,663,715
193 Arif Habib Corp Annual Report 2012 | Promoting Investments 194 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
2011 Capital Investment Brokerage Material and Others Consolidated market advisory / constructions operations assets manager
Revenues
Operating revenue 752,436,375 299,793,516 124,309,571 (3,695,386) 29,964,813 1,202,808,889 (Loss) / gain on sale of securities - net (14,377,233) 83,057,906 4,410,422 - 16,690,884 89,781,979 738,059,142 382,851,422 128,719,993 (3,695,386) 46,655,697 1,292,590,868
Gain on distribution of shares 127,125,000 - - - - 127,125,000 Loss on loss of control of subsidiary (293,142,614) - - - - (293,142,614) Operating, administrative and other expenses (69,403,580) (277,773,059) (929,967,522) (325,392) (79,307,211) (1,356,776,764) Impairment of goodwill - - - - (984,280,458) (984,280,458) Impairment loss on investment (186,112,451) (4,520,104) - - - (190,632,555) Operating profit 316,525,497 100,558,259 (801,247,529) (4,020,778) (1,016,931,972) (1,405,116,523)
Other income 77,546,387 1,747,394 307,822,146 225,096 1,272,468 388,613,491 394,071,884 102,305,653 (493,425,383) (3,795,682) (1,015,659,504) (1,016,503,032) Finance cost & other charges (231,161,148) (20,066,976) (68,317,670) (4,686,992) (7,291,776) (331,524,562) 162,910,736 82,238,677 (561,743,053) (8,482,674) (1,022,951,280) 57,088,929
Share of profit from associates 558,973,994 - - - - 558,973,994 Segment results 721,884,730 82,238,677 (561,743,053) (8,482,674) (1,022,951,280) (789,053,600)
Unallocated expenditures ------Profit / (loss) before tax 721,884,730 82,238,677 (561,743,053) (8,482,674) (1,022,951,280) (789,053,600) Taxation (199,137,235) 16,583,157 (9,417,228) (243,452) (570,686) (192,785,444) Profit / (loss) after tax Rupees 522,747,495 98,821,834 (571,160,281) (8,726,126) (1,023,521,966) (981,839,044)
2012 Capital Investment Brokerage Material and Others Consolidated market advisory / constructions operations assets manager Other information
Segment assets 7,649,395,415 - 950,183,967 4,148,144,235 (177,888,888) 12,569,834,729 Investment in equity accounted associates 11,409,620,805 - - - - 11,409,620,805 Unallocated corporate assets ------Consolidated total assets Rupees 19,059,016,220 - 950,183,967 4,148,144,235 (177,888,933) 23,979,455,534
Segment liabilities 2,921,385,599 - 2,163,540,838 3,710,446,151 100,356,060 8,895,728,648 Unallocated corporate liabilities ------Consolidated total liabilities Rupees 2,921,385,599 - 2,163,540,838 3,710,446,151 100,356,060 8,895,728,648
Capital expenditure Rupees 984,469 - 193,467,720 58,313,600 81,674,122 334,439,911 Depreciation Rupees 7,872,315 - 58,502,349 99,190,000 6,874,369 172,439,033 Non-cash expenses other than depreciation Rupees 77,453,544 - 254,960,574 (103,581,000) 102,398,133 331,231,251
195 Arif Habib Corp Annual Report 2012 | Promoting Investments 196 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
2011 Capital Investment Brokerage Material and Others Consolidated market advisory / and others constructions operations assets manager
Other information
Segment assets 2,010,742,594 - 1,236,123,071 5,200,086,000 1,381,389,893 9,828,341,558 Investment in equity accounted associates 10,490,544,974 - - - 10,490,544,974 Unallocated corporate assets - - - - - Consolidated total assets Rupees 12,501,287,568 - 1,236,123,071 5,200,086,000 1,381,389,893 20,318,886,532
Segment liabilities 1,480,772,949 505,938,049 4,275,742,000 333,082,610 6,595,535,608 Unallocated corporate liabilities - - - - - Consolidated total liabilities Rupees 1,480,772,949 - 505,938,049 4,275,742,000 333,082,610 6,595,535,608
Capital expenditure Rupees 1,792,925 11,518,293 128,146,214 4,269,545,000 143,205,712 4,554,208,144 DepreciationRupees 8,986,333 16,449,083 10,881,968 1,042,000 12,160,797 49,520,181 Non-cash expenses other than depreciation Rupees 15,000,000 4,520,104 854,999,061 - 955,476,917 1,829,996,082
Reconciliations of reportable segment revenues, profit or loss and assets and liabilities 2012 2011 Operating revenues Total revenue for reportable segments 1,369,125,120 2,954,479,193 Elimination of inter-segment revenue (25,534,147) (1,673,804,325) Consolidated revenue Rupees 1,343,590,973 1,280,674,868
Profit or loss Total profit or loss before tax for reportable segments 3,091,502,925 1,776,330,002 Elimination of inter-segment revenue / expense (171,818,439) (2,565,383,602) Consolidated profit from continuing operations before tax Rupees 2,919,684,486 (789,053,600)
Information about major customers
Arif Habib Limited is involved in a brokerage business. Its major clients are banking institutions such as National Bank of Pakistan Limited, United Bank Limited and Allied Bank Limited.
42.1 GEOGRAPHICAL SEGMENT ANALYSIS 2012 Profit / (loss) Total assets Net assets Contingencies before tax employed and commitments
Pakistan 2,952,861,622 23,797,787,041 15,049,932,901 46,551,988 Colombo, Srilanka (45,172,368) 80,005,366 (5,813,522) - Dubai, UAE 11,995,232 101,663,127 39,607,507 - Rupees 2,919,684,486 23,979,455,534 15,083,726,886 46,551,988
195 Arif Habib Corp Annual Report 2012 | Promoting Investments 196 Notes to the Consolidated Financial Statements For the year ended 30 June 2012
2011 Profit / (loss) Total assets Net assets Contingencies before tax employed and commitments
Pakistan (786,840,060) 20,021,012,023 13,676,814,772 180,174,750 Colombo, Srilanka (2,884,440) 152,102,480 21,820,921 - Dubai, UAE 670,900 145,772,029 24,715,231 - Rupees (789,053,600) 20,318,886,532 13,723,350,924 180,174,750
43. DATE OF AUTHORIZATION FOR ISSUE
These consolidated financial statements have been authorized for issue on 03 September 2012 by the Board of Directors of the Company.
