| B.R.R. Capital Modaraba |
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| (Annual
Report 1997) |
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| Contents |
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| Corporate
Information |
|
| Report
of the Directors |
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| Auditors'
Report
5 |
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| Balance
Sheet |
|
| Profit
and Loss Account |
|
| Cash
Flow Statement |
|
| Notes
to the Accounts |
|
| Pattern
of Certificate Holding |
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|
| Corporate
Information |
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|
| Modaraba
Company |
B.R.R. Investments
(Private) Limited |
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| Chairman |
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Mr. Siddique Dawood |
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| Chief
Executive |
Mr. Safdar Rashid |
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| Directors |
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Mr. S. Ghulam Abbas |
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|
Mr. Mansoorul Arfin |
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| Auditors |
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A.F. Ferguson & Co. |
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Chartered Accountants |
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| Bankers |
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ABN Amro Bank |
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Al-Faysal Investment Bank
Ltd, |
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American Express Bank
Limited |
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ANZ Grindlays Bank plc |
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Askari Commercial Bank |
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Faysal Bank Ltd. |
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First International
Investment Bank Limited |
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|
Muslim Commercial Bank
Limited |
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National Bank of Pakistan |
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Oman International Bank
Ltd. |
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Standard Chartered Bank |
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| Registrars |
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Gangjees Investment &
Finance Consultants |
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513 Clifton Centre, |
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Khayaban-e-Roomi, |
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|
Kehkeshan, Block 5, |
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|
Clifton, Karachi. |
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|
|
|
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| Registered
Office |
Dean Arcade, Block-8,
Kehkeshan, Clifton, Karachi. |
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|
| Report
of the Directors |
|
| The
Board of Directors of B.R.R. Investments (Private) Limited takes pleasure in
presenting the Thirteenth |
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| Annual
Report of B.R.R. Capital Modaraba together with the audited accounts for the
year ended June |
|
| 30, 1997. |
|
|
| FINANCIAL
RESULTS |
|
|
| The
financial results of your Modaraba for the year under review are summarised
below: |
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|
|
|
|
1997 |
1996 |
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|
|
|
|
Rupees |
Rupees |
|
|
|
|
|
|
|
|
| New
leases executed at prime cost |
|
221,325,532 |
249,261,626 |
|
|
|
|
|
---------- |
---------- |
|
|
| Gross
rentals |
|
|
405,087,399 |
475,173,559 |
|
|
|
|
|
---------- |
---------- |
|
|
| Profit
before management fee |
|
40,189,287 |
38,431,971 |
|
|
| Modaraba
Company's Management fee |
|
3,653,571 |
3,493,816 |
|
|
|
|
|
---------- |
---------- |
|
|
| Profit
before taxation |
|
|
36,535,716 |
34,938,155 |
|
|
| Taxation: |
|
|
---------- |
---------- |
|
|
| - Current |
|
|
3,000,000 I |
12,650,000 |
|
|
| -
Prior years |
|
|
(6,088,085) |
8,016,625 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
(3,088,085) |
20,666,625 |
|
|
| Profit
after taxation |
|
|
39,623,801 |
14,271,530 |
|
|
|
|
|
---------- |
---------- |
|
|
| Unappropriated
profit brought forward |
|
1,861,830 |
10,726~328 |
|
|
|
|
|
---------- |
---------- |
|
|
| Profit
available for appropriation |
|
41.485,631 |
24,997,858 |
|
|
| Appropriations: |
|
---------- |
---------- |
|
| Cash
profit distribution @ 11% (1996: 10%) |
22,309,894 |
20,281,722 |
|
| Transfer
to statutory reserve |
|
7,924,760 |
2,854,306 |
|
|
|
|
---------- |
---------- |
|
|
|
|
30,234,654 |
23,136,028 |
|
|
|
|
---------- |
---------- |
|
| Unappropriated
profit carried forward |
|
11,250,977 |
1,861,830 |
|
|
|
|
|
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| The
Board is pleased to declare a profit distribution in cash of Rs. 1.10 per
Modaraba Certificate aggregating |
|
| Rs.
