| First Equity Modaraba |
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|
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| Annual
Report 2000 |
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|
First Equity Modaraba |
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|
is committed to strive for excellence |
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|
in all areas of its activity |
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We view our business objective |
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of providing distinctive financial products |
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and services that promote commerce and industry |
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within the context of our overall objective |
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of contributing to the nation's prosperity |
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| CONTENTS |
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|
| REPORT
OF THE DIRECTORS |
|
| AUDITORS'
REPORT TO THE CERTIFICATE HOLDERS |
|
| BALANCE
SHEET |
|
| PROFIT
AND LOSS ACCOUNT |
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| NOTES
TO THE FINANCIAL STATEMENTS |
|
| PATTERN
OF CERTIFICATE HOLDING |
|
| CORPORATE
INFORMATION |
|
| BUSINESS
AND INVESTOR INFORMATION |
|
|
|
| REPORT
OF THE DIRECTORS OF THE MODARABA COMPANY |
|
|
| The
Directors of Premier Financial Services (Private) Limited, the management
company of |
|
| FIRST
EQUITY MODARABA, present their report and the audited financial statements of |
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| the
Modaraba for the year ended June 30, 2000. |
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| Financial
Results |
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| The
profit for the year before management fee and provisions amounted to Rs. 65
million, |
|
| is
improved by 13% from the last half year's reported profit of Rs. 29 million
and 18% from |
|
| the
corresponding full year. The substantial write back of the provision for
diminution in |
|
| the
value of investments as anticipated in the last half year was negated by
fresh |
|
| provisioning
requirement at the year end for non performing assets, thus affecting the |
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| available
profit by Rs. 9 million. Despite of providing for non performing assets the
earnings |
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| per
certificate at June 30, 2000 comes to Rs. 1.90 approximately the same as of
the last year's |
|
| Rs.
1.91. This performance, with our conservative income recognition criteria
dictated by |
|
| prudence,
is cause for satisfaction. |
|
|
| Profit
and Reserves |
|
Rupees |
|
|
|
|
| Profit
for the year after tax is |
|
49,903,297 |
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| which
together with unappropriated |
|
| profit
brought forward of |
|
18,982,816 |
|
|
|
|
------------------ |
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| makes
available for appropriation |
|
68,886,113 |
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| from
which the Directors have decided to |
|
|
| transfer to |
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| -
special reserve |
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|
4,995,000 |
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| - general reserve |
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|
20,000,000 |
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| pay
a cash dividend of |
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|
41,952,000 |
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|
------------------ |
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|
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|
66,947,000 |
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|
|
|
------------------ |
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| and
carry forward as unappropriated profit |
|
1,939,113 |
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|
|
|
========== |
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| Regulation
and Taxation |
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| With
the new Prudential Regulations specifically for modarabas in place, the
managers |
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| have
to respond while investors need to balance the equation. Regulators now
sought for |
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| diversification
with more stringent regulations. Allowing increase in cash payout as a |
|
| result
of decrease in mandatory reserve at the cost of the financial health of a
modaraba will |
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| aggravate
the resource mobilisation problems of already cash starved sector. |
|
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| Conditional
tax exemption needs to be liberalised especially after Regulators have
permitted |
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| issue
of bonus certificates. Tailor made treasury stock rules specifically for
modarabas is |
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| demand
of the time and may bring value to the investor. |
|
|
| Business
Environment and Performance |
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| Our
adherence to the financial sectors' dependence on trade and industry remains
valid. |
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| Multilateral
assistance to Pakistan has been committed and major structural reforms |
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| launched.
The financial implications of structural external imbalances are yet to be |
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| crystallized.
We, therefore, do not foresee major improvements in the industrial sector. |
|
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| Last
years' improvement in the agricultural products may not be achieved for the
current |
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| year.
This alongwith increase in value of imports due to sharp increase in rupee
parity |
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| coupled
with high rate of government borrowings bound to increase inflation. |
|
|
| As
envisaged, our estimate of earnings on equity investment has proved itself.
We were |
|
| able
to mobilise capital gain of Rs. 5.4 million as compared to a loss of Rs. 1.6
million last |
|
| year.
The dividend income also registered an increase of 34% over the last year.
