| First Fidelity Leasing Modaraba |
|
|
|
|
|
|
(Annual Report 1996) |
|
|
|
| CONTENTS |
|
|
| Corporate
Information |
|
| Directors'
Report and Chief Executive's Review |
|
| Auditors'
Report to the Certificate Holders |
|
| Balance
Sheet |
|
| Profit
and Loss Account |
|
| Statement
of Sources and Application of Funds |
|
| Notes
to the Accounts |
|
| Pattern
of Certificate Holdings |
|
|
|
|
COMPANY INFORMATION |
|
|
| Board
of Directors |
|
| Mian
Mohammad Mansha Yahya |
|
| (Chairman) |
|
|
| Mr.
Rashid Mansur |
|
| (Chief
Executive) |
|
|
| Mr.
Shafiq A. Khan |
|
| Mrs.
Naz Mansha |
|
| Mr.
Shahzad Saleem |
|
|
|
| Corporate
Secretary |
|
| Mr.
Wasim-ul-Haq Osmani |
|
|
| Auditors |
|
| Riaz
Ahmad & Company |
|
| Chartered
Accountants |
|
|
| Legal
Advisor |
|
| Cornelius,
Lane & Mufti |
|
| Advocate
& Solicitors |
|
|
| Bankers |
|
| Muslim
Commercial Bank Limited |
|
| Union
Bank Limited |
|
|
| Modaraba
Company |
|
| Fidelity
Capital Management |
|
| (Private)
Limited |
|
|
| Principal
Place of Business |
|
| 97-A,
Aziz Avenue, Canal Bank, |
|
| Lahore. |
|
|
| Registrars |
|
| Hameed
Majeed Associates |
|
| 7-Bank
Square, H.M. House |
|
| The
Mall, Lahore. |
|
|
|
|
|
|
|
DIRECTORS' REPORT |
|
|
AND CHIEF EXECUTIVE'S
REVIEW |
|
|
| The
Directors have pleasure in submitting the 5th Annual Report of the Modaraba
together |
|
| with
the Audited Accounts and Auditors' Report thereon for the year ended June 30,
1996. |
|
|
| During
the year under review the Stock Markets continued to perform badly. Although
the |
|
| KSE-100
index had improved from 1611 level as of June 30, 1995 to 1703 level as at
June 30, |
|
| 1996,
the increase was because of certain High Cap shares whereas prices of all
other shares |
|
| had
further slid down. The investors sentiment had turned so negative that prices
of many |
|
| inherently
sound and fundamentally strong shares have gone below their break-up values. |
|
| The
persistent negative sentiment resulted in minimal income accruing from
Capital Market |
|
| Investments
and also necessitated dis-investment of certain shares where chances of
recov- |
|
| ery
were remote. Such dis-investment resulted in realization of a net capital
loss of Rs.11.11 |
|
| million. |
|
|
| The
Modaraba has earned a net profit of Rs.14.89 million before tax for the year.
