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ATLAS LEASE LIMITED

Annual Report 1996

An ATLAS GROUP COMPANY

CONTENTS

Corporate Data

Notice of Meeting

Directors' Report

Chairman's Review

Pattern of Shareholding

Financial Highlights

Auditors' Report to the Members

Balance Sheet

Profit and Loss Account

Statement of Changes in Financial Position

Notes to the Accounts

The Atlas Family

CORPORATE DATA

BOARD OF DIRECTORS:

CHAIRMAN

Mr. Yusuf H. Shirazi

CHIEF EXECUTIVE

Mr. Khaleeq-ur-Rahman Khan

DIRECTORS

Mr. A. K.M. Sayeed

Mr. Hiroshi Sasaki

Mr. Iftikhar H. Shirazi

Mr. Kenichi Nakagawa

Mr. Razi-ur-Rahman Khan

Mr. Sanaullah Qureshi

COMPANY SECRETARY

Mr. Muhammad Rafique Umer

GROUP EXECUTIVE COMMITTEE:

CHAIRMAN

Mr. Yusuf H. Shirazi

MEMBERS

Mr. Jawaid Iqbal Ahmed

Mr. Frahim Ali Khan

Mr. Iftikhar H. Shirazi

Mr. Aamir H. Shirazi

SECRETARY

Mr. Amjad Hussain

GROUP PERSONNEL COMMITTEE:

CHAIRMAN

Mr. Nasim S. Mirza

GROUP AUDIT COMMITTEE:

CHAIRMAN

Mr. Sanaullah Qureshi

AUDITORS:

Ford, Rhodes, Robson, Morrow

Chartered Accountants

LEGAL ADVISORS:

Mohsin Tayebaly & Co.

BANKERS & LENDING INSTITUTIONS:

BANKERS:

ABN AMRO Bank

Allied Bank of Pakistan Limited

ANZ Grindlays Bank plc

Askari Commercial Bank Limited

Faysal Bank Limited

First International Investment Bank Limited

Habib Bank AG Zurich

Habib Bank Limited

National Bank of Pakistan

Standard Chartered Bank

The Bank of Tokyo-Mitsubishi, Limited

The Hongkong and Shanghai Banking Corporation

United Bank Limited

LENDING INSTITUTIONS:

Asian Development Bank (ADB)

Commonwealth Development Corporation (CDC)

German Investment and Development Company (DEG)

International Finance Corporation (IFC)

National Development Finance Corporation

Netherlands Development Finance Company (FMO)

REGISTERED OFFICE & HEAD OFFICE:

Federation House, Sharae Firdousi,

Clifton, Karachi- 75600

Tel: (92-21) 5866817 - 20, 5866919 - 20 Fax: 5870543

E-mail: atlasl @ paknetl.ptc.com

BRANCH OFFICES:

LAHORE OFFICE:

1st Floor, Emirates Bank Building,

14 - Egerton Road, Lahore

Tel: (92-42) 6366170 - 74,6364941 Fax: 6365058

ISLAMABAD OFFICE:

2rid Floor, Saudi PakTower,

Blue Area, Islamabad

Tel: (92-51) 824906, 824909 Fax:821377

NOTICE OF MEETING

Notice is hereby given that the Ninth Annual General Meeting of the members of ATLAS LEASE LIMITED will be held on

Monday the December 23, 1996 at 11.00 a.m. at 8th Floor, Adamjee House, I.I. Chundrigar Road, Karachi to transact the

following business:

ORDINARY BUSINESS:

1 To confirm the Minutes of the last Extraordinary General Meeting held on April 22, 1996.

2. To receive, consider and adopt the Audited Accounts of the Company for the year ended June 30, 1996 together with

the Directors' and Auditors' Report thereon.

3. To approve Cash Dividend @ 15% for the year ended June 30, 1996 as recommended by the Board of Directors.

4. To appoint Auditors and fix their remuneration for the year 1996-97. The retiring Auditors M/s. Ford, Rhodes, Robson,

Morrow, Chartered Accountants, being eligible, offer themselves for reappointment.

SPECIAL BUSINESS:

5. To approve the remuneration of the Chief Executive and the Working Director.

OTHER BUSINESS:

6. To transact any other business as may be placed before the meeting with the permission of the Chair.

A statement under section 160 of the Companies Ordinance, 1984 pertaining to the Special Business referred to above is

annexed to this Notice of Meeting.

