Half Yearly Report: December 31, 2004 (Unaudited) - Notes to the Financial Statements

NOTES TO THE FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED DECEMBER 31, 2004 (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. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies followed for the preparation of these financial statements are the same as those applied in preparing the financial statements for the year ended June 30, 2004, except for the change in accounting policy as stated below:

3.1 Change in accounting policy

During the half-year, the Securities and Exchange Commission of Pakistan (SECP) substituted the Fourth Schedule to the Companies Ordinance, 1984 vide SRO 589(I)/2004 dated July 5, 2004, which is effective from the financial year ending on or after July 5, 2004. This has resulted in the change in accounting policy pertaining to the recognition of dividends and other appropriations declared subsequent to the year / period end. Dividends and other appropriations to general reserve are now recognised in the period in which these are declared. Up until the previous year, dividends declared and appropriations made after the balance sheet date but before the financial statements were authorised for issue, were recognised as of the balance sheet date.

The change in accounting policy has been accounted for retrospectively and comparative information has been restated in accordance with the benchmark treatment specified in International Accounting Standard (IAS) 8 "Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies". Had there been no change in the accounting policy, the Unappropriated profit as at June 30, 2004 would have been lower by Rs. 60,000,000 (June 30, 2003: Rs. 60,000,000) and the liability for the proposed dividend and reserves for issue of bonus shares would have been higher as at June 30, 2004 by Rs. 30,000,000 (June 30, 2003: Rs. 60,000,000) and Rs. 30,000,000 (June 30, 2003: Nil) respectively. The effect of change in accounting policy has been reflected in the comparative balance sheet and the statement of change sin equity. The change in accounting policy has not resulted in any change in the profit for the current period.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED DECEMBER 31, 2004 (UNAUDITED)

			December 31,	June 30,
			2004	2004
		Note	Rupees	Rupees
4.	SHORT TERM INVESTMENTS

	Held for trading		52,503,728	56,181,129
	Quoted equity securities

	Available for sale
	Government securities		344,153,270	774,850,668

	Quoted securities
	- Term Finance Certificates		143,708,836	161,939,383
	- Investment in Mutual Funds		107,692,847	83,258,176
			251,401,683	245,197,559
	Unquoted securities - Term Finance Certificates	4.1	68,325,334	38,329,334
	Commercial paper	4.2	19,423,014	19,423,014
			683,303,301	1,077,800,575
			735,807,029	1,133,981,704

	4.1 Unquoted term Finance Certificates (at Cost):

	Crescent Commercial Bank Limited (formerly Fidelity Investment Bank Limited)	4.1.1	19,992,000	19,996,000
	Orient Petroleum Inc.	4.1.1	8,333,334	8,333,334
	Pakistan Mobile Communications (Private) Limited	4.1.1	5,000,000	5,000,000
	Crescent Steel & Allied Products Limited	4.1.1	5,000,000	5,000,000
	Al-Noor Sugar Mills Limited		30,000,000	-
			68,325,334	38,329,334

	4.1.1 These Term Finance Certificates have been reclassified from quoted Term Finance Certificates to unquoted Term Finance Certificates in comparative figures.


	4.2 This is a short term, unsecured, Commercial Paper issued by a local manufacturing company carrying a return of 3.90 percent per annum and will mature in February 2005.



5.	FUNDS PLACEMENTS - Considered good

	Clean placements - unsecured	5.1
	Under reverse repurchase agreements of government securities - secured
	Under reverse repurchase agreements of quoted securities - secured	5.2 & 5.3

	5.1 Represents amounts placed with financial institutions carrying mark-up at the rate of 9.00 to 15.00 percent (June 30, 2004: 5.00 to 11.00 percent) per annum.


	5.2 Represents amounts carrying mark-up at the rate of 8.52 to 18.64 percent (June 30, 2004: Nil) per annum.


	5.3 Market value of securities held as collateral against funds placements:

	Quoted shares		1,091,100,169	-
	Pakistan Investment Bonds		-	419,800,000
			1,091,100,169	419,800,000

NOTES TO THE FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED DECEMBER 31, 2004 (UNAUDITED)

6. ADVANCES, DEPOSIT, PREPAYMENTS AND OTHER RECEIVABLES

The above includes Rs. 118,563,987 (June 30, 2004: Nil) and Rs. 49,841,300 (June 30, 2004: Nil) due from customers and dividend receivable, respectively, pertaining to the Equity Brokerage Division.