The lower |
|
| net
profit is because of the non-performance of Capital Market Portfolio and
realization of |
|
| capital
loss on sale of shares of Rs.11.11 million as referred above. Taking a
prudent and con- |
|
| servative
view of the Capital Markets the Modaraba has also retained a provision of
Rs.14.20 |
|
| million
for diminution in value of investments made in the previous years. In the
event of |
|
| any
upturn in the capital markets, this provision may be converted into
additional reserves |
|
| for
the Modaraba. |
|
|
| It
is now common knowledge that Modarabas as a sector are caught-up in a vicious
circle due |
|
| to
over regulation which has become counter productive. The stock market
valuations have |
|
| dropped
sharply due to perceived instability. This perception is a direct result of
the negative |
|
| signals
sent out by different regulatory bodies from time to time. The Modaraba
Association |
|
| of
Pakistan has been and is making representations for rationalization of
regulations, facilita- |
|
| tion
of Modaraba transactions/business, restoration of tax exemption, removal of
un-due |
|
| constraints
vis-a-vis competition from Leasing Companies & Investment Banks which are |
|
| allowed
to issue Certificate of Investments and finally, for a visible expression of
confidence |
|
| and
support from the regulatory bodies. |
|
|
| Your
Modaraba is one of the few Modarabas which has qualified for permission to
issue Cer- |
|
| tificates
of Musharika. As soon as the market conditions become conducive, we shall
start |
|
| issuance
of said Certificates. The process of diversification of the business
transactions has |
|
| been
pursued further. The Leasing Portfolio of the Modaraba has been enhanced. The
ap- |
|
| praisal
of credit proposals has been managed in a manner so as to ensure the highest
quality |
|
| of assets. |
|
|
| FUTURE
OUTLOOK: |
|
| Restructuring
of the Capital Market Portfolio including switching to better growth shares
is |
|
| the
main priority of the management. Special emphasis is being placed for
resource mobiliza- |
|
| tion
on long term basis from banks and other institutions under Musharika
Arrangements. |
|
| Proceeds
from sale of shares and additional resources are planned to be invested in
leasing |
|
| transactions. |
|
|
| APPROPRIATION: |
|
| The
Directors have made the following appropriation:- |
|
|
Rupees |
|
| Net
profit for the year |
|
9,393,528 |
|
| Un-appropriated
profit brought forward |
|
5,853,883 |
|
|
--------- |
|
|
15,247,411 |
|
|
|
|
| Transfer
to special reserve as per requirement of Rule |
|
| 3
(a) of NBFI Circular No.1 dated December 5, 1991 |
1,878,706 |
|
|
--------- |
|
| Un-appropriated
profit carried forward |
|
13,368,705 |
|
|
========= |
|
|
| The
Directors keeping in view the prudent approach and to give Modaraba more
strength |
|
| have
decided to carry forward the balance of Rs.13,368,705 as Un-appropriated
profit. |
|
|
| AUDITORS: |
|
| The
present Auditors Messrs. Riaz Ahmed & Co. Chartered Accountants retire
and being |
|
| eligible
offer themselves for re-appointment. |
|
|
| Before
I conclude, I would like to place on record my sincere thanks to the
executives and all |
|
| employees
of your Modaraba who have shown dedication and put in concerted efforts dur- |
|
| ing
the period under review. |
|
|
|
for and on behalf of |
|
|
the Board of Directors |
|
|
| Lahore |
|
RASHID MANSUR |
|
| Dated:
