| Financial Link Modaraba |
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| Annual
Report 1999 |
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| CONTENTS |
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| Corporate
Information |
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| Directors'
Review |
|
| Pattern
of Holding of Certificates |
|
| Auditors'
Report |
|
| Balance Sheet |
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|
| Profit
& Loss Account |
|
| Statement
of Changes in Financial Position |
|
| Notes
to the Financial Statements |
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| CORPORATE
INFORMATION |
|
|
| MODARABA
COMPANY |
Financial Link Limited |
|
|
| BOARD
OF DIRECTORS |
Shahid Hameed |
|
Chairman |
Nominee Director Pak.
Libya |
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|
Holding Co. (Pvt) Ltd. |
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|
Syed Ghazanfar Ali |
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Nominee Director Pak
Libya |
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Holding Co. (Pvt) Ltd. |
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|
Tasnimul Haq Farooqui |
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Nominee Director Pakistan |
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|
Kuwait Investment |
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Co. (Pvt) Ltd. |
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Noman A. Qureshi |
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Nominee Director 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 Director The Bank
of |
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|
Khyber |
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|
Shahid Abdulla |
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|
Nominee Director
International |
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|
Brands (Pvt) Ltd. |
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|
Sajjad Haider |
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|
Director |
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| COMPANY
SECRETARY |
Farooq Hashmi |
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| AUDITORS |
|
Khalid Majid Husain
Rahman, Chartered Accountants. |
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|
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| Bankers |
|
Muslim Commercial Bank
Limited |
|
|
|
United Bank Limited |
|
|
|
| REGISTRAR |
|
Khalid Majid Husain
Rahman |
|
|
16-K, Block-6,
P.E.C.H.S., |
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|
Off Shahra-e-Faisal,
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, 1999. |
|
|
| FINANCIAL
HIGHLIGHTS |
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|
|
|
|
Rupees in thousand |
|
|
|
|
|
|
| Operating
Income/(Loss) |
|
(2,120) |
|
|
| Less: |
Expenses |
|
|
1,134 |
|
|
Profit on Musharika
obligations |
|
3,858 |
|
|
Loss on diminution in
value of investment |
|
336 |
|
|
Amortization of deferred
cost |
|
872 |
|
|
Financial Charges on
lease assets |
|
5 |
|
|
|
|
------------------ |
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|
|
|
6,205 |
|
|
|
|
------------------ |
|
| Operating
(loss) / Profit for the period |
|
(8,325) |
|
| Other income |
|
|
|
1,803 |
|
|
------------------ |
|
|
|
|
(6,522) |
|
| Unappropriated
Loss brought forward |
|
(94,245) |
|
|
|
|
------------------ |
|
| Profit
(loss) carried forward |
|
|
(100,767) |
|
|
========== |
|
|
| The
loss of the company for the period under review has been substantially
minimized mainly due to a number |
|
| of
settlements already made by the management. However, despite our best
efforts, investments could not be |
|
| liquidated
due to heavy potential losses. |
|
|
| PROFIT
DISTRIBUTION |
|
| The
Board of Directors of Modaraba Company have not recommended any dividend for
the year ended June 30, |
|
| 1999.
In addition, no management fee has been given to the company for the period
under review. |
|
|
| FUTURE
OUTLOOK |
|
| With
most of the investments, pledged with various financial institutions, already
settled and the remaining under |
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| settlement,
the FLM is actively Pursuing a "Re-habilitation plan" ensuring its
revival and safeguarding the interests of |
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| the
certificate holders. |
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|
| AUDITORS |
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| The
Present auditors Messrs. Khalid Majid Husain Rahman, Chartered Accountants
being due for retirement, have |
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| offered
themselves for re-appointment for the year ending June 30, 2000. Their
appointment has been confirmed by |
|
| the
Board of Directors, subject to the approval by the Registrar of Modaraba
Companies and Modaraba. |
|
|
| ACKNOWLEDGMENT |
|
| 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 Board of
Directors, Registrar of |
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| Modaraba
and the State Bank of Pakistan. |
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|
on behalf of the Board |
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|
FAROOQ HASHMI |
|
| Karachi:
December 28, 1999. |
|
Company Secretary |
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|
|
| Pattern
of holding of shares held by the |
|
| Shareholders
as on June 30. 1999 |
|
|
| No. of |
SHARE |
HOLDING |
Total Shares |
|
| Shareholders |
FROM |
TO |
Held |
|
|
| 23 |
1 |
100 |
2,300 |
|
| 2,517 |
101 |
500 |
1,247,800 |
|
| 53 |
501 |
1000 |
50,000 |
|
| 60 |
1001 |
5000 |
160,200 |
|
| 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 |
|
| 5 |
60001 |
65000 |
324,000 |
|
| 1 |
65001 |
70000 |
66,500 |
|
| 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 |
|
| 1 |
370001 |
375000 |
375,000 |
|
| 1 |
375001 |
380000 |
376,000 |
|
| 1 |
580001 |
585000 |
580,800 |
|
| 1 |
695001 |
700000 |
696,900 |
|
| 1 |
745001 |
750000 |
750,000 |
|
| 1 |
1995001 |
2000000 |
2,000,000 |
|
| ------------------ |
|
------------------ |
|
| 2,737 |
|
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 |
1,267,600 |
12.68 |
|
| 7.
