| Bolan Bank Limited |
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| Annual
Report 1998 |
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| CONTENTS |
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| Corporate
Information |
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| Chairman's
Review |
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| Auditors'
Report |
|
| Balance Sheet |
|
|
| Profit
and Loss Account |
|
| Cash
Flow Statement |
|
| Notes
to the Accounts |
|
| Notice
of Annual General Meeting |
|
| Pattern
of Shareholdings |
|
| Offices/Branch
Network |
|
|
|
| CORPORATE
INFORMATION |
|
|
| BOARD
OF DIRECTORS |
|
|
| Mr.
Javed Yunus |
|
| Chairman |
|
|
| Mr.
Mirza Ghulam Mustafa |
|
| Vice Chairman |
|
|
| Mr.
Pervez Yunus |
|
| Mr.
Naved Yunus |
|
| Mr.
Maheen Yunus |
|
| Mrs. R.J. Yunus |
|
| Mrs.
S.P. Yunus |
|
| Mrs.
Ambreen Naved Yunus |
|
| Mrs.
Najmus Sehar Mustafa |
|
| Mr.
Mirza Ghulam Mujtaba |
|
| Mr.
Syed Ijaz Hussain Shah |
|
|
| SECRETARY |
|
| Mr.
Shabbir Ali Kanchwala |
|
|
| MANAGEMENT |
|
| Mr.
Syed Ijaz Hussain Shah |
|
| President
& Chief Executive |
|
|
| AUDITORS |
|
| Taseer
Hadi Khalid & Co. |
|
| Chartered
Accountants |
|
|
| Taher
Moochhala & Co. |
|
| Chartered
Accountants |
|
|
| SHARE
REGISTRARS |
|
| Bema
Associates (Private) Limited |
|
| 515,
Qamar House, |
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| M.A.
Jinnah Road, Karachi. |
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|
|
| Chairman's
Review |
|
|
| I
am pleased to present before you the 7th Annual Report of Bolan Bank Limited
for the year ended |
|
| December
31, 1998. |
|
|
| ECONOMIC
OVERVIEW: |
|
|
| As
you are aware, 1998 has been a difficult year for country's economy due to
economic turmoil in |
|
| Far
East Asia and political developments in the sub-continent. This had ripple
effect on the economic |
|
| and
political scenario of Pakistan and country's monetary and fiscal policies had
to be adjusted |
|
| accordingly
to cope with the situation. The banks and financial institutions had to bear
the brunt of |
|
| uncertainties
in financial and investment markets besides the impact of freezing of foreign
currency |
|
| accounts.
Under these difficult circumstances, your Bank adopted a cautious approach
towards lend- |
|
| ing
and investment and mainly concentrated on consolidation besides focusing on
quality of Assets. |
|
|
| THE
YEAR IN PERSPECTIVE: |
|
|
| During
the year under review, there have been significant adjustment of advances
secured against |
|
| foreign
currency deposits and consequently, advances decreased by 35% whereas
reduction in |
|
| deposits
was contained within 17% with the mobilisation of fresh deposits.
Nevertheless, total |
|
| investments
registered a rise of Rs. 189.683 million i.e. 13% as compared to the previous
year. |
|
| Despite
our cautious approach, because of difficult market condition, the bank has
been able to reg- |
|
| ister
10% increase in the Import/Export business during the year as compared to the
previous year. |
|
|
| In
order to strengthen the capital base, the Bank has issued Right Shares at the
rate of 2:1 per share |
|
| to
the tune of Rs. 161.250 million and Bonus Share at the rate of 7.5% for Rs.
24.187 Million to our |
|
| Share-holders
which has increased the capital base by Rs. 185.437 Million making total to
Rs. |
|
| 507.937 Million. |
|
|
| In
compliance to the requirement under Prudential Regulations, Markup on
stuck-up loans has |
|
| either
been suspended or booked to other liability account, although these advances
are adequately |
|
| secured
and we are expecting full recovery during the year 1999. It has adversely
affected the prof- |
|
| itability
of the Bank during the year under review and consequently a nominal profit
has been |
|
| reflected.