22.31 Million. With the transfer to reserve the break-up value of your
Modaraba Certificate now |
|
| stands
at Rs. 14.29 against a face value of Rs. 10 (1996: Rs. 13.43). |
|
|
| OPERATIONS |
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| We
are pleased to report that during the year under review, your Modaraba
completed 11 years of business |
|
| operations.
The total number of leases executed since inception to June 30, 1997 were
7,084 with |
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| a
total value of Rs. 3.481 billion. |
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| As
at 30 June 97, there were a total of 794 "live" leases with a prime
cost of Rs. 1.26 billion (1996=1~355 |
|
| leases
prime cost Rs. 1.38 billion). 158 New leases executed during the year
totalled Rs. 221 Million |
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| (1996=244
leases prime cost Rs. 249.26 million). |
|
|
| Vigorous
efforts continue to be made to recover overdue rentals from defaulting
lessees. The new Banking |
|
|
| Reforms
Act of 1997, passed in June 97 is a welcome step and provides financial
institutions a |
|
| means
of. obtaining quick decisions from the Banking Courts. |
|
| During
the year, a decision was taken to merge BRR Second Modaraba (Managed by BRR
Investments |
|
| Private
Limited) and Equity International Modaraba (managed by Equity International
Private Limited) |
|
| with
your Modaraba. |
|
| In
economic terms, 1996-97 has been described as the worst year in the country's
history. There was |
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| a
business slowdown on account of higher input costs and mark-up rates. The
year saw 3 different |
|
| governments,
and whereas by the end of the year, the present government offered many
incentives to |
|
| the
business sector, investment was shy on account of credibility regarding
consistent policies. In spite |
|
| of
these adverse factors your Modaraba has been able to maintain its operations
to the extent of being |
|
| able
marginally to improve its dividend payout by 10 percent to Rs. 11.00. |
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|
| Property |
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| A
plot of land was acquired through public auction next to the Security Vault
at a cost of around |
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| Rs.
9.3 Million. The building that is proposed to be constructed on this plot
will serve both to extend |
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| space
for the Security Vault and custodial services, as well as to provide
accommodation for our Head |
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| Office
at this location. Thereafter we would propose to sell the existing office
owned by your Modaraba, |
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| at
a significant capital gain. |
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| The
internal layout and decor of the new Islamabad Office was undertaken during
the year, and subsequent |
|
| to
the year end, we shifted to the new office premises. |
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|
| Security
Vault |
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| Business
was steady during the year. With the inauguration of the Central Depository
System by the |
|
| Stock
Exchange, the Custodial services offered to selected clients will be reduced
in the years to come. |
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| Whereas
this is an event that may occur in the distant future, we have already
started to look for other |
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| areas
of business for the Vault. |
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|
| Income Notes |
