| First General Leasing Modaraba |
|
|
|
|
|
| Annual
Report 1999 |
|
|
|
| TABLE
OF CONTENTS |
|
|
| DIRECTOR'S'
REPORT |
|
| 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 |
|
| FINANCIAL
HIGHLIGHTS |
|
|
|
| CORPORATE
INFORMATION |
|
|
| DIRECTORS
OF MODARABA COMPANY |
|
|
| Mr.
Rafique Dawood - Chairman |
|
Nominee of: Dawood
Leasing Company Ltd. |
|
| Mr.
Ayaz Dawood - Chief Executive |
|
do |
|
|
| Mr.
Mehboob G. Rawjee |
|
do |
|
|
| Mr.
Salman Rasheed |
|
do |
|
|
| Mr.
Arshad A'ala |
|
Investment Corporation of
Pakistan |
|
| Mr.
Abdul Jalil Sheikh |
|
Saudi Pak Industrial
& Agricultural |
|
|
Investment Company (Pvt)
Limited. |
|
|
| SECRETARY |
|
| Syed
Jamal Macdi |
|
|
| REGISTERED
OFFICE |
|
| 5-B,
Lakson Square Building No. 1, |
|
| Sarwar
Shaheed Road, Karachi - 74200 |
|
|
| MANAGEMENT
COMPANY & |
|
| CERTIFICATE
TRANSFER OFFICE |
|
| General
Modaraba Services (Pvt) Limited. |
|
| 5-B,
Lakson Square Building No. 1, |
|
| Sarwar
Shaheed Road, Karachi - 74200 |
|
| Phone
Nos: 568-6697, 568-7778 |
|
| Fax:
(92-21) 568-5830 |
|
|
| AUDITORS
OF MODARABA |
|
| Khalid
Majid Husain Rahman |
|
| Chartered
Accountants |
|
| Modern
Motors House, |
|
| Beaumount
Road, Karachi- 75530 |
|
|
| LEGAL
ADVISOR |
|
| Mr.
Hyder Kedwai |
|
|
| BANKERS |
|
| Union
Bank Limited |
|
| Muslim
Commercial Bank Ltd. |
|
|
|
| DIRECTORS'
REPORT |
|
|
| The
new Board of Directors of General Modaraba Services (Private) Limited,
managers |
|
| of
First General Leasing Modaraba are pleased to present the audited accounts of
First |
|
| General
Leasing Modaraba for the year ended June 30, 1999. The management of your |
|
| Modaraba
was taken over by Dawood Leasing Company Limited after the balance sheet |
|
| date
on August 4, 1999. Since the takeover your new management has been striving
to |
|
| return
this Modaraba back to profitability, We are trying to achieve this goal by
reducing |
|
| cost
and by increasing revenue. The information given below relates to the 6th
full year of |
|
| operations. |
|
|
| FINANCIAL
RESULTS |
|
| Financial
results for the year under report are summarized as follows; |
|
|
|
|
|
|
1999 |
1998 |
|
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| Total
Operating (Loss) / Income |
|
(2,575,915) |
10,526,816 |
|
| Total
Operating Cost |
|
7,904,924 |
7,993,946 |
|
| Profit
/ (Loss) Before Provisions |
|
(10,480,839) |
2,532,870 |
|
| Provisions |
|
|
6,625,931 |
5,460,882 |
|
| Loss
Before Taxation |
|
17,106,770 |
2,928,012 |
|
| Loss
After Taxation |
|
17,206,770 |
3,001,894 |
|
|
| The
previous management sold the shares of General Fund Management Limited at a |
|
| loss
of Rs. 7.95 million and this caused the Modaraba to have negative income of
Rs. |
|
| 2.57
million. Operating cost has also increased from Rs. 11.45 million to 13.22
million. |
|
| The
previous year's loss after tax of Rs. 2.9 million has also boosted up to Rs.
17.21 |
|
| million
this year. |
|
|
| The
new management has taken some vital steps to strengthen the financial health
of |
|
| Modaraba.
