| B.R.R Second Modaraba |
|
|
|
|
|
|
|
| (ANNUAL
REPORT 1997) |
|
|
|
| CONTENTS |
|
| Corporate
Information |
|
| Seven
Years at a Glance, Financial Statistical Summary |
|
| Report
of the Directors |
|
| Auditors'
Report |
|
| Balance
Sheet |
|
| Profit
and Loss Account |
|
| Cash
Flow Statement |
|
| Notes
to the Accounts |
|
| Pattern
of Certificate Holding |
|
|
|
|
|
|
| Corporate Information |
|
|
| Modaraba
Company |
B.R.R. Investments
(Private) Limited |
|
| Chairman |
|
Mr. Siddique Dawood |
|
| Chief
Executive |
Mr. Safdar Rashid |
|
| Directors |
|
Mr. S. Ghulam Abbas |
|
|
Mr. Mansoorul Arfin |
|
| Auditors |
|
Taseer Hadi Khalid &
Co. |
|
|
Chartered Accountants |
|
| Bankers |
|
A1 Faysal Investment Bank
Ltd. |
|
|
|
American Express Bank
Limited |
|
|
Askari Commercial Bank
Ltd. |
|
|
Faysal Bank Limited |
|
|
|
Habib Bank Limited |
|
|
|
Muslim Commercial Bank
Limited |
|
|
|
National Bank of Pakistan |
|
|
|
Standard Chartered Bank |
|
| Registrars |
|
Gangjees Associates |
|
|
|
513 Clifton Centre, |
|
|
|
Khayaban-e-Roomi. |
|
|
Kehkeshan, Block 5 |
|
|
Clifton, Karachi. |
|
| Registered
Office |
Dean Arcade, Block |
|
|
|
Kehkeshan, Clifton, |
|
|
|
|
|
Karachi. |
|
|
|
|
|
|
| Seven
Year at a Glance Financial Statistical Summary |
|
|
|
|
1997 |
1996 |
1995 |
1994 |
1993 |
1992 |
1991 |
|
|
|
|
(141/2 Months) |
|
|
| Capital |
Rs. '000 |
150,000 |
150,000 |
150,000 |
150,000 |
150,000 |
150,000 |
150,000 |
|
|
|
|
| Reserves |
Rs. '000 |
45,077 |
37,939 |
31,879 |
27,425 |
15,399 |
7,294 |
730 |
|
|
|
|
| Certificate |
|
|
|
|
| Holders |
|
| Equity |
Rs. '000 |
195,077 |
187,939 |
181,879 |
177,425 |
165,399 |
157,294 |
100,730 |
|
|
|
|
| Profit
for the |
|
| Year |
Rs. '000 |
22,138 |
21,060 |
19,454 |
30,775 |
30,606 |
25,314 |
20,135 |
|
|
|
|
| Earnings
per |
|
|
| Certificate |
Rs. |
1.48 |
1.40 |
1.30 |
2.05 |
2.04 |
1.69 |
2.01 |
|
|
|
|
| Profits
paid per |
|
| Certificate |
Rs. |
1.00 |
1.00 |
1.00 |
1.25 |
1.50 |
1.25 |
2.00 |
|
|
| Break
up Value Rs. |
13.01 |
12.53 |
12.13 |
11.83 |
11.03 |
10.49 |
10.07 |
|
|
|
|
|
| Report of the Directors |
|
|
| The
Board of Directors of B.R.R. Investments (Private) Limited takes pleasure in
presenting the Seventh |
|
| Annual
Report of B.R.R. Second 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: |
|
|
|
|
1997 |
1996 |
|
|
|
Rupees |
Rupees |
|
|
| Operating
income |
|
|
80,894,591 |
46,443,225 |
|
|
| Operating
expenses |
|
|
28,347,625 |
5,830,429 |
|
| Financial
charges |
|
|
24,225,276 |
11,296,022 |
|
| Provision
for doubtful receivables |
|
2,287,200 |
1,892,632 |
|
|
| Provision
for diminution in |
|
| value
of investments |
|
|
2,200,000 |
700,000 |
|
|
57,060,101 |
19,719,083 |
|
|
|
|
---------- |
---------- |
|
|
|
|
23,834,490 |
26,724,142 |
|
| Other income |
|
|
600,055 |
291,419 |
|
|
|
|
---------- |
---------- |
|
|
24,434,545 |
27,015,561 |
|
| Modaraba
Company's management fee |
|
2,221,322 |
2,455,960 |
|
|
|
|
---------- |
---------- |
|
| Profit
before taxation |
|
|
22,213,223 |
24,559,601 |
|
| Taxation |
|
|
75,000 |
3,500,000 |
|
|
|
|
---------- |
---------- |
|
| Profit
available for appropriation |
|
22,138,223 |
21,059,601 |
|
|
|
| Appropriations: |
|
|
|
| Profit
distribution in cash |
|
15,000,000 |
15,000,000 |
|
| Transfer
to statutory reserve |
|
4,427,645 |
4,211,920 |
|
| Transfer
to General Reserve |
|
-- |
1,847,681 |
|
|
|
|
---------- |
---------- |
|
|
|
|
19,427,645 |
21,059,601 |
|
|
|
---------- |
---------- |
|
| Unappropriated
profit carried forward |
|
2,710,578 |
-- |
|
|
|
|
========== |
========== |
|
| Earnings
per certificate |
|
1.48 |
1.40 |
|
|
|
|
| The
Board is pleased to declare a profit distribution in cash of Rs. 1.00 per
Modaraba Certificate aggregating |
|
| Rs.
