| First Fidelity Leasing Modaraba |
|
|
|
|
|
|
|
|
| Annual
Report 1998 |
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| CONTENTS |
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| Corporate
Information |
|
| Directors'
Report |
|
| 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 |
|
|
| Chairman |
|
Mr. Masood Akbar |
|
|
|
|
| Chief
Executive |
|
Mr. Wasim-ul-Haq Osmani |
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|
|
|
| Directors |
|
Mr. Javaid B. Sheikh |
|
|
|
Mr. Arshad I. Khan |
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|
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| Corporate
Secretary |
|
Mr. Imran Hameed |
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|
|
|
| Auditors |
|
Riaz Ahmad & Company |
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|
|
Chartered Accountants |
|
|
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| Legal
Advisor |
|
Cornelius, Lane &
Mufti |
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|
Advocate & Solicitors |
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|
|
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| Bankers |
|
Muslim Commercial Bank
Limited |
|
|
|
Union Bank Limited |
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|
Habib Bank A.G. Zurich |
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|
|
| Modaraba
Company |
|
Fidelity Capital
Management (Private) |
|
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|
Limited (wholly owned
subsidiary of |
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|
|
Fidelity Investment Bank
Limited) |
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|
|
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| Principal
Place of Business |
97-A, Aziz Avenue, Canal
Bank, |
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|
Lahore. |
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| Registrars |
|
Hameed Majeed Associates |
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|
7-Bank Square, H.M. House |
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|
The Mall, Lahore. |
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| DIRECTORS'
REPORT |
|
|
| The
Directors have pleasure in submitting the 7th Annual Report of the Modaraba
together |
|
| with
the audited accounts and the auditors' report for the year ended June 30,
1998. |
|
|
| The
overall business environment during the year remained subdued. According to
the |
|
| Economic
Survey of Pakistan our GDP grew by 5.4 percent during the year 1997-98 as |
|
| compared
to 1.3 percent in the previous year, yet most of the economic targets were
not |
|
| met.
The decline in imports year on year provided a small positive impact on our
current |
|
| account
and balance of payments. However, in the post-nuclear scenario, the
impositions of |
|
| economic
sanctions have struck a major blow to our limited economic achievements of
last |
|
| year. |
|
|
| Almost
four years have now passed since bearish sentiments took hold of the capital
market |
|
| and
are still persisting. Any improvement during this period has only been
short-lived. Investors' |
|
| confidence
in the capital market remained very low for most part of the current year.
KSE- |
|
| 100
index closed at 880 points in June 30, 1998 from 1,566 at the end of June 30,
1997 i.e. |
|
| a
decline of 43.8%. Subsequently KSE Index touched an all time low of 766 in
July 1998. |
|
| The
daily volume on the KSE vary from 80 million to 120 million but only five
major stocks |
|
| account
for 90% of total volume. The rest of the market for all practical purposes
does not |
|
| exist.
Furthermore the decision of the Government of Pakistan to block Foreign
Currency |
|
| Accounts
fearing major withdrawals in view of likely post nuclear sanctions has
totally eroded |
|
| foreign
investors confidence. The foreign fund managers have now started selling
their stocks |
|
| and
even the low prices of some blue chip stocks have not convinced them to
reinvest the |
|
| proceeds
in the local market. It is going to take some time before foreign funds again
make |
|
| their
presence felt locally. |
|
|
| The
Modaraba during the year has earned a net profit before tax of Rs.13.21
million as |
|
| compared
to Rs. 12.45 million earned last year. In arriving at this profit, provisions
have been |
|
| made
against doubtful lease rental receivables amounting to Rs.19.6 million.
Adopting a |
|
| prudent
approach and instead of deferring matters, the Modaraba has always made
substantial |
|
| provisions
in its accounts which in case of an economic revival can turn into additional
reserves |
|
| for
the Modaraba. |
|
|
| FUTURE
OUTLOOK |
|
| In
the past, we did not come up with the required strategy to overcome the
economic crisis, |
|
| nor
undertook efforts to delve on the solutions considered to be the correct
ones. Although it |
|
| is
very easy to blame post nuclear sanctions for the crisis but careful analysis
show that it |
|
| has
been in the making over the years caused by excessive official spending and
economic |
|
| mismanagement. |
|
|
| We
have to keep in mind that the economic bailout package being negotiated with
IMF and |
|
| other
international agencies is going to bring only temporary relief and it is
imperative that |
|
| long
term strategy to be in place soon to solve the urgent outstanding economic
problems. |
|
| Now
that the economic team at the Federal level has been changed we hope that
consistent |
|
| long
term policies are put in place. |
|
|
| Future
growth of the Modaraba depends very much on economic revival in the country.