Emphasis was given to recover the bad leases. With respect to this, the law |
|
| suits
against eight clients of Rs. 44.57 million had been filed and the court has
given the |
|
| decree
against four clients of Rs. 26.77 million. Furthermore, the new management
has |
|
| already
recovered Rs. 1.0 million of a Musharika facility and repossessed a vehicle
from |
|
| another client. |
|
|
| Moreover,
Modaraba has curtailed unnecessary expenses by cutting down the number of |
|
| employee
to only one. In addition, registrar service has also been moved in house to |
|
| further
reduce the costs. |
|
|
| MILLENNIUM
COMPLIANCE |
|
| We
are fully in compliance. |
|
|
| AUDITORS |
|
| The
present auditors, Khalid Majid Husain Rahman, Chartered Accountants are due
for |
|
| retirement
and being eligible, offer themselves for re-appointment. They have been re- |
|
| appointed
by the Board of Directors, |
|
|
|
|
For and on behalf of the Board |
|
|
|
The Board of Directors |
|
|
|
|
|
| Karachi |
|
Rafique Dawood |
|
| Date:
November 16, 1999 |
|
Chairman |
|
|
|
|
|
| AUDITORS'
REPORT TO THE CERTIFICATE HOLDERS |
|
|
| We
have audited, in accordance with International Standards on Auditing, the
annexed |
|
| balance
sheet as at June 30, 1999 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, 1999 of First General Leasing Modaraba, which are Modaraba |
|
| Company's
[General Modaraba Services (Private) Limited] representation and we state |
|
| that
we have obtained all the information and explanation8 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 General Leasing 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 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; |
|
|
|
|
| (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, 1999 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)
the business conducted, investments made and expenditure incurred |
|
| by
the Modaraba are in accordance with objects, terms and conditions |
|
| of
the Modaraba. |
|
|
|
|
| Without
qualifying our opinion, we draw attention to notes 2.2 and 2.9 to the
financial |
|
| statements.
The Modaraba recognizes all leases as "operating leases" in
accordance |
|
| with
Islamic Sharia'a which are otherwise required to be recognized as
"finance leases" in |
|
| accordance
with the International Accounting Standard 17, Accounting for Leases. |
|
|
|
| Date:
November 16, 1999 |
|
Khalid Majid Husain Rahman |
|
| Karachi |
|
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1999 |
|
|
|
Note |
1999 |
1998 |
|
|
|
Rupees |
Rupees |
|
|
|
|
| CAPITAL
AND RESERVES |
|
|
|
|
|
|
| Authorized
capital |
|
|
|
| 10,000,000
modaraba certificates |
|
|
|
| of Rs. 10 each |
|
|
100,000,000 |
100,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid up capital |
|
3 |
56,250,000 |
50,250,000 |
|
| Statutory
reserve |
|
|
1,813,984 |
1,813,984 |
|
| Accumulated
loss |
|
|
(23,557,689) |
(6,350,919) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
34,506,295 |
51,713,065 |
|
| OBLIGATION
UNDER FINANCE LEASE |
|
4 |
-- |
219,526 |
|
| LEASE
DEPOSITS |
|
5 |
557,250 |
598,152 |
|
|
|
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
|
| Current
maturity of obligation |
|
|
|
|
| under
finance lease |
|
4 |
-- |
91,295 |
|
| Current
maturity of lease deposits |
|
5 |
1,475,090 |
1,465,991 |
|
| Short
term finances |
|
6 |
15,700,630 |
7,542,775 |
|
| Accrued
and other liabilities |
|
7 |
2,107,077 |
1,618,085 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