15.00 Million. With the transfers to reserves, the break up value of your
Certificate now stands at |
|
| Rs.
13.01 against a face value of Rs. 10 (1996: Rs. 12.53). |
|
|
| OPERATIONS
DURING THE YEAR UNDER REVIEW |
|
| The
operating income of your Modaraba during the year under review amounted to
Rs. 80.9 million) |
|
| (1996:
Rs. 46.4 million). The income increase was mainly from leasing activities
which rose from |
|
| Rs.
2.3 million in 1996 to Rs. 40.4 million in 1997. Operating expenses were up
from Rs. 5.8 million |
|
| to
Rs. 28.3 million, the main reason for this being amortisation of leases which
was Rs. 25.6 million |
|
| during
the year (1996: Rs. 1.3 million). The increased business activity led to an
increase in financial |
|
| charges
which totalled Rs. 24.2 million (1996: Rs. 11.3 million). The profit
available for appropriation |
|
| Rs.
22.1 million is after providing Rs. 2.3 million for doubtful debts and Rs.
2.2 million for diminution |
|
| in
value of investments. |
|
|
| In
economic terms, 1996-97 has been described as the worst year in the country's
history. Due to the |
|
| paucity
of funds from financial institutions, borrowing costs were high. The
imposition of central excise |
|
| duty
on musharaka and leasing transactions added to the cost of funds. In this
difficult environment. |
|
| we
are pleased to report that your Modaraba managed to maintain the same level
of profitability as the |
|
| previous
year, and is also paying a dividend at the same level. |
|
|
| REGULATORY
AUTHORITIES |
|
| During
the year under review, the State Bank of Pakistan, by declaring that
Modarabas and leasing |
|
| Companies
were no longer "non banking financial institutions" ceased to act
as regulator. Thereafter, |
|
| the
weekly, monthly, quarterly, half-yearly and annual reports, which were
previously submitted to State |
|
| Bank
of Pakistan, were submitted to the Registrar of Modarabas. |
|
|
| LEGISLATION |
|
| We
are grateful to the present government for withdrawing Central Excise Duty in
the Finance Bill |
|
| 1997-98.
This move will help reduce cost of leasing for customers. A welcome piece of
legislation |
|
| promulgated
during the year under review was the Banking Companies (Recoveries of Loans,
Advances, |
|
| Credits
and Finances) Act 1997. This will help financial institutions in their
recovery drive. |
|
|
| FUTURE
PROSPECTS |
|
| A
decision has been taken to merge your Modaraba, and Equity International
Modaraba (Managed by |
|
| Equity
International Private Limited) with BRR Capital Modaraba (managed by BRR
Investments (Private) |
|
| Limited.
The merger will lead to a saving in costs and give a new direction to the
merged entity. The |
|
| combined
equity of the merged entity will be over Rs. 500 million making it the
largest Modaraba in |
|
| the
country, with a total asset base of over Rs. 2.0 Billion. A petition has been
filed in the High Court |
|
| of
Sindh for this purpose. |
|
|
| AUDITORS |
|
| The
present auditors Messrs. Taseer Hadi Khalid & Co. Chartered Accountants
being due for retirement |
|
| have
offered themselves for re-appointment for the year ending June 30, 1998.