Neverthelegs, with the expeditious recovery of non-performing loans during
the year 1999, |
|
| profit
position will definitely be retrieved. |
|
|
| As
a part of our strategy, recovery of non-performing loans has been given a top
priorit and Recovery |
|
| Cell
of the-Bank has also been revitalised with the set-up of a new full fledged
department in the |
|
| name
of "Special Assets Management". It has started functioning in full
swing and progress thereof is |
|
| being
closely monitored on weekly basis by the senior Management. These steps will
bring further |
|
| strength
to the bank and we will be able to attain a level of sustainable growth,
Insha-Allah during |
|
| 1999. |
|
|
| Revamping
systems and control and Marketing Activities has also been given top priority
and |
|
| accordingly
six new Zones have been created which has strengthened our field operations. |
|
|
| LAUNCHING
OF NEW PRODUCTS |
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| We
are moving from strength to strength to attain a level of sustainable growth
and to remain com- |
|
| petitive
in the market three new products i.e. "Rupee Travellers Cheques",
"Mahana Munafa Scheme" |
|
| and
"Special Deposit Scheme" have been launched which we hope will
attract new customers to |
|
| enhance
banking activities. |
|
|
| Y2K
PROBLEMS: |
|
| The
Bank is cognizant of the implication of Y2K problems and accordingly
corrective measures have |
|
| been
taken to address the issue. The bank has installed a year 2000 Compliant
Banking Package |
|
| which
covers all the computerised branches. We are hopeful for smooth transition of
the program |
|
| within
the specified time for which necessary software has already been tested and
implemented. |
|
|
| BRANCH
NETWORK: |
|
| Although
the Bank's branch network comprising of 50 Branches is the largest among new |
|
| Commercial
Banks operating in the country, we are pursuing a policy of consolidation to
attain a |
|
| level
of sustainable growth by providing full range of efficient banking services
to our customers. |
|
| Almost
all the branches are now fully automated/computerised and well equiped to
handle cus- |
|
| tomers
needs. The other important aspect of our strategy for branch expansion
programme is the |
|
| acquisition
of the premises of our Key Area branches on ownership basis. This has not
also |
|
| enhanced
the image of the bank as to its strength but have also added substantially in
the value of |
|
| Assets
of the bank over the period. |
|
|
| AUDITORS |
|
| The
retiring auditors M/s. Taseer Hadi Khalid & Co. Chartered Accountants and
M/s. Taher |
|
| Moochhala
& Co., Chartered Accountants being eligible, offer themselves for
reappointment. |
|
|
| PATTERN
OF SHAREHOLDINGS: |
|
| A
statement showing the pattern of Shareholding of the Company as at December
31, 1998 is |
|
| annexed
with the report. |
|
|
| GRATITUDE: |
|
| I
would like to express my sincere gratitude to all our Account Holders for
their wholehearted sup- |
|
| port
and confidence in our bank which has always been a source of strength and
pride for the bank. |
|
| The
hard work, devotion and commitment of our Executives, Officers and Staff in
accomplishment of |
|
| desired
objectives for the growth and glory of the bank is also greatly appreciated. |
|
|
| I
would also like to thank the shareholders/investors for their confidence in
our scrip and assure |
|
| them
of our dedication and commitment to protect their interest by enhancing the
value of their |
|
| investment
and return on equity. |
|
|
| I
would be rather failing in my duties if I do not acknowledge with gratitude
and thanks the contin- |
|
| ued
guidance and support extended by the State Bank of Pakistan to run our bank
