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Annual Report 1996
ASIAN LEASING CORPORATION LTD.
COMPANY INFORMATION
Board of Directors :
Mr. Mohammad Aslam Khan Chairman
Mr. Mohammad Zafamllah Khan Director
Dr. Iftekhar A. Khan Director
Mr. Khalid Iqbal Director
Syed Ghulam Abbas Director
Mrs. Roohi Raees Khan Director
Mr. Muhammad Bashir Chaudhry Director
Syed Manzar Alam Director
Mr. Khalid Niaz Khawaja Director/Chief Executive Officer
Company Secretary :
Mr. Ahsan Iqbal (ACA)
Bankers to the Company:
Allied Bank of Pakistan Limited
Al Baraka Islamic Investment Bank Limited
Al Faysal Investment Bank Limited
Al-Towfeek Investment Bank Limited
Bank of Punjab
Crescent Investment Bank Limited
Faysal Bank Limited
Fidelity Investment Bank Limited
Habib Bank Limited
Indus Bank Limited
Muslim Commercial Bank Limited
National Development Finance Corporation
Prime Commercial Bank Limited
Prudential Commercial Bank Limited
United Bank Limited
Auditors :
Ford, Rhodes, Robson, Morrow
Chartered Accountants
Legal Advisor:
Mr. Masood Javaid
Advocate, Supreme Court of Pakistan
Registrars and Share Transfer Office:
Noble Computer Services (Private) Ltd.
1st Floor, Al-Mansoor Building,
Dr. Ziauddin Ahmed Road, Karachi.
Registered Office 8: Head Office :
85-B, Gulberg (Jail) Road,
LAHORE- 54000
Tel 7584417, 7584381
7584247, 7573766, 7578836
Tlx 44013 ALC PK.
Fax (042) 7584418
Branch Office :
204-Clifton Centre
Khayaban-e-Roomi, Clifton, Karachi.
Tel : 5835936, 5866095
Fax: 5873573
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the TENTH ANNUAL GENERAL MEETING OF ASIAN LEASING
CORPORATION LIMITED will be held on Thursday 26th December, 1996 at the registered office
of the Company, i.e. 85-B, Gulberg (Jail) Road, Lahore at 9.00 a.m. to transact the following business:
1. To confirm the minutes of Extra Ordinary General Meeting of the Company held on 30th
June, 1996.
2. To receive, consider and adopt the audited accounts for the period of eighteen months
ended June 30, 1996 together with the Directors' and Auditors' reports thereon.
3. To declare cash dividend @ Rs. 1.00 per share (10%) as recommended by the Board
of Directors.
4. To appoint Auditors and fix their remuneration. The present Auditors,
Messrs. Ford, Rhodes, Robson, Morrow, Chartered Accountants, retire and being eligible,
offer themselves for re-appointment.
5. To transact any other business with the permission of the Chair.
BY ORDER OF THE BOARD
AHSAN IQBAL
CORPORATE SECRETARY
NOTES:
1. The Register of Members of the Company will remain closed from 21st December, 1996
to 27th December, 1996 (both days inclusive) and no transfer of shares will be made during
the period the register is closed.
2. A member entitled to attend and vote at the General Meeting is entitled to appoint one
person as his proxy to attend and vote on his behalf.
3. Instrument appointing proxy and the power of attorney or other authority under which it
is signed or a naturally certified copy of the power or authority must be deposited at the
registered office of the Company atleast 48 hours before the time of the meeting.
4. Shareholders are requested to notify any change in address immediately.
DIRECTORS' REPORT TO THE MEMBERS
The Board of Directors have pleasure in presenting their report together with audited accounts of your
Company for a period of eighteen months from January 1995 to June 1996. To comply with the requirements
of Finance Act, 1995, your Company has changed its accounting year from calendar to fiscal:
FINANCIAL RESULTS
The financial results of the Company for the period under review are summarised as follows:
(Rupees)
Revenue 135,973,224
Expenditure 103,803,894
Profit before taxation 32,169,330
Provision for taxation 19,400,000
Profit after taxation 12,769,330
Un-appropriated profit brought forward 84,413
Transfer from General Reserve 154,523
Profit available for appropriation 13,008,266
Appropriations
- Transfer to Special Reserve 2,553,866
- Proposed dividend 10,454,400
- Un-appropriated profit carried forward -
DIVIDEND
Your company believes in sharing its profits with its shareholders and in view of this policy, the Board
of Directors have recommended a cash dividend @ Re. 1.00 per share (10%) for the period under review.