Their appointment has |
|
| been
confirmed by the Board subject to the approval of the Registrar, Modaraba
Companies and Modarabas. |
|
|
| ACKNOWLEDGMENTS |
|
| The
Board expresses its appreciation of the hard work and positive efforts of the
staff and thanks them |
|
| for
their dedication. |
|
|
| FOR
AND ON BEHALF OF BOARD OF DIRECTORS |
|
|
| KARACHI:
December 05, 1997 |
|
CHAIRMAN |
|
|
|
|
|
|
| Auditors
Report to the Certificate Holders |
|
| 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. |
|
| Second
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 |
|
| due
verification thereof, we report that: |
|
|
| (a)
the modaraba has recorded its lease transactions as operating leases. We
consider that based on |
|
| substance
of these leases and in accordance with International Accounting Standard 17
"Accounting |
|
| for
Leases", these should be recorded as finance leases. The effect of
recording these leases as |
|
| finance
leases instead of operating leases on the financial position and results of
the Modaraba |
|
| has
not been quantified; |
|
|
| (b)
In our opinion, proper books of account have been kept by the Modaraba
Company in respect |
|
| of
B.R.R. Second Modaraba as required by the Modaraba Companies and Modaraba
(Floatation |
|
| and
Control) Ordinance, 1980; and Modaraba Companies and Modaraba Rules. 1981; |
|
|
| (c)
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 |
|
|
| (d)
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. are |
|
| in
agreement with the books of account, and except for the financial effect of
the matter |
|
| referred
to in para (a) above, respectively exhibit 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 for the year |
|
| ended
on that date; |
|
|
|
| (ii)
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 objects, terms and conditions of the Modaraba. |
|
|
|
|
|
|
|
| KARACHI:
December 05, 1997 |
|
TASEER HADI KHALID &
CO. |
|
|
CHARTERED ACCOUNTANTS |
|
|
| Balance
Sheet as at June 30, 1997 |
|
|
|
|
|
1997 |
1996 |
|
|
|
Note |
Rupees |
Rupees |
|
|
| CAPITAL
AND RESERVES |
|
|
| Certificate
capital |
|
| Authorised |
|
|
| 25,000,000
Modaraba Certificates |
|
| of
Rs. 10/- each |
|
250,000,000 |
250,000,000 |
|
|
| Issued,
subscribed and paid-up |
|
| 15,000.000
Modaraba |
|
| Certificates
of Rs. 10/- each |
|
3 |
150.000,000 |
150,000.00 |
|
|
| Capital
reserve |
|
|
594,966 |
594,966 |
|
| Statutory
reserve |
|
|
4 |
29,869,463 |
25~441,818 |
|
| General
reserve |
|
|
5 |
11,901,853 |
11,901,853 |
|
| Unappropriated
profit |
|
|
2,710,578 |
-- |
|
|
----------- |
----------- |
|
|
|
|
195,076,860 |
187,938,637 |
|
| REDEEMABLE
CAPITAL - Secured |
|
6 |
202,805.75 |
175,938,750 |
|
| LONG
TERM MORABAHA FINANCE - Secured |
|
7 |
79,450,000 |
40,000.00 |
|
| CUSTOMERS'
SECURITY DEPOSITS |
|
|
15,975,571 |
1,599,858 |
|
|
| CURRENT
LIABILITIES |
|
| Current
portion of long term |
|
| Morababa
finance |
|
7 |
23,800,000 |
10,000.00 |
|
|
| Short
term finance - Secured |
|
-- |
20,000,000 |
|
| Due
to Modaraba Company |
|
|
2,221,322 |
2,455,960 |
|
| Accrued
expenses and other liabilities |
|
8 |
16,353,086 |
7.042,626 |
|
| Taxation |
|
|
4,388,381 |
5,990,928 |
|
| Unclaimed
profit distribution |
|
614,914 |
522,295 |
|
| Profit
distribution |
|
|
15,000.00 |
15,000,000 |
|
|
|
|
|
|
62,377,703 |
61,011.81 |
|
| COMMITMENTS |
|
|
9 |
|
|
|
|
|
----------- |
----------- |
|
| Rupees |
|
|
555,685,884 |
466,489,054 |
|
|
|
=========== |
=========== |
|
|
| FIXED ASSETS - Tangible assets |
|
10 |
148,970,515 |
44,511,287 |
|
| leased out |
|
| HIRE
PURCHASE INSTALLMENTS |
|
| RECEIVABLE |
|
11 |
5,429,421 |
9,035,246 |
|
|
| INVESTMENTS
- At cost |
|
12 |
242,430,935 |
211,795,710 |
|
| CURRENT
ASSETS |
|
| Current portion of long
term Morabaha and |
|
| Hire Purchase Installment
receivable |
|
13 |
11,249,198 |
16,834,897 |
|
|
| Morabaha
transactions |
|
14 |
24,700,000 |
24,800,000 |
|
|
| Short
term Musharaka |
|
| arrangements |
|
15 |
-- |
6,671,140 |
|
|
| Other
receivables |
|
16 |
70,299,703 |
79,710,386 |
|
| Cash
and bank balances |
|
17 |
52,606,112 |
73,130,388 |
|
|
|
|
158,855,013 |
201,146,811 |
|
|
| Rupees |
|
|
555,685,884 |
466,489,054 |
|
|
|
|
=========== |
=========== |
|
|
| These
accounts should be read in conjunction with the attached notes. |
|
|
|
| Chief Executive |
Director |
|
Director |
|
|
| B.R.R.
