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First Confidence Modaraba
Annual report for the Year
Ended 30 June 1997
CONTENTS
Modaraba Information
Directors' Report
Statement under Rule 12(1) of the Modaraba Companies
and Modaraba Rules, 1981
Auditors' Report
Balance Sheet
Profit & Loss Account
Statement of Changes in Financial Position
Notes to the Accounts
Pattern of Certificates Holding
Modaraba Information
Modaraba Company			Confidence Modaraba Management (Pvt.) Ltd.
Directors of Modaraba Company			Esmail Ahmed Bagasrawala		Chairman
			Shah Abu Saad Ahmed		Chief Executive
			Mohammad Saleem Adam
Auditors of the Modaraba			Taseer Hadi Khalid & Co.
			Chartered Accountants
Auditors of the Modaraba Company			Daudally, Lalani & Company
			Chartered Accountants
Bankers			Askari Commercial Bank Ltd.
			Habib Bank AG Zurich
			Faysal Bank Limited
			Credit Agricole Indosuez
			Soneri Bank Limited
			Metropolitan Bank Limited
			Muslim Commercial Bank Ltd.
			Prudential Commercial Bank Ltd.
Registered Office			6th Floor, AI-Falah Court,
			I. I. Chundrigar Road, Karachi-74200 Pakistan.
			Ph : 2634249-51, 2635011-13
			Fax No. 00-9221-2631310
Registrars and
Share Registration Office			Hameed Majeed Associates (Pvt.) Ltd.
			5th Floor, Karachi Chambers,
			Hasrat Mohani Road, Karachi.
			Ph: 2424826-2412754
Report of the Directors of Modaraba Company
For the year ended 30 June 1997
ALLAH IN HIS BENIGN MERCY has granted us an opportunity to present the audited accounts of the
First Confidence Modaraba for the year ended 30 June 1997
Financial Results
Financial results are summarised as under :-
					Year ended	Eighteen months
					30 June	period ended
					1997	30 June 1996
					(Rupees in thousands)
Profit before Modaraba Company's
management fee					10,775	11,640
Less: Modaraba Company's management fee					(980)	(1,058)
					----------	----------
Profit before taxation					9,795	10,582
Taxation - current					(332)	-
					----------	----------
Profit after taxation					9,463	10,582
Add: Unappropriated profit brought forward					187	796
					----------	----------
Profit available for appropriation					9,650	11,378
Appropriations
Interim-profit distribution: Nil (1996: 6.5%)					-	3,933
Final-profit distribution: 10% (1996: 8.5%)					6,050	5,142
Transfer to statutory reserve					1,893	2,116
					----------	----------
					7,943	11,191
					----------	----------
Unappropriated profit carded forward					1,707	187
					==========	==========
Operation during the period under review
In our report last year we had explained to our certificate holders the reasons due to which our import &
export business had suffered set back. Same conditions persisted during the year under review and as such
our import, export and trading business have been nominal. Notwithstanding the unfavourable conditions,
we are determined to revive our export & import business during the current yea? and we have taken steps to
achieve our goal. Our leasing income during the year under review increased to Rs. 11.527 million as against
Rs. 2.551 million for the period ended 30 June 1996.
As in the past, we continue to take a realistic view of our investment in shares quoted in the Stock Exchange
that's why in this year we have disposed off number of investments in marketable securities and have
reversed the provision for diminution in the value of marketable securities upto the extent of Rs. 3.123
million. Despite of all such drawbacks we have declared the 10% dividend to our certificate holders. The
Certificate Transfer Books of Modaraba will be closed from 11 December 1997 to 18 December 1997 (both
days inclusive).
Future Prospects
Our certificate holders would observe that this modaraba continues to be financially sound and its
investments except in shares are risk free. The profitability of the modaraba shall Insha-Allah increase
considerably with the revival of import / export business and larger investment in leases.
Appointment of Auditors
The present auditors Messrs. Taseer Hadi Khalid & Co. being due for retirement, have offered themselves
for re-appointment for the year ending 30 June 1998. Subject to the approval by the Registrar of Modaraba
Companies and Modaraba, their appointment has been confirmed by the Board.
Acknowledgment
The Board is grateful to our certificate holders for their continued Confidence, the State Bank of Pakistan,
Corporate Law Authority and Registrar Modaraba Companies & Modaraba for guidance and to the staff for
their dedicated services and sincere efforts for the cause of Modaraba.
Statement Explaining The Reason for Non-Compliance
Of The Provision Of Rule 12(1) Of The
Modaraba Companies and Modaraba Rules, 1981
Mr. Esmail Ahmed Bagasrawala one of the three directors of the Management Company
(Confidence Modaraba Management (Pvt.) Ltd.) is out of Pakistan in connection with his medical
treatment. As such the Balance Sheet, Profit and Loss Account and Statement of Changes in Financial
Position of the First Confidence Modaraba for the year ended 30 June 1997 have been signed by the Chief
Executive and the remaining other Director of the Management Company.
