| First Grindlays Modaraba |
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| Annual
Report 1999 |
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| Contents |
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| Modaraba
Information |
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| Directors'
Report |
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| Auditors'
Report |
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| Balance Sheet |
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| Profit
& Loss Account |
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| Cash
Flow Statement |
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| Notes
to the Accounts |
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| Pattern
of Certificates Holding |
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| Modaraba
Information |
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| Directors
of Modaraba Company |
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| Mr.
Azhar Hamid |
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| Chairman |
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| Mr.
Khalid S. Tirmizey |
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| Managing
Director & Chief Executive |
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| Mr. Asif Sindhu |
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| Director |
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| Auditors |
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| A.
F. Ferguson & Co. |
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| Chartered
Accountants |
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| Bankers |
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| ANZ
Grindlays Bank Limited |
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| Muslim
Commercial Bank Limited |
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| Habib
Bank Limited |
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| Askari
Commercial Bank Limited |
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| A1-Meezan
Investment Bank Limited |
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| Standard
Chartered Bank |
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| Faysal
Bank Limited |
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| Legal Advisors |
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| Orr
Dignam & Co. |
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| Mobsin
Tayebaly & Co. |
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| S.
D. Rana & Co. |
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| Registered
and Head Office |
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| ANZ
Grindlays Bank Building |
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| P.O. Box 5556 |
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| I.
I. Chundrigar Road |
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| Karachi-74000 |
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| Branch Office |
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| ANZ
Grindlays Bank Building |
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| P.O. Box 566 |
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| Bank Square |
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| Shahrah-e-Quaid-e-Azam |
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| Lahore |
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| Registrars and |
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| Share
Registration Office |
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| Ferguson
Associates (Pvt) Ltd. |
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| P.O. Box 4716 |
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| State
Life Building |
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| Off
I. I. Chundrigar Road |
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| Karachi-74000 |
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| Thirteenth
Report of the Directors of Modaraba |
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| Company
for the year ended June 30, 1999 |
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| The
Board of Directors of Grindlays Services of Pakistan (Private) Limited, the |
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| Management
Company of First Grindlays Modaraba (FGM), has pleasure in |
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| presenting
the thirteenth Directors' report of FGM, together with audited |
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| accounts
for the year ended June 30, 1999. |
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| 1.
Financial Results |
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| Financial
results are summarized as under: |
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Year |
Year |
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ended |
ended |
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30.06.1999 |
30.06.1998 |
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|
(Rupees in
thousands) |
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| Profit
for the year |
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|
114,296 |
104,892 |
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| Add:
Unappropriated profit brought forward |
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|
6,085 |
4,521 |
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|
------------------ |
------------------ |
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| Profit
available for appropriation |
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|
120,381 |
109,413 |
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| Appropriations: |
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| Profit
distribution @ 22 % (1998 @ 22%) |
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|
82,328 |
82,328 |
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| Statutory
reserve |
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|
23,000 |
21,000 |
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------------------ |
------------------ |
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|
105,328 |
103,328 |
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------------------ |
------------------ |
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| Unappropriated
profit carried forward |
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|
15,053 |
6,085 |
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========== |
========== |
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| 2.
Profit Distribution |
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| The
Board in its meeting held on October 29, 1999 has approved the |
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| distribution
of profit of Rs. 2.20 (22%) per certificate of Rs. 10 each, |
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| subject
to deduction of zakat and tax at source where applicable, for the |
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| year
ended June 30, 1999. |
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| An
amount of Rs. 23 million has been transferred to statutory reserve |
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| in
compliance with statutory requirements. |
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| 3.
Credit Rating |
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| FGM,
since 1996, maintains an entity rating of A-3 assigned by |
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| Pakistan
Credit Rating Agency (Pvt.) Limited (PACRA). In assigning the |
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| aforementioned
rating, PACRA has concluded that FGM is in |
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| outstanding
financial condition with a consistent record of above |
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| average
performance. |
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| 4.
Review of Operations |
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| Net
profit for the year ended June 30, 1999 of Rs. 114 million was 9% |
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| higher
than the profit during the corresponding period last year. Lease |
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| disbursements
during the year amounted to Rs. 769 million against |
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| Rs.