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| During
the year under review, a total of Rs. 108 Million (1996= Rs. 69 million) was
disbursed from |
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| the
proceeds of the Income Notes for leasing activities. |
|
|
| Regulatory
Authorities |
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| During
the year under review, the State Bank of Pakistan declared that Modarabas and
Leasing Companies |
|
| were
no longer "non banking financial institutions", and so ceased to
act as regulator. The weekly, monthly, |
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| quarterly,
half yearly and annual returns are now submitted to the Registrar of
Modarabas. |
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| Central
Excise Duty |
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| We
are grateful that the government withdrew central excise duty on leasing and
musharika transactions, |
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| in
the Finance Bill 1997-98. This will help reduce the cost of leasing. |
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| Future
Prospects |
|
| As
has been reported elsewhere in this report, your Modaraba is being merged
with two other Modarabas |
|
| within
the BRR Group. The merger will lead to saving in costs, and give the Modaraba
a new direction. |
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| The
combined equity of the merged entity will be over Rs. 500 million, and the
total assets will be in |
|
| excess
of Rs. 2 billion. We pray the merger will be profitable for all our
certificate holders, and lead |
|
| to
our enlarging the scope and volume of our business in additional modes. |
|
|
| Auditors |
|
| The
present auditors Messrs A.F. Ferguson & Co., Chartered Accountants are
due for retirement and |
|
| have
offered themselves for reappointment for the year ending June 30, 1998. Their
appointment has |
|
| been
confirmed by the Board subject to the approval of the Registrar, Modaraba
Companies & Modarabas. |
|
|
| Acknowledgment |
|
| The
Board expresses its appreciation of the hard work and positive efforts of the
staff and thanks them |
|
| for
their dedication. |
|
|
| We
have audited the annexed Balance Sheet as at June 30, 1997 and the related
Profit and Loss Account |
|
| and
Cash Flow Statement together with the Notes to the Accounts for the year then
ended of B.R.R. |
|
| Capital
Modaraba which are Modaraba Company's (B.R.R. Investments (Private) Limited)
representation |
|
| and
we state that we have obtained all the information and explanations which we
required and. after |
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| due
verification thereof, we report that: |
|
|
| (a)
In our opinion proper books of account have been kept by the Modaraba Company
in respect |
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| of
B.R.R. Capital Modaraba as required by the Modaraba Companies and Modaraba
(Floatation |
|
| and
Control) Ordinance, 1980; and Modaraba Companies and Modaraba 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 Modaraba (Floatation and Control) Ordinance, 1980;
and |
|
| Modaraba
Companies and Modaraba 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 Cash Flow
Statement, 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 June 30, 1997; and the profit and the
cash flows |
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| for
the year ended on that date; |
|
|
| (ii)
in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance.
1980: has |
|
| been
deducted by the Modaraba and deposited in the Central Zakat Fund, established
under |
|
| Section
7 of that Ordinance; 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. |
|
|
| Balance
Sheet as at June 30, 1997 |