24 December, 1996 |
Chief Executive |
|
|
|
|
AUDITORS' REPORT TO THE |
|
|
CERTIFICATE HOLDERS |
|
|
| We
have audited the annexed balance sheet as at 30 June 1996 and the related
profit and loss account |
|
| and
Statement of sources and application of funds together with the notes to the
accounts for the year |
|
| ended
30 June 1996 of FIRST FIDELITY LEASING MODARABA which are modaraba company's |
|
| [Fidelity
Capital Management (Private) Limited] representation and we state that we
have obtained |
|
| all
the information and explanations which we required and, after due
verification thereof, we report |
|
| that: |
|
|
| (a)
in our opinion, proper books of account have been kept by the modaraba
company in respect |
|
| of
First Fidelity Leasing Modaraba as required by the Modaraba Companies and
Modarabas |
|
| (Floatation
and Control) Ordinance, 1980, and Modaraba Companies and Modarabas Rules, |
|
| 1981; |
|
|
| (b)
in our opinion, the balance sheet and the profit and loss account have been
drawn up in |
|
| conformity
with the Modaraba Companies and Modarabas (Floatation and Control) Ordinance, |
|
| 1980,
and Modaraba Companies and Modarabas Rules, 1981; and |
|
|
| (c)
in our opinion and to the best of our information and according to the
explanations given to us; |
|
|
| i)
the balance sheet and the related profit and loss account and statement of
sources and |
|
| application
of funds, which are in agreement with the books of account, exhibit
respectively |
|
| a
true and fair view of the state of the modaraba's affairs as at 30 June 1996
and the profit |
|
| and
the changes in the sources and application of funds for the year ended on
that date; |
|
|
| ii)
in our opinion, no Zakat was deductible at source under the Zakat and Ushr
Ordinance, |
|
| 1980; and |
|
|
| iii)
the business conducted, investments made and expenditure incurred by the
modaraba |
|
| are
in accordance with the objects, terms and conditions of the modaraba. |
|
|
| LAHORE:-
24 December |
|
RIAZ AHMAD AND COMPANY |
|
|
Chartered Accountants |
|
|
|
|
FINANCIAL |
|
|
STATEMENTS |
|
|
|
|
|
BALANCE SHEET |
|
|
AS AT 30 JUNE 1996 |
|
|
|
NOTE |
30 June |
30 June |
|
|
|
1996 |
1995 |
|
|
|
Rupees |
Rupees |
|
|
| CAPITAL
AND RESERVES |
|
|
| Authorised
capital |
|
| 30,000,000
modaraba certificates |
|
| of
Rupees 10 each |
|
300,000,000 |
300,000,000 |
|
|
========= |
========= |
|
| Issued,
subscribed and paidup capital |
|
|
| 20,633,399
modaraba certificates |
|
| of
Rupee 10 each |
|
3 |
206,333,990 |
206,333,990 |
|
|
|
|
|
| Reserves |
|
4 |
13,640,440 |
11,761,734 |
|
|
|
|
|
| Unappropriated
profit |
|
|
13,368,705 |
5,853,883 |
|
|
|
--------- |
--------- |
|
|
|
233,343,135 |
223,949,607 |
|
|
|
|
|
| LONG
TERM DEPOSITS |
|
5 |
12,083,355 |
9,727,248 |
|
| DEFERRED
TAXATION |
|
|
1,800,000 |
- |
|
| CURRENT
LIABILITIES |
|
|
|
|
| Short
term finances |
|
6 |
- |
40,000,000I |
|
| Creditors,
accrued and other liabilities |
7 |
3,580,760 |
3,167,755 |
|
| Provision
for taxation |
|
|
3,700,000 |
- |
|
| Dividend
payable |
|
|
- |
41,269,998 |
|
|
|
--------- |
--------- |
|
|
|
7,280,760 |
84,437,753 |
|
| CONTINGENCIES
AND COMMITMENTS |
|
|
- |
- |
|
|
|
--------- |
--------- |
|
|
|
254,507,250 |
318,114,608 |
|
|
========= |
========= |
|
| The
annexed notes form an integral part of these accounts. |
|
|
| TANGIBLE
FIXED ASSETS |
|
|
| Operating
assets in own use |
|
8 |
1,750,340 |
2,125,698 |
|