The |
|
| average
carrying value of our equity investments yielded 22.5% as compared to 5.7% in
the |
|
| same
period last year. |
|
|
| The
export target of US$ 10 billion seems to be achievable with continuous slide
of rupee |
|
| value
and steep decline in financial cost. Being a non bank financial institution,
we were |
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| also
effected by this decline in profit rates, but cautiously, managed to get
better yield on |
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| our
average investments in morabahas. Unless, sizeable investment is made in the
much |
|
| needed
BMR expansion, in the textile sector, the small players will loose their
market share. |
|
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| Other
than the textile and agro-based manufacturing the other industrial sector
remain |
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| under
pressure. Without the capital investments, resolution of IPPs brawl,
deregulation of |
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| gas
sectors, privatisation of state owned companies and greater incentives to
value added |
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| textile
sector, the process of revival of economy may not be achieved. |
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| Acknowledgements |
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| We
acknowledge the services rendered by Mr. Fakhir A Rahman, as Chief Executive
who |
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| resigned
in February 2000 and appreciate the valuable contributions made by him. |
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| We
also acknowledge the hard work and dedication of our employees and support of
our |
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| business
associates and investors. We also appreciate the guidance and co-operation |
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| received
from our regulators. They have our full support and good wishes in their
efforts at |
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| reforms. |
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| Auditors |
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| The
Directors have confirmed appointment of Husain Rahman, Chartered Accountants,
as |
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| auditors
of the modaraba subject to the required official approval. |
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|
On behalf of the Board |
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|
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| Karachi |
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|
Adil A. Ghaffar |
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| December
04, 2000 |
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Chief Executive |
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| AUDITORS'
REPORT TO THE CERTIFICATE HOLDERS |
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| We
have audited the annexed Balance Sheet as at June 30, 2000 and the related
Profit and |
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| Loss
Account and Statement of Changes in Financial Position (Cash flow statement), |
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| together
with the Notes to the Financial Statements for the year ended June 30, 2000
of First |
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| Equity
Modaraba which are Modaraba Company's [Premier Financial Services (Private) |
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| Limited]
representation and we state that we have obtained all the information and |
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| 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 |
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| respect
of First Equity Modaraba as required by the Modaraba Companies and |
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| Modaraba
(Floatation and Control) Ordinance, 1980, and Modaraba Companies and |
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| Modaraba
Rules, 1981; |
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|
|
|
| (b)
in our opinion, the Balance Sheet and the Profit and Loss Account have been
drawn |
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| up
in conformity with the Modaraba Companies and Modaraba (Floatation and
Control) |
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| 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: |
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|
|
|
| (i)
the Balance Sheet and the related Profit and Loss Account and Statement of |
|
| Changes
in Financial Position (Cash flow statement), which are in agreement |
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| with
the books of account, exhibit respectively a true and fair view of the state |
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| of
the Modaraba's affairs as at June 30, 2000 and the profit and the changes in |
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| the
financial position for the year ended on that date; |
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|
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| (ii)
Zakat deductible at source under Zakat and Ushr Ordinance, 1980, has been |
