Financial Risk Manager

Ways of Financial and Risk Management

INVESTOR'S PROTECTION FUND

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INVESTOR'S PROTECTION FUND Means a fund creadted by the stock exchange to protect the investors in case of default by a member.
KSE INVESTORS PROTECTION FUND REGULATIONS are as under
PREMABLE
WHEREAS the Management of Karachi Stock Exchange considers that the investors' confidence in the fair dealings at the Exchange is the key to rapid development of the market;
AND WHEREAS to ensure effective risk management in secondary market trading and to protect investors' interest in the case of a default by a member of the Exchange there is need to have necessary regulations;
NOW, THEREFORE, the Karachi Stock Exchange (Guarantee) Limited in exercise of the powers conferred by sub-section (1) of section 34 of the Securities & Exchange Ordinance, 1969 makes, with the prior approval of the Federal Government, the following regulations, namely:
1. SHORT TITLE AND COMMENCEMENT
i. These regulations rnay be called "The KSE Investors Protection Fund Regulations."
ii. These regulations shall take effect upon their publication in the official Gazette of Pakistan.
2. DEFINITIONS
In these regulations, unless the subject or context otherwise requires;
(a) “Authority” means the Corporate Law Authority;
(b) "Board" means the Board of Directors of the Exchange;
(c) "Exchange" means the Karachi Stock Exchange (Guarantee) Limited;
(d) "Fund" means the KSE Investors Protection Fund;
(e) "Investor" means a person, not being Member, his agent or representative, who has purchased or sold any of the securities listed at the Exchange;
(f) "Member" means a Member of the Exchange;
3. ESTABLISHMENT OF FUND
The fund shall be established by the Board with contributions as follows:
(a) There shall be an initial contribution of rupees twenty million by the Exchange out of the Clearing House Protection Fund;
(b) Twenty five per cent of the clearing house charges paid by the members of the Exchange would be allocated to the Fund every year until the total amount in the Fund is raised to rupees five hundred million.
Provided that on the direction of the Authority the Fund shall cease to exist upon the creation of a national fund for the protection of investors through appropriate legislation.
4. ELIGIBILITY OF CLAIMS
All claims of an investor arising out of transactions entered into as per Rules and Regulations of the Exchange and approved by the Arbitration and Advisory Committee of the Exchange would be eligible to be considered under these regulations.
5. PROCEDURE FOR SETTLEMENT OF CLAIMS
(a) In the event of default of a Member, in addition to any surplus after distribution of losses as per Members' Default and Procedure for Recovery of Losses Regulations of the Exchange, an amount up to rupees ten million shall be set aside out of the Fund to satisfy the claims of the investors against the defaulting Member.
(b) In case eligible claims of investors determined against the defaulting Member exceed the amount available for settlement such claims of investors shall be satisfied on a pro-rata basis.
6. MANAGEMENT OF THE FUND
The Management of the Fund shall vest in the Board who may regulate the same through a Committee to be constituted under these regulations to process the claims and their settlements. The Committee shall include two outside directors who shall not be members of the Exchange.