| Operating
assets given on lease |
|
9 |
102,153,590 |
91,015,676 |
|
|
--------- |
--------- |
|
|
103,903,930 |
93,141,374 |
|
| DEFERRED
COST |
|
10 |
191,204 |
573,616 |
|
|
| INVESTMENTS |
|
11 |
74,326,511 |
96,907,212 |
|
|
| LONG
TERM MUSHARIKA |
FINANCE |
|
12 |
- |
5,999,479 |
|
|
| CURRENT
ASSETS |
|
| Current
portion of long term |
|
| musharika
finance |
|
5,999,479 |
10 487,715 |
|
| Musharika
finances |
|
13 |
- |
21,000,000 |
|
| Morabaha
finances |
|
14 |
10,500,000 |
40,084,574 |
|
| Other
receivables |
|
15 |
23,433,325 |
13,270,653 |
|
| Cash
in hand and bank balances |
|
16 |
36,152,801 |
36,649,985 |
|
|
--------- |
--------- |
|
|
76,085,605 |
121,492,927 |
|
|
--------- |
--------- |
|
|
254,507,250 |
318,114,608 |
|
|
========= |
========= |
|
|
|
PROFIT AND LOSS ACCOUNT |
|
|
FOR THE YEAR ENDED 30
JUNE 1996 |
|
|
|
NOTE |
30 June |
30 June |
|
|
1996 |
1995 |
|
|
Rupees |
Rupees |
|
|
| OPERATING
INCOME |
|
17 |
40,455,291 |
20,401,385 |
|
| OPERATING
EXPENSES |
|
18 |
17,720,596 |
5,512,581 |
|
| FINANCIAL
AND OTHER CHARGES |
|
19 |
11,910,577 |
12,783,546 |
|
|
|
--------- |
--------- |
|
|
29,631,173 |
18,296,127 |
|
|
--------- |
--------- |
|
|
10,824,118 |
2,105,258 |
|
| OTHER
INCOME |
|
20 |
5,558,763 |
5,120,071 |
|
|
--------- |
--------- |
|
|
16,382,881 |
7,225,329 |
|
| MODARABA
COMPANY'S MANAGEMENT FEE |
|
1,489,353 |
656,848 |
|
|
--------- |
--------- |
|
| PROFIT
FOR THE YEAR |
|
14,893,528 |
6,568,481 |
|
| PROVISION
FOR TAXATION |
|
21 |
5,500,000 |
- |
|
|
--------- |
--------- |
|
| PROFIT
AFTER TAXATION |
|
9,393,528 |
6,568,481 |
|
| UNAPPROPRIATED
PROFIT BROUGHT FORWARD |
|
5,853,883 |
599,098 |
|
|
--------- |
--------- |
|
| PROFIT
AVAILABLE FOR APPROPRIATION |
|
15,247,411 |
7,167,579 |
|
|
| APPROPRIATION |
|
| Special
reserve |
|
1,878,706 |
1,313,696 |
|
|
--------- |
--------- |
|
| UNAPPROPRIATED
PROFIT |
|
13,368,705 |
5,853,883 |
|
|
========= |
========= |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
STATEMENT OF SOURCES AND
APPLICATION OF FUNDS |
|
|
FOR THE YEAR ENDED 30
JUNE 1996 |
|
|
|
|
30 June |
30 June |
|
|
1996 |
1995 |
|
|
Rupees |
Rupees |
|
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
| Cash
generated/used by from Operations |
|
13,258,069 |
54,402,825 |
|
| Long
term advances and deposits - Net |
|
10,487,715 |
4,574,048 |
|
| Lease
rentals |
|
19,748,102 |
2,615,451 |
|
| Profit
paid on musharika finances |
|
(1,221,721) |
(6,210,697) |
|
| Profit
received on morabaha/ |
|
| musharika
finances |
|
7,972,255 |
12,633,778 |
|
|
--------- |
--------- |
|
| NET
CASH FLOWS FROM OPERATING ACTIVITIES |
|
50,244,420 |
68,015,405 |
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
| Dividend
received |
|
695,848 |
279,360 |
|
| Gain/(loss)
on sale of shares |
|
(11,116,676) |
1,616,788 |
|
| Investment
sold |
|
22,580,701 |
(37,822,610) |
|
| Lessees
security deposits |
|
2,356,107 |
9,012,666 |
|
| Sale
proceeds of leased assets sold |
|
498,175 |
- |
|
| Fixed
assets acquired-Own use |
|
(81,768) |
(836,495) |
|
| Fixed
assets -Leased out |
|
(25,194,400) |
(89,070,661) |
|
|
--------- |
--------- |
|
| NET
CASH FLOWS FROM INVESTING ACTIVITIES |
|
(10,262,013) |
(116,820,952) |
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
| Dividend
paid |
|
(40,479,591) |
- |
|
| Issue
of share capital |
|
- |
37,960 |
|
|
--------- |
--------- |
|
| NET
CASH FLOWS FROM FINANCING ACTIVITIES |
|
(40,479,591) |