A |
|
| majority
of business executives foresee stagnation in economic growth. However, one
hopes |
|
| that
international lending agencies will come forward and provide much needed
assistance |
|
| to
Pakistan. In such a situation we can perceive a moderate growth in economy
and some |
|
| increase
in businesses. Economic growth will not only help create corporate activities
but |
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| also
the businesses which at present have weak financial standing will start
earning and |
|
| able
to meet their liabilities towards Modaraba. |
|
|
| To
tap the middle class and to take benefit of low percentage of default by
small lenders, the |
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| Modaraba
has launched and pursued consumer leasing using a prudent selection criteria. |
|
| The
Modaraba experience in this category is very good and we intend to pursue
this mode |
|
| more
aggressively in the year 1999. |
|
|
| The
Modaraba has made adequate arrangements in its software installations so that |
|
| millennium
bug does not effect its operations. |
|
|
| APPROPRIATION |
|
|
| The
Beard has made following appropriations:- |
|
|
|
Rupees |
|
|
| Net
profit after taxation for the year |
|
15,012,229 |
|
| Un-appropriated
profit brought forward |
|
2,579,869 |
|
|
|
|
---------- |
|
| Available
for appropriation |
|
17,592,098 |
|
|
|
|
| Transfer
to special reserve as per requirement of |
|
| rule
3 (a) of NBFI Circular No. 1 dated December 5, 1991 |
3,002,446 |
|
| Transfer
from general reserve |
|
(10,000,000) |
|
| Transfer
to Final Dividend payable account Rs. 1.15 |
|
| per
certificate |
|
23,728,409 |
|
|
---------- |
|
|
|
|
16,730,855 |
|
|
|
|
---------- |
|
| Unappropriated
profit carried forward |
|
861,243 |
|
|
|
|
========== |
|
|
| DECLARATION
OF DIVIDEND |
|
| The
Directors of Modaraba are pleased to announce a final dividend of 11.50% for
the year |
|
| ended
June 30, 1998. The Certificate Transfer Books of the Modaraba will remain
closed |
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| from
January 08, 1999 to January 16, 1999 (both days inclusive) for determination
of dividend |
|
| entitlement. |
|
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|
|
| AUDITORS |
|
|
| The
present Auditors Messrs. Riaz Ahmed & Co. Chartered Accountants, retire
and being |
|
| eligible,
offer themselves for re-appointment. |
|
|
| In
the end, I conclude by reaffirming the Management's commitment to a sound
approach |
|
| based
on high standards of professional ethics and moral integrity with a note of
thanks to all |
|
| the
staff members of the Modaraba. |
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|
For and on behalf of the |
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|
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|
Board of Directors |
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| Lahore |
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|
MASOOD AKBAR |
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| Dated:
December 18, 1998 |
|
Chairman |
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|
|
|
| AUDITORS'
REPORT TO THE CERTIFICATE HOLDERS |
|
|
| We
have audited the annexed balance sheet as at 30 June 1998 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 1998 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 1998 and the profit and the changes in |
|
| the
sources and application of funds 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 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 |
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| the
modaraba. |
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| Lahore |
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|
RIAZ AHMAD & CO. |
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| Dated:
December 18, 1998 |
|
Chartered Accountants |
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| BALANCE
SHEET |
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| AS