INDIVIDUALS |
|
2705 |
2,800,800 |
28.00 |
|
| 8.
ASSOCIATED COMPANIES |
|
0 |
0 |
0.00 |
|
| 9.
FOREIGN INVESTORS |
|
0 |
0 |
0.00 |
|
| 10. OTHERS |
|
0 |
0 |
0.00 |
|
|
|
------------------ |
------------------ |
------------------ |
|
|
|
2737 |
10,000,000 |
100.00 |
|
|
========== |
========== |
========== |
|
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|
|
|
| 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, 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 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: |
|
|
| (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 con- |
|
| formity
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, |
|
| 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 the objects, terms and conditions of the Modaraba. |
|
|
| Without
qualifying our opinion, we draw attention to note 1.2 to the financial
statements which interalia |
|
| states
that the Modaraba has accumulated losses of Rs. 100.77 million (1998: Rs.
94.24 million) and the |
|
| Modaraba's
current liabilities exceeded its current assets by Rs. 19.98 million (1998:
Rs. 23.07 million). |
|
| Management
is working on a plan to reduce expenses and generate enough cash flow to pay
the liabili- |
|
| ties.
For these reasons, these financial statements have been prepared on a going
concern assumption. |
|
|
|
|
KHALID MAJID HUSAIN RAHMAN |
|
|
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1999 |
|
|
|
|
1999 |
1998 |
|
|
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 |
|
3 |
100,000,000 |
100,000,000 |
|
|
|
|
|
|
| Statutory
reserve |
|
|
3 |
1,368,000 |
1,368,000 |
|
|
|
|
|
|
| Accumulated
loss |
|
|
3 |
(100,767,361) |
(94,244,751) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
600,639 |
7,123,249 |
|
|
|
|
|
|
| OBLIGATIONS
UNDER FINANCE LEASE |
|
4 |
2,756 |
17,300 |
|
|
|
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
| Current
maturity of obligations under finance lease |
|
|
14,545 |
11,658 |
|
| Musharika
obligations |
|
|
5 |
22,802,659 |
30,702,659 |
|
| Creditors,
accrued expenses and other liabilities |
|
6 |
9,450,019 |
16,358,325 |
|
| Unclaimed
profit distribution |
|
|
|
69,016 |
69,016 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
32,336,239 |
47,141,658 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
32,939,634 |
54,282,207 |
|
|
|
|
|
========== |
========== |
|
|
| TANGIBLE
FIXED ASSETS |
|
7 |
32,774 |
35,253 |
|
| LONG
TERM INVESTMENTS |
|
8 |
20,552,651 |
29,308,775 |
|
| DEFERRED
COSTS |
|
9 |
-- |
872,220 |
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
| Short
term investments |
|
10 |
1,967,038 |
5,392,366 |
|
| Musharika
receivable |
|
11 |
3,252,019 |
8,601,404 |
|
| Debtors |
|
12 |
433,009 |
1,027,579 |
|
| Advances,
prepayments and other receivables |
|
13 |
5,496,997 |
7,852,052 |
|
| Cash
and bank balances |
|
14 |
1,205,146 |
1,192,558 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
12,354,209 |
24,065,959 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
32,939,634 |
54,282,207 |
|
|
|
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these financial statements. |
|
|
|
Director |
|
Director |
|
Director |
|
|
Financial Link Limited |
|
Financial Link Limited |
|
Financial Link Limited |
|
|
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 1999 |
|
|
|
|
1999 |
1998 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| Profit
on musharika |
|
|
1,056,045 |
1,956,983 |
|
| Loss
on sale of investments |
|
|
(3,179,409) |
(16,112,964) |
|
| Dividend
income |
|
|
3,128 |
1,083,750 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(2,120,236) |
(13,072,231) |
|
|
|
|
| Operating
expenses |
|
15 |
1,133,945 |
1,424,949 |
|
| Profit
on musharika obligations |
|
|
3,857,505 |
3,683,575 |
|
| Financial
charges on leased asset |
|
|
5,323 |
5,538 |
|
| Amortization
of deferred cost |
|
|
872,220 |
1,622,655 |
|
| Loss
on diminution in value of investments |
|
|
336,562 |
