| FINANCIAL LINK MODARABA |
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|
|
|
| ANNUAL
REPORT 1998 |
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| CONTENTS |
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| Corporate
Information |
|
| Directors'
Review |
|
| Pattern
of Holding of Certificates |
|
| Auditors'
Report |
|
| Balance
Sheet |
|
| Profit
& Loss Account |
|
| Statement
of Changes in Financial Position |
|
| Notes
to the Financial Statements |
|
|
|
|
| CORPORATE
INFORMATION |
|
|
| MODARABA COMPANY: |
Financial Link Limited |
|
|
| BOARD
OF DIRECTORS: |
Shahid Hameed |
Chairman |
Nominee Pak. Libya |
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|
Holding Co. (Pvt) Ltd. |
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|
Syed Ghazanfar Ali |
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Nominee Pak Libya |
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|
Holding Co. (Pvt) Ltd. |
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|
Ibrar Gul Niazi |
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Nominee Pakistan |
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|
Kuwait Investment |
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|
Co. (Pvt) Ltd. |
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|
Faridullah Khan |
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Nominee Saudi Pak |
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Industrial &
Agricultural |
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|
Investment Co. (Pvt) |
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|
Ltd. |
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|
Sajid Ali Abbasi |
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Nominee The Bank of |
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|
Khyber |
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|
Shahid Abdulla |
|
Nominee International |
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|
Brands (Pvt) Ltd. |
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|
Sajjad Haider |
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| COMPANY
SECRETARY: |
Farooq Hashmi |
|
|
| AUDITORS: |
|
Khalid Majid Husain
Rahman, Chartered Accountants. |
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|
| Bankers: |
|
Muslim Commercial Bank
Limited |
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|
United Bank Limited |
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|
| REGISTRAR: |
|
Khalid Majid Husain
Rahman |
|
|
1st Floor, Modern Motors
House, |
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|
Beaumont Road, Karachi. |
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| REGISTERED
OFFICE: |
1st Floor, Modern Motors
House |
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|
Beaumont Road, Karachi. |
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| POSTAL
ADDRESS: |
1st Floor, N.I.C.
Building, Abbasi Shaheed Road, |
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|
Off: Shahra-e-Faisal,
Karachi. |
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|
| DIRECTORS'
REVIEW |
|
|
| The
Board of Directors of Financial Link Limited take pleasure in presenting the
audited accounts of the Financial |
|
| Link
Modaraba for the year ended June 30, 1998. |
|
|
| FINANCIAL
HIGHLIGHTS |
|
|
| Operating
Income/(Loss) |
|
Rupees in thousand |
|
|
|
|
(13,072) |
|
|
|
|
| Less:
Expenses |
|
|
|
1,430 |
|
| Profit
on Musharika & Murabaha obligations |
|
3,684 |
|
| Provision
for diminution in value of investment |
|
4,253 |
|
| Amortization
of deferred cost |
|
|
1,623 |
|
|
---------- |
|
|
|
(10,990) |
|
|
---------- |
|
| Operating
(loss)/Profit for the period |
|
(24,062) |
|
| Other income |
|
|
4,363 |
|
|
|
|
---------- |
|
|
|
|
(19,699) |
|
| Unappropriated
profit brought forward |
|
(74,546) |
|
|
|
|
---------- |
|
| Profit
(loss) carried forward |
|
(94,245) |
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|
========== |
|
|
| The
loss of the company for the period under review is due to the fact that
Financial Link Modaraba's major |
|
| investments
were made in the stock market which remained in bearish state for the last
couple of years. Despite our |
|
| best
efforts, investment could not be liquidated due to heavy potential losses.
This restricted FLM's ability to diversify |
| to
other modes of business, specially "leasing". At the appropriate
time stock market investments will be liquidated |
|
| orderly
to minimize further losses. |
|
|
| PROFIT
DISTRIBUTION |
|
| The
Board of Directors of Madaraba Company have not recommended any dividend for
the year ended June 30, |
|
| 1998.