AT JUNE 30, 1998 |
|
|
|
|
1998 |
1997 |
|
|
Note |
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 paid up capital |
3 |
206,333,990 |
206,333,990 |
|
|
|
|
|
| Reserves
and surplus |
|
|
|
|
|
|
|
| Capital
reserve |
|
4 |
17,695,677 |
14,693,231 |
|
| Revenue
reserve-General |
|
|
5,000,000 |
15,000,000 |
|
| Unappropriated
profit |
|
|
861,243 |
2,579,869 |
|
|
|
|
---------- |
---------- |
|
|
|
|
229,890,910 |
238,607,090 |
|
|
|
|
|
| LONG
TERM DEPOSITS |
|
5 |
12,267,353 |
12,216,488 |
|
|
|
|
|
| DEFERRED
TAXATION |
|
|
1,000,000 |
1,000,000 |
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
|
|
|
| Short
term finance |
|
6 |
- |
4,995,700 |
|
| Creditors,
accrued and other liabilities |
7 |
1,888,609 |
2,040,307 |
|
| Provision
for taxation |
|
|
4,972,688 |
11,690,660 |
|
| Dividend
payable |
|
|
23,728,409 |
- |
|
|
|
|
---------- |
---------- |
|
|
|
|
30,589,706 |
18,726,667 |
|
|
|
|
|
|
| CONTINGENCIES
AND COMMITMENTS |
|
|
- |
- |
|
|
|
|
---------- |
---------- |
|
|
|
|
273,747,969 |
270,550,245 |
|
|
|
|
========== |
========== |
|
|
| TANGIBLE
FIXED ASSETS |
|
|
|
|
|
|
| Operating
assets in own use |
|
8 |
148,036 |
998,020 |
|
| Operating
assets given on lease |
|
9 |
105,230,078 |
85,347,179 |
|
|
|
|
---------- |
---------- |
|
|
|
|
105,378,114 |
86,345,199 |
|
|
|
|
|
| INVESTMENTS |
|
10 |
35,925,297 |
33,823,823 |
|
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
|
|
|
|
|
| Morabaha
finances |
|
11 |
42,218,009 |
53,718,009 |
|
| Other
receivables |
|
12 |
28,600,652 |
39,617,549 |
|
| Cash
in hand and bank balances |
|
13 |
61,625,897 |
57,045,665 |
|
|
|
|
---------- |
---------- |
|
|
|
|
132,444,558 |
150,381,223 |
|
|
|
|
---------- |
---------- |
|
|
|
|
273,747,969 |
270,550,245 |
|
|
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| MASOOD
AKBAR |
WASlM-UL-HAQ OSMANI |
|
JAVAID B. SHEIKH |
|
| Chairman |
|
Chief Executive |
|
Director |
|
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
Note |
1998 |
1997 |
|
|
|
Rupees |
Rupees |
|
|
|
|
| REVENUES |
|
|
|
|
|
|
| Lease
rentals |
|
|
21,344,328 |
39,741,993 |
|
| Profit
on morabaha finances |
|
|
9,766,860 |
4,307,505 |
|
| Other
income |
|
14 |
11,530,520 |
8,612,275 |
|
|
|
|
---------- |
---------- |
|
|
|
|
42,641,708 |
52,661,773 |
|
|
|
|
|
| OPERATING
EXPENSES |
|
15 |
16,362,258 |
21,580,502 |
|
| FINANCIAL
AND OTHER CHARGES |
|
16 |
11,745,998 |
17,381,194 |
|
|
|
|
---------- |
---------- |
|
|
|
|
28,108,256 |
38,961,696 |
|
|
|
|
---------- |
---------- |
|
|
|
|
14,533,452 |
13,700,077 |
|
|
|
|
|
|
| MODARABA
COMPANY'S MANAGEMENT FEE |
|
|
1,321,223 |
1,245,462 |
|
|
|
|
---------- |
---------- |
|
| PROFIT
BEFORE TAXATION |
|
|
13,212,229 |
12,454,615 |
|
| PROVISION
FOR TAXATION |
|
17 |
18,000,000 |
(7,190,660) |
|
|
|
|
---------- |
---------- |
|
| PROFIT
AFTER TAXATION |
|
|
15,012,229 |
5,263,955 |
|
| UNAPPROPRIATED
PROFIT BROUGHT FORWARD |
|
2,579,869 |
13,368,705 |
|
|
|
|
---------- |
---------- |
|
| PROFIT
AVAILABLE FOR APPROPRIATION |
|
17,592,098 |
18,632,660 |
|
|
|
|
|
|
|
| APPROPRIATIONS |
|
|
|
| Transfer
to statutory reserve |
|
|
3,002,446 |
1,052,791 |
|
| Transfer
to/(from) general reserve |
|
|
(10,000,000) |
15,000,000 |
|
| Final
Dividend Rs. 1.15 per certificate (1997: Nil) |
23,728,409 |
- |
|
|
|
|
---------- |
---------- |
|
|
|
16,730,855 |
16,052,791 |
|
|
|
---------- |
---------- |
|
| UNAPPROPRIATED
PROFIT |
|
861,243 |
2,579,869 |
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
MASOOD AKBAR |
|
WASIM-UL-HAQ OSMANI |
|
JAVAID B. SHEIKH |
|
|
Chairman |
|
Chief Executive |
|
Director |
|
|
|
|
| STATEMENT
OF SOURCES AND APPLICATION OF FUNDS |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
|
|
1998 |
1997 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
| Cash
generated from/used by operations |
|
12,704,008 |
(35,829,962) |
|
| Long
term advances and deposits - Net |
|
- |
5,999,479 |
|
| Lease
rentals |
|
|
|
14,669,023 |
