Unicap Modaraba : Transmission of Annual Report for the Year Ended 30 June 2022

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Directors' Report

On behalf of the Board of Directors of Map Out Management Company (Pvt.) Limited, we are presenting the Annual Report of UNICAP Modaraba together with Audited Accounts for the year ended June 30, 2022.

1. Economy

Pakistan's economy is facing formidable challenges in its recent times. According to the annual report released by State Bank of Pakistan's economy achieved a real GDP growth of around 6 percent. The report noted that the expansionary fiscal stance in FY22, an upsurge in global commodity prices, and the fallout of the Russia-Ukraine conflict, led to a marked deterioration in the current account deficit (CAD). In addition, the delay in the resumption of the IMF program and political instability exacerbated the country's vulnerability through the depletion of FX reserves.

The external account pressures, together with the appreciation in USD index especially in the second half of the fiscal year, led to a substantial depreciation in the PKR, which further magnified the combined effect of elevated domestic demand and the global commodity price increase, leading to a rise in inflationary pressures. National Consumer Price Index (NCPI) inflation reached the double-digit level of 12.2 percent in FY22, exceeding the SBP's revised projection of 9-11 percent.

As the macroeconomic challenges during the year rose, the government and the SBP undertook various corrective measures to curb the pace of domestic demand: (i) raising the policy rate by a cumulative 675 bps; (ii) tightening the prudential regulations for auto and consumer financing; (iii) imposition of 100 percent cash margin requirements (CMR) on a number of import items; (iv) increasing the cash reserve requirement (CRR) for commercial banks; (v) increasing FED on locally assembled cars; (vi) elimination of various tax exemptions under the Supplementary Finance Act; (vii) imposition of ban on import of non-essential items; and (viii) gradual roll back of fiscal package

The Government is trying to develop an effective strategy to put the economy back on tracks to revive business confidence for the local industry as well as foreign investors seeking to invest in Pakistan. The business confidence would largely depend on the yields of the economic policies brought by the Government since incumbency.

2. Operating Results and Business Overview

By the grace of Almighty Allah and despite the weak business environment we are pleased to report that the Modaraba has sold the Stock of High-Quality Cotton / Rice Seeds valuing Rs. 56.90 million. The Modaraba earned gain of Rs. 1.460 million from the sale of High-Quality Seeds. The total value of stock including the gain amount was simultaneously reinvested in High Quality Agriculture Inputs valuing Rs. 58.260 million for future gains in upcoming sowing seasons.

	Before Take Over by Map	After Take Over by	Financial Impact
	Out Management Company	Map Out	On The Health Of
	(Pvt.) Ltd as mentioned in	Management	Modaraba
	Transfer Order dated	Company (Pvt.) Ltd	Increase In M
	27.11.2014	(June 2021)
Authorized Modaraba Fund	200M	240M	Increased by 40M
Paid Up Fund	136.40M	236.40M	Increased by 100M
Equity	(0.957)M	54.549M	Increased by
			53.592M
Total Assets	3.649M	58.542M	Increased by
			54.893M
Break Up Value Per	(0.070)	2.31	Increased by 2.24 Rs
Certificate

The Modaraba booked a loss of Rs. 0. 645 million during the year under review as compared to Rs. 0.358 million during period ended June 30, 2021. The above figures indicate that the Modaraba is showing a very positive financial outlook.

The Registrar Modaraba, SECP passed an Order bearing Serial No.SC/M/MS/Unicap/46/2022/75 dated March 28,2022 stating that the accumulated losses of the Modaraba have exceeded more than 50% of the total amount subscribed by the Modaraba Certificate Holders and it may be wound up in public interest by filing an application of Winding Up before the Modaraba Tribunal Lahore. UNICAP Modaraba filed a Writ Petition the Order in the Lahore High Court challenging the Order passed by SECP and the Honorable Lahore High Court, on August 03, 2022 suspended the operations of the impugned order dated March 28 ,2022 passed by SECP

3. Outlook

UNICAP Modaraba has strong financial support and backing of its sponsors and its associated concerns.

The management stands fully committed to revive UNICAP Modaraba according to the SECP Revival Order dated April 19, 2017 through injection of fresh capital but this target can't be achieved without the approval of 2nd tranche of equity injection of Rs.50 M at discount, which is pending with the office of the Registrar Modaraba SECP since the date of its application dated September 28, 2017.