19,282,797 |
10,718,146 |
|
| Contingencies: |
|
8 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
54,346,342 |
83,248,889 |
|
|
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| TANGIBLE
FIXED ASSETS |
|
9 |
7,362,510 |
8,511,750 |
|
| INVESTMENTS |
|
10 |
11,705,340 |
25,704,554 |
|
| LONG
TERM DEPOSITS AND |
|
|
|
| DEFERRED
COSTS |
|
11 |
20,000 |
101,253 |
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
|
| Stock-in-trade |
|
12 |
-- |
367,356 |
|
| Repossessed
asset |
|
13 |
-- |
3,900,000 |
|
| Short
term musharika receivables |
|
14 |
17,900,000 |
4,400,000 |
|
| Advances,
prepayments and |
|
|
|
|
| other
receivables |
|
15 |
10,643,791 |
13,296,351 |
|
| Cash
and bank balances |
|
16 |
6,714,701 |
7,307,625 |
|
|
|
|
------------------ |
------------------ |
|
|
|
35,258,492 |
28,871,332 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
54,346,342 |
63,248,889 |
|
|
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these financial statements. |
|
|
|
Chairman |
|
Chief Executive |
|
Director |
|
|
General Modaraba Services |
|
General Modaraba Services |
|
General Modaraba Services |
|
|
(Private) Limited |
|
(Private) Limited |
|
(Private) Limited |
|
|
|
|
|
|
|
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 1999 |
|
|
|
|
Note |
1999 |
1998 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| Income |
|
|
|
| Leasing income |
|
|
1,315,575 |
5,791,616 |
|
| Loss
on sale of investments |
|
|
(7,950,000) |
(238,279) |
|
| Dividend
income |
|
|
48,877 |
99,840 |
|
| Trading loss |
|
17 |
(226,728) |
(861,999) |
|
| Gain
on repossession of asset |
|
|
-- |
1,484,963 |
|
| Reversal
of allowance for potential |
|
|
|
|
| lease losses |
|
|
-- |
2,852,000 |
|
| Other income |
|
18 |
4,236,361 |
1,398,871 |
|
|
|
|
------------------ |
------------------ |
|
|
|
(2,575,915) |
10,526,818 |
|
|
|
|
| Expenditure |
|
|
|
| Administrative
and operating expenses |
|
19 |
3,644,206 |
3,291,126 |
|
| Depreciation
on leased out fixed assets |
|
|
598,247 |
2,487,616 |
|
| Amortization
of deferred costs |
|
|
81,253 |
494,788 |
|
| Allowance
for potential lease losses |
|
|
3,510,786 |
229,000 |
|
| Provision
for diminution in the |
|
|
| value
of investments |
|
|
1,309,214 |
2,250,000 |
|
| Allowance
for doubtful musharika receivables |
|
|
1,500,000 |
250,000 |
|
| Allowance
for doubtful other receivables |
|
|
305,931 |
2,731,882 |
|
| Financial
charges |
|
|
3,581,218 |
1,720,416 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
14,530,855 |
13,454,828 |
|
|
|
|
|
------------------ |
------------------ |
|
| Loss
Before Taxation |
|
|
(17,106,770) |
(2,928,012) |
|
| Taxation |
|
|
100,000 |
73,882 |
|
|
|
|
------------------ |
------------------ |
|
| Loss
After Taxation |
|
|
(17,206,770) |
(3,001,894) |
|
| Accumulated
Loss Brought Forward |
|
|
(6,350,919) |
(3,349,025) |
|
|
|
|
------------------ |
------------------ |
|
| Accumulated
Loss Carried Forward |
|
|
(23,557,689) |
(6,350,919) |
|
|
|
|
========== |
========== |
|
| Earnings
Per Modaraba Certificate |
|
23 |
(3.06) |
(0.53) |
|
|
|
|
|
|
========== |
========== |
|
|
|
|
| The
annexed notes form an integral part of these financial statements. |
|
|
|
Chairman |
|
Chief Executive |
|
Director |
|
|
General Modaraba Services |
|
General Modaraba Services |
|
General Modaraba Services |
|
|
(Private) Limited |
|
(Private) Limited |
|
(Private) Limited |
|
|
|
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| FOR