as a financially |
|
| sound
and disciplined institution. |
|
|
| May
Allah Almighty bless you all. |
|
|
| Javed Yunus |
|
| Chairman |
|
| Quetta:
May 20, 1999 |
|
|
|
| Auditors'
Report to the Members |
|
|
| We
have audited the annexed balance sheet of Bolan Bank .Limited as at 31
December 1998 and the |
|
| related
profit and loss account and cash flow statement together with the notes
forming part thereof, |
|
| for
the year then ended, in which are incorporated the un-audited certified
returns from the branches |
|
| except
for thirteen branches which have been audited by us and, we state that we
have obtained all |
|
| the
information and explanations which, to the best of our knowledge and belief,
were necessary for |
|
| the
purposes of our audit and, after due verification thereof, found them
satisfactory and, we report |
|
| that: |
|
|
| (a)
in our opinion, proper books of account have been kept by the Bank as
required by the |
|
| Companies
Ordinance, 1984 and the returns referred to above received from the branches |
|
| have
been found adequate for the purposes of our audit; |
|
|
| (b)
in our opinion: |
|
|
| i)
the balance sheet and profit and loss account together with the notes thereon
have been |
|
| drawn
up in conformity with the Banking Companies Ordinance, 1962 and the |
|
| Companies
Ordinance, 1984 and are in agreement with the books of account and are fur- |
|
| ther
in accordance with accounting policies consistently applied except for the
change as |
|
| explained
in note 3.3 with which we concur; |
|
|
| ii)
the expenditure incurred during the year was for the purpose of the Bank's
business; and |
|
|
| iii)
the business conducted, investments made and the expenditure incurred during
the year, |
|
| were
in accordance with the objects of the Bank and transactions of the Bank,
which have |
|
| come
to our notice have been within the powers of the Bank; |
|
|
| (c)
in our opinion, and to the best of our information and according to the
explanations given to |
|
| us,
the balance sheet and the profit and loss account and cash flow statement
together with |
|
| the
notes forming part thereof, give the information required by the Banking
Companies |
|
| Ordinance,
1962 and the Companies Ordinance, 1984, in the manner so required and give a |
|
| true
and fair view of the state of the Bank's affairs as at 31 December 1998 and
its true bal- |
|
| ance
of the loss for the year then ended; and |
|
|
| (d)
in our opinion, Zakat deductible at source under the Zakat and Ushr
Ordinance, 1980 was |
|
| deducted
by the Bank and deposited in the Central Zakat Fund established under Section
7 |
|
| of
that Ordinance. |
|
|
|
Taseer Hadi Khalid & Co. |
|
Taher Moochhala & Co. |
|
|
Chartered Accountants |
|
Chartered Accountants |
|
|
| Karachi: |
|
| Date:
May 20, 1999 |
|
|
|
| Balance
Sheet |
|
| As
at 31 December, 1998 |
|
|
| Assets |
|
Note |
1998 |
1997 |
|
|
| Cash |
|
4 |
668,504,911 |
953,606,568 |
|
| Balance
with other banks |
|
5 |
248,582,384 |
62,186,293 |
|
| Money
at call and short notice |
|
|
100,000,000 |
-- |
|
| Investments |
|
6 |
1,630,524,725 |
1,440,841,975 |
|
| Advances
net of provision |
|
7 |
2,033,503,462 |
3,139,255,693 |
|
| Operating
fixed assets |
|
8 |
571,891,279 |
368,138,120 |
|
| Capital
work in progress |
|
9 |
9,906,305 |
149,661,066 |
|
| Other assets |
|
10 |
416,486,689 |
379,876,236 |
|
|
|
------------------ |
------------------ |
|
|
|
5,679,399,755 |
6,493,565,951 |
|
|
|
|
|
| Liabilities |
|
|
|
| Deposits
and other accounts |
|
11 |
4,797,729,002 |
5,761,170,061 |
|
| Borrowings
from other banks, agents etc. |
|
12 |
116,189,000 |
94,133,936 |
|
| Bills payable |
|
|
103,736,659 |