|
|
|
|
|
1997 |
1996 |
|
|
|
Note |
Rupees |
Rupees |
|
| CAPITAL
AND RESERVES |
|
|
| Certificate
capital |
|
| Authorised |
|
|
| 62.500,000
(1996: 50,000,000) |
|
| Modaraba
Certificates of Rs. 10 each |
|
625,000,000 |
500,000,000 |
|
|
|
=========== |
=========== |
|
| Issued,
subscribed and paid up |
|
3 |
202,817,220 |
202,817,220 |
|
|
|
|
| Reserves
- capital |
|
4 |
44,658,207 |
36,733,447 |
|
| - general |
|
|
31,000,000 |
31,000,000 |
|
|
|
|
| Unappropriated
profit |
|
|
11,250,977 |
1,861.83 |
|
|
|
|
---------- |
---------- |
|
|
|
|
289,726,404 |
272,412,497 |
|
| REDEEMABLE
CAPITAL |
|
5 |
405,611,000 |
351,877,500 |
|
| LONG-TERM
MUSHARAKAS, MORABAHA AND |
|
|
|
| FINANCE
UNDER MARK-UP ARRANGEMENTS |
|
6 |
129,000,000 |
78,332.29 |
|
|
|
|
| DEFERRED
LIABILITY AND INCOME |
|
|
---------- |
---------- |
|
| Customers'
security deposits |
|
|
95,503,926 |
108,813,191 |
|
| Deferred
income |
|
|
- |
204,710 |
|
|
|
|
---------- |
---------- |
|
|
|
|
95,503,926 |
109,017,901 |
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
|
|
|
| Current
maturity of long-term Musharakas, |
|
|
| Morabahas
and Finance under mark-up |
|
|
---------- |
---------- |
|
| arrangements |
|
6 |
49,082,006 |
69,162,946 |
|
| Current
maturity of Customers' security deposits |
|
29,910,534 |
22,401,974 |
|
| Short-term
profit and loss sharing loan |
7 |
8,516,588 |
2,596,343 |
|
| Short-term
Morabaha, Musharaka and Working |
|
|
|
| capital
finance under mark-up arrangements |
8 |
247,313,710 |
307,304,439 |
|
| Creditors,
accrued arid other liabilities |
9 |
58,225,303 |
29,066,513 |
|
| Taxation |
|
|
|
11,116,138 |
20,001,699 |
|
| Unclaimed
profit distribution |
|
|
1,126,334 |
393,254 |
|
| Proposed
profit distribution |
|
|
22,309,894 |
20,281,722 |
|
|
|
|
---------- |
---------- |
|
|
|
|
427,600,507 |
471,208,890 |
|
| COMMITMENTS |
|
|
|
10 |
1,347,441,837 |
1,282,849,079 |
|
|
|
|
| FIXED
ASSETS - tangible |
|
|
| Assets
leased out |
|
11.1 |
682,039,828 |
749,728,937 |
|
| Work-in-progress
of assets to be |
|
|
|
|
| leased out |
|
|
|
|
2,981,374 |
11,500,000 |
|
|
|
---------- |
---------- |
|
|
|
|
685,021,202 |
761,228~937 |
|
|
|
|
|
| Assets
in own use |
|
11.2 |
72,009,592 |
60,247,590 |
|
| Work-in-progress
of assets in own use |
|
|
3,829,200 |
6,198,736 |
|
|
|
---------- |
---------- |
|
|
|
|
760,859,994 |
827,675~263 |
|
| DEFERRED
EXPENDITURE |
|
12 |
1,447,154 |
2,237,590 |
|
| LONG-TERM
DEPOSITS AND PREPAYMENTS |
|
13 |
44,500 |
91,162 |
|
| LONG-TERM
RECEIVABLES |
|
|
- |
1,862,298 |
|
| INVESTMENTS |
|
|
14 |
423,113,117 |
364,125,200 |
|
| CURRENT
ASSETS |
|
|
---------- |
---------- |
|
| Trade debts |
|
|
15 |
70,719,674 |
65,434,761 |
|
| Current
portion of long-term |
|
|
|
|
| receivables |
|
|
1,415,926 |
406,518 |
|
| Advances
and prepayments |
|
16 |
4,562,552 |
6,523,314 |
|
| Other
receivables |
|
17 |
6,837,350 |
7,611,231 |
|
| Short-term
investments |
|
18 |
35,000,000 |
- |
|
| Cash
and bank balances |
|
19 |
43,441,570 |
6,881,742 |
|
|
---------- |
---------- |
|
|
|
161,977,072 |
86,857,566 |
|
|
---------- |
---------- |
|
|
|
|
1,347,441,837 |
1,282,849,079 |
|
|
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts |
|
|
| Profit
and Loss Account for the Year ended, June 30, 1997 |
|
|
|
|
|
1997 |
1996 |
|
|
|
Note |
Rupees |
Rupees |
|
|
| REVENUES |
|
| Lease
rentals |
|
|
405,087,399 |
475.173,559 |
|
| Other income |
|
20 |
62,071,442 |
21,692,103 |
|
|
|
|
---------- |
---------- |
|
|
|
|
467,158,841 |
496,865,662 |
|
| EXPENSES |
|
|
|
|
|
|
|
---------- |
---------- |
|
| Operating
expenses |
|
21 |
316,588,246 |
365,533,297 |
|
| Financial
charges |
|
22 |
110,381,308 |
92,900,394 |
|
|
|
|
---------- |
---------- |
|
|
|
|
426,969,554 |
458,433,691 |
|
|
|
|