Investment |
B.R.R. Investments |
|
B.R.R. Investments |
|
|
| (Pvt.)limited |
(Pvt)Limited |
|
(Pvt.)limited |
|
|
|
|
|
| PROFIT AND
LOSS ACCOUNT for the Year ended June 30, 1997 |
|
|
|
|
1997 |
1996 |
|
|
|
Note |
Rupees |
Rupees |
|
|
| OPERATING INCOME |
|
|
|
| Lease
rentals |
|
|
|
40,373,516 |
2,262.92 |
|
| Income
on Morabaha transactions |
|
|
6,760,527 |
8,987,565 |
|
| Income
on Musharaka arrangements |
|
|
487,824 |
8,310.88 |
|
| Income
on Hire Purchase arrangements |
|
|
3.494.825 |
4,711.29 |
|
| Income
from investments |
|
|
18 |
29,777,899 |
22.170,568 |
|
|
----------- |
----------- |
|
|
|
|
|
80,894,591 |
46,443,225 |
|
|
| OPERATING
EXPENSES |
|
|
19 |
32,834,825 |
8,423,061 |
|
| FINANCIAL
CHARGES |
|
|
20 |
24,225,276 |
11.296.022 |
|
|
|
|
|
57,060,101 |
19,719,083 |
|
|
----------- |
----------- |
|
|
|
|
23,834,490 |
26,724,142 |
|
| OTHER INCOME |
|
21 |
600,055 |
291,419 |
|
|
|
|
----------- |
----------- |
|
|
|
|
24,434,545 |
27,015,561 |
|
| MODARABA
COMPANY'S MANAGEMENT FEE |
|
|
2221.322 |
2,455,960 |
|
|
|
|
----------- |
----------- |
|
| PROFIT
BEFORE TAXATION |
|
|
22.213,223 |
24.559.601 |
|
| TAXATION
- Current |
|
23 |
75,000 |
3,500.00 |
|
|
|
|
----------- |
----------- |
|
| PROFIT
FOR THE YEAR |
|
|
22,138.22 |
21,059,601 |
|
|
| APPROPRIATIONS: |
|
|
| Profit
distribution @ 10% (1996: 10%) |
|
15,000,000 |
15,000,000 |
|
| Transfer
to statutory reserve |
|
4,427,645 |
4,211.92 |
|
| Transfer
to general reserve |
|
-- |
1,847,681 |
|
|
|
|
|
|
19,427,645 |
21,059,601 |
|
| Unappropriated
profit carried forward |
|
|
2,710,578 |
-- |
|
|
|
|
|
|
=========== |
=========== |
|
|
| These
accounts should be read in conjunction with the attached notes. |
|
|
|
| Chief Executive |
Director |
|
Director |
|
|
| B.R.R.