135,105,050 |
|
| Other liabilities |
|
13 |
71,655,593 |
57,704,066 |
|
| Deferred
liability for taxation |
|
|
-- |
3,000,000 |
|
|
------------------ |
------------------ |
|
|
5,089,310,254 |
6,051,113,113 |
|
|
------------------ |
------------------ |
|
| Net assets |
|
Rupees |
590,089,501 |
442,452,838 |
|
|
========== |
========== |
|
|
|
|
| Represented by |
|
|
|
| Share capital |
|
14 |
507,937,500 |
322,500,000 |
|
| Reserve
fund and other reserves |
|
15 |
81,600,000 |
119,700,000 |
|
| Unappropriated
Profit |
|
|
552,001 |
252,838 |
|
|
|
------------------ |
------------------ |
|
| Shareholders
equity |
|
Rupees |
590,089,501 |
442,452,838 |
|
|
|
========== |
========== |
|
|
|
|
|
|
| Memorandum
Items |
|
|
|
|
| Bills
for collection |
|
16 |
275,408,836 |
233,757,162 |
|
| Acceptances,
endorsements and others obligations |
|
575,850,023 |
925,485,294 |
|
| Contingent
liabilities and commitments |
|
17 |
|
|
|
|
|
| These
accounts should be read in conjunction with the attached notes. |
|
|
| Syed
ljaz Hussain Shah |
|
Javed Yunus |
|
Mirza Ghulam Mustafa |
Pervez Yunus |
|
| President
& Chief Executive |
|
Chairman |
|
Vice Chairman |
|
Director |
|
|
|
| Profit
and Loss Account |
|
| For
the year ended 31 December, 1998 |
|
|
|
|
|
Note |
1998 |
1997 |
|
|
| Mark-up/Interest
and/or return earned |
|
623,402,724 |
538,948,370 |
|
| Less:
Cost/Return on deposits, borrowings etc. |
|
(406,736,674) |
(296,350,064) |
|
|
------------------ |
------------------ |
|
|
|
216,666,050 |
242,598,306 |
|
|
|
------------------ |
------------------ |
|
| Fee,
commission and brokerage |
|
|
36,876,906 |
32,608,526 |
|
| Other
operating income |
|
18 |
30,752,952 |
14,964,792 |
|
|
|
------------------ |
------------------ |
|
|
|
67,629,858 |
47,573,318 |
|
|
|
------------------ |
------------------ |
|
|
|
284,295,908 |
290,171,624 |
|
|
|
|
|
|
| Operating
expenses |
|
|
|
|
|
|
| Administrative
expenses |
|
19 |
279,042,920 |
202,967,238 |
|
| Provisions
against non-performing advances |
|
7.2 |
6,221,868 |
18,608,884 |
|
| Bad
debts written-off directly |
|
|
1,397,211 |
-- |
|
|
|
------------------ |
------------------ |
|
|
|
286,661,999 |
221,576,122 |
|
|
|
------------------ |
------------------ |
|
|
|
(2,366,091) |
68,595,502 |
|
| Other income |
|
20 |
3,112,745 |
1,621,129 |
|
|
|
------------------ |
------------------ |
|
| Profit
before taxation |
|
|
746,654 |
70,216,631 |
|
|
|
------------------ |
------------------ |
|
| Taxation
- current |
|
21 |
(18,000,000) |
(32,000,000) |
|
|
- prior |
|
|
(24,359,991) |
-- |
|
|
- deferred |
|
|
28,000,000 |
(3,000,000) |
|
|
|
------------------ |
------------------ |
|
|
|
(14,359,991) |
(35,000,000) |
|
|
|
------------------ |
------------------ |
|
| (Loss)/Profit
after taxation |
|
|
(13,613,337) |
35,216,631 |
|
|
|
|
|
| Unappropriated
profit brought forward |
|
|
252,838 |
136,207 |
|
|
|
------------------ |
------------------ |
|
| Accumulated
(Loss)/Profit available for appropriation |
|
(13,360,499) |
35,352,838 |
|
|
|
|
|
|
|
| Appropriations |
|
|
|
|
|
|
| Transfer
from/(to): |
|
|
|
| - Revenue reserve |
|
|
13,912,500 |
(28,000,000) |
|
| -
Statutory reserve |
|
|
-- |
(7,100,000) |
|
|
|
------------------ |
------------------ |
|
|
|
13,912,500 |
(35,100,000) |
|
|
------------------ |
------------------ |
|
| Unappropriated
profit carried forward |
|
Rupees |
552,001 |
252,838 |
|
|
========== |
========== |
|
|
| Syed
ljaz Hussain Shah |
|
Javed Yunus |
|
Mirza Ghulam Mustafa |
Pervez Yunus |
|
| President
& Chief Executive |
|
Chairman |
|
Vice Chairman |
|
Director |
|
|
|
| Cash
Flow Statement |
|
| For
the year ended 31 December, 1998 |
|
|
|
1998 |
1997 |