44. EVENTS AFTER BALANCE SHEET DATE
The Board of Directors of the Parent has proposed a cash dividend of Rs. 2 per share amounting to Rs. 825 million and bonus shares in the proportion of 1 ordinary shares per 10 ordinary shares held amounting to Rs. 412.5 million at its meeting held on 30 July 2012 for the approval of the members at the annual general meeting to be held on 29 September 2012. These consolidated financial statements do not reflect this appropriation as explained in note 3.20.
45. RESTATEMENT OF PRIOR YEAR FINANCIAL STATEMENTS
In case of subsidiary, AACIL, a disputed amount of Rs. 118 million included in stores and spares has been off set against loan from related party (sponsor) for better presentation.
Had the said adjustment not been made stores, spares and loose tools and loan from related party as at 30 June 2011 would have been higher by Rs. 118 million.
The following adjustments have been made in these consolidated financial statements for the year ended 30 June 2011:
Amounts Reclassification Reclassified previously amounts reported Rupees
Stores, spares and loose tools 22 444,791,000 (118,149,000) 326,642,000 Deferred liabilities 239,619,185 (118,149,000) 121,470,185
The consolidated balance sheet as of 30 June 2010 has not been presented as AACIL became a subsidiary in 2011 and no assets and liabilities of AACIL were consolidated in these consolidated financial statements for the year ended 30 June 2010.
CHAIRMAN & CHIEF EXECUTIVE DIRECTOR CHIEF FINANCIAL OFFICER
197 Arif Habib Corp Annual Report 2012 | Promoting Investments 198 corporate calendar of major events
• Results
The Company follows the period from 1st July to 30th June as the Financial Year.
For the Financial Year ending on 30th June 2013, Financial Results will be announced as per the following tentative schedule:
Last Last 1st quarter 30th 2nd quarter 31st ending ending September 2012 Week December 2012 Week of October 2012 of January 2013 Last Last 3rd quarter 31st year ending 30th ending March 2013 Week June 2013 Week of April 2013 of July 2013
• Issuance of Annual Report
21 days before AGM i.e. on or before 8th September 2012.
• 18th Annual General Meeting
The 18th Annual General Meeting of the Shareholders of Arif Habib Corporation Limited (“the Company”) will be held on Saturday, 29th September 2012 at 10:30 A.M at the Beach Luxury Hotel, Moulvi Tamizuddin Khan Road Karachi.
• CASH DIVIDEND
A final Cash Dividend for the year ended 30th June 2012 at Rs. 2 per share i.e. 20% as recommended by the Board of Directors. Subject to the approval by members in the AGM, the date of entitlement of cash dividend shall be 20th September 2012, and the company expects to dispatch the final dividend warrants on or before 29th October 2012, being the statutory limit of 30 days from the date of General Meeting in which the dividend is approved.
• BONUS SHARES
The Board of Directors have recommended a bonus issue for the year ended 30th June 2012 at the rate of 10%, i.e. one share for every ten shares held. Bonus shares will not be entitled for the final cash dividend for the year ended 30th June 2012. Subject to the approval by members in the AGM, the date of entitlement of bonus issue shall be 20th September 2012, and the company expects the bonus shares to be issued on or before 29th October 2012, being the statutory limit of 30 days from the date of re-opening of the share transfer register closed for the purpose of determining the entitlement.
Annual Report 2012 | Promoting Investments 198 statement under section 160(1)(b) of the companies ordinance, 1984
Material facts concerning special business to be transacted at the Annual General Meeting are given below:
Issue of Bonus Shares to Members
The Directors in their meeting held on 30th July 2012 have recommended issue of bonus shares in proportion of 1 ordinary share for every 10 ordinary shares held by the members, i.e. 10%. While recommending stock dividend the directors have taken cognizance of the financial strength of the company. They are of the view that the company’s financial position and its reserves justify the capitalization of free reserves.
Pursuant to rule 6 (iii) of the Companies (issue of capital) Rules 1996 ( the Rules), the auditors have certified that the "Free Reserves" (in accordance with the meaning given to it in Rule 5 & 6 of the Rules) retained after the issue of bonus shares will not be less than twenty five percent of the increased capital.
The directors of the company are interested in the business to the extent of their shareholding in the company.
Investments in Associated Companies & Associated Undertakings
The Board of Directors of the Company has approved the specific limits for equity investments and loans/advances alongwith other particulars for investments in its following existing and planned associated companies and associated undertakings subject to the consent of members under Section 208 of the Companies Ordinance, 1984 / Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2012. The Board of Directors do hereby undertake that necessary due diligence for the following proposed investments have been carried out. The principle purpose of this special resolution is to make the Company in a ready position to captalise on the investment opportunities as and when they arrive. It is prudent that the Company should be able to make the investment at the right time when the opportunity is available.