By Order of the Board

MUHAMMAD RAFIQUE UMER

Company Secretary

NOTES:

i) The Register of Members of the Company will remain closed from December 16, 1996 to December 23, 1996 (both

days inclusive). Transfers received in order at the Registered Office of the Company at the close of business on

December 15, 1996 will be treated in time for the purpose of entitlement of dividend.

ii) A member entitled to attend and vote at this meeting may appoint another member as his / her proxy to attend and

vote on his / her behalf. The instrument appointing a Proxy and the power of attorney or other authority under which

it is signed or a notarially certified copy of the power of authority must be received at the Registered Office of the

company duly stamped, signed and witnessed not later than 48 hours before the meeting. A form of Proxy is

enclosed.

iii) Members are requested to notify any change in their addresses immediately.

STATEMENT UNDER SECTION 160 OF THE COMPANIES ORDINANCE,1984

This statement sets out the material facts concerning the Special Business to be transacted at the Ninth Annual General

Meeting of Atlas Lease Limited to be held on December 23, 1996.

Approval of the shareholders will be sought for the remuneration payable to the Chief Executive and working Director in

accordance with their terms and conditions of service. For this purpose, it is intended to pass following resolution as an

Ordinary Resolution, namely:

RESOLVED

"that the Company hereby authorises the holding of offices of profit and payment as remuneration to Mr. Khaleeq-ur-

Rahman Khan, Chief Executive and Mr. Iftikhar H. Shirazi, working Director, not exceeding in the aggregate Rs. 3.5 million

per annum for the year ending June 30, 1997 in addition to company maintained car with driver for each of them."

The Chief Executive and the working Director are interested in the remuneration payable to them.

DIRECTORS' REPORT

The Directors have pleasure in submitting Annual Report of the Company together with the Audited Accounts and the

Auditors' Report thereon for the year ended June 30, 1996.

Financial Results:

1996

1995

Rupees

Net profit for the year after charging all

expenses and doubtful debts

41,733,087

32,206,760

Previous profit brought forward

81,234

529,474

Profit available for appropriation

41,814,321

32,736,234

Appropriations:

Transfer to general reserve

26,000,000

Cash dividend

15,778,590

6,655,000

41,778,590

32,655,000

Unappropriated profit carried forward

35,731

81,234

Dividend:

The Directors are pleased to recommend a cash dividend of 15%.

Chairman's Review:

The accompanying Chairman's Review deals with the performance of the Company during the year and future outlook. The

Directors of the Company endorse the contents of the review.

Pattern of Shareholding:

The pattern of Shareholding of the Company is annexed.

Auditors:

The present Auditors Messrs. Ford, Rhodes, Robson, Morrow, Chartered Accountants retire and being eligible offer

themselves for reappointment.

for and on behalf of

BOARD OF DIRECTORS

Karachi: November 25, 1996

CHAIRMAN'S REVIEW

I have great pleasure to welcome you to the 9th Annual

General Meeting of the Company and to present a review

of the operations of your Company for the year ended June

30, 1996.

THE ECONOMY

The overall economic indicators showed an upward trend

during the year under review. The GDP grew from 4.4% of

thelastyearto6.1%duringtheyear. The Agriculture sector

witnessed growth from 5.9% last year to 6.7%. The

manufacturing sector also registered a growth of 4.8% as

compared with 2.9% last year.

Although the above statistics show improvement, yet the

country's economy generally, and of the large scale industry

particularly, continued to have problems during the period

under review. The balance of trade and the deficit finance

continued to be adverse for the past several years. The

rate of inflation also remained high in two digits resulting in

increased cost of production in the manufacturing sector.

In finance and investment sector the Credit Deposit Ratio

(CDR) was done away with as an instrument of credit

control. The floor rate on all bank lending was increased by

1%. The Capital Market recorded an all time low during

the Year. Consequently, the decline was witnessed despite

floatation of several large issues. Out of 764 listed

companies, 548 companies could not make any distribution

of profits during 1995 as compared to 272 companies out

of a total of 542 listed companies in 1991 (vide table on

page 10). In other words, the number of companies on the

KSE paying dividend reduced from 50% in 1991 to 28% in

1995.