REVIEW OF OPERATIONS
Despite unfavorable economic scenario, continued recession in the economy and constraints faced in
resource mobilization during the period under review, Asian Leasing Corporation Limited maintained its
total portfolio of net investment in lease finance and disbursed Rs. 224.21 million including Rs. 176.32
million from July, 1995 to June, 1996 as against Rs. 163.36 million in 1994 - an overall increase of
37.25% and generated Revenue of Rs. 135.97 million including Rs. 90.47 million from July,
1995 to June, 1996 as against Rs. 91.50 million in 1994 - an overall increase of 48.60%.
Profit after tax for the period under review registered a fall of Rs. 9.99 million as compared to that of
year 1994 due to the impact of heavy taxation and the reduction in cushion available between average
rate of return on lease financing and rate of mark-up on loans. Profit before tax for the period under
review recorded a growth of 19.35% at Rs. 32.17 million including Rs. 19.56 million from July, 1995 to
June, 1996 as against Rs. 26.95 million in 1994. Management kept a strict control on the overall
expenditure of the company. However, as a result of increase in salaries and benefits to staff, raise in
mark-up rates on the financial facilities given by the lending agencies and high inflation in the economy,
financial charges and administrative expenses increased by Rs. 35.30 million (59.35%) during the period
of eighteen months as against expenses of Rs. 59.48 million during the year 1994.
Your company has followed a balanced and prudent policy to build up a quality and diversified portfolio
of lease financing. The sector-wise and asset-wise disbursement of lease portfolio of the company are
as under:
SECTOR-WISE PORTFOLIO
Sector Percentage
Spinning 14.58%
Weaving 6.86%
Knitting 7.94%
Textile Composite 487%
Sugar 5.04%
Cement 1235%
Engineering 14.98%
Energy, Oil & Gas 3.42%
Financial Institutions 0.59%
Chemical 11.46%
Leather 2.28%
Construction 2.82%
Service 2.20%
Others 10.61%
--------- ---------
TOTAL 100.00%
========= =========
ASSET-WISE PORTFOHO
TYPE OF ASSETS PERCENTAGE
Machinery 84.40%
Vehicle 12.86%
Equipment 162%
Computer 1.12%
--------- ---------
TOTAL 100.00%
========= =========
The company has managed to keep a balance of all important sectors of industry in disbursement and
also made investment in such items which are necessary for the increase of productivity of the
industrial sector.
RESOURCE MOBIHZATION
Inspite of increased competition in the field of resource mobilization and tight conditions prevailing in
the capital market due to micro and macro economic factors, your company has managed to get credit
lines of nearly Rs. 100 million from the Local Financial Institutions during the period under review.
Most of the funds available from financial institutions have short term maturity and, in such circumstances,
fund generation through Certificates of Investments (COIs) has become increasingly important and the
ability of a company to issue its own COIs would lower currently high cost of borrowings thereby increasing
margins which would ultimately lead to higher profitability. Your company has been quite successful
in mobilizing funds through the COIs in an environment where every nationalized and private bank,
investment 'banks, development financial institutions, non-banking financial institutions and even the
Government itself is trying to attract investors by offering increased returns. COIs which were launched
in 1994 continued to be a success and a strategy has been devised to intensify efforts by concentrating
on potential market for deposits. Management is confident that in future scheme of COIs will prove to
be a useful source of funds.
The company is grateful to the following financial institutions who have helped or are helping in extending
facilities to the company and without their assistance the progress as above could not be possible.
· Asian Development Bank
· National Development Finance Corporation
· Crescent Investment Bank Limited
· Faysal Bank Limited
· AI-Faysal Investment Bank Limited
· Allied Bank of Pakistan Limited
· Fidelity Investment Bank Limited
· Muslim Commercial Bank Limited
· AI-Towfeek Investment Bank Limited
· Saudi Pak Agricultural and Investment Co. (Pvt) Ltd.
· Prudential Commercial Bank Limited
FUTURE PROSPECTS
State Bank of Pakistan has made it mandatory for Non-Banking Financial Institutions to maintain a cash
reserve of 1% of its liabilities. No return is paid on this deposit. Further, requirement for maintaining
liquidity has also been enhanced from 15% to 19% from December 31, 1996. These steps will have a
negative impact on cost of funds of leasing companies.
The Finance Act, 1996 has introduced central excise duty for services rendered in respect of leasing. This
will not only increases the cost of leasing of assets but also increases administrative cost for the lessor
in recovering excise duty from the lessee.
The growth for 1996-97 is expected to be affected and we have set ourselves realistic budgetary targets
keeping in view the socio-economic conditions of the country. We expect the conditions to improve
in near future and look forward for the better results.