199 Arif Habib Corp 1 INVESTMENT IN SECURITIES
Sr.No. Description Information Requried
(i) Name of the associated company or associated AL-ABBAS CEMENT INDUSTRIES LIMITED undertakingalong with criteria based on which the A subsidiary company associated relationship is established
(ii) Purpose, benefits and period of investment For the benefit of the company and to earn better returns in the long run on strategic investment by capturing the opportunities on the right time
(iii) Maximum amount of investment Fresh limit of Rs.500 million is requested for approval. This is in addition to : - renewal requested seperately for the unutilised limit of equity investment of Rs.93.7 million; and - Investment at cost of Rs.1.43 billion already made upto 30 June 2012
(iv) Maximum price at which securities will be acquired At par/premium/market/offered/negotiated price prevailing on the date of transaction/investment
(v) Maximum number of securities to be acquired No. of securities purchasable under approved limit in accordance with / based on Sr. No. iii & iv above
(vi) Number of securities and percentage thereof held Before : 237,791,680 being 65% holding in the company as on before and after the proposed investment 30 June 2012 After : Increase in securities / percentage in accordance with / based on Sr. No. iii, iv & v above
(vii) In case of investment in listed securities, average of Rs. 4.5 the preceding twelve weekly average price of the security intended to be acquired
(viii) In case of investment in unlisted securities, fair Not Applicable market value of such securities determined in terms of regulation 6(1)
(ix) Break-up value of securities intended to be acquired Rs. 3.08 on the basis of the latest audited financial statements
(x) Earning per share of the associated company or 2012 : Rs 0.42 associated undertaking for the last three years 2011 : Rs (4.27) 2010 : Rs (3.94)
(xi) Sources of fund from which securities will be From company's own available liquidity and credit lines acquired
(xii) Where the securities are intended to be acquired using borrowed funds
(i) justification for investment through borrowings Company foresee the return on this strategic investment higher than the borrowing cost (ii) detail of guarantees and assets pledged for obtaining such funds Pledge of listed securites
(xiii) Salient features of the agreement(s), if any, entered There is no agreement as this is a Long Term Strategic into with its associated company or associated Investment undertaking with regards to the proposed investment
(xiv) Direct or indirect interest of directors, sponsors, Following directors of the company have no interest in the majority shareholders and their relatives, if any, in investee company except in their capacity as director / the associated company or associated undertaking shareholder : Mr.Kashif A. Habib - Chief Executive, Mr.Nasim or the transaction under consideration Beg - Director and Mr. Muhammad Ejaz - Director
(xv) Any other important details necessary for the Not Applicable members to understand the transaction
(xvi) In case of investment in securities of a project of an associated company or associated undertaking that has not commenced operations, in addition to the information referred to above, the following further information, is required, namely (i) description of the project and its history since conceptualization Not Applicable (ii) starting and expected dated of completion of work Not Applicable (iii) time by which such project shall become commercially operational Not Applicable (iv) expected time by which the project shall start paying return on investment Not Applicable
Annual Report 2012 | Promoting Investments 200 2 INVESTMENT IN SECURITIES
Sr.No. Description Information Requried
(i) Name of the associated company or associated Thatta Power (Pvt.) Limited undertakingalong with criteria based on which the An associated company due to common directorship of associated relationship is established Mr. Nasim Beg in both the companies"
(ii) Purpose, benefits and period of investment For the benefit of the company and to earn better returns in the long run on strategic investment by capturing the opportunities on the right time
(iii) Maximum amount of investment Fresh limit of Rs.150 million is requested for approval.
(iv) Maximum price at which securities will be acquired At par/offered/negotiated price prevailing on the date of transaction/investment
(v) Maximum number of securities to be acquired No of securities purchasable under approved limit in accordance with / based on Sr. Nos. 3 & 4 above
(vi) Number of securities and percentage thereof held Not Applicable before and after the proposed investment
(vii) In case of investment in listed securities, average of Not Applicable the preceding twelve weekly average price of the security intended to be acquired
(viii) In case of investment in unlisted securities, fair Rs.103.32 market value of such securities determined in terms of regulation 6(1)
(ix) Break-up value of securities intended to be acquired Rs.103.32 on the basis of the latest audited financial statements
(x) Earning per share of the associated company or Rs. 3.42 for 2012 as per audited financial result of first full 12 associated undertaking for the last three years months.
(xi) Sources of fund from which securities will be From company's own available liquidity and credit lines acquired
(xii) Where the securities are intended to be acquired using borrowed funds
(i) justification for investment through borrowings Company foresee the return on this strategic investment higher than the borrowing cost
(ii) detail of guarantees and assets pledged for Pledge of listed securites obtaining such funds
(xiii) Salient features of the agreement(s), if any, entered There is no agreement as this is a Long Term Strategic into with its associated company or associated Investment undertaking with regards to the proposed investment
(xiv) Direct or indirect interest of directors, sponsors, Mr.Nasim Beg - Director have no interest in the investee majority shareholders and their relatives, if any, in company except in his capacity as director / shareholder the associated company or associated undertaking or the transaction under consideration
(xv) Any other important details necessary for the members to understand the transaction
(xvi) In case of investment in securities of a project of an associated company or associated undertaking that has not commenced operations, in addition to the information referred to above, the following further information, is required, namely
(i) description of the project and its history since The Company was incorporated as a private limited Company conceptualization under the Companies Ordinance, 1984 on November 12, 2010 and is a subsidiary of Thatta Cement Company Limited. The Company shall install 45.6 MW gas fired captive power plant to generate and supply electric power to Thatta Cement Company Limited. Power generated shall be sold to Thatta Cement and to Public Utility Companies. In the first phase installation of seven generators are in process to generate 23.1 MW. (ii) starting and expected dated of completion of work 15th November 2012 (iii) time by which such project shall become Expected date is 15th November 2012 commercially operational (iv) expected time by which the project shall start paying 30th June 2014 return on investment
201 Arif Habib Corp 1 LOANS AND ADVANCES
Sr.No. Description Information Requried
(i) Name of the associated company or associated "AL-ABBAS CEMENT INDUSTRIES LIMITED undertaking along with criteria based on which the A subsidiary company" associated relationship is established
(ii) Amount of loans or advances Fresh limit of Rs.500 million is requested for approval. This is in addition to renewal requested seperately for the previously sanctioned limit of loan amounting to Rs.500 million which is fully utilised upto 30 June 2012.
(iii) Purpose of loans or advances and benefits likely to To support the functionality , operations and growth of the accrue to the investing company and its members subsidiary. from such loans or advances
(iv) In case any loan has already been granted to the During 2011-12, a loan amounting to Rs.500 million was given said associated company or associated to the subsidiary which was outstanding as on 30th June 2012. undertaking, the complete details thereof The loan carries a markup rate of 3 month Kibor + 2.5% which is higher than company borrowing cost. Approval from shareholders for renewal of the aforementioned loan in the nature of running finance has also been sought.
(v) Financial position, including main items of balance Total Equity, Total assets and total liability amounting to Rs.1,125 sheet and profit and loss account of the associated million, Rs.5,183 million and Rs. 4,058 million respectively. Gross company or associated undertaking on the basis of profit, Profit before tax and Profit after tax amounting to Rs.297 its latest financial statements million, Rs.293 million and Rs.153 million respectvely
(vi) Average borrowing cost of the investing company or Markup ranging from 1 month KIBOR + 1% to 3 month KIBOR + in case of absence of borrowing the Karachi Inter 2.5% per annum Bank Offered Rate for the relevant period
(vii) Rate of interest, mark up, profit, fees or commission 3 month KIBOR + 2.5% per annum etc. to be charged
(viii) Sources of funds from where loans or advances will From company's own available liquidity and credit lines be given
(ix) Where loans or advances are being granted using borrowed funds (i) justification for granting loan or advance out of To support the functionality , operations and growth of the borrowed funds subsidiary. (ii) detail of guarantees / assets pledged for obtaining Pledge of listed securites such funds, if any (iii) repayment schedules of borrowing of the investing Obtained facailities have different maturity dates upto company December, 2013.