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posted @ 1:55 PM, ,

Economic and Business - Last Week Updates

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THE Planning Commission constitutes a task force on maritime industry to propose amendments to the Merchant shipping ordinance 2001 that will target reduction of freight bill by $4 billion annually.
IRAN agrees to provide either furnace or light crude oil Pakistan for a two year period and a memorandum of understanding is likely to be signed by end of this month.
THE International Monetary Fund proposes to the Federal Board of Revenue to restore the authority of provinces to collect sales tax on services.
THE draft of the revised Afghan Transit Trade Agreement proposes establishment of a Transit Co-ordination Authority for monitoring and facilitation of transportation of containers and cargo between the two countries.
SAUDI Arabia has refused to provide $400 million additional credit facility to Pakistan for the purchase of urea on deferred payment.
THE Asian Development Bank observes that the lack of private sector participation in the development process further hurts growth prospects of Balochistan, which is rich in minerals.
THE Head of International Monetary Fund warns that the economic situation could get even worse in 2009 if governments fail to take firm enough action.
GAS exporting states finalize the creation of a new Qatar based forum aims at coordinating gas policy that consumer countries fear could become the gas equivalent of oil cartel opec.
THE federal minister for port and shipping lauds the efforts of Balochistan chief minister for making Gwadar Port functional.
THE Planning Commission moves a summary to the cabinet to make necessary arrangements for blending of 10 Percent ethanol in petrol to be sold in the country from late next year.
PRIME Minister Yousuf Raza Gillani says the IMF facility is the only viable option at the moment to acquire economic stability, contain inflation, build foreign exchange reserves and arrest budgetary deficit.
ZARI Taraqiati Bank will soon launch Benazir Zarai Credit Card and Benazir Tractor Scheme with Rs72 billion to provide easy credit facility to farmers.
THE government will be footing a bill of around Rs1 billion to provide subsidy for the haulage of three million tons fertilizer from the Gwadar Port to hinterland.
BANKS deposits have started shifting fast towares National Savings Scheme adding frustration to the already shaking banking industry.
PAKISTAN has withdrawn around $1.7 billion invested with selected fund managers out of total $3.2 billion largely put into various tools of the US Treasury and capital market.
THE country registers a deficit of some $2 billion in services sector in the first five months of the current fiscal year.

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posted @ 2:20 PM, ,

ANNUAL INDICATORS

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FISCAL YEAR-----------------------2007/08----2006/07
Population (millions)---------------------**160.9-------156.77
Per capita income------------------------**$1085------ $925
External debt (billion dlr)----------------**45.0-------- $40.5
Total F.Debt as pct of GDP--------------- **24.7-------- 27.1
Domestic debt (billion rupees)------------**3,020------ 2,610
Total domestic debt as pct of GDP-------- **30.3 -------30.0
Gross domestic product growth-----------**5.8 pct----- 6.8 pct
Manufacturing sector growth------------- **5.4 pct----- 8.2 pct
Services sector growth------------------- **8.2 pct------9.6 pct
Agricultural sector growth---------------- **1.5 pct----- 3.7 pct
Commodity Producing sector growth------**3.2 pct----- 6.0 pct
Average consumer price inflation----------12 pct-------- 7.77 pct
Fiscal deficit (pct of GDP)----------------- **7.0 pct----- 4.3 pct
Trade balance (FBS July-June)------------ $-20.74 bln--- $-13.56 bln
Exports----------------------------------- $19.22 bln---- $16.98 bln
Imports----------------------------------- $39.96 bln---- $30.54 bln
Current a/c balance------------------------$-14.016 bln --$-6.878 bln
* = revised
** = provisional

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posted @ 9:52 AM, ,

LEASE HOLD LAND VS FREE HOLD LAND

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LEASE HOLD LAND Means Land which is rented from the owner for a specified term under a lease. At the expiry of the term the land reverts back to the owner.
FREE HOLD LAND Means real land held in absolute possession after payment in cash or kind.

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posted @ 10:14 AM, ,

Tax Depreciation Rates

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Depreciation rates specified for the purposes of section 22 shall be -

I. Building (all types). @10%
II. Furniture (including fittings) and machinery and plant (not otherwise specified), Motor vehicles (all types), ships, technical or professional books @15%
III. Computer hardware including printer, monitor and allied items, machinery and equipment used in manufacture of I.T. products aircrafts and aero engines @30%
IV. In case of mineral oil concerns the income of which is liable to be computed in accordance with the rules in Part-I of the Fifth Schedule.
(a) Below ground installations @ 100%
(b)Offshore platform and production installations. @ 20%