DIRECTORS
During the period under review, members of the company, at the Extra-ordinary General Meeting held
on June 30, 1996, approved the increase in the number of directors on the Board and consequently,
Syed Manzar Alam, Nominee of NIT was elected as a director of your company. The directors welcome
Mr. Manzar Alam on the Board and .are hopeful of benefiting from his guidance and suggestions as a
Director.
AUDITORS
The auditors Ford, Rhodes, Robson, Morrow, Chartered Accountants retire and being eligible offer themselves
for re-appointment.
PATTERN OF SHAREHOLDING
The pattern of Shareholding as of June 30, 1996 is enclosed.
ACKNOWLEDGEMENT
The company is thankful to the authorities of the State Bank of Pakistan, Corporate Law Authority and
our valuable clients, financial institutions and shareholders for their continued support and co-operation.
An appreciation is also placed on record for the dedication, commitment and hard work put in by the
staff of the Company.
In the last the Board thank all concerned agencies once again who helped, patronised and assisted in
our progress; particularly, I record my appreciation in fayour of the management of NDFC for their all-
out support.
ON BEHALF OF THE BOARD
(KHALID NIAZ KHAWAJA)
CHIEF EXECUTIVE
PATTERN OF SHARE HOLDINGS AS AT JUNE 30, 1996
Shareholding
Number of Shareholders From To Total Shares Held
291 1 100 14,141
33 101 500 77,881
138 501 1000 99,477
328 1001 5000 603,805
44 5001 10000 297,279
6 10001 15000 67,057
2 15001 20000 35,738
3 20001 25000 65,052
1 25001 3000 26,136
1 40001 45000 41,817
1 50001 55000 52,272
1 55001 60000 57,306
2 65001 70000 134,489
1 70001 75000 72,600
1 80001 85000 81,416
1 100001 105000 104,544
1 120001 125000 121,000
1 135001 140000 139,800
1 140001 145000 143,244
1 245001 250000 249,284
2 260001 265000 522,720
3 520001 525000 1,568,160
1 565001 570000 569,329
1 2610001 2615000 2,613,600
1 2695001 2700000 2,696,253
--------- ---------
1,166        TOTAL 10,454,400
========= =========
There is no Shareholding falling in the slab which have not been included above.
CATEGORIES OF SHAREHOLDERS AS AT 31ST DECEMBER, 1994
Categories of Shareholders  Number  Shares Held Percentage
1. INDMDUALS 1,145 3,624,287 34.668
2. INVESTMENT COMPANIES 5 254,185 2.431
3. INSURANCE COMPANIES 2 611,146 5,846
4. JOINT STOCK COMPANIES 9 362,422 3.47
5. FINANCIAL INSTITUTIONS 3 5,382,453 51.49
6. MODARABA COMPANIES 4 104,038 0.995
7. FOREIGN INVESTORS - - -
8. CO-OPERATIVE SOCIETIES 2 112,733 1.078
9. CHARITABLE TRUSTS 1 3,136 0.030
10. OTHERS - - -
--------- --------- ---------
TOTAL 1,166 10,454,400 100.00
========= ========= =========
AUDITORS' REPORT TO THE MEMBERS
    We have audited the annexed balance sheet of Asian Leasing Corporation Limited as at June 30,
1996 and the related profit and loss account and statement of sources and application of funds, together
with the notes forming part thereof, for the eighteen months then ended and we state that we have
obtained all the information and explanations which to the best of our knowledge and belief were
necessary for the purposes of our audit and, after due verification thereof, we report that:
(a) in our opinion, proper books of accounts have been kept by the Company as required by the
Companies Ordinance, 1984;
(b) in our opinion:
i) the balance sheet and profit and loss account together with the notes thereon have
been drawn up in conformity with the Companies Ordinance, 1984 and are in agreement
with the books of account and are further in accordance with accounting policies
consistently applied;
ii) the expenditure incurred during the period was for the purpose of the Company's
  business; and
iii) the business conducted, investments made and the expenditure incurred during the
period were in accordance with the objects of the Company;
(c) in our opinion and to the best of our information and according to the explanations given
  to us, the balance sheet, profit and loss account and the statement of sources and .application
  of funds, together with the notes forming part thereof, give the information required by the
  Companies Ordinance, 1984 in the manner so required and respectively give a true and fair
  view of the state of the Company's affairs as at June 30, 1996 and of the profit and the changes
  in sources and application of funds for the period then ended; and
(d) in our opinion zakat deductible at source under the Zakat and Usher Ordinance, 1980, was
  deducted by the company and deposited in the Central Zakat Fund established under
  section 7 of that ordinance.
