ORIX Investment Bank Pakistan Limited - Half Yearly Report: December 31, 2003

Notes To The Financial Statements

For The Half-Year Ended December 31, 2003 (Unaudited)

1. LEGAL STATUS AND NATURE OF BUSINESS

1.1 ORIX Investment Bank Pakistan Limited (the Company) was incorporated as a public limited Company in Pakistan under the name of ORIX Investment Finance Company Pakistan Limited. Subsequently, the name of the Company was changed to ORIX Investment Bank Limited. The registered office of the company is situated at Overseas Investors Chamber of Commerce Building, Talpur Road, Karachi, Pakistan. The Company is licensed to carry out investment finance services as a Non-Banking Finance Company (NBFC) under the Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003 issued by the Securities and Exchange Commission of Pakistan (SECP) [Previously described under SRO 585 (1)/87 dated July 13, 1987 issued by the Ministry of Finance, Government of Pakistan]. The company is listed on the Karachi and Lahore Stock Exchanges.

1.2 The company is corporate member of the Karachi Stock Exchange (Guarantee) Limited and is engaged in equity brokerage services since April 15, 2004.

2. BASIS FOR PREPARATION

These financial statements are unaudited but subject to limited scope review by the auditors and are being submitted to the shareholders as required under Section 245 of the Companies Ordinance, 1984 and have been prepared in accordance with the requirements of the International Accounting Standard (IAS) 34 "Interim Financial Reporting" as applicable in Pakistan.

3. ACCOUNTING POLICIES

3.1 The accounting policies followed are consistent with those followed in the annual financial statements. The presentation of the interim financial statements is consistent with the annual financial statements.

3.2 Stock market brokerage license

Stock market brokerage license acquired during the period has been classified as intangible asset and is carried at cost less impairment, if any.

3.3 Related party transactions

As a result of amendments made in the Companies Ordinance, 1984 and Listing Regulations, all listed companies are now required to disclose their accounting policy in respect of related party transactions. The Company's policy in this respect as approved by its Board of Directors is that the transactions between the Company and its related parties are carried out on an arm's length basis and the related price is determined in accordance with the "Comparable Uncontrolled Price Method".

			Note	December 31, 2003 Rupees	June 30, 2003 Rupees
4.	INTANGIBLE ASSETS
		Money market brokerage license		4,250,000	4,250,000
		Stock Market brokerage license	3.2	34,750,000	-
				39,000,000	4,250,000
		Less: Accumulated amortisation		3,069,438	2,361,111
				35,930,562	1,888,889

Notes to the Financial Statements

For the half-year ended December 31, 2003 (Unaudited)

			Note	December 31, 2003 Rupees	June 30, 2003 Rupees
5.	DEFERRED TAX ASSET
	Taxable temporary differences
		Surplus on revaluation of government securities		-	(17,367,95)
		Intangible assets		(2,102,433)	(661,112)
				(2,102,433)	(18,029,062)
	Deductible temporary differences
		Deficit on revaluation of government securities		7,725,537	-
		Provision for potential losses on term finances/ credit facilities		25,049,500	18,749,500
		Effect on depreciation		994,754	610,608
				33,769,791	19,360,108
				31,667,358	1,331,046

6.	SHORT TERM INVESTMENTS
	Held for trading
	Government securities		6.1	999,300,000	71,325,000
	Quoted Securities - equity investments			61,955,947	50,185,825
				1,061,255,947	121,510,825
	Available for sale
	Government Securities			562,615,350	1,106,555,768
	Quoted Securities
		- Term Finance Certificates		202,587,927	220,341,102
		- Investment in Mutual Funds		98,064,908	68,026,145
				300,652,835	288,367,247
	Un-quoted Securities
		- Term Finance Certificates		35,000,000	-
				1,959,524,132	1,516,433,840

6.1	These have been sold under forward contracts at contracted prices (note 8).

7.	LONG TERM LOANS
	Secured
		Saudi Pak Industrial and Agricultural Investment Company (Private) Limited		37,430,762	54,782,791
		Muslim Commercial Bank Limited		83,333,333	100,000,000
		National Bank of Pakistan	7.1	200,000,000	-
				320,764,095	154,782,791
	Unsecured
		The Bank of Khyber (repaid)		-	150,000,000
				320,764,095	304,782,791
		Less: Current maturity		70,764,095	218,675,468
				250,000,000	86,107,323

7.1	Represents long term loan obtained from National Bank of Pakistan carrying mark-up at the rate of 4.5 percent per annum. The loan is secured by way of first tanking pari passu charge by way of hypothecation of present and future book debts and receivables of the Company. The loan is repayable in December 2006.