In addition, no management fee has been given to-the company for the period
under review. |
|
|
| FUTURE
OUTLOOK |
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| Once
the current investments in the Stock Market are orderly liquidated, more
emphasis would be placed on |
|
| diversification
of activities particularly "leasing" for which necessary approvals
are in place. |
|
|
| AUDITORS |
|
| The
Present auditors Messrs. Khalid Majid Husain Rahman, Chartered Accountants
being due for retirement, have |
|
| offered
themselves for re-appointment for the year ending June 30, 1999. Their
appointment has been confirmed by |
|
| the
Board of Directors, subject to the approval by the Registrar of Madaraba
Companies and Modaraba. |
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|
| ACKNOWLEDGEMENT |
|
| The
Board wishes to place on record its appreciation for the dedicated, untiring
and positive efforts of all the |
|
| members
of staff and valuable guidance and assistance extended to us by the Registrar
of Modaraba and the State |
|
| Bank
of Pakistan. |
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|
on behalf of the Board |
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|
FAROOQ HASHMI |
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| Karachi:
December 29, 1998. |
|
Company Secretary |
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|
|
| Pattern
of holding of shares held by the |
|
| Shareholders
as at June 30, 1998 |
|
|
| No. of |
SHARE |
HOLDING |
Total Shares |
|
| Shareholders |
FROM |
TO |
Held |
|
|
| 22 |
1 |
100 |
2,200 |
|
|
| 2,530 |
101 |
500 |
1,254,400 |
|
|
| 52 |
501 |
1000 |
49,000 |
|
|
| 57 |
1001 |
5000 |
153,700 |
|
|
| 38 |
5001 |
10000 |
336,500 |
|
|
| 6 |
10001 |
15000 |
72,500 |
|
|
| 3 |
15001 |
20000 |
55,500 |
|
|
| 2 |
20001 |
25000 |
42,300 |
|
|
| 5 |
25001 |
30000 |
145,100 |
|
|
| 2 |
30001 |
35000 |
67,000 |
|
|
| 2 |
40001 |
45000 |
82,300 |
|
|
| 1 |
45001 |
50000 |
50,000 |
|
|
| 3 |
55001 |
60000 |
173,500 |
|
|
| 4 |
60001 |
65000 |
260,000 |
|
|
| 2 |
65001 |
70000 |
132,500 |
|
|
| 2 |
95001 |
100000 |
200,000 |
|
|
| 1 |
115001 |
120000 |
116,300 |
|
|
| 1 |
145001 |
150000 |
145,400 |
|
|
| 1 |
290001 |
295000 |
290,500 |
|
|
| 3 |
295001 |
300000 |
900,000 |
|
|
| 1 |
340001 |
345000 |
345,000 |
|
|
| 1 |
345001 |
350000 |
348,600 |
|
|
| 2 |
370001 |
375000 |
750,000 |
|
|
| 1 |
580001 |
585000 |
580,800 |
|
|
| 1 |
695001 |
700000 |
696,900 |
|
|
| 1 |
745001 |
750000 |
750,000 |
|
|
| 1 |
1995001 |
2000000 |
2,000,000 |
|
|
| ---------- |
|
---------- |
|
|
| 2,745 |
|
|
10,000,000 |
|
|
| ========== |
|
|
========== |
|
|
| CATEGORIES
OF SHARE HOLDERS |
NUMBER |
SHARES HELD |
PERCENTAGE |
|
| 1.
JOINT STOCK COMPANIES |
12 |
2,449,100 |
24.49 |
|
| 2.
FINANCIAL INSTITUTIONS |
6 |
1,222,300 |
12.22 |
|
| 3.
LEASING/MODARABA COMPANIES |
4 |
172,700 |
1.73 |
|
| 4.
MODARABA COMPANIES |
|
1 |
2,000,000 |
20.00 |
|
| 5.
INSURANCE COMPANIES |
|
2 |
87,500 |
0.88 |
|
| 6.
INVESTMENT COMPANIES |
|
7 |
1,268,800 |
12.69 |
|
| 7.
INDIVIDUALS |
|
2,713 |
2,799,800 |
28.00 |
|
| 8.
ASSOCIATED COMPANIES |
|
0 |
0 |
0.00 |
|
| 9.
FOREIGN INVESTORS |
|
0 |
0 |
0.00 |
|
| 10. OTHERS |
|
0 |
0 |
0.00 |
|
|
|
---------- |
---------- |
---------- |
|
|
|
2,745 |
10,000,000 |
100.00 |
|
|
|
========== |
========== |
========== |
|
|
|
| AUDITORS'
REPORT TO THE CERTIFICATE HOLDERS |
|
|
| We
have audited in accordance with the International Standards on Auditing, the
annexed Balance Sheet |
|
| as
at June 30, 1998 and the related Profit and Loss Account and Statement of
Changes in Financial |
|
| Position
together with the Notes to the financial Statements for the year ended June
30, 1998 of Financial |
|
| Link
Modaraba which are Modaraba Company's (Financial Link 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: |
|
|
|
|
| 1.
as stated in note 14.3 to the financial statements, the Modaraba has paid Rs.