Moreover, the management is continuously exploring possible options for resource mobilization for Modaraba, including leveraging of its balance sheet through credit lines from banks and financial support from the Management Company of the Modaraba. UNICAP Modaraba has adequate credit support available from its sponsors undertaking to support its future growth. The availability of on-going financial support further strengthens the Modaraba's initiative for extending its outreach and to capitalize on the opportunities available under Islamic financing.

The management pledges to take all possible measures to maintain the growth of the Modaraba. The growth targets are planned to be achieved through controlled leveraging of balance sheet. Strict monitoring of operating expenses shall continue to keep them at a sustainable level. Within a short span of time, Modaraba has carved a niche among performing entities of the sector and we are hopeful to further improve our position in the coming years.

4. Profit / Loss

The Board of Directors has approved accumulated loss of Rs. 166.011M for the year ended June 30, 2022 compared to Rs. 165.365M as on June 30, 2021.

As per Prudential Regulations issued by Securities & Exchange Commission of Pakistan, Modarabas are required to transfer a minimum 20% and maximum 50% post-tax profit to statutory reserves. Rs. 8,738,973 is held towards the Statutory Reserve.

5. External Annual Audit

The financial statements of Modaraba have been audited without any qualification by the auditors namely M/s. Muniff Ziauddin & Co. Chartered Accountants.

6. Corporate Governance

The Modaraba is required to comply with various requirements of the Code of Corporate Governance (CCG) contained in Pakistan Stock Exchange Regulations as well as Public Sector Companies (Corporate Governance) Rules, 2013 (Rules) issued by the SECP.

The statutory auditors are also required to issue their review report over the compliance statement of the best practices, which is published with the financial statements.

The Board of Directors has reviewed the CCG and Rules and confirms that:

• The Board has consistently complied with the relevant principles of corporate governance and has identified the rules that have not been complied with the period in which such non-compliance continued and the reasons for such non-compliance.
• Financial statements, prepared by the management, present fairly the state of affairs, the results of its operations, cash flows and change in equity.
• Proper books of account have been maintained.
• Appropriate accounting policies have been applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment.
• The system of internal control is sound in design and has been effectively implemented and monitored.
• The appointment of CEO and other members of the Board and the terms of their appointment along with the remuneration policy adopted are in the best interests of the Modaraba as well as in line with the best practices.
• International Financial Reporting Standards, as applicable to modarabas in Pakistan, have been followed in preparation of financial statements and any departure there from has been adequately disclosed and explained.
• There are no significant doubts upon the Modaraba's ability to revive its business activities.
• There are no statutory payments on account of taxes, duties, levies and charges which are outstanding as on June 30, 2022, except for those disclosed in financial statements.
• No investment was made by the Employees Provident Fund as on June 30, 2022.
• Key operating and financial data of last six years cannot be presented as this is the fifth year of Modaraba's operations after takeover by the Map Out Management Company (Pvt.) Limited on December 14, 2014.
• 6 Board meetings of the Modaraba Company were held during the year.
• Two Credit/Investment Committee meetings of the Modaraba Company were held during the year under review.
• The Board has established Audit, Human Resource, Risk Management, Nomination and Procurement Committees as required under the Rules. No meetings of these committees were held during the period under review.
• The pattern of shareholding is annexed to this report.
• The Directors, CEO, Executives and their spouses and minor children did not carry out any transaction in the certificates of the Modaraba during the year.

7. Social Responsibility

The Modaraba ensures its role of a Responsible Corporate Citizen by conducting business in a socially responsible and ethical manner, protecting the environment, and supporting the communities and cultures with which it works.

The Modaraba is committed to maintain the highest standards of integrity and corporate governance practices in order to maintain excellence in its daily operations, and to build-up confidence in its governance systems.

The Modaraba constantly strives to build trust and demonstrate respect for human dignity and rights in all relationships, including respect for cultures, customs and values of individuals and groups.

8. Auditors

On the recommendation of Audit Committee, the Board has approved the appointment of M/s Muniff Ziauddin & Co. Chartered Accountants as auditors for the financial year ending June 30, 2022.

9. Acknowledgment

The Board would like to thank the SECP for its continued guidance and support. It would also like to thank the valued Modaraba Certificate Holders and customers of the Modaraba for their continued trust and support.

On behalf of the Board

	-Sd/-
Lahore	S. Saeed Ahmed
January 30, 2023	Chief Executive Officer