(x) Particulars of collateral security to be obtained Being a group Company no collateral will be obtained against loan to the borrowing company or undertaking, if any
(xi) If the loans or advances carry conversion feature i.e. N/A it is convertible into securities, this fact along with complete detail including conversion formula, circumstances in which the conversion may take place and the time when the conversion may be exercisable
(xii) Repayment schedule and terms of loans or The fresh requested facility will be in the nature of term finance advances to be given to the investee company for a period of five year from the date of first draw down with the option to the investee to repay before final maturity.
(xiii) Salient feature of all agreements entered or to be Tenor : 5 years entered with its associated company or associated Principal Repayments: At the end of fifth year from the date of undertaking with regards to proposed investment first draw down with the option to repay early with the investee Markup pricing: 3 months KIBOR plus 2.5% or 0.5% plus average cost to the Company, which ever is higher Markup payment: Markup accrued from first draw down date till the date of repayment of principal will be paid on semi annual basis.
(xvi) Direct or indirect interest of directors, sponsors, Following directors of the company have no interest in the majority shareholders and their relatives, if any, in investee company except in their capacity as director / the associated company or associated undertaking shareholder : Mr.Kashif A. Habib - Chief Executive, Mr.Nasim or the transaction under consideration Beg - Director and Mr. Muhammad Ejaz - Director
Annual Report 2012 | Promoting Investments 202 LOANS AND ADVANCES
Sr.No. Description Information Requried
(xv) Any other important details necessary for the Not applicable members to understand the transaction
(xvi) In case of investment in a project of an associated company or associated undertaking that has not commenced operations, in addition to the information referred to above, the following further information is required, namely (i) a description of the project and its history since Not Applicable conceptualization (ii) starting date and expected date of completion Not Applicable (iii) time by which such project shall become Not Applicable commercially operational (iv) expected return on total capital employed in the Not Applicable project (v) funds invested or to be invested by the promoters Not Applicable distinguishing between cash and non-cash amounts
2 LOANS AND ADVANCES
Sr.No. Description Information Requried
(i) Name of the associated company or associated JAVEDAN CORPORATION LIMITED undertaking along with criteria based on which the An associated undertaking due to common directorships associated relationship is established
(ii) Amount of loans or advances Fresh limit of Rs.900 million is requested for approval. This is in addition to renewal requested seperately for the previously sanctioned limit of loan amounting to Rs.81.5 million which is fully utilised upto 30 June 2012. Above facilities will be in the nature of running finance for a period of one year and shall be renewable in next general meeting(s) for further period(s) of one year(s).
(iii) Purpose of loans or advances and benefits likely to To support the functionality , operations and growth of the accrue to the investing company and its members associated undertaking. from such loans or advances
(iv) In case any loan has already been granted to the During 2011-12, a loan amounting to Rs.81.5 million was given said associated company or associated to the associated undertaking. Outstanding amount of loan as undertaking, the complete details thereof on 30th June 2012 was Rs.460 million. The loan carries a markup rate of 3 month Kibor + 3% which is higher than the Company’s borrowing cost. Approval from shareholders for renewal of the loan amounting to Rs.81.5 million in the nature of running finance has also been sought.
(v) Financial position, including main items of balance Total Equity, total assets and total liability amounting to Rs.4,526 sheet and profit and loss account of the associated million , Rs.10,385 million and Rs.5,859 million respectively. company or associated undertaking on the basis of Operating loss, Loss before tax and Loss after tax amounting to its latest financial statements (Rs.218) million, (Rs.704) million and Rs.(482) million respectvely
(vi) Average borrowing cost of the investing company or Markup ranging from 1 month KIBOR + 1% to 3 month KIBOR + in case of absence of borrowing the Karachi Inter 2.5% per annum Bank Offered Rate for the relevant period
(vii) Rate of interest, mark up, profit, fees or commission 3 month KIBOR + 3% per annum etc. to be charged
(viii) Sources of funds from where loans or advances will From company's own available liquidity and credit lines be given
(ix) Where loans or advances are being granted using borrowed funds (i) justification for granting loan or advance out of To support the functionality , operations and growth of the borrowed funds subsidiary. (ii) detail of guarantees / assets pledged for obtaining Pledge of listed securites such funds, if any (iii) repayment schedules of borrowing of the investing Obtained facilities have different maturity dates upto December, company 2013.
203 Arif Habib Corp LOANS AND ADVANCES
Sr.No. Description Information Requried
(x) Particulars of collateral security to be obtained To be secured against REIT units to be issued by the borrower against loan to the borrowing company or to the Company in the proposed REIT scheme of the borrower undertaking, if any which is in the process of getting permissions from Securities and Exchange Commission of Pakistan (SECP). In case where REIT Scheme is not approved by the SECP, the borrower, as an alternate shall provide a registered mortgage deed in favour of the Company over its immovable property located in Deh Manghopir and Gadap Town, Karachi, totaling 166 acres.
(ix) If the loans or advances carry conversion feature i.e. Not Applicable it is convertible into securities, this fact along with complete detail including conversion formula, circumstances in which the conversion may take place and the time when the conversion may be exercisable
(xii) Repayment schedule and terms of loans or Above facilities will be in the nature of running finance for a advances to be given to the investee company period of one year and shall be renewable in next general meeting(s) for further period(s) of one year(s).