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| deducted
by the Modaraba and deposited in the Central Zakat Fund established |
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| under
section 7 of that Ordinance; and |
|
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| (iii)
the business conducted, investments made and expenditure incurred by the |
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| Modaraba
are in accordance with the objects, terms and conditions of the |
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| Modaraba. |
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| Karachi |
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|
Khalid Majid Husain Rahman |
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| December
04, 2000 |
|
Chartered Accountants |
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| BALANCE
SHEET AS AT JUNE 30, 2000 |
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|
|
2000 |
1999 |
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|
Note |
Rupees |
Rupees |
|
|
|
|
| Capital
and Reserves |
|
| Authorised
capital |
|
| 30,000,000
modaraba |
|
| certificates
of Rs. 10 each |
|
|
300,000,000 |
300,000,000 |
|
|
|
|
========== |
========== |
|
|
|
|
| Issued,
subscribed and paid-up capital |
3 |
262,200,000 |
262,200,000 |
|
| Reserves |
|
4 |
68,189,113 |
60,237,816 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
330,389,113 |
322,437,816 |
|
| Deferred
liabilities |
|
5 |
380,250 |
525,000 |
|
|
|
------------------ |
------------------ |
|
| Current
Liabilities |
|
|
|
|
| Creditors,
accrued expenses |
|
|
|
| and
other liabilities |
|
6 |
7,914,621 |
7,392,061 |
|
| Pro
fit distribution |
|
|
41,952,000 |
39,330,000 |
|
| Unclaimed
profit distribution |
|
7,465,531 |
5,704,042 |
|
| Provision
for taxation |
|
1,053,786 |
1,053,786 |
|
|
|
------------------ |
------------------ |
|
|
|
58,385,938 |
53,479,889 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
389,155,301 |
376,442,705 |
|
|
|
|
========== |
========== |
|
|
|
|
| Tangible
Fixed Assets |
|
7 |
43,622 |
61,672 |
|
| Deferred Costs |
|
8 |
-- |
14,625 |
|
| Investments |
|
9 |
54,823,859 |
40,757,159 |
|
|
|
|
| Current Assets |
|
|
|
| Morabaha
receivables |
|
10 |
147,956,172 |
184,477,316 |
|
| Advances,
deposits, prepayments |
|
|
| and
other receivables |
|
11 |
8,132,212 |
12,136,667 |
|
| Cash
and bank balances |
|
12 |
178,199,436 |
138,995,266 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
334,287,820 |
335,609,249 |
|
|
------------------ |
------------------ |
|
|
|
|
389,155,301 |
376,442,705 |
|
|
|
|
========== |
========== |
|
|
|
|
| The
annexed notes form an integral part of these financial statements. |
|
|
|
Adil A. Ghaffar |
|
Maqbul Ahmad |
|
Zahid Bashir |
|
|
Chief Executive |
|
Director |
|
Director |
|
|
Premier Financial |
|
Premier Financial |
|
Premier Financial |
|
|
Services (Private) Ltd. |
|
Services (Private) Ltd. |
|
Services (Private) Ltd. |
|
|
|
|
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2000 |
|
|
|
|
2000 |
1999 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| Income |
|
13 |
72,270,966 |
61,983,162 |
|
|
|
|
|
|
| Expenditure |
|
|
|
|
| Operating
expenses |
|
14 |
7,439,081 |
7,011,026 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
64,831,885 |
54,972,136 |
|
| Reversal
of provision for diminution in |
|
|
| value
of investments |
|
|
8,500,000 |
-- |
|
|
------------------ |
------------------ |
|
|
|
73,331,885 |
54,972,136 |
|
| Provision
for non performing assets |
|
17,883,778 |
-- |
|
|
|
------------------ |
------------------ |
|
|
|
55,448,107 |
54,972,136 |
|
| Modaraba
Company's management fee |
|
5,544,810 |
4,997,466 |
|
|
------------------ |
------------------ |
|
| Profit
for the year |
|
|
49,903,297 |
49,974,670 |
|
| Unappropriated
profit brought forward |
|
18,982,816 |
18,333,146 |
|
|
------------------ |
------------------ |
|
| Profit
available for appropriation |
|
|
68,886,113 |
68,307,816 |
|
|
|
|
|
|
| Appropriations |
|
| Special reserve |
|
|
4,995,000 |
9,995,000 |
|
| General reserve |
|
|
20,000,000 |
-- |
|
| Profit
distribution @ 16% (1999: 15%) |
|
41,952,000 |
39,330,000 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
66,947,000 |
49,325,000 |
|
|
------------------ |
------------------ |
|
| Unappropriated
profit carried forward |
|
1,939,113 |
18,982,816 |
|
|
|
========== |
========== |
|
| Earnings
per certificate |
|
15 |
1.90 |
1.91 |
|
|
|
|
|
========== |
========== |
|
|
|
|
|
|
|
|
| The
annexed notes form an integral part of these financial statements. |
|
|
|
Adil A. Ghaffar |
|
Maqbul Ahmad |
|
Zahid Bashir |
|
|
Chief Executive |
|
Director |
|
Director |
|
|
Premier Financial |
|
Premier Financial |
|
Premier Financial |
|
|
Services (Private) Ltd. |
|
Services (Private) Ltd. |
|
Services (Private) Ltd. |
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| (CASH
FLOW STATEMENT) |
|
| FOR
THE YEAR ENDED JUNE 30, 2000 |
|
|
|
|
2000 |
1999 |
|
|
|
Rupees |
Rupees |
|
|
| Cash
Flows from Operating Activities |
|
| Profit
for the year |
|
|
49,903,297 |
49,974,670 |
|
|
|
|
| Adjustments
for: |
|
| Depreciation |
|
|
18,050 |
18,050 |
|
| Provision
for gratuity |
|
|
368,750 |
525,000 |
|
| Amortisation
of deferred costs |
|
|
14,625 |
104,319 |
|
| Reversal
of provision for diminution in |
