KARACHI, Nov 5: First Prudential Modaraba (FPM) earned a net profit of over Rs53 million in July-June 2003-04, but the company has not declared any dividends for its shareholders.

The last fiscal year was the third in a row that the certificate-holders did not get dividends. This prompted them to record their concern for non-distribution of profit at the recently held annual general meeting of FPM, but they showed satisfaction over its general health and performance.

The chief executive justified this, saying that "un-appropriated profit has been utilized to absorb part of the accumulated losses, thereby improving the net equity by 11 per cent and pushing up the break-up value of the modaraba certificate to Rs5.63 per certificate," according to a press release.

He further explained that in consequences of merger of Second Prudential Modaraba and Third Prudential Modaraba into First Prudential Modaraba from July 2001, the paid-up capital had shot up to Rs872 million against a net equity of Rs332 million. He said that through persistent growth and sustained profitability, the net equity increased to Rs491million.

"The modaraba management is aware of its obligations to the certificate-holders as well as the requirements of listing rules, which require mandatory declaration of dividend in five years.

The management has taken cognizance of the excessive paid-up capital, a substantial part of which represents non-performing accounts. The management intends to get the paid-up capital reduced suitably to bring it in line with the real net asset value and necessary action in this regard has been initiated."

In the last fiscal year, FPM wrote new leases of around Rs104 million and disbursed Rs103 million under morabaha, besides making investments of about Rs51 million in musharika projects. The modaraba also recovered Rs147 million during July-June 2003-04.