7. LONG TERM LOANS / CREDIT FACILITIES

7.1 This includes a long term loan obtained during the half-year from a commercial bank amounting to Rs. 100 million carrying a mark-up at the rate of 6 months ask average KIBOR plus 1.50 percent per annum with no floor or cap. The loan is secured by way of first ranking pari passu charge by the way of hypothecation of present and future book debts and receivables of the Company. The balance loan amounting to Rs. 83.33 million as at December 31, 2004 is repayable in four installments by June 21, 2007.

7.2 This also includes a long term loan of Rs. 300 million obtained from commercial bank carrying a mark-up at the rate of 6 months ask average KIBOR plus 1.00 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 twelve installments by November 30, 2007.

8. CONTINGENCIES AND COMMITMENTS

		December 31,	June 30,
		2004	2004
		Rupees	Rupees
8.1	Contingencies
	Guarantees issued on behalf of customers	124,200,000	14,200,000
	Tax contingencies	5,954,257	5,954,257

8.2	Commitments
	Undisbursed credit commitments	38,125,000	32,500,000

9. BASIC EARNINGS PER SHARE

		Half-Year Ended		Quarter Ended
		December 31,	December 31,	December 31,	December 31,
		2004	2003	2004	2003

	Net profit for the period (Rupees)	28,948,727	62,225,800	9,755,780	27,969,238


	Weighted average number of ordinary shares outstanding during the period	33,000,000	33,000,000	33,000,000	33,000,000


	Basic earnings per share (Rupees)	0.877	1.886	0.296	0.848

9.1	The comparative figure for weighted average number of shares has been readjusted for bonus issue during the period.

9.2	No figure for diluted earnings per share has been presented as the Company has not issued any instruments which would have an impact on earnings per share when exercised subsequent to December 31, 2004.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED DECEMBER 31, 2004 (UNAUDITED)

10.	SEGMENT RESULTS

	The segment results for the half-year ended December 31, 2004 are as follows:


						Money
		Credit and			Corporate	Market	Equity
		Marketing		Treasury	Finance	Brokerage	Brokerage	Total
		-------------------------------------------------- Rupees --------------------------------------------------
	Segment results for the half-year
	ended December 31, 2004

	External operating revenue	41,488,707	*	6,495,955	27,700,965	6,417,132	76,300,325	158,403,084
	Inter-segment revenue	-		(1,261,270)	-	795,381	465,889	-
	Unallocated revenue							804,346

		41,488,707		5,234,685	27,700,965	7,212,513	76,766,214	159,207,430


	Segment results	2,976,858		(23,336,676)	20,229,340	(1,344,089)	40,294,342	38,819,775
	Unallocated revenue							804,346
	Profit before taxation							39,624,121
	Income tax expense							10,745,394
	Net profit for the half-year							28,878,727



	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

	This amount is net of deficit on sale of Investments amounting to Rs. 37,184,585 incurred during the half-year.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED DECEMBER 31, 2004 (UNAUDITED)

		Half-Year Ended		Half-Year Ended
		December 31,	December 31,	December 31,	December 31,
		2004	2003	2004	2003
		------------------------- Rupees -------------------------
11.	TRANSACTIONS WITH RELATED PARTIES /
	ASSOCIATED UNDERTAKINGS

	Brokerage fee earned	4,467,798	1,651,848	3,163,618	849,913
	Underwriting / arrangement fee received during the period	-	4,750,000	-	4,680,000

	Mark-up / Interest paid on long term finance to:
	- Saudi Pak Industrial and Agricultural Investment Company (Pvt.) Limited	722,112	2,554,458	242,677	1,140,612

	Certificate of deposit from:
	- a relative of a director	-	1,615,707	-	1,615,707
	- Pakistan Automotive Manufacturers Association	6,183,998	6,069,096	6,183,998	6,069,096

	Mark-up / Interest charged on certificates of deposit from:
	- a relative of a director	-	76,789	-	76,789
	- Pakistan Automotive Manufacturers Association	121,960	284,649	38,214	33,169
	- Pak Kuwait Investment Company (Pvt.) Limited	739,726	-	739,726	-

	Dividend Paid	15,244,500	26,364,000	15,244,500	26,364,000


12.	DATE OF AUTHORISATION FOR ISSUE
	These financial statements were authorised for issue on February 23, 2005 by the Board of Directors of the Company.


13.	GENERAL
	13.1 Quarterly figures were not subject to an audit or a limited scope review by the auditors.

	13.2 Due to certain changes made by the Securities and Exchange Commission of Pakistan (SECP) in the Fourth Schedule to the Companies Ordinance, 1984 vide circular SRO 589(I)/2004 dated July 5, 2004, previous period's figures have been rearranged or reclassified wherever necessary for the purpose of comparison.



	13.3 Figures have been rounded off to the nearest rupee.

KUNWAR IDRIS NAIM FAROOQUI

Chairman Chief Executive

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