|
|
|
| value
of investments |
|
|
(8,500,000) |
-- |
|
| Provision
for non performing assets |
|
17,883,778 |
-- |
|
| (Gain)
/ loss on sale of investments |
|
(5,445,352) |
1,673,061 |
|
| Dividend
income |
|
|
(5,301,131) |
(3,966,855) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(961,280) |
(1,646,425) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
48,942.02 |
48,328,245 |
|
| Decrease
/ (increase) in current assets |
|
| Morabaha
receivables |
|
|
27,831,116 |
(17,871,157) |
|
| Trade debts |
|
|
-- |
9,410,601 |
|
| Advances,
deposits, prepayments |
|
|
|
| and
other receivables |
|
|
(5,103.968) |
3,200,090 |
|
|
------------------ |
------------------ |
|
|
|
22,727,148 |
(5,260,466) |
|
|
|
------------------ |
------------------ |
|
| (Decrease)
/ increase in current liabilities |
|
| Creditors,
accrued expenses |
|
| and
other liabilities |
|
|
522,560 |
2,590,558 |
|
| Gratuity paid |
|
|
(513,500) |
-- |
|
| Income tax paid |
|
|
-- |
(8,648,304) |
|
| Dividends paid |
|
|
(37,568,511) |
(563,411) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(37,559,451) |
(6,621,157) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
|
| Net
Cash from Operating |
|
|
|
|
| Activities |
|
Carried forward |
|
34,109,714 |
36,446,622 |
|
|
| Net
Cash from Operating |
|
| Activities |
|
Brought forward |
34,109,714 |
36,446,622 |
|
|
| Dividends
received |
|
5,215,804 |
4,102,712 |
|
| Purchase
of investments |
|
(133,138,581) |
(72,270,765) |
|
| Proceeds
from sale of investments |
|
133,017,233 |
68,637,065 |
|
|
|
------------------ |
------------------ |
|
| Net
cash from Investing Activities |
|
5,094,456 |
469,012 |
|
|
|
------------------ |
------------------ |
|
| Net
increase in cash and bank balances |
|
39,204,170 |
36,915,634 |
|
|
|
|
|
| Cash
and bank balances at the |
|
|
| beginning
of the year |
|
138,995,266 |
102,079,632 |
|
|
|
|
| Cash
and bank balances at the |
|
------------------ |
------------------ |
|
| end of the year |
|
178,199,436 |
138,995,266 |
|
|
|
|
========== |
========== |
|
|
|
Adil A. Ghaffar |
|
Maqbul Ahmad |
|
Zahid Bashir |
|
|
Chief Executive |
|
Director |
|
Director |
|
|
Premier Financial |
|
Premier Financial |
|
Premier Financial |
|
|
Services (Private) Ltd. |
|
Services (Private) Ltd. |
|
Services (Private) Ltd. |
|
|
|
| NOTES
TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2000 |
|
| 1.
Legal Status and Nature of Business |
|
| First
Equity Modaraba was formed in 1991 under the Modaraba Companies and |
|
| Modaraba
(Floatation and Control) Ordinance, 1980 and the Rules framed thereunder |
|
| and
is managed by Premier Financial Services (Private) Limited, a company |
|
| incorporated
in Pakistan. |
|
|
| The
Modaraba is a perpetual, multipurpose modaraba able to undertake a variety of |
|
| fund
and fee based activities. These include trading, manufacturing, equity
investment |
|
| and
their financing and facilitation. |
|
|
| The
Modaraba is listed on Karachi, Lahore and Islamabad Stock Exchanges. |
|
|
| 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 |
|
|
|
| Fixed
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. 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. |
|
|
|
|
|
| 2.3
Deferred costs |
|
|
|
| Expenses
incurred in connection with the floatation and capital enhancement |
|
| of
the Modaraba are being written off over a period of five years on a |
|
| proportionate
basis as the benefit of these expenses will be derived over an |
|
| extended
period of time. |
|
|
|
|
| 2.4 Investments |
|
|
| (a)
Investments are stated at cost and provisions are made for other than |
|
| temporary
diminution in value, if any. |
|
|
| (b)
Gains and losses on disposal of investments are taken to the profit and |
|
| loss account. |
|
|
|
|
| 2.5
Stock-in-trade |
|
| Stock-in-trade
is stated at the lower of average cost and net realisable value. |
|
| Stock
in transit is valued at cost comprising invoice values plus other charges |
|
| paid
thereon. Net realisable value signifies the estimated selling price in the |
|
| ordinary
course of business less costs necessarily to be incurred to make the sale. |
|
|
|
|
|
| 2.6
Revenue recognition |
|
|
| (a)
Income from musharaka transactions is recognised on the basis of |
|
| pro-rata
accrual of the estimated profit earned during the year. |
|
|
| (b)
Income from morabaha transactions is recognised on the basis of pro- |
|
| rata
accrual of profit earned during the year. |
|
|
| (c)
Sales are recognised when goods are identified for despatch and invoiced. |
|
|
| (d)
Dividend income is recognised when the right to the dividend is |
|
| established. |
|
|
| (e)
Commission and fee income is recognised when received. |
|
|
|
|
| (f)
Profit on PLS deposits is recognised on accrual basis. |
|
|
| 2.7 Taxation |
|
| Provision
for current taxation is made on taxable income at applicable tax |
|
| rates
after taking into account tax rebates and credits available, if any. |
|
|
|
|
| Deferred
taxation is accounted for on all material timing differences using the |
|
| liability method. |
|
|
|
|
| 2.8
Retirement benefits |
|
|
|
| An
unfunded gratuity scheme is operated for permanent employees completing |
|
| prescribed
period of service. Provision for obligations under the scheme is |
|
| made
by charging the profit and loss account. |
|
|
|
| 3.