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posted @ 3:12 PM, ,

S&P raises FC rating on Pakistan to CCC+

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Standard & Poor's Ratings Services raised its long-term foreign-currency sovereign credit rating on the Islamic Republic of Pakistan to 'CCC+' from 'CCC', and affirmed the 'CCC+' long-term local-currency rating. The outlook on the long-term rating is developing.
Standard & Poor's also affirmed its 'CCC+' issue rating on Pakistan's senior unsecured local-currency debt and the 'B-' transfer and convertibility (T&C) rating on Pakistan. We raised the issue rating on the sovereign's senior unsecured foreign-currency debt to 'CCC+' from 'CCC'. Likewise, we lifted the foreign-currency issue rating on Pakistan International Sukuk Co. to 'CCC+' from 'CCC'.
The upgrade of Pakistan incorporates the disbursal of the first tranche (US$3.1 billion) of the US$7.6 billion International Monetary Fund (IMF) loan facility in November 2008. The disbursal appears to have stabilized the sovereign's foreign reserve position, substantially alleviating the prospects of near-term debt service stress. Moreover, we take comfort from the explicit recognition of all debt service needs in a Letter of Intent to the IMF.
In addition, the upgrade takes into account positive expectations on improving macroeconomic stability and external liquidity in light of the comprehensive set of stabilization policies to which Pakistan has committed itself under the IMF's Stand By Arrangement (SBA) loan facility. By providing a robust policy framework for achieving fiscal and external sustainability, the program should unlock additional material support from various multilateral and bilateral sources, which in turn further moderate prospects of external payment distress.
The current sovereign credit rating level of 'CCC+', however, takes into account the considerable risks to implementation, given Pakistan's fluid domestic political situation, where an unstable coalition is confronted with numerous domestic political and security challenges. Against this background and a highly politicized and partisan environment, policy making and implementation may become derailed. This could lead to missed program targets, as has happened in the past under previous IMF programs.

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posted @ 5:11 PM, ,

Foreign Debt of Pakistan

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Annual 2007/08
* Foreign Debt $45.00bn
* Per Cap Income $1085
* GDP Growth 5.8%
* Average CPI 12.00%
Monthly November
* Trade Balance $-1.196bln
* Exports $1.53bln
* Imports $2.72bln
Weekly December 11, 2008
* Reserves $9.095 bln

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posted @ 10:08 AM, ,

Avail the Opportunity On All Undisclosed Investments / Assets

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INVESTMENT TAX SCHEME, 2008.
In exercise of the powers conferred under section 120A of the Income Tax Ordinance, 2001 the Federal Board of Revenue is pleased to introduce the scheme for the declaration of moveable and immoveable assets and payment of "investment tax" thereon as under:-
1. TITLE AND SCOPE OF THE SCHEME
(i) This Scheme shall be called "Investment Tax Scheme (ITS) 2008".
(ii) The Scheme shall apply to all existing as well as new taxpayers.
(iii) The scheme shall not apply to the cases where proceedings are pending before the Department, Appellate Authority or any court.
2. DEFINITIONS
For the purposes of this Scheme,-
a) "Investment Tax" means tax as defined under clause (63) of section 2 of the Income Tax Ordinance, 2001.
b) "Unexplained income/assets" means any asset for which the taxpayer has no explanation regarding nature and source and was chargeable to tax but could not be so charged under Income Tax Ordinance, 2001, for any tax year or years ended on or before 30th day of June, 2007.
c) "Declaration" means declaration made on the prescribed form annexed
to the Scheme (Annex-I).
d) "Declarant" means a person, as defined under section 80 of Income Tax Ordinance, 2001, who files declaration under the Scheme.
3. CHARGE OF TAX.
Investment tax shall be payable @ 2% of fair market value of the asset at the time of declaration of all moveable/immovable, undisclosed/unexplained investments/ assets, as declared by the taxpayer under this scheme, on the prescribed form any time from 1st July, 2008 to 31st December, 2008.
4. COMPULSORY FILING OF RETURN FOR NEW DECLARANTS.
New tax payers availing this scheme shall be obliged to file return of income for the tax year 2008 and subsequent three consecutive tax years. The department shall not question the source of acquisition of assets declared under the scheme for the past years and obligation of filing income tax return, if any, for the last five years.
5.INCORPORATION OF UNEXPLAINED INCOME/ASSETS IN BOOKS OF ACCOUNTS.
Where the declarant has paid tax on his unexplained income/assets in accordance with the Scheme, he shall be entitled to incorporate such income in his books of accounts.
6. FINALITY OF PROCEEDINGS UNDER THE SCHEME.
(i) Where a declaration in respect of undisclosed/unexplained income/assets has been made and the tax due thereon has been fully paid, such declaration shall be accepted by the department and the declarant shall be informed within one month of the date of receipt of the declaration.
(ii) Where any deficiency in calculation of tax or filling in the columns of the declaration form is noticed, the taxpayer shall be conveyed through a letter to make good the deficiency. The aforesaid letter shall be issued with the approval of Director General requiring the declarant to meet the deficiency within 10 days of the service of such letter.
7. DEPRECIATION ALLOWANCE
No depreciation allowance in respect of building, plant and machinery or other depreciable assets declared under the Scheme shall be admissible for any tax year prior to the tax year commencing on or before the 1st day of July, 2008.
8. VALUATION OF ASSETS
The Scheme of "Investment Tax – 2008" is a voluntary scheme through which government has reposed trust in the taxpayers and an opportunity has been provided to legitimize the unexplained/undisclosed assets at a nominal rate of 2% of the fair market value of the assets as declared.