1,594,364 to its |
|
| management
company in violation of section 17(2) of the Modaraba Companies and Modaraba |
|
| (Floatation
and Control) Ordinance, 1980, which prohibits a modaraba company to obtain
loan, |
|
| advance
or credit from the funds of the modaraba: |
|
|
| 2.
(a) in our opinion proper books of account have been kept by the Modaraba
Company in respect |
|
| of
Financial Link 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 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 June 30, |
|
| 1998 and the loss and the changes in the
financial position for the year ended on that |
|
| date; |
|
|
| (ii)
no Zakat was deductible at source under the Zakat and Ushr Ordinance 1980;
and |
|
|
| (iii)
except as stated in paragraph 1 above, the business conducted, investments
made and |
|
| expenditure
incurred by the Modaraba are in accordance with the objects, terms and |
|
| conditions
of the Modaraba. |
|
|
| 3.
Without qualifying our opinion, we draw attention to note 1.2 to the
financial statement which |
|
| interalia
states that the Modaraba has accumulated loss of Rs. 94.24 million (1997: Rs.
74.55 |
|
| million)
during the year ended June 30, 1998 and as of that date the Modaraba's
current liabilities |
|
| exceeded
its current assets by Rs. 23.07 million (1997: Rs. 32.93 million). Management
is |
|
| working
on a plan to reduce expenses and generated enough cash flow to pay the
liabilities. For |
|
| these
reasons, these financial statements have been prepared on a going concern
assumption. |
|
|
|
|
KHALID MAJID HUSAIN RAHMAN |
|
|
|
Chartered Accountant |
|
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1998 |
|
|
|
|
|
June 30, |
June 30, |
|
|
|
|
1998 |
1997 |
|
|
|
Note |
Rupees |
Rupees |
|
| CAPITAL
AND RESERVES |
|
|
|
|
|
|
|
| Authorised
capital |
|
|
|
| 25,000,000
modaraba certificates of Rs. 10 each |
|
250,000,000 |
250,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up capital |
|
| 10,000,000
modaraba certificates of Rs. 10 each |
|
| fully
paid in cash |
|
|
100,000,000 |
100,000,000 |
|
| Statutory
reserve |
|
|
3 |
1,368,000 |
1,368,000 |
|
|
|
|
|
|
| Accumulated
loss |
|
|
|
(94,244,751) |
(74,545,605) |
|
|
|
|
---------- |
---------- |
|
|
|
|
7,123,249 |
26,822,395 |
|
|
|
|
|
|
| OBLIGATIONS
UNDER FINANCE LEASE |
|
4 |
17,300 |
- |
|
| CURRENT
LIABILITIES |
|
|
|
|
|
| Current
portion of obligations under finance lease |
11,658 |
- |
|
| Musharika
obligations |
|
|
5 |
30,702,659 |
44,317,784 |
|
| Creditors,
accured expenses and other liabilities |
6 |
16,358,325 |
20,997,727 |
|
| Unclaimed
profit distribution |
|
|
69,016 |
69,016 |
|
|
|
|
---------- |
---------- |
|
|
|
|
47,141,658 |
65,384,527 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
54,282,207 |
92,206,922 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these financial statements. |
|
|
|
|
|
June 30, |
June 30, |
|
|
|
1998 |
1997 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| TANGIBLE
FIXED ASSETS |
|
7 |
1,440 |
480,318 |
|
|
|
|
|
| ASSETS
SUBJECT TO FINANCE LEASE |
|
8 |
33,813 |
- |
|
|
|
|
|
| LONG
TERM INVESTMENTS |
|
9 |
29,308,775 |
56,778,250 |
|
|
|
|
|
| DEFERRED
COSTS |
|
10 |
872,220 |
2,494,875 |
|
|
|
|
| CURRENT
ASSETS |
|
|
|
|
|
|
| Short
term investments |
|
11 |
5,392,366 |
14,021,200 |
|
| Musharika
receivable |
|
12 |
8,601,404 |
8,800,000 |
|
| Debtors |
|
13 |
1,027,579 |
372,000 |
|
| Advances,
prepayments and other receivables |
14 |
7,852,052 |
8,681,656 |
|
| Cash
and bank balances |
|
15 |
1,192,558 |
578,623 |
|
|
|
|
---------- |
---------- |
|
|
|
|
24,065,959 |
32,453,479 |
|
|
|
|
---------- |