Issued, Subscribed and Paid-up Capital |
|
| Fully
paid modaraba certificates of Rs. 10 each. |
|
|
| 1999 |
2000 |
|
2000 |
1999 |
|
| Number |
Number |
|
Rupees |
Rupees |
|
|
| 20,000,000 |
20,000,000 |
Issued for cash |
|
200,000,000 |
200,000,000 |
|
|
|
|
|
Issued as bonus |
|
|
| 6,220,000 |
6,220,000 |
certificates |
|
62,200,000 |
62,200,000 |
|
| ------------------ |
------------------ |
|
------------------ |
------------------ |
|
| 26,220,000 |
26,220,000 |
|
262,200,000 |
262,200,000 |
|
| ========== |
========== |
|
========== |
========== |
|
|
| 4. Reserves |
Special |
General |
Unappropriated |
|
|
|
reserve |
reserve |
profit |
|
|
|
Rupees |
Rupees |
Rupees |
|
|
|
|
|
| At beginning of |
|
| the year |
41,255,000 |
-- |
18,982,816 |
60,237,816 |
49,593,146 |
|
| Transfer
from/(to) |
|
|
| profit and |
|
|
| loss
account |
4,995,000 |
20,000,000 |
(17,043,703) |
7,951,297 |
10,644,670 |
|
|
------------------ |
------------------ |
------------------ |
------------------ |
------------------ |
|
| At
end of the year |
46,250,000 |
20,000,000 |
1,939,113 |
68,189,113 |
60,237,816 |
|
|
========== |
========== |
========== |
========== |
========== |
|
|
| The
special reserve is created and held in compliance with the Prudential
Regulations |
|
| for Modarabas. |
|
|
| There
are no changes in equity except those shown here or in the profit and loss
account. |
|
|
|
2000 |
1999 |
|
|
Rupees |
Rupees |
|
|
| 5.
Deferred Liabilities |
|
| Provision
for gratuity |
|
|
380,250 |
525,000 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| 6.
Creditors, Accrued Expenses and Other Liabilities |
|
|
| Creditors |
|
|
375,833 |
578,110 |
|
| Accrued
expenses |
|
|
673,020 |
499,809 |
|
| Due
to associated undertakings |
|
|
6,865,768 |
6,314,142 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
7,914,621 |
7,392,061 |
|
|
========== |
========== |
|
|
|
|
| 7.
Tangible Fixed Assets |
|
| Motor vehicles |
|
| Cost
at beginning and end of the year |
|
430,250 |
430,250 |
|
| Accumulated
depreciation |
|
|
(386,628) |
(368,578) |
|
|
|
|
------------------ |
------------------ |
|
| Book
value at end of the year |
|
|
43,622 |
61,672 |
|
|
|
|
========== |
========== |
|
|
| Depreciation
charged during the |
|
| year
@ 20% per annum |
|
18,050 |
18,050 |
|
|
========== |
========== |
|
|
|
|
| 8.
Deferred Costs |
|
| Listing
and registration fees |
|
|
1,203,757 |
1,203,757 |
|
| Advertising
and promotion expenses |
|
1,242,184 |
1,242,184 |
|
| Certificate
issue expenses |
|
|
2,224,469 |