687 million last year resulting in a growth of 16% in net investment |
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| in
leased assets which stood at Rs. 1,81 billion as at June 30, 1999. |
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| Plant,
machinery and equipment constituted 75% of the net leased |
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| asset
portfolio as at June 30, 1999. |
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| The
aforementioned performance has been achieved against a |
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| backdrop
of difficult and uncertain economic conditions by optimizing |
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| all
available avenues, following in particular: |
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| *
Tight control over operating expenses. |
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| *
Aggressive but practical marketing and financial strategies, |
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| including
strict compliance with ANZ Grindlays Bank's credit |
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| policies. |
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| *
Timely rate reduction agreements with majority lenders. |
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| The
sectorwise break-up of FGM's lease portfolio below reflects its policy |
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| of
avoiding risk concentration in any given sector. |
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| 5. Taxation |
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| The
Finance Act, 1998 had exempted the income of non-trading |
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| modarabas
from tax, provided 90% of the total profits are distributed to |
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| the
certificate holders. Provision for taxation has not been made in the |
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| accounts
for the year ended June 30, 1999 in view of this exemption. |
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| Appeals
remain pending before the Income Tax Appellate Tribunal in |
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| respect
of disallowed unabsorbed depreciation amounting to Rs. 449 |
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| million
brought forward from the tax holiday period and certain other |
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| disallowances
relating to prior years upheld by the Commissioner of |
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| Income
Tax (Appeals). FGM has, however, fully accounted for the |
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| aforementioned
disallowances during prior years. |
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| 6.
Regulatory Policy |
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| Securities
and Exchange Commission of Pakistan, in consultation with |
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| the
Modaraba Association of Pakistan, remains in the process of |
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| rationalizing
the Modaraba Ordinance and the Rules framed thereunder: |
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| 7.
Millennium Compliance |
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| As
also stated in our previous reports, FGM has taken all necessary |
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| steps
in order to address the Millennium compliance issue. |
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| 8.
Business Outlook |
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| The
expected turnaround in the economy did not materialize during the |
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| year
under review due to continuing recession. In order to revive the |
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| economy,
steps will need to be taken to boost investors' confidence, |
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| increase
exports and reduce deficit financing. |
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| FGM's
strategy remains focused on enhancing shareholder value |
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| through
optimizing funding mix and booking of quality risk assets. New |
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| areas
of business will continue to be explored but ventured into very |
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| prudently.
Consumer leasing operations were started during the year |
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| under
review on a very selective basis. Our experience has been most |
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| satisfactory
and therefore we plan to expand this line of business. |
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| As
mentioned earlier, during and particularly close to the end of the |
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| year
under review, profit rates on our funding lines were rationalized. |
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| The
focus is now on raising matching funds under the Certificate of |
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| Musharika
scheme to further consolidate the funding base. |
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| 9.