---------- |
|
|
|
|
54,282,207 |
92,206,922 |
|
|
|
|
========== |
========== |
|
|
| Director |
|
Director |
|
Director |
|
|
| Financial
Link Limited |
Financial Link Limited |
Financial Link Limited |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
|
June 30, |
June 30, |
|
|
|
1998 |
1997 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| Profit
on musharika receivable |
|
|
1,956,983 |
2,710,354 |
|
| Loss
on sale of investments |
|
|
(16,112,964) |
(6,049,493) |
|
| Dividend
income |
|
|
1,083,750 |
1,881,000 |
|
| Financial
advisory fee from an associated undertaking |
- |
290,431 |
|
|
|
|
---------- |
---------- |
|
|
|
|
(13,072,231) |
(1,167,708) |
|
|
|
|
| Operating
expenses |
|
16 |
1,430,487 |
2,915,126 |
|
| Profit
on musharika obligations |
|
|
3,683,575 |
10,354,814 |
|
| Amortisation
of deferred cost |
|
|
1,622,655 |
2,731,871 |
|
| Provision
for diminution in value of investments |
4,253,242 |
8,284,403 |
|
|
|
|
---------- |
---------- |
|
|
|
|
(10,989,959) |
(24,286,214) |
|
|
|
|
---------- |
---------- |
|
| Operating
loss for the year |
|
|
(24,062,190) |
(25,453,922) |
|
|
|
|
| Other income |
|
17 |
4,363,044 |
804,041 |
|
|
|
|
---------- |
---------- |
|
| Loss
for the year |
|
|
(19,699,146) |
(24,649,881) |
|
| Accumulated
loss carried forward |
|
|
(74,545,605) |
(49,895,724) |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
(94,244,751) |
(74,545,605) |
|
|
|
|
========== |
========== |
|
|
|
|
| The
annexed notes form an integral part of these financial statements. |
|
|
| Director |
|
Director |
|
Director |
|
| Financial
Link Limited |
Financial Link Limited |
Financial Link Limited |
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| (CASH
FLOW STATEMENT) |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
|
June 30, |
June 30, |
|
|
|
1998 |
1997 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
| Cash
generated from operations (Note 18) |
|
5,796,958 |
11,626,528 |
|
| Dividend
received |
|
|
1,083,750 |
2,969,844 |
|
|
|
|
---------- |
---------- |
|
| Net
cash generated from operating activities |
|
6,880,708 |
14,596,372 |
|
|
|
|
|
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
| Proceeds
on disposal of fixed assets |
|
850,000 |
985,000 |
|
| Purchase
of fixed assets |
|
|
(1,600) |
(17,310) |
|
| proceeds
from sale of long term investments |
|
12,035,308 |
8,464,850 |
|
| Purchase
of long term investments |
|
|
(2,840) |
(106,000) |
|
|
|
|
---------- |
---------- |
|
| Net
cash generated from investing activities |
|
12,880,868 |
9,326,540 |
|
|
|
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
| Proceeds
from musharika obligation |
|
|
- |
534,894 |
|
| Payment
of musharika obligation |
|
|
(13,615,125) |
(18,060,671) |
|
| Payment
of profit on musharika obligations |
|
(5,518,366) |
(7,297,904) |
|
| Payment
against finance lease |
|
|
(8,612) |
- |
|
| Payment
of financial charges |
|
|
(5,538) |
- |
|
|
|
|
---------- |
---------- |
|
| Net
cash used in financing activities |
|
(19,147,641) |
(24,823,681) |
|
|
|
|
| NET
INCREASE/(DECREASE) IN CASH AND |
|
|
| BANK
BALANCES |
|
|
613,935 |
(900,769) |
|
|
|
|
|
|
| OPENING
CASH AND BANK BALANCES |
|
|
578,623 |
1,479,392 |
|
|
|
|
---------- |
---------- |
|
| CLOSING
CASH AND BANK BALANCES |
|
|
1,192,558 |
578,623 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these financial statements. |
|
|
| Director |
|
Director |
|
Director |
|
| Financial
Link Limited |
Financial Link Limited |
Financial Link Limited |
|
|
|
|
|
|
|
|
|
|
|
| NOTES
TO THE FINANCIAL STATEMENTS |
|
| FOR
THE YEAR ENDED JUNE 30, 1998 |
|
|
|
| 1.