---------- |
---------- |
|
|
|
|
40,189,287 |
38,431,971 |
|
| Modaraba
company's management fee |
|
|
3,653,571 |
3,493,816 |
|
|
|
|
---------- |
---------- |
|
| Profit
before taxation |
|
|
36,535,716 |
34,938,155 |
|
| Taxation |
|
|
---------- |
---------- |
|
| Current |
|
|
|
3,000,000 |
12,650,000 |
|
| Prior years |
|
|
|
(6,088,085) |
8,016,625 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
(3,088,085) |
20,666,625 |
|
|
|
|
|
---------- |
---------- |
|
| Profit
after taxation |
|
|
|
39,623,801 |
14,271,530 |
|
| Unappropriated
profit brought forward |
|
|
1,861,830 |
10,726,328 |
|
|
|
|
|
---------- |
---------- |
|
| Profit
available for appropriation |
|
|
41,485,631 |
24,997,858 |
|
| Appropriations: |
|
|
|
| Final
profit distribution @ 11°/0 |
|
|
---------- |
---------- |
|
| (1996 10%) |
|
|
22,309,894 |
20,281,722 |
|
|
|
4 |
7,924,760 |
2,854,306 |
|
|
|
- |
- |
|
| Transfer
to general reserve |
|
---------- |
---------- |
|
|
|
|
30,234,654 |
23,136~028 |
|
|
|
|
---------- |
---------- |
|
| Unappropriated
profit carried forward |
|
|
11,250,977 |
1,861,830 |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| Cash
Flow Statement for the Year ended June 30, 1997 |
|
|
|
|
|
1997 |
1996 |
|
|
|
Note |
Rupees |
Rupees |
|
|
| Cash
flow from operating activities |
|
| Cash
generated from operations |
|
25 |
316,991,317 |
382,593,955 |
|
| Profit
paid on redeemable capital |
|
|
(1,548,261) |
- |
|
| Profit
paid on Musharaka, Morabahas |
|
| and
Finance under mark-up arrangements |
|
|
(78,434,727) |
(95,161,563) |
|
| Taxes paid |
|
|
|
(5,797,476) |
(1,712,466) |
|
| Long-term
deposits and prepayments |
|
|
46,662 |
175,016 |
|
| Customers'
security deposits |
|
|
(5,800,705) |
(4,588,008) |
|
| Long-term
receivables |
|
|
852,890 |
2,982,730 |
|
| Deferred
expenditure |
|
|
(300,000) |
-- |
|
|
---------- |
---------- |
|
| Net
cash inflow from operating activities |
|
226,009,700 |
284,289,664 |
|
| Cash
flow from investing activities |
|
---------- |
---------- |
|
| Fixed
capital expenditure |
|
|
(228,175,872) |
(268,921,172) |
|
| Proceeds/assignment
price on disposal |
|
| of
assets given on lease |
|
|
|
50,703,306 |
65,495,397 |
|
| Proceeds
on disposal of assets in own use |
|
1,070,000 |
30,657,000 |
|
| Investments
made |
|
|
(5,842,965) |
(354,461,202) |
|
| Proceeds
on disposal of investment in |
|
|
|
|
| property |
|
|
|
|
30,000 |
40,000 |
|
| Dividend
received |
|
|
736,789 |
422,811 |
|
| Mark-up/profit
received on deposit and PLS |
|
|
|
| savings
accounts and certificate of investments |
|
35,061,227 |
249,984 |
|
|
|
---------- |
---------- |
|
| Net
cash outflow from investing activities |
|
(146,417,515) |
(526,517.182) |
|
| Cash
flow from financing activities |
|
|
---------- |
---------- |
|
| Redeemable
capital |
|
|
|
- |
351,877,500 |
|
| Long-term
Musharaka, Morabahas and |
|
|
|
|
| Finance
under mark-up arrangements |
|
|
30,586,769 |
5,528,960 |
|
| Short-term
profit and loss sharing loan |
|
5,920,245 |
(9,714.104) |
|
| Short-term
Musharaka, Morabaha and |
|
|
|
|
| Working
capital finance under mark-up |
|
|
|
|
| arrangements |
|
(59,990,729) |
(80,595,308) |
|
| Profits paid |
|
|
|
(19,548,642) |
(35,729,833) |
|
|
|
|
|
---------- |
---------- |
|
| Net
cash (outflow)/inflow from financing activities |
|
(43,032,357) |
231,367,215 |
|
|
|
---------- |
---------- |
|
| Net
increase/(decrease) in cash and cash equivalents |
36,559,828 |
(10,860,303) |
|
| Cash
and bank balances at the beginning |
|
|
|
| of the year |
|
|
|
6,881,742 |
17,742,045 |
|
|
|
|
|
---------- |
---------- |
|
| Cash
and bank balances at the end of the year |
|
43,441,570 |
6,881,742 |
|
|
========== |
========== |
|
|
| Notes
to the Accounts for the Year ended June 30, 1997 |
|
|
| 1.