THE YEAR ENDED JUNE 30, 1999 |
|
|
|
|
|
1999 |
1998 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
| Loss
before taxation |
|
|
(17,106,770) |
(2,928,012) |
|
| Adjustments
for: |
|
|
|
| Depreciation
- owned |
|
|
571,500 |
748,969 |
|
|
- leased out |
|
|
598,247 |
2,487,616 |
|
| Amortization
of deferred costs |
|
|
81,253 |
404,785 |
|
| Financial
charges |
|
|
3,581,218 |
1,720,416 |
|
| Diminution
in value of investments |
|
|
1,309,214 |
2,250,000 |
|
| Allowance
for potential lease losses |
|
|
3,510,786 |
229,000 |
|
| Reversal
of allowance for potential lease losses |
|
|
-- |
(2,852,000) |
|
| Provision
for doubtful musharika |
|
|
1,500,000 |
250,000 |
|
| Provision
for other receivables |
|
|
305,931 |
2,731,882 |
|
| Dividend
income |
|
|
|
(48,877) |
(99,840) |
|
| Loss
on disposal of investments |
|
|
|
7,950,000 |
238,279 |
|
| Gain
on disposal of fixed assets |
|
|
|
-- |
(5,500) |
|
| Gain
on sale of textile quota |
|
|
|
-- |
(13,680) |
|
| Operating
(loss)/profit before working |
|
|
------------------ |
------------------ |
|
| capital changes |
|
|
|
2,252,502 |
5,251,918 |
|
|
|
|
|
|
|
| Changes
in working capital |
|
|
|
| Asset
repossessed |
|
|
|
3,500,000 |
(3,500,000) |
|
| Decrease
in stock-in-trade |
|
|
|
367,356 |
2,544,963 |
|
| (Increase)
in advances, prepayments and |
|
|
|
|
| other
receivables |
|
|
|
(877,069) |
(172,967) |
|
| Increase/(decrease)
in accured expenses |
|
|
|
|
| and
other liabilities |
|
|
|
694,128 |
(651,868) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
5,936,917 |
3,472,046 |
|
| (Decrease)
in long term security deposits |
|
|
(31,803) |
(1,241,836) |
|
| Tax paid |
|
|
|
(371,245) |
(73,882) |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash from operating activities |
|
|
5,533,869 |
2,150,328 |
|
|
|
|
|
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
| Purchase
of investments |
|
|
|
-- |
(24,525) |
|
| Sale
proceeds of investments |
|
|
|
4,800,000 |
264,798 |
|
| Increase
in deposits and deferred costs |
|
|
-- |
(72,278) |
|
| Dividend
income |
|
|
|
32,477 |
99,840 |
|
| Purchase
of fixed assets |
|
|
|
(19,950) |
(315,847) |
|
| Sale
proceeds of fixed assets |
|
|
|
-- |
5,500 |
|
| Short
term musharika receivable |
|
|
(15,000,000) |
-- |
|
| Disposal
of textile quota |
|
|
-- |
54,720 |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash (used in)/from investing activities |
|
|
(10,187,473) |
12,208 |
|
|
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
| Repayment
of obligation under finance lease |
|
|
(310,821) |
(38,391) |
|
| Shod
term finance obtained/(repaid) |
|
|
8,157,855 |
(1,776,145) |
|
| Financial
charges paid |
|
|
(3,786,354) |
(724,809) |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash from/(used in) financing activities |
|
|
4,060,680 |
(2,539,435) |
|
|
|
|
------------------ |
------------------ |
|
| Net
decrease in cash and bank balances |
|
|
(592,924) |
(370,899) |
|
| Cash
and bank balances as on July 01 |
|
|
7,307,625 |
7,678,524 |
|
|
|
|
------------------ |
------------------ |
|
| Cash
and bank balances as on June 30 |
|
|
6,714,701 |
7,307,625 |
|
|
|
|
|
========== |
========== |
|
|
|
Chairman |
|
Chief Executive |
|
Director |
|
|
General Modaraba Services |
|
General Modaraba Services |
|
General Modaraba Services |
|
|
(Private) Limited |
|
(Private) Limited |
|
(Private) Limited |
|
|
|
| NOTES
TO THE FINANCIAL STATEMENTS |
|
| FOR
THE YEAR ENDED JUNE 30, 1999 |
|
|
| 1.