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
| Profit
before taxation |
|
746,654 |
70,216,631 |
|
| Less:
Profit from investment securities |
|
(201,352,610) |
(134,897,065) |
|
| Profit
on sale of fixed assets |
|
(411,087) |
(582,649) |
|
| Mark-up
on borrowing from other banking |
|
8,591,878 |
6,798,139 |
|
| companies
& agents etc. |
|
------------------ |
------------------ |
|
|
(192,425,165) |
(58,464,944) |
|
| Adjustments
for non-cash charges |
|
| Depreciation |
|
50,795,042 |
36,034,988 |
|
| Provision
for Gratuity |
|
8,013,771 |
2,795,290 |
|
| Amortization
of discount on Investments |
|
(379,000) |
(379,000) |
|
| Amortization
of Premium on investments |
|
47,800 |
47,800 |
|
| Provision
for non-Performing advances |
|
6,221,868 |
18,608,884 |
|
|
------------------ |
------------------ |
|
|
64,699,481 |
57,107,962 |
|
|
------------------ |
------------------ |
|
|
(127,725,684) |
(1,356,982) |
|
|
| (Increase)/Decrease
in Operating Assets |
|
| Advances |
|
1,099,530,363 |
(1,183,526,164) |
|
| Other
assets (excluding advance tax) |
|
31,899,144 |
(184,692,336) |
|
|
------------------ |
------------------ |
|
|
1,131,429,507 |
(1,368,218,500) |
|
|
| (Increase)/Decrease
in Operating Liabilities |
|
| Deposits'
& Other Accounts |
|
(963,441,059) |
2,316,071,459 |
|
| Bills Payable |
|
(31,368,391) |
57,428,162 |
|
| Other
Liabilities (excluding provision for taxation) |
|
13,191,885 |
27,060,178 |
|
|
------------------ |
------------------ |
|
|
(981,617,565) |
2,400,559,799 |
|
|
------------------ |
------------------ |
|
| Cash
flow from Operating Activities before Income Tax |
|
22,086,258 |
1,030,984,317 |
|
| and
gratuity payment |
|
|
|
| Income tax paid |
|
(112,099,486) |
(55,682,448) |
|
| Gratuity Paid |
|
(5,055,045) |
(95,290) |
|
|
------------------ |
------------------ |
|
| Net
cash (used in)/flow from operating activities |
|
(95,068,273) |
975,206,579 |
|
|
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
| Return
on investments |
|
226,528,881 |
100,739,350 |
|
| Purchase/sale
of investments (Net) |
|
(189,682,750) |
(780,103,975) |
|
| Capital
expenditure incurred |
|
(115,955,411) |
(21l,152,841) |
|
| Proceeds
from sale of fixed assets |
|
1,573,058 |
2,256,844 |
|
|
------------------ |
------------------ |
|
| Net
cash (used in) investing Activities |
|
(77,536,222) |
(888,260,622) |
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
| Issue
of Right Shares |
|
161,250,000 |
-- |
|
| Borrowing
from other banking companies and agents etc. |
|
22,055,064 |
36,471,936 |
|
| Mark-up
on borrowings from other banking companies and agents |
|
(9,406,135) |
(6,532,970) |
|
|
------------------ |
------------------ |
|
| Net
cash flow from financing activities |
|
173,898,929 |
29,938,966 |
|
|
------------------ |
------------------ |
|
| Net
cash increase in cash and equivalents |
|
1,294,434 |
116,884,923 |
|
| Cash
and cash equivalents at the beginning of the year |
|
1,015,792,861 |
898,907,938 |
|
|
------------------ |
------------------ |
|
| Cash
and cash equivalents at the end of the year |
|
Rupees |
1,017,087,295 |
1,015,792,861 |
|
|
|
========== |
========== |
|
|
|
|
| Cash
and cash equivalents |
|
| Cash |
|
668,504,911 |
953,606,568 |
|
| Balance
with Other Banks |
|
248,582,384 |
62,186,293 |
|
| Money
at Call and Short Notice |
|
100,000,000 |
-- |
|
|
------------------ |
------------------ |
|
|
Rupees |
1,017,087,295 |
1,015,792,861 |
|
|
|
========== |
========== |
|
|
| Syed
ljaz Hussain Shah |
|
Javed Yunus |
|
Mirza Ghulam Mustafa |
Pervez Yunus |
|
| President
& Chief Executive |
|
Chairman |
|
Vice Chairman |
|
Director |
|
|
|
| Notes
to the Accounts |
|
| For
the year ended 31 December 1998 |
|
|
| 1.