24,168,741 |
|
| Profit
paid on musharika finance |
|
|
(332,275) |
(114,931) |
|
| Profit
received on morabaha finance |
|
|
9,786,592 |
4,615,174 |
|
| Income
tax paid |
|
|
|
(8,005,914) |
(1,436,866) |
|
|
|
---------- |
---------- |
|
| NET
CASH FLOWS FROM OPERATING ACTIVITIES |
|
28,821,434 |
(2,598,365) |
|
|
|
|
|
|
|
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
|
| Dividend
received |
|
|
|
457,229 |
797,240 |
|
| Sale
proceeds from sale of shares/certificates |
|
6,618,297 |
23,856,981 |
|
| Lessees
security deposits |
|
|
50,865 |
133,133 |
|
| Sale
proceeds of leased assets sold |
|
|
3,325,983 |
702,194 |
|
| Sale
proceeds of own assets sold |
|
|
815,628 |
460,000 |
|
| Fixed
assets acquired-Own use |
|
|
- |
(44,300) |
|
| Fixed
assets-Leased out |
|
|
(35,493,400) |
(2,382,333) |
|
|
|
---------- |
---------- |
|
| NET
CASH FLOWS FROM INVESTING ACTIVITIES |
|
(24,225,398) |
23,522,915 |
|
|
|
|
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
| Dividend
paid |
|
|
|
(15,804) |
(31,686) |
|
|
|
---------- |
---------- |
|
| NET
INCREASE/(DECREASE) IN CASH |
|
|
|
| AND
CASH EQUIVALENT |
|
|
|
4,580,232 |
20,892,864 |
|
|
|
|
|
|
| CASH
AND CASH EQUIVALENT AT THE |
|
|
|
| BEGINNING
OF THE YEAR |
|
|
|
57,045,665 |
36,152,801 |
|
|
|
|
|
|
| CASH
AND CASH EQUIVALENT AT |
|
|
---------- |
---------- |
|
| THE
END OF THE YEAR |
|
|
|
61,625,897 |
57,045,665 |
|
|
|
========== |
========== |
|
|
| CASH
GENERATED FROM/USED BY OPERATIONS |
|
|
|
|
|
| Profit
before taxation |
|
13,212,229 |
12,454,615 |
|
| Adjustment
for non-cash charges and |
|
|
|
| other
items: |
|
|
|
|
|
|
| Provision
for diminution in the value of investment |
|
| and
doubtful lease rentals receivable |
|
11,636,411 |
16,645,707 |
|
| Depreciation |
|
12,327,880 |
18,753,250 |
|
| Amortization
of deferred costs |
|
- |
191,204 |
|
| Profit
on musharika finances obtained |
|
83,174 |
364,032 |
|
| Dividend
income |
|
(457,229) |
(797,240) |
|
| Profit
on morabaha finances given |
|
(9,766,860) |
(4,307,505) |
|
| (Gain)/loss
on sale of fixed assets |
|
(21,042) |
69,920 |
|
| (Gain)/loss
on sale of shares/certificates |
|
(698,342) |
- |
|
| Lease
rentals |
|
(21,344,328) |
(39,741,993) |
|
| Fixed
assets discarded |
|
12,037 |
- |
|
| Working
capital changes |
|
7,720,078 |
(39,461,952) |
|
|
|
---------- |
---------- |
|
|
|
12,704,008 |
(35,829,962) |
|
|
|
========== |
========== |
|
|
|
|
| WORKING
CAPITAL CHANGES |
|
|
|
|
|
|
|
| (Increase)/decrease
in operating assets |
|
|
|
|
|
| Morabaha
finances |
|
|
|
11,500,000 |
(43,218,009) |
|
| Other
receivables |
|
|
|
918,476 |
701,322 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
12,418,476 |
(42,516,687) |
|
|
|
|
|
|
|
|
| Increase/(decrease)
in operating liabilities |
|
|
| Short
term finances |
|
|
|
(4,995,700) |
4,995,700 |
|
| Creditors,
accrued and other liabilities |
|
297,302 |
(1,940,965) |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
(4,698,398) |
3,054,735 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
7,720,078 |
(39,461,952) |
|
|
|
========== |
========== |
|
|
|
MASOOD AKBAR |
|
WASIM-UL-HAQ OSMANI |
|
JAVAID B. SHEIKH |
|
|
Chairman |
|
Chief Executive |
|
Director |
|
|
|
|
|
| NOTES
TO THE ACCOUNTS |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
| 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. It is listed |
|
| on
all the stock exchanges in Pakistan. |
|
|
| The
Modaraba is a perpetual, multipurpose and multidimensional 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
Accounts receivables |
|
| Provision
for doubtful receivables is made/adjusted after a review of the |
|
| outstanding
portfolio at year end on the basis of Prudential Regulations as |
|
| applicable
and management's own judgement. |
|
|
|
|
| 2.4
Investments |
|
| Investments
are valued at cost. Full provision is made against permanent |
|
| diminution
in the value of investments. |
|
|
| 2.5
Revenue recognition |
|
| Rental
income is recognize |