THE MODARABA AND ITS OPERATIONS |
|
|
| The
Modaraba was formed under the Modaraba Companies and Modaraba |
|
| (Floatation
and Control) Ordinance, 1980 and the Rules framed thereunder, and is |
|
| managed
by General Modaraba Services (Private) Limited. The Modaraba is listed |
|
| on
the Karachi Stock Exchange. |
|
|
|
|
|
|
| The
Modaraba is multipurpose perpetual modaraba and is principally engaged in |
|
| leasing
of moveable assets and investing in capital market securities. |
|
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
|
| 2.1
Accounting convention |
|
| These
financial statements have been prepared under the "historical cost |
|
| convention". |
|
|
|
|
| 2.2
Accounting for leases |
|
| The
Modaraba is required to enter into the lease contracts in accordance with the |
|
| principles
of Islamic Sharia'a and in the form and manner approved by the Modaraba |
|
| Religious
Board. The application of Sharia'a principles have profound implications |
|
| on
the accounting treatment for leases which are divergent from the accounting |
|
| treatment
pronounced by the International Accounting Standard (IAS) 17, Accounting |
|
| for
leases. The treatment is explained below: |
|
|
| (i)
Although all the leases entered into by the Modaraba are full payout leases,
in |
|
| accordance
with the principles of Sharia'a, substantial risks and rewards incident to |
|
| ownership
of leased assets still remain with the Modaraba as the lessor and are not |
|
| transferred
to the lessee. |
|
|
|
|
| (ii)
The method of income recognition in finance leases prescribed by IAS 17 is
interest |
|
| based
which is not consistent with the Sharia'a principles. |
|
|
| In
view of the above anomalies and in accordance with injunctions of Sharia'a,
the |
|
| Modaraba
accounts for the leases as operating lease. The Modaraba takes the |
|
| entire
lease rentals. to income while amortization of leased assets is charged to |
|
| expenses
over the lease period using annuity method. Simultaneously, the leased |
|
| assets
are depreciated during the lease period. Thus, the net income from leases is |
|
| effectively
the same as in the case of leases recorded as finance lease in accordance |
|
| with IAS 17. |
|
|
| 2.3
Revenue Recognition |
|
|
|
| Lease
rentals are taken to income using the time pattern of the rentals contained
in |
|
| the
lease contracts subject to NBFI's regulation requirements. |
|
|
|
| Front-end
fee, documentation and other charges, if any, are taken to income when |
|
| realized. |
|
|
|
|
|
|
| Profit/return
from morabaha/musharika and PLS deposits is recognized on accrual |
|
| basis. |
|
|
|
|
|
|
| Revenue
from trading activities is recorded on dispatch of goods to the customers. |
|
|
|
|
| Dividends
are recognized at the time of closure of the share transfer book of the |
|
| investee
declaring the dividend. |
|
|
|
|
| 2.4 Taxation |
|
|
|
| The
charge for current taxation is based on taxable income at the current rates
of |
|
| taxation
after taking in to account tax credits, if any. |
|
|
|
|
|
| The
tax effect for deferred taxation is calculated using the liability method on
all |
|
| major
timing differences, which are expected to reverse in the foreseeable future. |
|
| As
a measure of prudence, deferred tax debits are not accounted for. |
|
|
| 2.5
Tangible Fixed Assets and Depreciation |
|
|
|
|
|
|
|
| Leased out |
|
|
|
| These
are stated at a cost less accumulated depreciation. Depreciation is charge |
|
| to
income applying the annuity method whereby the depreciable values of assets |
|
| are
depreciated over the lease period. |
|
|
|
|
|
|
| Own Use |
|
|
|
| Fixed
assets are stated at cost less accumulated depreciation. Depreciation is |
|
| charged
to income applying the straight-line method over their estimated useful life. |
|
|
| Full
year's depreciation is charged on acquisition during the year while no |
|
| depreciation
is charged on fixed assets disposed off during the year. |
|
|
|
|
| Gain
or loss on disposal of fixed assets, if any, are included in income
currently. |
|
|
|
|
| Assets
subject to Finance Lease |
|
|
|
|
|
|
| These
are stated at the lower of present value of minimum lease payments and fair |
|
| value
of assets acquired on lease. Assets so acquired are depreciated over their |
|
| useful
life. Financial charges allocated to accounting period during lease terms in
a |
|
| manner
so as to produce a constant periodic rate of charge on the outstanding |
|
| liability. |
|
|
|
|
| 2.6 Investments |
|
|
|
| 2.6.1
Long Term |
|
| These
are stated at cost and are reduced to recognize a decline other than
temporary |
|
| in
values, if any. |
|
|
|
|
| 2.6.2
Short Term |
|
|
|
| These
are valued at the lower of cost and market values determined on an aggregate |
|
| portfolio basis. |
|
|
|
|
| Gain
or loss on sale and diminution in values are taken to the Profit and |
|
| account. |
|
|
|
|
| 2.7
Stock-in-Trade |
|
|
|
| These
are stated at the lower of cost and net realizable value determined on
average |
|