LEGAL STATUS AND NATURE OF BUSINESS |
|
|
|
| 1.1
Financial Link Modaraba was formed under the Modaraba Companies and Modaraba
(Floatation |
|
| and
Control) Ordinance, 1980 and the Rules framed thereunder and is managed by
Financial |
|
| Link
Limited. The Modaraba was floated on January 09, 1994 and is commenced its
operation in |
|
| March, 1994. |
|
|
|
|
|
| The
Modaraba is a perpetual and multipurpose modaraba and is engaged in venture
capital, |
|
| equity
investment, musharika financing arrangement and financial advisory services. |
|
|
| 1.2
The Modaraba has accumulated losses of Rs. 94.24 million as at June 30, 1998
(1997: Rs. 74.55 |
|
| million)
as against its paid-up capital of Rs. 100 million and statutory reserve of
Rs. 1.37 million. |
|
| The
Modaraba incurred a net loss of Rs. 19.69 million during the year (1997: Rs.
24.64 million). |
|
| The
Modaraba's current liabilities exceed its current assets by Rs. 23.07 million
(1997: Rs. 32.93 |
|
| million).
The Modaraba has obtained significant musharika financing on which it is
paying |
|
| profit.
Although expenses of the Modaraba have been reduced significantly, immediate
attention |
|
| has
been given by the management on generating enough cash flows by selling
investments in |
|
| listed
securities in order to pay the liabilities. For these reasons, these
financial statements have |
|
| been
prepared under the going concern assumption. |
|
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
|
| 2.1
Accounting convention |
|
| These
financial statements have been prepared under the historical cost convention. |
|
|
| 2.2
Fixed assets and depreciation |
|
|
|
|
| 2.2.1 Owned |
|
|
| Fixed
assets are stated at cost less accumulated depreciation. Depreciation is
charged to income |
|
| applying
the straight line method. Full year's depreciation is charged on additions
while no |
|
| depreciation
is charged on deletion during the year. |
|
|
| Normal
repairs and maintenance are charged to income as and when incurred. |
|
|
|
|
| Gains
and losses on disposal of assets are taken to the profit and loss account. |
|
|
| 2.2.2 Leased |
|
| Assets
subject to finance leases are stated at the lower of present value of minimum
lease |
|
| payments
under the lease agreements and the fair value of the assets. The related
obligations |
|
| under
the leases are accounted for as liabilities. Depreciation is charged to
income applying the |
|
| straight
line method. |
|
|
| 2.3
Deferred costs |
|
| Expenses
incurred in connection with incorporation and floatation of the Modaraba are
being |
|
| written
off over a period of sixty months on a proportionate basis. |
|
|
| 2.4
Investments |
|
| Long
term investments are stated at cost and provisions are made for other than
term |
|
| porary
diminution in value, if any. |
|
|
|
|
| Short
term investments are carried at the lower of average cost and market value |
|
| determined
on an aggregate portfolio basis. |
|
|
| 2.5
Revenue recognition |
|
|
| a)
Profit from musharika transactions is recognised on the basis of pro-rata
accrual of the |
|
| estimated
profit during the year. |
|
| b)
Gain/loss on sale of investments is accounted for in the period in which it
arises. |
|
| c)
Income from financial advisory services is recognised as and when services
are rendered. |
|
| d)
Dividend income is recognised when the right to the dividend is established. |
|
| e)
Profit on PLS account is recognised on accrual basis. |
|
|
| 3.
STATUTORY RESERVE |
|
|
| This
reserve has been created under the State Bank of Pakistan regulations for Non
Bank |
|
| Financial
Institutions. |
|
|
|
|
|
|
|
| 4.
OBLIGATIONS UNDER FINANCE LEASE |
|
|
|
|
|
|
|
| 4.1
The rentals under the lease agreements aggregating Rs. 36,790 are payable in
equal monthly |
|
| installments
under lease agreements latest by 2001. Taxes repairs, replacement and
insurance |
|
| costs,
if any, are to be borne by the Modaraba. The rate of financing is equal to
22.33% per |
|
| annum
which rate has been used as discounting factor. |
|
|
|
|
| 4.2
The minimum lease payments for which the Modaraba has committed to pay in
future under the |
|
| lease
agreements are due as follows: |
|
|
|
|
|
|
|
|
1998 |
1997 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| Year
ending June 30, 1999 |
|
16,980 |
- |
|