(xiii) Salient feature of all agreements entered or to be As disclosed in the financial statements entered with its associated company or associated undertaking with regards to proposed investment
14 Direct or indirect interest of directors, sponsors, Following directors of the company have no interest in the majority shareholders and their relatives, if any, in investee company except in their capacity as director / the associated company or associated undertaking shareholding : Mr. Arif Habib, Mr. Samad A. Habib, Mr. Kashif A. or the transaction under consideration Habib and Mr. Muhammad Ejaz
15 Any other important details necessary for the Not applicable members to understand the transaction
16 In case of investment in a project of an associated company or associated undertaking that has not commenced operations, in addition to the information referred to above, the following further information is required, namely (i) a description of the project and its history since Not Applicable conceptualization (ii) starting date and expected date of completion Not Applicable (iii) time by which such project shall become Not Applicable commercially operational (iv) expected return on total capital employed in the Not Applicable project (v) funds invested or to be invested by the promoters Not Applicable distinguishing between cash and non-cash amounts
* Following directors of the company have no inertest in the investee company except in their capacity as directors / shareholders:
Mr. Arif Habib Chairman and shareholder of Javedan Corporation Ltd. Mr. Samad A. Habib Chief Executive and shareholder of Javedan Corporation Ltd. Mr. Kashif Habib Chief Executive and shareholder of AlAbbas Cement Industries Ltd. & Director and shareholder of Javedan Corporation Ltd. Mr. Nasim Beg Director and shareholder of AlAbbas Cement Industries Ltd. & Director and shareholder of Thatta Power (Pvt.) Ltd. Mr. Muhammad Ejaz Director and shareholder of Javedan Corporation Ltd. & AlAbbas Cement Industries Ltd.
Annual Report 2012 | Promoting Investments 204 Statement under Section 160(1)(b) of the Companies Ordinance, 1984, in compliance with Regulation 4(2) of Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2012, for decision to make investment under the authority of a resolution passed pursuant to provisions of section 208 of the Ordinance is not implemented either fully or partially:
The Company in its previous general meetings had sought approvals under section 208 of the Companies Ordinance, 1984 for investments in the following Associated Companies and Associated Undertakings in which investment has not been made so far, either fully or partially. Approval of renewal of unutilised portion of equity investments and sanctioned limit of loans and advances is also hereby sought for some of the companies as per following details.
1 Name of associated company / undertaking : Javedan Corporation Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 1,000,000,000 600,000,000
b) amount of investment made to date; 99,999,754 600,000,000
c) reasons for not having made complete Waiting for an appropriate time in the interest N/A investment so far where resolution of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the June 2012 June 2011 June 2012 June 2011 resolution passed for approval of investment in such company :
i Loss per share (9.51) (2.25) (9.51) (2.25)
ii Net loss (482,077,116) (732,207,000) (482,077,116) (732,207,000)
iii Shareholders Equity 4,526,072,687 3,951,251,000 4,526,072,687 3,951,251,000
iv Total Assets 10,384,832,000 9,687,851,000 10,384,832,000 9,687,851,000
v Break-up value 26.48 67.98 26.48 67.98
RENEWAL IN PREVIOUS LIMITS Unutilised 900,000,246 Sanctioned 81,550,000 REQUESTED I.E. :
205 Arif Habib Corp 2 Name of associated company / undertaking : Arif Habib Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 2,921,676,000 250,000,000
b) amount of investment made to date; 2,685,816,861 -
c) reasons for not having made complete Waiting for an appropriate time in the interest Waiting for an appropriate time in the interest investment so far where resolution of the shareholders of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the June 2012 June 2011 June 2012 June 2011 resolution passed for approval of investment in such company :
i Earnings / (loss) per share 8.13 (12.43) 8.13 (12.43)
ii Net Profit / (loss) 365,911,313 (559,394,281) 365,911,313 (559,394,281)
iii Shareholders Equity 1,095,946,335 730,035,022 1,095,946,335 730,035,022
iv Total Assets 3,257,943,540 1,236,123,071 3,257,943,540 1,236,123,071
v Break-up value 24.35 16.22 24.35 16.22
RENEWAL IN PREVIOUS LIMITS Unutilised 235,859,139 Sanctioned 250,000,000 REQUESTED I.E. :
3 Name of associated company / undertaking : Arif Habib Investments Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 281,200,000 250,000,000
b) amount of investment made to date; 81,947,527 -
c) reasons for not having made complete Waiting for an appropriate time in the interest Waiting for an appropriate time in the interest investment so far where resolution of the shareholders of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the June 2012 June 2011 June 2012 June 2011 resolution passed for approval of investment in such company :
i Earnings per share 2.01 1.97 2.01 1.97
ii Net Profit 144,579,667 71,634,948 144,579,667 71,634,948
iii Shareholders Equity 1,281,927,110 1,269,600,302 1,281,927,110 1,269,600,302
iv Total Assets 1,410,024,333 1,356,613,468 1,410,024,333 1,356,613,468
v Break-up value 17.80 17.63 17.80 17.63
RENEWAL IN PREVIOUS LIMITS Unutilised 199,252,473 Sanctioned To be lapsed REQUESTED I.E. :
Annual Report 2012 | Promoting Investments 206 4 Name of associated company / undertaking : Pakistan Private Equity Management Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 1,004,250,000 250,000,000
b) amount of investment made to date; 42,500,000 -
c) reasons for not having made complete Waiting for an appropriate time in the interest Waiting for an appropriate time in the interest investment so far where resolution of the shareholders of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the resolution passed for approval of June 2012 June 2011 June 2012 June 2011 investment in such company :
i Loss per share (0.525) (0.44) (0.525) (0.44)
ii Net loss (2,625,542) (2,190,941) (2,625,542) (2,190,941)
iii Shareholders Equity 6,123,490 8,749,032 6,123,490 8,749,032
iv Total Assets 6,190,690 8,894,574 6,190,690 8,894,574