Chief Executive			Director
Confidence Modaraba			Confidence Modaraba
Management (Pvt) Ltd.			Management (Pvt) Ltd.
Karachi: November 15, 1997
Auditors' Report to the Certificate Holders
We have audited the annexed balance sheet as at 30 June 1997 and the related profit and loss account and
statement of changes in financial position together with the notes to the accounts for the year ended 30 June
1997 of First Confidence Modaraba which are Modaraba Company's {Confidence Modaraba
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 accounts have been kept by the Modaraba Company in respect
of First Confidence 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 explanation given to us;
(i) The balance sheet and the related profit and loss account and statement of changes in
financial position, 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 1997
and the profit and the changes in financial position for the year ended on that date;
(ii) Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 have 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.
				Taseer Hadi Khalid & Co.
Karachi Nov 5, 1997				Chartered Accountants
Balance Sheet as at 30 June 1997
				Note	30 June	30 June
					1997	1996
CAPITAL AND RESERVES
CERTIFICATE CAPITAL
Authorised
10,000,000 Modaraba Certificates
of Rs. 10 each					100,000,000	100,000,000
					==========	==========
Issued, subscribed and paid-up				3	60,500,000	60,500,000
Statutory reserve				4	7,920,513	6,027,943
Unappropriated-profit					1,707,051	186,770
					----------	----------
					70,127,564	66,714,713
LONG TERM LIABILITIES
Security deposits on leases					3,528,414	2,611,471
CURRENT LIABILITIES
Short-term musharaka finance-secured				5	3,448,316	-
Short-term morabaha finance-secured				6	500,000	26,400,000
Creditors, accrued expenses
and other liabilities				7	298,978	4,458,399
Management fee payable					979,559	1,058,267
Lease rentals received in advance					-	107,052
Unclaimed profit distribution					145,314	130,819
Taxation					332,740	-
Proposed profit distribution					6,050,000	5,142,500
					----------	----------
					11,754,907	37,297,037
					----------	----------
				Rupees	85,410,885	106,623,221
					==========	==========
TANGIBLE FIXED ASSETS
Operating assets-At cost less
accumulated depreciation				8	1,280,045	1,655,236
NET INVESTMENT IN LEASES				9	38,022,236	43,118,778
DEFERRED COSTS				10	-	158,069
CURRENT ASSETS
Stock-in-trade				11	1,242,407	3,718,811
Current portion of net investment in leases				9	14,053,868	9,944,698
Marketable securities				12	8,008,768	17,910,952
Morabaha transaction					-	10,000,000
Musharaka arrangement				13	24,496	924,496
Trade debts-unsecured-considered good		m			-	391,375
Advances, deposits, prepayments
& other receivables				14	14,668,838	16,959,885
Cash and bank balances				15	8,110,227	1,840,921
					----------	----------
					46,108,604	61,691,138
					----------	----------
Rupees					85,410,885	106,623,221
					==========	==========
These accounts should be read in conjunction with the attached notes.
Profit and Loss Account
For the year ended 30 June 1997
				Note	Year ended	Eighteen months
					30 June 1997	period ended
						30 June 1996
Trading profit				16	478,924	8,186,965
Profit on musharaka arrangement					116,184	1,981,694
Profit on morabaha transaction					35,479	3,057,167
Leasing income					11,527,337	2,551,319
Other (loss) / revenue				17	(2,043,023)	345,954
					----------	----------
					10,114,901	16,123,099
Operating expenses					----------	----------
Administrative and selling				18	2,579,898	3,582,452
Amortisation of deferred costs					158,069	203,229
Financial charges				19	1,577,790	7,013,620
					----------	----------
					4,315,757	10,799,301
					----------	----------
Operating profit					5,799,144	5,323,798
Other income				20	1,852,782	12,155,963
					----------	----------
					7,651,926	17,479,761
Reversal / (Provison) for diminution in the
value of marketable securities					3,123,224	(5,838,824)
Profit before modaraba company's					----------	----------
management fee					10,775,150	11,640,937
Modaraba company's management fee					979,559	1,058,267
					----------	----------
Profit before taxation					9,795,591	10,582,670
Taxation-current				22	(332,740)	-
					----------	----------
Profit after taxation					9,462,851	10,582,670
					----------	----------
Unappropriated profit brought forward					186,770	795,634
Profit available for appropriation					9,649,621	11,378,304
Appropriations:
Interim profit distribution Nil (1996:6.5 %)					-	3,932,500
Proposed final profit distribution: 10 % (1996: 8.5 %)					6,050,000	5,142,500
Transfer to statutory reserve					1,892,570	2,116,534
					----------	----------
					7,942,570	11,191,534
					----------	----------
Unappropriated profit				Rupees	1,707,051	186,770
					==========	==========
These accounts should be read in conjunction with the attached notes.