LEGAL STATUS AND NATURE OF THE BUSINESS |
|
|
| B.R.R.
Capital Modaraba is a multipurpose, perpetual Modaraba floated under the
Modaraba |
|
| Companies
and Modarabas (Floatation and Control) Ordinance, 1980 and the Rules framed |
|
| thereunder
and is managed by B.R.R. Investments (Private) Limited a company incorporated
in |
|
| Pakistan.
The Modaraba is listed on the Karachi and Lahore Stock Exchanges. The
Modaraba's |
|
| principal
activity is leasing of assets. |
|
|
| The
directors of the B.R.R. Investments (Private) Limited have decided to
amalgamate operations |
|
| of
B.R.R. Capital Modaraba (Modaraba) with B.R.R. Second Modaraba managed by
B.R.R. |
|
| Investments
(Private) Limited and Equity International Modaraba managed by Equity
International |
|
| (Private)
Limited. In this connection a petition has been filed in the High Court of
Sindh by the |
|
| Modaraba,
B.R.R. Second Modaraba and the Management Company B.R.R. Investments
(Private) |
|
| Limited,
Equity International Modaraba and its Management Company, Equity
International (Private) |
|
| Limited. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
| (a)
Overall valuation policy |
|
| These
accounts have been prepared under the historical cost convention. |
|
| (b)
Fixed Assets |
|
|
| (i)
Assets leased out and amortisation |
|
|
| Leased
assets are stated at cost less accumulated amortisation. Amortisation is
charged |
|
| to
income applying the straight-line method whereby the cost of an asset is
written |
|
| off
over its lease period. In respect of additions and disposals during the year |
|
| amortisation
is charged proportionately to the period of lease. |
|
|
| Profit
or loss on disposal of leased assets is included in income currently. |
|
| (ii)
Assets in own use and depreciation |
|
| Operating
assets are stated at cost less accumulated depreciation. Depreciation is |
|
| charged
to income applying the straight-line method whereby the cost of an asset |
|
| is
written off over its estimated useful life. In respect of additions and
disposals during |
|
| the
year, depreciation is charged proportionately to the period of use. |
|
|
| Profit
or loss on disposal of assets is included in income currently. |
|
|
| (c)
Investments |
|
|
| Investments,
other than property, are stated at lower of cost and market value on an
aggregate |
|
| basis.
Property is valued at cost. Profit or loss on sale of investments is taken to
profit and |
|
| loss
account currently. |
|
|
| (d)
Revenue recognition |
|
|
| Income
from leases is recognised as and when lease rentals become due on a
systematic |
|
| basis
over the lease period. However, income from those leases which have been
assigned |
|
| to
third parties, future rental is also recognised as income when actually
received. but if |
|
| not
so received, the future rentals are first treated as deferred income and
later transferred |
|
| to
profit and loss account in equal instalments over the period of the lease. |
|
|
| (e)
Deferred Expenditure |
|
|
| Project
evaluation and documentation fee paid for obtaining long term finance is
written |
|