STATUS AND NATURE OF BUSINESS |
|
|
| Bolan
Bank Limited is incorporated in Pakistan and is engaged in commercial banking
and |
|
| related
services. The Bank is listed on Karachi and Lahore Stock Exchanges. |
|
|
| 2.
BASIS OF PRESENTATION |
|
|
| in
accordance with the directives Of the Federal Government, regarding the
shifting of the |
|
| banking
system to Islamic modes, the State Bank of Pakistan has issued various
circulars |
|
| from
time to time. One permissible form of trade related mode of financing
comprises of pur- |
|
| chase
of goods by the banks from their customers and resale to them at appropriate
mark-up |
|
| in
price on deferred payment basis. The purchases and sales arising under these
arrange- |
|
| ments
are not reflected in these accounts as such but are restricted to the amount
of facility |
|
| actually
utilised and the appropriate portion of mark-up thereon. |
|
|
| 3.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 3.1
Accounting convention |
|
|
| These
accounts have been prepared using the historical cost convention and are in
conformi- |
|
| ty
with the accounting policies of banking institutions in Pakistan. |
|
|
| 3.2
Staff Retirement Benefits |
|
|
|
| 3.2.1 Gratuity. |
|
|
| The
Bank operates an unfunded gratuity scheme and provisions are made annually to
cover |
|
| obligations
under the scheme. The bank is in the process to establish the gratuity fund. |
|
|
| 3.2.2
Provident Fund |
|
|
| The
Bank also operates an approved provident fund scheme for all its employees
and appro- |
|
| priate
contributions are made by the employer and employees. |
|
|
| 3.3 Taxation |
|
|
| The
charge for taxation is based on taxable income at the current rates of
taxation after tak- |
|
| ing
into consideration available tax credits, rebates and tax losses, etc. The
Bank accounts |
|
| for
deferred taxation using the liability method on all major timing differences
except where |
|
| these
are not expected to reverse in the foreseeable future. Upto last year
deferred tax debits |
|
| were
not incorporated in accounts, however, in order to comply with the
requirements of the |
|
| revised
International accounting standard (IAS) - 12 - Income Taxes from current year
the |
|
| Bank
has changed its policy and deferred tax debits are now accounted for. The
amount of |
|
| adjustment
as a result of this change in accounting policy relates only to the current
period. |
|
| Had
the accounting policy as described above, not been changed the loss after
taxation for |
|
| the
year would have been higher by Rs. 25 million. |
|
|
| 3.4 Investments |
|
|
| Investments
are stated at cost net of provisions made for permanent diminution in value
of |
|
| investments,
if any. Profit and Loss on sale of investments are dealt with through the
profit |
|
| and
loss account in the year in which they arise. Premium/Discount on purchase of
invest- |
|
| ments
are being amortised over the term of investment. |
|
|
| Where
the bank enters into transactions of repurchase (Repo) and resale (Reverse
Repo) of |
|
| government
securities, these are recorded/deleted at contracted rates for specified
period of |
|
| time. |
|
|
| 3.5 Advances |
|
|
| Advances
are stated net of provisions for bad and doubtful debts. Specific and general
provi- |
|
| sions
for bad and doubtful debts are determined by the management. keeping in view
the |
|
| requirements
of the Prudential Regulations issued by the State Bank of Pakistan. |
|
|
| 3.6
Premises, furniture & fixtures, vehicles and other fixed assets |
|
|
| i)
The cost of premises, furniture, fixtures and other fixed assets are
depreciated over its |
|
| estimated
useful life on reducing balance method. Further, the cost of vehicles is |
|