v Break-up value 1.22 1.75 1.22 1.75
RENEWAL IN PREVIOUS LIMITS Unutilised 961,750,000 Sanctioned 250,000,000 REQUESTED I.E. :
5 Name of associated company / undertaking : Real Estate Modaraba Management Company Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 300,000,000 300,000,000
b) amount of investment made to date; - -
c) reasons for not having made complete Waiting for an appropriate time in the interest Waiting for an appropriate time in the interest investment so far where resolution of the shareholders of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the June 2011 June 2010 June 2011 June 2010 resolution passed for approval of investment in such company :
i Loss per share (8) (505.74) (8) (505.74)
ii Net loss (2,000,000) (126,435,657) (2,000,000) (126,435,657)
iii Shareholders Equity (158,218,197) (156,218,197) (158,218,197) (156,218,197)
iv Total Assets 142,004,804 144,004,804 142,004,804 144,004,804
v Break-up value (632) (625) (632) (625)
RENEWAL IN PREVIOUS LIMITS Unutilised 300,000,000 Sanctioned 300,000,000 REQUESTED I.E. :
207 Arif Habib Corp 6 Name of associated company / undertaking : Pakarab Fertilizers Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 2,324,332,000 1,000,000,000
b) amount of investment made to date; 1,324,332,073 -
c) reasons for not having made complete Waiting for an appropriate time in the interest Waiting for an appropriate time in the interest investment so far where resolution of the shareholders of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the December 2011 December 2010 December 2011 December 2010 resolution passed for approval of investment in such company :
i Earnings per share 10.20 7.18 10.20 7.18
ii Net Profit 4,590,139,000 3,231,962,000 4,590,139,000 3,231,962,000
iii Shareholders Equity 22,356,334,000 14,724,303,000 22,356,334,000 14,724,303,000
iv Total Assets 65,340,926,000 50,637,407,000 65,340,926,000 50,637,407,000
v Break-up value 49.68 32.72 49.68 32.72
RENEWAL IN PREVIOUS LIMITS Unutilised 999,999,927 Sanctioned 1,000,000,000 REQUESTED I.E. :
7 Name of associated company / undertaking : Fatima Fertilizer Company Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 1,500,000,000 1,000,000,000
b) amount of investment made to date; 700,037,106 -
c) reasons for not having made complete Waiting for an appropriate time in the interest Waiting for an appropriate time in the interest investment so far where resolution of the shareholders of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the resolution passed for approval of December 2011 December 2010 December 2011 December 2010 investment in such company :
i Earnings / (loss) per share 2.06 (0.08) 2.06 (0.08)
ii Net Profit / (loss) 4,116,975,000 (163,639,000) 4,116,975,000 (163,639,000)
iii Shareholders Equity 28,054,865,000 24,258,780,000 28,054,865,000 24,258,780,000
iv Total Assets 76,347,248,000 69,457,038,000 76,347,248,000 69,457,038,000
v Break-up value 12.02 10.13 12.02 10.13
RENEWAL IN PREVIOUS LIMITS Unutilised 799,962,894 Sanctioned 1,000,000,000 REQUESTED I.E. :
Annual Report 2012 | Promoting Investments 208 8 Name of associated company / undertaking : Rotocast Engineering Co. (Pvt.) Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 300,000,000 200,000,000
b) amount of investment made to date; - -
c) reasons for not having made complete Waiting for an appropriate time in the interest Waiting for an appropriate time in the interest investment so far where resolution of the shareholders of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the June 2012 June 2011 June 2012 June 2011 resolution passed for approval of investment in such company :
i Earnings per share 127.93 16.52 127.93 16.52
ii Net Profit 127,934,075 16,523,962 127,934,075 16,523,962
iii Shareholders Equity 2,600,272,199 2,533,563,243 2,600,272,199 2,533,563,243
iv Total Assets 3,195,474,358 4,808,483,444 3,195,474,358 4,808,483,444
v Break-up value 2600.27 2,533.56 2600.27 2,533.56
RENEWAL IN PREVIOUS LIMITS Unutilised 300,000,000 Sanctioned 200,000,000 REQUESTED I.E. :
9 Name of associated company / undertaking : Thatta Cement Company Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 300,000,000 200,000,000
b) amount of investment made to date; 188,370,257 -
c) reasons for not having made complete Waiting for an appropriate time in the interest Waiting for an appropriate time in the interest investment so far where resolution of the shareholders of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the June 2012 June 2011 June 2012 June 2011 resolution passed for approval of investment in such company :
i Loss per share (0.44) (0.93) (0.44) (0.93)
ii Net loss (43,882,000) (74,495,000) (43,882,000) (74,495,000)
iii Shareholders Equity 958,240,000 702,968,000 958,240,000 702,968,000
iv Total Assets 2,041,987,000 1,992,166,000 2,041,987,000 1,992,166,000
v Break-up value 9.61 8.81 9.61 8.81
RENEWAL IN PREVIOUS LIMITS Unutilised 111,629,743 Sanctioned 200,000,000 REQUESTED I.E. :
209 Arif Habib Corp 10 Name of associated company / undertaking : International Complex Projects Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 1,500,000,000 1,000,000,000 - - b) amount of investment made to date;
c) reasons for not having made complete Waiting for an appropriate time in the interest Waiting for an appropriate time in the interest investment so far where resolution of the shareholders of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the June 2011 June 2010 June 2011 June 2010 resolution passed for approval of investment in such company :
i Earnings per share 8.10 9.72 8.10 9.72
ii Net Profit 182,248,671 218,630,220 182,248,671 218,630,220
iii Shareholders Equity 6,084,804,691 5,402,556,020 6,084,804,691 5,402,556,020
iv Total Assets 9,181,085,634 7,193,884,588 9,181,085,634 7,193,884,588
v Break-up value 270.44 240.11 270.44 240.11
RENEWAL IN PREVIOUS LIMITS Unutilised 1,500,000,000 Sanctioned 1,000,000,000 REQUESTED I.E. :
11 Name of associated company / undertaking : Arif Habib REIT Management Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 1,500,000,000 1,000,000,000
b) amount of investment made to date; - -
c) reasons for not having made complete Waiting for an appropriate time in the interest Waiting for an appropriate time in the interest investment so far where resolution of the shareholders of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the June 2011 June 2010 June 2011 June 2010 resolution passed for approval of investment in such company :