In the Atlas Group, out of 7 companies listed on the stock

exchanges, 5 paid dividends in 1995 including your

Company. Your Company has an uninterrupted record of

payout to its shareholders since 1992, the third year of

operations. It paid 10% cash and 10% stock dividend, every

year, from 1992 to 1994, and 10% cash dividend in 1995

alongwith a Right issue at 50%. A Right issue was made,

first, at 150% during 1990.

THE LEASING INDUSTRY

The inflow of new entrants slowed down during the period

under review and only two more companies entered the

field since my last report to you. At present, 30 leasing

companies and 34 modaraba companies engaged in

leasing business are listed on the stock exchanges of the

country. The competition kept on growing as industry

grew. The lease financing aggregated over Rs. 11.0 billion

in 1996. Leasing companies have opened up a non-

traditional avenue for diversification of long-term capital

financing and have made substantial contribution towards

promoting industrial expansion in the country, particularly

in financing the small and medium sized enterprises. The

Government is aware of the growth of the lease business.

The Corporate Law Authority, for example, with due

consultation with the relevant quarters, has amended the

leasing rules for the good of the industry. The changes in

the rules are expected to bring about improvement in the

image and working of the leasing companies in Pakistan.

THE COMPANY'S GROWTH

Your Company's equity grew to Rs.196.05 million on June

30, 1996 from IRs.21.23 million in 1990, the first year of

your Company's operations. The gross lease disbursements

touched an amount of Rs. 2.96 billion in 1996 from Rs.

118.97 million during 1990. In order to meet the growing

needs of the business, long term foreign and local loans

arranged stood at Rs.746.46 million and Rs.37.40 million

respectively at the end of the year under review as against

Rs.20.0 million long term local currency loan initiated in

1991.

During the period under review, the Company earned a post

tax profit of Rs. 41.73 million as against Rs.1.85 million in

1990. The ROE after tax increased to 21.29% in 1996 from

8.71% in 1990 and EPS increased to Rs.3.97 in 1996 from

Rs.0.93 in 1990.

The overall progress of your Company during these

years is as follows:

THE OPERATIONS

I am pleased to report that your Company is growing

steadily. It achieved 16.92% growth in lease disbursement,

amounting to Rs.713.69 million during the year under review

as against Rs.610.42 million during the last year. The

portfolio comprised of 61.38% in machinery, 33.14% in

vehicles and 5.48% in office equipment. Net investment

in lease finance grew by 30.70% from Rs. 1,269.81 million

in June 1995 to Rs. 1,659.58 million in June 1996. The

sectoral exposure at the end of the year stood diversified:

it comprised of 17.57% investment in textile sector, 13.89%

in chemical & fertilizer, 10.65% in cement, 9.92% in food,

tobacco and beverages, 7.74% in electrical & electronic

goods, and 7.31% in steel, engineering & automobiles.

297 contracts were executed during the year under review

as compared to 173 contracts during last year.

The sectoral exposure as on June 30, 1997 (See Image)

The total revenues for the year amounted to Rs. 288.58

million, up 34.20%, from Rs.215.03 million in the previous

year. The financial charges and administrative expenses

were incurred to the tune of Rs. 203.67 million and Rs.33.94

million respectively during the year. The recovery position

remained satisfactory. An amount of Rs. 7.80 million was

charged as general provision for potential lease losses

bringing the aggregate to Rs. 33.19 million. This provision

is in accordance with the Companys prudent policy being

followed from the beginning. The profit after tax stood at

Rs. 41.73 million, 29.56% higher from the previous year's

Rs.32.21 million. A sum of Rupees 14.85 million was paid

to exchequer during the period under review by way of tax

deducted at source and turnover tax.

FUNDING

The Capital base of your Company expanded from Rs.

66.55 million last year to Rs.105.19 million during the year

under review. The increase was due to the issue of Right

shares at par of Rs. 33.27 million and IFC's exercising

their option of converting a part of their loan into equity

worth Rs.5.37 million. A total of 536,560 shares were issued

to IFC at a conversion price of Rs.20.85 per share. The

proceeds were utilised in the last quarter of the year under

review.

In line with the Group's trends and sustained growth, your

Company got full support from the financial institutions,

banks, etc. Adequate funds remained available to the

Company. The I FC's second loan amounting to USS 2.2

million was utilised during the period under review. Efforts

were also made to raise local funds through COl, which

stood at Rs.336.32 million as against Rs. 80.81 million

last year. The two approved foreign currency credit lines

of USS 10.0 million and NLG 10.0 million (equivalent to

USS 6.0 million). of ADB and FMO respectively are in the

process of being utilised. Efforts are on way to diversify

sources of funding and to explore other means of financing

to meet growing demand of the business.