37,960 |
|
|
--------- |
--------- |
|
| NET
(DECREASE)/INCREASE IN CASH |
|
| AND
CASH EQUIVALENT |
|
(497,184) |
(48,767,587) |
|
|
| CASH
AND CASH EQUIVALENT AT |
|
| BEGINNING
OF THE YEAR |
|
36,649,985 |
85,417,572 |
|
|
| CASH
AND CASH EQUIVALENT AT |
|
--------- |
--------- |
|
| THE
END OF THE YEAR |
|
36,152,801 |
36,649,985 |
|
|
========= |
========= |
|
|
| CASH
GENERATED FROM OPERATIONS |
|
|
| Profit
before taxation |
|
14,893,528 |
6,568,481 |
|
| Adjustment
for non-cash charges and |
|
| other
items: |
|
|
| Provision
for diminution in the value |
|
|
of investments |
|
- |
6,633,291 |
|
| Depreciation |
|
14,015,439 |
3,161,498 |
|
| Amortization
of deferred costs |
|
382,412 |
191,206 |
|
| Profit
on morabaha/musharika finances |
|
405,556 |
3,533,437 |
|
| Dividend
income |
|
(695,848) |
(279,360) |
|
| Profit
on morabaha/musharika finances |
|
(5,395,856) |
(10,504,135) |
|
| (Gain)/loss
on sale of investments |
|
11,116,676 |
(1,616,788) |
|
| Lease
rentals |
|
(33,784,898) |
(6,488,460) |
|
| Working
capital changes |
|
12,321,060 |
53,203,655 |
|
|
--------- |
--------- |
|
|
13,258,069 |
54,402,825 |
|
|
========= |
========= |
|
| WORKING
CAPITAL CHANGES |
|
|
| (Increase)/decrease
in operating assets |
|
|
| Morabaha
finances |
|
29,584,574 |
83,465,305 |
|
| Musharika
finances |
|
21,000,000 |
(21,000,000) |
|
| Other
receivables |
|
1,297,724 |
(4,608,051) |
|
|
--------- |
--------- |
|
|
51,882,298 |
57,857,254 |
|
|
| Increase/(decrease)
in operating liabilities |
|
|
| Short
term finances |
|
(40,000,000) |
- |
|
| Creditors,
accrued and other liabilities |
|
819,200 |
189,982 |
|
| Management
company fee |
|
(380,438) |
(4,843,581) |
|
|
--------- |
--------- |
|
|
(39,561,238) |
(4,653,599) |
|
|
--------- |
--------- |
|
|
12,321,060 |
53,203,655 |
|
|
========= |
========= |
|
|
|
NOTES TO THE ACCOUNTS |
|
|
FOR THE YEAR ENDED 30
JUNE 1996 |
|
|
| 1.
LEGAL STATUS AND NATURE OF BUSINESS |
|
| First
Fidelity Leasing Modaraba was formed under the Modaraba Companies and
Modarabas |
|
| (Floatation
and Control) Ordinance, 1980 and the Rules framed thereunder and is managed
by |
|
| Fidelity
Capital Management (Private) Limited. The Modaraba commenced its business
operations |
|
| from
05 December 1991. |
|
|
| The
Modaraba is a perpetual, multipurpose Modaraba and is primarily engaged in
the business of |
|
| leasing,
musharika and morabaha financing, investment in marketable securities and
other related |
|
| business. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
| 2.1
Overall valuation policy |
|
| These accounts have been prepared under the
historical cost convention. |
|
| 2.2
Tangible fixed assets |
|
| 2.2.1
Assets in own use and depreciation. |
|
|
| Operating
fixed assets are stated at cost less accumulated depreciation. Depreciation
is |
|
| charged
to income applying the reducing balance method whereby the cost of an asset
is written |
|
| off
over its estimated useful life. Full year's depreciation is charged on
additions while no |
|
| depreciation
is charged on assets disposed of during the year. |
|
|
| Maintenance
and normal repairs are charged to income as and when incurred. Gain/loss on |
|
| disposal
of fixed assets are included in income currently. |
|
|
| 2.2.2
Assets given on lease and depreciation |
|
| Leased
assets are stated at cost less accumulated depreciation. Depreciation is
charged to in |
|
| come