Acknowledgment |
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| The
Board places on record its appreciation of the services rendered by |
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| the
staff members responsible for FGM's affairs. |
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| 10. Auditors |
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| The
present auditors Messrs. A. F. Ferguson & Co., being due for |
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| retirement,
have offered themselves for re-appointment for the year |
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| ending
June 30, 2000. Subject to approval by the Registrar of |
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| Modaraba
Companies & Modarabas, their appointment has been |
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| confirmed
by the Board. |
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On behalf of the Board |
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|
Azhar Hamid |
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| Dated:
October 29, 1999 |
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Chairman |
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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, 1999 and |
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| the
related Profit and Loss Account and Cash Flow Statement together |
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| with
the notes to the accounts for the year ended June 30, 1999 of First |
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| Grindlays
Modaraba, which are Modaraba Company's (Grindlays |
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| Services
of Pakistan (Private) Limited) representation and we state that |
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| we
have obtained all the information and explanations which we |
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| required
and, after due verification thereof, we report that: |
|
|
| (a)
In our opinion, proper books of account have been kept by the |
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| Modaraba
Company in respect of First Grindlays Modaraba as |
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| required
by the Modaraba Companies and Modaraba (Floatation |
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| 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 |
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| have
been drawn up in conformity with the Modaraba Companies |
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| and
Modaraba (Floatation and Control) Ordinance, 1980, and |
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| Modaraba
Companies and Modaraba Rules, 1981; and |
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| (c)
In our opinion and to the best of our information and according to |
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| the
explanations given to us; |
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| (i)
the Balance Sheet and the related Profit and Loss Account and |
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| Cash
Flow Statement, which are in agreement with the books of |
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| account,
exhibit respectively a true and fair view of the state of |
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| the
Modaraba's affairs as at June 30, 1999 and the profit and |
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| the
cash flows for the year ended on that date; |
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| (ii)
zakat deductible at source under the Zakat and Ushr |
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| Ordinance,
1980 has been deducted by the Modaraba and |
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| deposited
in the Central Zakat Fund established under section |
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| 7
of that Ordinance; and |
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| (iii)
the business conducted, investments made and expenditure |
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| incurred
by the Modaraba are in accordance with the objects, |
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| terms
and conditions of the Modaraba. |
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|
A.F. Ferguson & Co. |
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| Karachi:
November 04, 1999 |
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Chartered Accountants |
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| Balance
Sheet as at June 30, 1999 |
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|
Note |
1999 |
1998 |
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|
Rupees |
Rupees |
|
| CAPITAL
AND RESERVES |
|
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|