4,253,242 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
(6,205,555) |
(10,989,959) |
|
|
|
|
------------------ |
------------------ |
|
| Operating
loss for the year |
|
|
(8,325,791) |
(24,062,190) |
|
|
|
|
|
|
| Other income |
|
16 |
1,803,181 |
4,363,044 |
|
|
|
|
------------------ |
------------------ |
|
| Loss
for the year |
|
|
(6,522,610) |
(19,699,146) |
|
|
|
|
| Accumulated
loss brought forward |
|
|
(94,244,751) |
(74,545,605) |
|
|
|
|
------------------ |
------------------ |
|
| Accumulated
loss carried forward |
|
|
(100,767,361) |
(94,244,751) |
|
|
|
|
========== |
========== |
|
| Earning
per modaraba certificate |
|
17 |
(0.65) |
(1.97) |
|
|
|
|
========== |
========== |
|
|
|
|
| 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, 1999 |
|
|
|
|
1999 |
1998 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
| Cash
generated from operations (Note 18) |
|
|
7,028,128 |
5,796,958 |
|
| Dividend
received |
|
|
2,655 |
1,083,750 |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash generated froth operating activities |
|
|
7,030,783 |
6,880,708 |
|
|
|
|
|
|
|
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
| Proceeds
on disposal of fixed assets |
|
|
-- |
850,000 |
|
| Purchase
of fixed assets |
|
|
(1,600) |
(1,600) |
|
| proceeds
from sale of long term investments |
|
|
900,386 |
12,035,308 |
|
| Purchase
of long term investments |
|
|
-- |
(2,840) |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash generated from investing activities |
|
|
898,786 |
12,880,868 |
|
|
|
|
|
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
| Payment
of musharika obligation |
|
(7,900,000) |
(13,615,125) |
|
| Payment
of profit on musharika obligations |
|
-- |
(5,518,366) |
|
| Payment
against finance lease |
|
(11,658) |
(8,612) |
|
| Payment
of financial charges |
|
(5,323) |
(5,538) |
|
|
|
------------------ |
------------------ |
|
| Net
cash used in financing activities |
|
(7,916,981) |
(19,147,641) |
|
|
|
------------------ |
------------------ |
|
| NET
INCREASE IN CASH AND BANK BALANCES |
|
12,588 |
613,935 |
|
|
|
|
| OPENING
CASH AND BANK BALANCES |
|
|
1,192,558 |
578,623 |
|
|
|
|
------------------ |
------------------ |
|
| CLOSING
CASH AND BANK BALANCES |
|
|
1,205,146 |
1,192,558 |
|
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| 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, 1999 |
|
|
| 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. 100.77 million as at June 30, 1999
(1998: |
|
| Rs.
94.24 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. 6.52 million during the
year (1998: |
|
| Rs.
19.69 million). The Modaraba's current liabilities exceed its current assets
by Rs. 19.98 |
|
| million
(1998: Rs. 23.07 million). The Modaraba has obtained significant musharika
financing on |
|
| which
it is paying profit. Expenses of the Modaraba have been reduced
significantly, and |
|
| management
has given special attention to 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 inception of the lease, at the
lower of the fair |
|
| value
of the assets and present value of minimum lease payments under the lease
agreements. |
|
| The
related obligations under the leases are accounted for as liabilities.
Depreciation is charged |
|
| to
income applying the straight line method in the same manner as for owned
assets. |
|
|
| 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
tem- |
|
| 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.
CHANGES IN EQUITY |
|
|
|
|
|
Share |
Statutory |
Accumulated |
Total |
|
|
|
Capital |
reserve |
loss |
|
|
|
|
|
|
|
|
Rupees |
|
|
|
|
| Balance
as at July 1, 1997 |
|
100,000,000 |
1,368,000 |
(74,545,605) |
26,822,395 |
|
| Loss
for the year 1997-98 |
|
-- |
-- |
(19,699,146) |
(19,699,146) |
|
|
|
------------------ |
------------------ |
------------------ |
------------------ |
|
| Balance
as at June 30. 1998 |
|
100,000,000 |
1,368,000 |
(94,244,751) |
7,123,249 |
|
| Loss
for the year 1998-99 |