i Loss per share (2.10) (2.58) (2.10) (2.58)
ii Net loss (10,489,833) (12,907,005) (10,489,833) (12,907,005)
iii Shareholders Equity 25,787,118 36,276,951 25,787,118 36,276,951
iv Total Assets 28,678,547 38,630,792 28,678,547 38,630,792
v Break-up value 5.16 7.25 5.16 7.25
RENEWAL IN PREVIOUS LIMITS Unutilised 1,500,000,000 Sanctioned 1,000,000,000 REQUESTED I.E. :
Annual Report 2012 | Promoting Investments 210 12 Name of associated company / undertaking : Askari Siddiqsons Development Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 1,560,000,000 1,040,000,000
b) amount of investment made to date; - -
c) reasons for not having made complete Waiting for an appropriate time in the interest Waiting for an appropriate time in the interest investment so far where resolution of the shareholders of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the June 2011 June 2010 June 2011 June 2010 resolution passed for approval of investment in such company :
i Loss per share (0.03) (0.16) (0.03) (0.16)
ii Net loss (776,163) (3,890,669) (776,163) (3,890,669)
iii Shareholders Equity 238,426,789 239,202,952 238,426,789 239,202,952
iv Total Assets 238,801,789 239,452,952 238,801,789 239,452,952
v Break-up value (9.55) (9.58) (9.55) (9.58)
RENEWAL IN PREVIOUS LIMITS Unutilised To be lapsed Sanctioned To be lapsed REQUESTED I.E. :
13 Name of associated company / undertaking : S.K.M Lanka Holdings (Pvt.) Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 150,000,000 100,000,000
b) amount of investment made to date; 56,818,578 -
c) reasons for not having made complete Waiting for an appropriate time in the interest Waiting for an appropriate time in the interest investment so far where resolution of the shareholders of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the resolution passed for approval of March 2012 March 2011 March 2012 March 2011 investment in such company :
i (Loss) / eanings per share (4.08) 0.47 (4.08) 0.47
ii Net (Loss) / profit (40,767,818) 8,142,048 (40,767,818) 8,142,048
iii Shareholders Equity (5,813,522) 77,824,966 (5,813,522) 77,824,966
iv Total Assets 80,005,366 144,547,367 80,005,366 144,547,367
v Break-up value (0.58) 4.45 (0.58) 4.45
RENEWAL IN PREVIOUS LIMITS Unutilised 93,181,422 Sanctioned 100,000,000 REQUESTED I.E. :
211 Arif Habib Corp 14 Name of associated company / undertaking : Aisha Steel Mills Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 1,750,000,000 750,000,000
b) amount of investment made to date; 1,558,283080 436,938,467
c) reasons for not having made complete Waiting for an appropriate time in the interest Waiting for an appropriate time in the interest investment so far where resolution of the shareholders of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the June 2012 June 2011 June 2012 June 2011 resolution passed for approval of investment in such company :
i (Loss) / earnings per share (0.82) 0.39 (0.82) 0.39
ii Net (Loss) / profit (86,083,000) 139,339,000 (86,083,000) 139,339,000
iii Shareholders Equity 2,997,537,000 2,849,326,000 2,997,537,000 2,849,326,000
iv Total Assets 10,947,074,000 8,475,912,000 10,947,074,000 8,475,912,000
v Break-up value 8.72 8.90 8.72 8.90
RENEWAL IN PREVIOUS LIMITS Unutilised 191,716,920 Sanctioned 750,000,000 REQUESTED I.E. :
15 Name of associated company / undertaking : Al-Abbas Cement Industries Limited
S.no Description Investment in Securities Loans and Advances
a) total investment approved; 1,522,000,000 500,000,000
b) amount of investment made to date; 1,428,272,468 500,000,000
c) reasons for not having made complete Waiting for an appropriate time in the interest N/A investment so far where resolution of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the June 2012 June 2011 June 2012 June 2011 resolution passed for approval of investment in such company :
i Earnings / (loss) per share 0.42 (4.27) 0.42 (4.27)
ii Net Profit / (loss) 153,431,000 (926,670,000) 153,431,000 (926,670,000)
iii Shareholders Equity 1,125,410,000 971,979,000 1,125,410,000 971,979,000
iv Total Assets 5,183,077,000 5,051,256,000 5,183,077,000 5,051,256,000
v Break-up value 3.08 2.66 3.08 2.66
RENEWAL IN PREVIOUS LIMITS Unutilised 93,727,532 Sanctioned 500,000,000 REQUESTED I.E. :
Annual Report 2012 | Promoting Investments 212 16 Name of associated company / undertaking : Sweetwater Dairies Pakistan (Pvt.) Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 600,000,000 100,000,000
b) amount of investment made to date; 342,735,585 3,000,000
c) reasons for not having made complete Waiting for an appropriate time in the interest Waiting for an appropriate time in the interest investment so far where resolution of the shareholders of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the June 2012 June 2011 June 2012 June 2011 resolution passed for approval of investment in such company :
i Loss per share (7.71) (1.75) (7.71) (1.75)
ii Net loss (479,397,124) (107,836,755) (479,397,124) (107,836,755)
iii Shareholders Equity 129,229,479 580,880,962 129,229,479 580,880,962
iv Total Assets 136,129,705 649,151,268 136,129,705 649,151,268
v Break-up value 2.08 9.43 2.08 9.43
RENEWAL IN PREVIOUS LIMITS Unutilised 257,264,416 Sanctioned 100,000,000 REQUESTED I.E. :
17 Name of associated company / undertaking : Memon Health & Educational Foundation
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; - 50,000,000
b) amount of investment made to date; - -
c) reasons for not having made complete N/A Waiting for an appropriate time in the interest investment so far where resolution of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the June 2011 June 2010 June 2011 June 2010 resolution passed for approval of investment in such company :
i Total Income 313,898,002 207,594,080 313,898,002 207,594,080
ii Deficit for the year (7,754,961) (31,547,728) (7,754,961) (31,547,728)
iii Total Assets 1,208,963,432 1,143,425,722 1,208,963,432 1,143,425,722
iv Net Assets 669,512,284 677,267,245 669,512,284 677,267,245
RENEWAL IN PREVIOUS LIMITS Unutilised N/A Sanctioned 50,000,000 REQUESTED I.E. :
213 Arif Habib Corp 18 Name of associated company / undertaking : Arif Habib Foundation
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; - 250,000,000
b) amount of investment made to date; - -
c) reasons for not having made complete N/A Waiting for an appropriate time in the interest investment so far where resolution of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the June 2012 June 2011 June 2012 June 2011 resolution passed for approval of investment in such company :