| Certificate
capital |
|
|
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| Authorised |
|
|
|
| 40,000,000
(1998: 40,000,000) |
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|
| Modaraba
certificates of Rs. 10 each |
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|
400,000,000 |
400,000,000 |
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|
|
|
========== |
========== |
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|
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| Issued,
subscribed and paid-up |
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3 |
374,220,000 |
374,220,000 |
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| Reserves |
|
4 |
235,000,000 |
212,000,000 |
|
| Unappropriated
profit |
|
|
15,052,645 |
6,085,129 |
|
|
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|
------------------ |
------------------ |
|
|
|
|
624,272,645 |
592,305,129 |
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| REDEEMABLE
CAPITAL |
|
5 |
246,000,000 |
182,810,096 |
|
|
|
|
| LONG-TERM
FINANCES AND |
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|
|
| DEFERRED
LIABILITIES |
|
|
|
| Morabaha
finance |
|
6 |
50,000,000 |
-- |
|
| Security
deposits from lessees |
|
|
114,813,029 |
102,840,708 |
|
| Staff gratuity |
|
|
|
469,639 |
260,595 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
165,282,668 |
103,101,303 |
|
| CURRENT
LIABILITIES |
|
|
|
| Current
maturity of |
|
|
|
| - long-term morabaha finance |
|
6 |
33,333,333 |
-- |
|
| - security deposits from lessees |
|
|
23,815,386 |
36,385,801 |
|
| Short-term
redeemable capital |
|
7 |
10,000,000 |
-- |
|
| Short-term
musharika finances |
|
8 |
88,563,245 |
399,468,224 |
|
| Short-term
morabaha finances |
|
9 |
550,000,000 |
200,000,000 |
|
| Creditors,
accrued and other liabilities |
|
10 |
53,206,668 |
77,175,839 |
|
| Rentals
received in advance |
|
|
97,100,934 |
81,300,629 |
|
| Unclaimed
profit distribution |
|
|
5,498,525 |
4,299,254 |
|
| Profit
distribution |
|
|
82,328,400 |
82,328,400 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
943,846,491 |
880,958,147 |
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|
|
|
------------------ |
------------------ |
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|
|
|
1,979,401,804 |
1,759,174,675 |
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|
|
|
========== |
========== |
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|
|
| FIXED
ASSETS - Tangible |
|
|
|
| Assets
leased out |
|
11 |
1,811,396,722 |
1,563,209,802 |
|
| Assets
in own use |
|
12 |
9,133,304 |
7,120,354 |
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|
|
|
------------------ |
------------------ |
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|
|
|
1,820,530,026 |
1,570,330,156 |
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| LONG-TERM
INVESTMENTS |
|
13 |
12,003,964 |
12,003,964 |
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
| Trade debts |
|
|
14 |
77,964,431 |
67,875,178 |
|
| Short-term
musharika arrangement |
|
15 |
-- |
3,950,000 |
|
| Short-term
morabaha arrangement |
|
16 |
25,000,000 |
50,000,000 |
|
| Advances,
deposits, prepayments and |
|
|
|
| other
receivables |
|
17 |
5,253,346 |
14,771,470 |
|
| Taxation
recoverable |
|
|
30,489,826 |
30,488,870 |
|
| Cash
and bank balances |
|
18 |
8,160,211 |
9,755,037 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
146,867,814 |
176,840,555 |
|
|
|
|
------------------ |
------------------ |
|
|
|
1,979,401,804 |
1,759,174,675 |
|
|
|
|
========== |
========== |
|
|
|
|
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| The
annexed notes form an integral part of these accounts. |
|
|
|
Azhar Hamid |
|
Khalid S. Tirmizey |
|
Asif Sindhu |
|
|
Chairman |
|
Chief Executive |
|
Director |
|
|
Grindlays Services of |
|
Grindlays Services of |
|
Grindlays Services of |
|
|
Pakistan (Private) Ltd. |
|
Pakistan (Private) Ltd. |
|
Pakistan (Private) Ltd. |
|
|
|
|
| Profit
and Loss Account |
|
| for
the year ended June 30, 1999 |
|
|
|
Note |
1999 |
1998 |
|
|
|
Rupees |
Rupees |
|
|
|
|
| Operating
income |
|
19 |
755,454,195 |
673,470,569 |
|
|
|
|
|
| Operating
expenses |
|
20 |
503,498,965 |
471,179,759 |
|
| Financial
charges |
|
21 |
146,649,343 |
105,630,408 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
650,148,308 |
576,810,167 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
105,305,887 |
96,660,402 |
|
| Other income |
|
22 |
20,419,621 |
18,721,536 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
125,725,508 |
115,381,938 |
|
|
|
|
| Modaraba
Company's management fee |
|
|
11,429,592 |
10,489,267 |
|
|
|
|
------------------ |
------------------ |
|
| Profit
for the year |
|
|
114,295,916 |
104,892,671 |
|
|
|
|
| Unappropriated
profit brought forward |
|
|
6,085,129 |
4,520,858 |
|
|
|
|
------------------ |
------------------ |
|