CHANGE IN BOARD OF DIRECTORS

Mr. T. Nakano, on relinquishing charge as the General

Manager of The Bank of Tokyo-Mitsubishi Ltd., Karachi

was replaced by Mr. K. Nakagawa on April 22, 1996 and

Mr. M. Asadullah Shaikh on relinquishing charge as

Chairman and Managing Director of NIT was replaced by

Mr. Razi-ur-Rahman Khan, Chairman & Managing Director

of NIT subsequent to the period under review. May I place

on record appreciation of the contribution made by Messrs:

T. Nakano and M.Asadullah Shaikh and welcome Messrs:

K. Nakagawa and Razi-ur-Rahman Khan on the Board and

look forward to their support in managing the affairs of

your Company.

ATLAS PHILOSOPHY AND FUTURE OUTLOOK

Atlas Group of companies, of which your Company is a

constituent member, had a record growth. During the period

under review, despite unfavourable economic conditions,

all group companies performed better than the previous

year as your Company. Atlas believes in steady and

sustainable growth. We have travelled a long way to be,

where we are today. It firmly believes in what Willian G.

Jordan said:

"Everything that is great in life is the product of slow

growth; the greater and higher, the nobler the work,

the slower the growth, the surer is its lasting success.

Mushrooms attain their full power in a night; Oaks

require decades."

The Federal Budget 1996 levied Central Excise Duty on

lease finance @ 1/12th of 1% of each lease amount

outstanding at the end of each calendar month. The Sindh

Government has introduced a levy @ 0.5% on the services

provided by leasing companies. All these will ultimately

increase the cost of lease financing, thus effecting the

growth of the industrial investment in the country.

The recent mini budget and repeated devaluation of Pak

Rupee have further burdened the economy. These

continuing adverse factors are responsible for the loss of

Rupee value against other currencies. With the three

massive downward exchange adjustments in Rupee within

a short span of one year - October-95 to October-96 - the

impact is of more than 22 percent.

The devaluation, levies on POL, gas distribution and

withholding tax on imports and supplies will directly add to

the cost of production. Inflation which is officially running

at about 11% may get worse. All this is causing a

dampening effect on the economy and the pace of industrial

activity could further decline.

Your Company, however, by adopting a steady and

sustained growth pattern in line with the philosophy of the

Group is focusing on the Group synergy, market penetration,

stricter credit evaluation, other avenues of income, human

resource development and providing quality product and

service. We are sure, we will continue to endeavour for a

higher level of achievement year after year.

(If the vision is clear and direction set,

it is then the commitment that matters)

ACKNOWLEDGEMENTS

May I, on behalf of the Board, thank the CEO and his team

for their dedication and hardwork, The Bank of Tokyo-

Mistubishi, Ltd. and National Investment Trust for their

advice and guidance provided to the Company. May I also

thank the State Bank of Pakistan, financial institutions for

their help and support and all our clients for the trust and

confidence reposed in your Company.

YUSUF H. SHIRAZl

LISTED COMPANIES DISTRIBUTION

Dividend, Bonus & Issue of Right Shares

Dec. 31,

PARTICULARS

1991

1992

1993

1994

1995

Rs. in Million

Paid Up Capital

37,024.343

58,t98.532

69,476.15

104,137.24

134,372.32

No. of Listed Companies

542

628

653

724

764

Announcements:

Cash Dividend

No. of Companies

139

157

138

156

139

% of Total Listed Companies

26%

25 %

21%

22%

18%

Bonus Shares Issued

No of Companies

% of Total Listed Companies

11%

Cash + Bonus Issued

No. of Companies

% of Total Listed Companies

Cash + Right Issued

No. of Companies

% of Total Listed Companies

Bonus + Right Issued

No. of Companies

% of Total Listed Companies

Cash + Bonus + Right Issued

No. of Companies

% of Total Listed Companies

Right Shares Offered

No. of Companies

% of Total Listed Companies

---------

Total Companies announced

Cash and Bonus

270

278

293

292

216

% of Total Listed Companies

50%

44%

45%

40%

28%

---------

Total Companies Issued/Offered

Right Shares

% of Total Listed Companies

16%

11%

---------