Statement of Changes in Financial Position
For the year ended 30 June 1997
					Year ended	Eighteen months
					30 June 1997	period ended
						30 June 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation					9,795,591	10,582,670
Adjustments for
Depreciation					401,921	602,403
Amortisation of deferred costs					158,069	203,229
Gain on sale of fixed assets					(24,230)	-
Loss on sale of marketable securities					2,545,169	1,452,889
Dividen0 income					(502,147)	(1,551,343)
Underwriting fee					-	(247,500)
Profit on musharaka arrangement					(116,184)	(1,981,694)
Profit on short term morabaha finance					1,445,835	6,246,237
(Reversal)/Provision for diminution
in value of marketable securities					(3,123,224)	5,838,824
					----------	----------
Operating profit					10,580,800	21,145,715
Decrease/(Increase) in net investment in lease finance					987,374	(53,063,476)
					----------	----------
					11,568,174	(31,917,761)
					----------	----------
(Increase)/decrease in operating assets
Stock in trade					2,476,404	12,991,797
Trade debts					391,375	(391,375)
Advances, deposits, prepayments
and other receivables					2,610,690	(3,743,357)
					----------	----------
					5,478,469	8,857,065
					----------	----------
Increase/(decrease) in operating liabilities
Creditors, accrued expenses and other liabilities					(3,473,300)	(17,963,903)
Lease rentals received in advance					(107,052)	107,052
Management fee payable					(78,708)	(481,749)
					----------	----------
					(3,659,060)	(18,338,600)
					----------	----------
Cash generated from/(used for) operations					13,387,583	(41,399,296)
Income tax paid					(1,237,723)	(9,978,438)
Profit distributed					(5,128,005)	(13,200,869)
Net cash generated from/(used for)					----------	----------
operating activities				c/f	7,021,855	(64,578,603)
					Year ended	Eighteen months
					30 June 1997	period ended
						30 June 1996
Net cash generated from/(used for)
operating activities				b/f	7,021,855	(64,578,603)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of securities					10,807,050	15,260,497
Purchase of securities					(326,812)	(26,441,084)
Dividend Income					892,267	1,167,323
Underwriting fee					-	247,500
Musharaka arrangement					900,000	26,575,504
Purchase of fixed assets					(37,500)	(222,292)
Sale proceeds of fixed assets					35,000	-
Security deposit on leases					916,943	2,611,471
Morabaha transaction					10,000,000	(10,000,000)
Profit on musharaka arrangement					644,143	1,887,091
					----------	----------
Net cash generated from investing activities					23,831,091	11,086,010
					----------	----------
					30,852,946	(53,492,593)
					----------	----------
CASH FLOW FROM FINANCING ACTIVITIES
Changes in short term musharaka finance					3,448,316	-
Changes in short term morabaha finance					(25,900,000)	26,400,000
Profit on short term morabaha finance					(2,131,956)	(5,416,846)
					----------	----------
Net cash (used for)/generated from financing activities					(24,583,640)	20,983,154
					----------	----------
Net Increase/(decrease) in cash and cash equivalents					6,269,306	(32,509,439)
Cash & cash equivalents at the beginning
of the year/period					1,840,921	34,350,360
					----------	----------
Cash & cash equivalents at the end
of the year/period				Rupees	8,110,227	1,840,921
					==========	==========
Notes to the Accounts
For the year ended 30 June 1997
1. LEGAL STATUS AND NATURE OF BUSINESS
First Confidence Modaraba is a multipurpose, perpetual modaraba registered under the Modaraba
Companies and Modaraba (Floatation and Control) Ordinance, 1980 and rules framed thereunder and
is managed by Confidence Modaraba Management (Private) Limited, a company incorporated in
Pakistan under the Companies Ordinance, 1984 and registered with the Registrar of Modaraba
Companies an Modaraba under the Modaraba Companies and Modaraba (Floatation and Control)
Ordinance, 1980. The Modaraba is listed on Karachi Stock Exchange and is primarily engaged in
leasing of plant, machinery, motor vehicles, computers, furniture & equipments etc., Morabaha and
Musharaka financing, commodity trading, investment in marketable securities and other related
business in accordance with the injunctions of Islam.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Accounting convention.
These accounts have been prepared under the historical cost convention.
2.2 Investment in lease finance
The Modaraba provides asset on leasing arrangements to its customers under the lease
agreements as approved by the Religious Board. These leases are recorded in the books of
accounts as finance lease in accordance with International Accounting Standard 17.
2.3 Tangible fixed assets 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.
A full year's depreciation is charged on assets acquired during the year while no depreciation is
charged on assets disposed off during the year. Depreciation has however been provided on
additions during the year.
Maintenance and normal repairs are charged to income as and when incurred.
Gain and loss on disposal of fixed assets is included in income currently.