| Profit
available for appropriation |
|
|
120,381,045 |
109,413,529 |
|
|
|
|
| Appropriations: |
|
|
|
| Profit
distribution: 22% (1998: 22%) |
|
|
82,328,400 |
82,328,400 |
|
|
|
|
| Capital reserve: |
|
|
| Statutory |
|
|
23,000,000 |
21,000,000 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
105,328,400 |
103,328,400 |
|
|
|
|
------------------ |
------------------ |
|
| Unappropriated
profit carried forward |
|
|
15,052,645 |
6,085,129 |
|
|
|
|
========== |
========== |
|
| Earning
per certificate - Basic and Diluted |
|
23 |
3.05 |
2.80 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
Azhar Hamid |
|
Khalid S. Tirmizey |
|
Asif Sindhu |
|
|
Chairman |
|
Chief Executive |
|
Director |
|
|
Grindlays Services of |
|
Grindlays Services of |
|
Grindlays Services of |
|
|
Pakistan (Private) Ltd. |
|
Pakistan (Private) Ltd. |
|
Pakistan (Private) Ltd. |
|
|
|
| Cash
Flow Statement |
|
| for
the year ended June 30, 1999 |
|
|
|
|
Note |
1999 |
1998 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
| Cash
generated from operations |
|
27 |
725,700,826 |
602,515,927 |
|
| Profit paid on |
|
|
|
|
| -
redeemable capital |
|
|
(22,250,201) |
(9,717,740) |
|
| - long term morabaha finance |
|
|
(8,787,290) |
(3,280,092) |
|
| - short-term morabaha finances |
|
|
(57,080,189) |
(13,365,206) |
|
| - short-term musharika finances |
|
|
(80,622,247) |
-35,654,655 |
|
| Leased
assets purchased |
|
|
(769,077,672) |
(657,159,442) |
|
| Taxes paid |
|
|
(956) |
(19,929,281) |
|
| Gratuity paid |
|
|
-- |
(161,202} |
|
| Security
deposits from lessees (net) |
|
|
(598,094) |
(21,771,225) |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash (outflow) from operating activities |
|
|
(212,715,823) |
(188,522,916) |
|
|
|
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
|
| Fixed
capital expenditure |
|
|
(4,323,161) |
(4,772,925) |
|
| Proceeds/insurance
claims on transfer |
|
|
|
|
| of
assets leased out |
|
|
87,527,658 |
134,679,872 |
|
| Proceeds/insurance
claims on disposal |
|
|
|
|
| of
assets in own use |
|
|
249,000 |
1,567,000 |
|
| Dividend
received |
|
|
642,028 |
1,626,020 |
|
| Receipt
of encashment value receivable from NIT |
|
|
-- |
17,001,700 |
|
| Profit
received on PLS savings account |
|
|
476 |
905 |
|
| Profit
received on short-term musharika |
|
|
|
|
| arrangement |
|
|
5,636,998 |
-- |
|
| Profit
received on short-term morabaha arrangement |
|
6,898,869 |
4,750,000 |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash inflow from investing activities |
|
|
96,631,868 |
154,852,572 |
|
|
|
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
|
| Redeemable
capital less repayments |
|
|
63,189,904 |
149,476,762 |
|
| Long-term
morabaha finances less repayments |
|
|
83,333,333 |
(48,333,333) |
|
| Short-term
musharika finances less repayments |
|
|
(310,904,979) |
(109,167,247) |
|
| Short-term
morabaha finances |
|
|
350,000,000 |
118,000,000 |
|
| Short-term
redeemable capital |
|
|
10,000,000 |
-- |
|
| Profits paid |
|
|
(81,129,129) |
(75,469,538) |
|
|
|
|
------------------ |
------------------ |
|
| Net
cash inflow from financing activities |
|
|
114,489,129 |
34,506,644 |
|
|
|
|
------------------ |
------------------ |
|
| Net
(decrease)/increase in cash and cash |
|
|
| equivalents |
|
|
(1,594,826) |
836,300 |
|
| Cash
and bank balances at July 1 |
|
|
9,755,037 |
8,918,737 |
|
|
|
|
------------------ |
------------------ |
|
| Cash
and bank balances at June 30 |
|
|
8,160,211 |
9,755,037 |
|
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
Azhar Hamid |
|
Khalid S. Tirmizey |
|
Asif Sindhu |
|
|
Chairman |
|
Chief Executive |
|
Director |
|
|
Grindlays Services of |
|
Grindlays Services of |
|
Grindlays Services of |
|
|
Pakistan (Private) Ltd. |
|
Pakistan (Private) Ltd. |
|
Pakistan (Private) Ltd. |
|
|
|
| Notes
to the Accounts |
|
| for
the year ended June 30, 1999 |
|
|
| 1.
LEGAL STATUS AND NATURE OF BUSINESS |
|
| First
Grindlays Modaraba was formed under the Modaraba Companies |
|
| and
Modaraba (Floatation and Control) Ordinance, 1980 and the Rules |
|
| framed
thereunder and is managed by Grindlays Services of Pakistan |
|
| (Private)
Limited. The Managements Company is a wholly owned subsidiary |
|
| of
ANZ Grindlays Bank Limited. The Modaraba is listed on the Karachi |
|
| and
Lahore Stock Exchanges. |
|
|
| The
Modaraba is a perpetual modaraba and is primarily engaged in |
|
|
| leasing
of plant, machinery, motor vehicles (both commercial and private), |
|
| computer,
furniture and equipment etc. The Modaraba may also invest in |
|
| commercial
and industrial ventures suitable for the Modaraba. |
|
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
|
|
|
|
| (a)
Overall valuation policy |
|
|
|
| These
accounts have been prepared under the historical cost convention. |
|
|
| (b)
Staff retirement benefits |
|
|
|
|
|
|
|
| The
Modaraba operates |