applying annuity method whereby the cost of an asset less salvage value is
written off |
|
| over
its lease period. In respect of additions and disposals during the year,
depreciation is |
|
| charged
proportionately to the period of the leases. |
|
|
| 2.3
Investments |
|
| Investments
are valued at cost. Full provision is made against permanent diminution in
the |
|
| value
of investments. |
|
|
| 2.4
Revenue recognition |
|
| Profit
on morabaha and musharika finances is recognized on accrual basis, calculated
on num |
|
| ber
of days funds were utilized. |
|
|
| Lease
rentals are recognized as income when due on a systematic basis over the
lease period. |
|
|
| Profit
or loss on sale of investments is accounted for in the year in which it
arises. Dividend |
|
| income
is recognized on receipt basis. |
|
|
| Profit
on bank deposit is recognised on time proportion basis taking into account
period of |
|
| deposit
and rate of return applicable thereon. |
|
|
|
|
|
|
NOTES TO THE ACCOUNTS |
|
|
FOR THE YEAR ENDED 30
JUNE 1996 |
|
|
| 2.5
Deferred taxation |
|
| Provision
for current taxation is based on taxable major income at current rates of
taxation |
|
| after
taking into account tax credits receivable. |
|
|
| The
Modaraba accounts for deferred taxation on all timing differences, using the
liability method, |
|
| excluding
the tax effect of those timing differences which are not likely to reverse in
the foreseable |
|
| future. |
|
|
| 2.6
Deferred cost |
|
| Deferred
costs are amortized over a period of five years. |
|
|
|
30 June |
30 June |
|
|
1996 |
1995 |
|
|
Rupees |
Rupees |
|
|
| 3.
ISSUED, SUBSCRIBED AND PAID UP CAPITAL |
|
|
| 16,656,491
modaraba certificates |
|
| of
Rupees 10 each |
|
166,564,910 |
166,564,910 |
|
|
| 3,976,908
modaraba certificates |
|
| of
Rupees 10 each issued as bonus |
39,769,080 |
39,769,080 |
|
|
--------- |
--------- |
|
|
206,333,990 |
206,333,990 |
|
|
========= |
========= |
|
|
| 4.
RESERVES |
|
| Reserve
for issue of bonus certificates |
|
|
| Opening
balance |
|
- |
41,269,998 |
|
| Less:
Converted into cash dividend |
- |
41,269,998 |
|
|
--------- |
--------- |
|
|
- |
- |
|
| Special
reserve (Note 4.1) |
|
|
| Opening
balance |
|
11,761,734 |
10,448,038 |
|
| Transferred
from profit and |
|
| loss
account |
|
1,878,706 |
1,313,696 |
|
|
--------- |
--------- |
|
|
13,640,440 |
11,761,734 |
|
|
--------- |
--------- |
|
|
13,640,440 |
11,761,734 |
|
|
| 4.1
This represents the reserve created to comply with the prudential regulations
issued by the |
|
| State Bank of Pakistan. |
|
|
| 5.
LONG TERM DEPOSITS |
|
| These
represent the security deposits (lease key money) received against lease
contracts and are |
|
| refundable
at the expiry of respective lease periods. |
|
|
| 6.
SHORT TERM FINANCES |
|
| These
represent the unsecured musharika finances obtained from The Bank of Punjab
under |
|
| musharika
arrangements on profit and loss sharing basis. |
|
|
|
|
NOTES TO THE ACCOUNTS |
|
|
FOR THE YEAR ENDED 30
JUNE 1996 |
|
|
| 7.
CREDITORS, ACCRUED AND |
|
| OTHER
LIABILITIES |
|
30 June |
30 June |
|
|
1996 |
1995 |
|
|
Rupees |
Rupees |
|
|
| Profit
accrued on musharika finances obtained |
|
- |
816,165 |
|
| Rental
received in advance |
|
76,889 |
692,517 |
|
| Due
to management company |
|
- |
380,438 |
|
| Accrued
and other payables |
|
2,713,463 |
1,278,635 |
|
| Unclaimed
dividend |
|
790,408 |
- |
|
|
--------- |
--------- |
|
|
3,580,760 |