i Donation received during the year 14,432,077 2,800,000 14,432,077 2,800,000
ii Donation utilised during the year 14,670,492 3,022,862 14,670,492 3,022,862
iii Net Assets 28,819 267,234 28,819 267,234
RENEWAL IN PREVIOUS LIMITS Unutilised N/A Sanctioned 250,000,000 REQUESTED I.E. :
19 Name of associated company / undertaking : Crescent Textile Mills Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 700,000,000 -
b) amount of investment made to date; 292,566,283 -
c) reasons for not having made complete Waiting for an appropriate time in the interest N/A investment so far where resolution of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the resolution passed for approval of June 2011 June 2010 June 2011 June 2010 investment in such company :
i (Loss) / earnings per share (2.41) 7 (2.41) 7
ii Net (Loss) / profit (118,645,000) 344,670,000 (118,645,000) 344,670,000
iii Shareholders Equity 4,153,273,000 4,312,846,000 4,153,273,000 4,312,846,000
iv Total Assets 12,616,421,000 10,988,698,000 12,616,421,000 10,988,698,000
v Break-up value 84,40 87.64 84,40 87.64
RENEWAL IN PREVIOUS LIMITS Unutilised 407,433,717 Sanctioned N/A REQUESTED I.E. :
Annual Report 2012 | Promoting Investments 214 20 Name of associated company / undertaking : Sachal Energy Development (Pvt.) Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 1,000,000,000 250,000,000
b) amount of investment made to date; 185,000,060
c) reasons for not having made complete Waiting for an appropriate time in the interest Waiting for an appropriate time in the interest investment so far where resolution of the shareholders of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the June 2012 June 2011 June 2012 June 2011 resolution passed for approval of investment in such company :
i Loss per share (0.52) (0.84) (0.52) (0.84)
ii Net loss (9,599,910) (10,934,726) (9,599,910) (10,934,726)
iii Shareholders Equity 139,914,761 94,514,671 139,914,761 94,514,671
iv Total Assets 146,364,641 102,023,284 146,364,641 102,023,284
v Break-up value 7.56 7.27 7.56 7.27
RENEWAL IN PREVIOUS LIMITS Unutilised 814,999,940 Sanctioned 250,000,000 REQUESTED I.E. :
21 Name of associated company / undertaking : Rozgar Microfinance Bank Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 69,010,000 -
b) amount of investment made to date; - -
c) reasons for not having made complete Waiting for an appropriate time in the interest N/A investment so far where resolution of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the resolution passed for approval of December 2011 December 2010 December 2011 December 2010 investment in such company :
i Earnings / (loss) per share 0.43 (0.20) 0.43 (0.20)
ii Net Profit / (loss) 8,025,696 (3,695,565) 8,025,696 (3,695,565)
iii Shareholders Equity 100,985,532 92,959,835 100,985,532 92,959,835
iv Total Assets 110,621,855 120,092,834 110,621,855 120,092,834
v Break-up value 5.44 5.01 5.44 5.01
RENEWAL IN PREVIOUS LIMITS Unutilised To be lapsed Sanctioned N/A REQUESTED I.E. :
215 Arif Habib Corp 22 Name of associated company / undertaking : Summit Bank Limited
Sr.No. Description Investment in Securities Loans and Advances
a) total investment approved; 1,000,000,000 -
b) amount of investment made to date; 255,822,522 -
c) reasons for not having made complete Waiting for an appropriate time in the interest N/A investment so far where resolution of the shareholders required it to be implemented in specified time; and
d) material change in financial statements of associated company or associated undertaking since date of the December 2011 December 2010 December 2011 December 2010 resolution passed for approval of investment in such company :
i Loss per share (1.53) (5.58) (1.53) (5.58)
ii Net loss (1,536,838,000) (3,018,373,000) (1,536,838,000) (3,018,373,000)
iii Shareholders Equity 6,229,170,000 3,373,262,000 6,229,170,000 3,373,262,000
iv Total Assets 119,752,891,000 72,268,830 119,752,891,000 72,268,830
v Break-up value 5.78 4.65 5.78 4.65
RENEWAL IN PREVIOUS LIMITS Unutilised 744,177,478 Sanctioned N/A REQUESTED I.E. :
Annual Report 2012 | Promoting Investments 216
Form of Proxy 18th Annual General Meeting
The Company Secretary Arif Habib Corporation Limited Arif Habib Centre 23, M.T. Khan Road Karachi.
I/ we of being a member(s) of Arif Habib Corporation Limited holding ordinary shares as per CDC A/c. No. hereby appoint Mr./Mrs../Miss of (full address) or failing him/her Mr./Mrs./Miss of (full address)
(being member of the company) as my/our Proxy to attend, act vote for me/us and on my/our behalf at the Eighteenth Annual General Meeting of the Company to be held on September 29, 2012 and/or any adjournment thereof.
Signed this day of 2012.
Witnesses: 1. Name : Signature on Address : Rs. 5/- CNIC No. : Revenue Stamp Signature :
2. Name : Address : CNIC No. : Signature :
NOTES: 1. A member entitled to attend and vote at the meeting may appoint another member as his / her proxy who shall have such rights as respects attending, speaking and voting at the meeting as are available to a member. 2. Proxy shall authenticate his/her identity by showing his/her identity by showing his/her original passport and bring folio number at the time of attending the meeting 3. In order to be effective, the proxy Form must be received at the office of our Registrar M/s. Central Depository Company of Pakistan, Share Registrar Department, CDC House, 99-B, Block-B, S.M.C.H.S, Main Shahra-e-Faisal, Karachi, not later than 48 hours before the meeting duly signed and stamped and witnessed by two persons with their signature, name, address and CNIC number given on the form. 4. In the case of individuals attested copies of CNIC or passport of the beneficial owners and the proxy shall be furnished with the proxy Form. 5. In the case of proxy by a corporate entity, Board of Directors resolution/power of attorney and attested copy of the CNIC or passport of the proxy shall be submitted alongwith proxy Form. ARIF HABIB CORPORATION LIMITED Registrar: Central Depository Company of Pakistan, Share Registrar Department, CDC House, 99-B, Block-B, S.M.C.H.S, Main Shahra-e-Faisal, Karachi.
back annual report 2012
Arif Habib Corp Creativedge.com.pk Arif Habib Centre 23, M. T. Khan Road Karach-74000 Tel: (021) 32460717-19 Fax: (021) 32429653, 32468117 Company website: www.arifhabibcorp.com Group website: www.arifhabib.com.pk Designed and produced by Designed and produced