Investment |
B.R.R. Investments |
|
B.R.R. Investments |
|
| (Pvt.)limited |
(Pvt)Limited |
|
(Pvt.)limited |
|
|
|
|
| Cash
Flow Statement for the year ended June 30,1997 |
|
|
|
|
|
1997 |
1996 |
|
|
|
|
Rupees |
Rupees |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
| PROFIT
BEFORE TAXATION |
|
|
22,213,223 |
24,559.60 |
|
|
| Adjustments
of non cash and other items: |
|
| Gain
on sale of fixed assets |
|
|
(35,622) |
--- |
|
| Depreciation |
|
|
|
25,600,814 |
1,342.54 |
|
| Provision
for doubtful debts |
|
|
2,287,200 |
1,892.63 |
|
| Provision
for diminution in value of Investments |
|
2,200,000 |
700,000 |
|
| Gain
on sale of investments |
|
|
(20,800) |
(3,269.399) |
|
| Financial
charges |
|
|
24,225,276 |
11,296,022 |
|
| Operating profit
before changes in operating |
|
----------- |
----------- |
|
| asset and |
liabilities |
|
|
76,470,091 |
36,521.40 |
|
|
| CHANGES
IN OPERATING ASSETS AND LIABILITIES |
|
| Increase
in customers' security deposits |
|
|
14,375,713 |
1,508.36 |
|
| (Decrease)
in due to Modaraba company |
|
|
(234,638) |
(5,925,299) |
|
| Increase
in accrued expenses & other liabilities |
|
720,005 |
552.12 |
|
| Decrease
in long term Musharaka arrangements |
|
|
-- |
13,882,136 |
|
| Decrease
in Long term Morabaha arrangements |
|
|
2,245.73 |
8,479,160 |
|
| Decrease/(lncrease)
in hire purchase arrangements |
|
4,658,596 |
(2,301.775) |
|
| Decrease
in Morabaha transactions |
|
|
100,000 |
1,488,045 |
|
| Decrease/(Increase)
in Musharaka arrangements |
|
6,671,140 |
(1,696.140) |
|
| Decrease/(Increase)
in other receivables |
|
|
11,938,948 |
(4,292,979) |
|
|
|
|
----------- |
----------- |
|
|
|
|
116,945,583 |
48,215,027 |
|
| Taxes paid |
|
|
|
(4,205,812) |
(602.238) |
|
| Financial
charges paid |
|
|
(15,634,821) |
(7,535,393) |
|
|
|
|
|
----------- |
----------- |
|
| Net
cash flow from operating activities |
|
97,104,950 |
40,077,396 |
|
|
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
| Increase
in Long Term Certificates of Investment |
|
-- |
(175,938.750) |
|
| Assets
acquired for leasing activities |
|
|
(130,615,380) |
(45.853,826) |
|
| Sale
proceeds of investments |
|
|
79,225 |
23,507,632 |
|
| Sale
proceeds from sale of fixed assets |
|
|
590,960 |
-- |
|
| Investments
acquired |
|
|
|
(6,026,650) |
(564,970) |
|
| Net
cash flow from investing activities |
|
|
(135,971,845) |
(198,849,914) |
|
|
|
|
|
|
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
| Redeemable
capital |
|
|
|
-- |
175,938,750 |
|
| Long
term Morabaha Finance obtained (net) |
|
|
53,250,000 |
45,333,333 |
|
| Short
term finance paid |
|
|
|
(20,000,000) |
(16,000,000) |
|
| Profit
paid to Modaraba certificate holders |
|
|
(14,907,381) |
(14,850,154) |
|
| Net
cash flow from financing activities |
|
|
18,342,619 |
190,421,929 |
|
|
------------ |
------------ |
|
| Net
increase in cash and cash equivalents |
|
(20,524,276) |
31,649,411 |
|
| Cash and cash
equivalents at beginning of the |
|
|
|
| year |
|
73,130,388 |
41,480,977 |
|
|
|
|
|
------------ |
------------ |
|
| Cash
and cash equivalents at end of the year |
|
52,606,112 |
73,130,388 |
|
|
|
============ |
============ |
|
|
|
|
|
| Note
to the Accounts for the year ended June 30,1997 |
|
|
| 1.
STATUS AND NATURE OF BUSINESS |
|
|
| B.
R. R. Second Modaraba is a multipurpose, perpetual Modaraba registered under
the Modaraba Companies |
|
| and
Modarabas (Floatation & 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 is engaged in the deployment of funds in Musharakas, Morabahas
Leasing. Equity |
|
| Participation
and trading of marketable securities. |
|
|
|
|
| A
decision has been taken to amalgamate the operations of B.R.R. Second
Modaraba with B.R.R. Capital |
|
| Modaraba
both 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 Capital Modaraba and their management company
and Equity |
|
| International
Modaraba and its management company. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
|
|
| 2.1
Accounting convention |
|
| These
accounts have been prepared under the historical cost convention. |
|
|
| 2.2
Revenue Recognition |
|
|
|
| 2.2.1
Income from Morabaha transactions is recognised on the basis of pro rata
accrual of the profit |
|
| estimated
for the transaction over the period. |
|
|
| 2.2.2
For hire purchase transactions, the unearned finance income is deferred and
amortized to |
|
| income
over the term of hire purchase, applying the annuity method to produce a
constant |
|
| rate of return on the net
investment. |
|
|
| 2.2.3
Lease rentals are recorded as and when the rentals become due. |
|
|
| 2.2.4
Dividend income is recognised at time of closure of share transfer books of
the Company/ |
|
| Modaraba declaring dividend. |
|
|
| 2.2.5
Capital gain/loss arising on sale of marketable securities are accounted for
in the year in which |
|
| it arises. |
|
|
| 2.2.6
Profit |