Notes to the Financial Statements

For the half-year ended December 31, 2003 (Unaudited)

			Note	December 31, 2003 Rupees	June 30, 2003 Rupees
8.	CONTINGENCIES AND COMMITMENTS
	Contingencies
	Guarantees issued on behalf of customers			22,300,000	49,175,000
	Tax contingencies			8,562,302	8,562,302
	Commitments
	Forward sale commitment in respect of government Securities at contracted prices		6.1	1,064,749,000	72,390,000
	Undisbursed credit commitments			3,200,000	-

9.	EARNINGS PER SHARE - Basic and diluted
		During the half year, the number of ordinary shares remained constant at 30,000,000 (June 30, 2003: 30,000,000). Basic earnings per share were Rs. 2.074 (December 31, 2002: Rs. 2.510). Diluted earnings per share for the half year ended December 31, 2003 is same as basic earnings per share as there are no outstanding subscription rights at the balance sheet date.


10.	SEGMENT RESULTS
		The segment results for the quarter and half-year ended December 31, 2003 are as follows:

				Money & Foreign Exchange Brokerage
			Corporate
	Credit	Treasury	Finance		Total
	------------------------------------------- Rupees -------------------------------------------
Segment results for the half-year
ended December 31, 2003

External operating revenue	60,558,869	89,620,267	21,496,560	10,787,035	182,462,731
Inter-segment revenue					-
Unallocated revenue					478,543
	60,558,869	89,620,267	21,496,560	10,787,035	182,941,274
Segment results	15,275,844	54,023,538	13,115,285	4,089,765	86,504,432
Unallocated revenue					478,543
Profit before taxation					86,982,975
Income tax expense					24,757,175
Net profit for the half-year					62,225,800

Segment results for the half-year
ended December 31, 2002

External operating revenue	83,962,479	130,310,895	11,808,749	6,994,280	233,076,403
Inter-segment revenue					-
Unallocated revenue					578,551
	83,962,479	130,310,895	11,808,749	6,994,280	233,654,954
Segment results	17,434,773	47,903,859	4,921,237	1,490,639	71,850,508
Unallocated revenue					578,551
Profit before taxation					72,429,059
Income tax expense					22,227,000
Net profit for the half-year					50,202,059

Notes to the Financial Statements

For the half-year ended December 31, 2003 (Unaudited)

				Money & Foreign Exchange Brokerage
			Corporate
	Credit	Treasury	Finance		Total
	------------------------------------------- Rupees -------------------------------------------
Segment results for the quarter
ended December 31, 2003

External operating revenue	27,437,308	39,654,258	10,415,890	5,044,265	82,551,721
Inter-segment revenue					-
Unallocated revenue					173,734
	27,437,308	39,654,258	10,415,890	5,044,265	82,725,455
Segment results	4,268,414	21,572,911	5,959,091	1,482,946	33,283,362
Unallocated revenue					173,734
Profit before taxation					33,457,096
Income tax expense					5,487,858
Net profit for the half-year					27,969,238

Segment results for the quarter
ended December 31, 2002

External operating revenue	40,553,116	55,218,601	4,928,965	4,361,921	105,062,603
Inter-segment revenue					-
Unallocated revenue					344,945
	40,553,116	55,218,601	4,928,965	4,361,921	105,407,548
Segment results	7,574,038	20,255,502	1,069,046	1,277,554	30,176,140
Unallocated revenue					344,945
Profit before taxation					30,521,085
Income tax expense					9,026,629
Net profit for the half-year					21,494,456

			Half-year Ended
			December 31, 2003 Rupees	December 31, 2002 Rupees
11.	TRANSACTIONS WITH RELATED PARTIES/ ASSOCIATED UNDERTAKINGS
		Brokerage Fee earned during the period	1,651,848	1,936,567
		Underwriting / arrangement fee received during the period	4,750,000	2,649,269
		Deposits from:
		- a relative of a director	1,615,707	1,615,707
		- Pakistan Automotive Manufacturers Association	6,069,096	5,782,965
		Mark-up / interest charged on deposits from:
		- a relative of a director	76,789	63,160
		- Pakistan Automotive Manufacturers Association	284,649	346,670
		Dividend Paid	26,364,000	13,633,500

12.	CORRESPONDING FIGURES
		Certain prior period's figures have been rearranged consequent upon certain changes in current period's presentation.

13.	GENERAL
13.1		The figures for the quarter ended December 31, 2003 and December 31, 2002 have not been subject to limited scope review by the auditors.
13.2		These financial statements were authorised for issue on February 23, 2004 by the Board of Directors of the company.

KUNWAR IDRIS NAIM FAROOQUI

Chairman Chief Executive

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