ANNEX-I INVESTMENT TAX SCHEME - 2008
DECLARATION FORM FOR UNEXPLAINED INCOME/ASSETS/INVESTMENTS
1. NTN _______________(New declarant shall attach NTN application form duly filled in)
2. Name and Address of the declarant ________________________________
3. CNIC No. __________________________________________________
4. Name and address of business ____________________________________
5. Status. Individual /AOP /Company /Member of AOP/ Principal Officer/Chief Executive /Officer of the Company

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posted @ 1:24 PM, ,

Tax Treatment of Gift

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As per Income Tax Ordinance, 2001 there is no tax implication over gift received from any one, however gain on sale of such asset that was received as gift would be treated under section 37 of ITO, 2001 that is as follows;

37. Capital gains.-

(1) Subject to this Ordinance, a gain arising on the disposal of a capital asset by a person in a tax year, other than a gain that is exempt from tax under this Ordinance, shall be chargeable to tax in that year under the head “Capital Gains”.
(2) Subject to sub-sections (3) and (4), the gain arising on the disposal of a capital asset by a person shall be computed in accordance with the following formula, namely:–
A – B
where –
A is the consideration received by the person on disposal of the asset; and
B is the cost of the asset.
(3) Where a capital asset has been held by a person for more than one year, the amount of any gain arising on disposal of the asset shall be computed in accordance with the following formula, namely:–
A x ¾
where A is the amount of the gain determined under sub-section (2).
(4) For the purposes of determining component B of the formula in subsection (2), no amount shall be included in the cost of a capital asset for any expenditure incurred by a person –
(a) that is or may be deducted under another provision of this Chapter; or
(b) that is referred to in section 21.
(4A) Where the capital asset becomes the property of the person-
(a) under a gift, bequest or will;
(b) by succession , inheritance or devolution;
(c) distribution of assets on dissolution of an association of persons; or
on distribution of assets on liquidation of a company, the fair market value of the asset, on the date of its transfer or acquisition by the person shall be treated to be the cost of the asset.
(5) In this section, “capital asset” means property of any kind held by a person, whether or not connected with a business, but does not include –
(a) any stock-in-trade (not being stocks and shares), consumable stores or raw materials held for the purpose of business;
(b) any property with respect to which the person is entitled to a depreciation deduction under section 22 or amortisation deduction under section 24;
(c) any immovable property; or
(d) any movable property (excluding capital assets specified in sub-section (5) of section 38) (Substituted for "(including wearing apparel, jewellery, or furniture)" by Finance Act, 2003) held for personal use by the person or any member of the person’s family dependent on the person.

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posted @ 4:49 PM, ,

Easiest Way of Preparing Cash Flow Statements

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Basically Cash Flow Statement is the difference of figures for the current year with last year of Balance sheet.
For example for caluclating total cash flows inflow/(outflow) relating to current assets and liabilities we just deduct current year figures with the last year figures. The whole cash flow statement is prepared on the same basis. For preparing it you just follow the given instructions one by one from your excel sheet of Balance Sheet
1) Deduct current year figures of liability side from the last year figures.
2) Deduct last year figures of asset side from the current year figures.
3) Make necessary adjustements of those figures having impact in profit and loss account, however keep in mind that at the end the adjustments would not effect the difference of current year figures with the last year figures.

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posted @ 2:26 PM, ,


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