FORD, RHODES, ROBSON, MORROW
Chartered Accountants
BALANCE SHEET AS AT JUNE 30, 1996
June 30 December 31
Notes 1996 1994
Rupees Rupees
Tangible fixed assets 4 4,495,434 4,908,929
Investment in lease finance
Lease payments receivable 501,660,101 521,961,765
Residual value 77,223,219 62,904,075
------------ ------------
Gross lease payments receivable 578,883,320 584,865,840
Less: Unearned mark-up 112,768,230 122,729,716
------------ ------------
466,115,090 462,136,124
Less: Bad debts written off (4,191,735) -
------------ ------------
Net investment in lease finance 461,923,355 462,136,124
Less: Current maturity (191,375,952) (166,869,521)
(2,569,681) (4,117,791)
------------ ------------
267,977,722 291,148,812
------------ ------------
Long term investments 5 5,888,000 4,052,500
Long term finances 6 5,489,243 19,319,469
Deferred costs 7 2,183,864 1,841,724
286,034,263 321,271,434
Current assets
Current portion of net investment
in lease finance 191,375,952 166,869,521
Short term finances 8 16,954,204 22,356,426
Advances, deposits, prepayments
and other receivables 9 18,169,876 21,043,139
Cash and bank balances 10 27,080,252 47,185,178
------------ ------------
253,580,284 257,454,264
Current liabilities 11 (165,058,900) (141,583,396)
------------ ------------
Working capital 88,521,384 115,870,868
------------ ------------
Total capital employed 374,555,647 437,142,302
Less: Long term and deferred liabilities
Long term loans - secured 12 150,204,299 227,923,046
Marginal deposits on lease
arrangements 77,710,965 65,993,803
Customers' deposits - COIs 13 3,600,000 2,500,000
Provision for gratuity 55,085 55,085
------------ ------------
231,570,349 296,471,934
------------ ------------
Net capital employed 142,985,298 140,670,368
============= =============
June 30 December 31
Notes 1996 1994
Rupees Rupees
REPRESENTED BY
Share capital 14 104,544,000 86,400,000
Reserve & Surplus  '- Special Reserve 15 7,104,821 4,550,955
- General Reserve 16 31,336,477 31,491,000
- Reserve for issue of
  bonus shares 17 -- 18,144,000
- Unappropriated profit -- 84,413
------------ ------------
38,441,298 54,270,368
CONTINGENCIES AND COMMITMENTS 27 -- --
------------ ------------
142,985,298 140,670,368
============ ============
The annexed notes form and integral part of these accounts,
PROFIT AND LOSS ACCOUNT
FOR THE PERIOD FROM JANUARY 01, 1995 TO JUNE 30, 1996 Eighteen
 months Year ended
ended June 30 December 31
Notes 1996 1994
Rupees Rupees
REVENUE
Income from lease operations 18 113,017,336 75,651,760
Mark-up income 19 21,886,231 15,321,941
Other income 20 1,069,657 528,038
--------------- ---------------
135,973,224 91,501,739
EXPENDITURE
Direct cost of leases 21 175,654 143,890
Financial Charges 22 79,709,257 50,674,470
Administrative and operating expenses 23 15,068,325 8,805,111
Depreciation 4 1,533,005 1,115,147
Deferred costs-Amortised 7 1,528,537 947,513
Bad debts written off 9,663,938 --
Provision for doubtful receivables (3,874,822) 2,860,832
--------------- ---------------
103,803,894 64,546,963
--------------- ---------------
Profit before tax 32,169,330 26,954,776
Taxation 24 19,400,000 4,200,000
--------------- ---------------
Profit after tax 12,769,330 22,754,776
Unappropriated profit brought forward 84,413 24,592
Transfer from general reserve 154,523 --
--------------- ---------------
Profit available for appropriation 13,008,266 22,779,368
--------------- ---------------
Appropriations -
Transfer to Special reserve 2,553,866 4,550,955
Transfer to Reserve for Issue of Bonus Shares- -- 18,144,000
Proposed dividend 10,454,400 --
--------------- ---------------
13,008,266 22,694,955
--------------- ---------------
Unappropriated profit carried forward -- 84,413
=============== ===============
The annexed notes form an integral part of these accounts.
STATEMENT OF SOURCES AND APPHCATION OF FUNDS
FOR THE PERIOD FROM JANUARY 01, 1995 TO JUNE 30, 1996
1996 1994
Rupees Rupees
CASH FLOW FROM OPERATING ACTIVITIES
Net profit after taxation 12,769,330 22,754,776
Adjustment for:
Depreciation 1,533,005 1,115,147
Amortisation of deferred costs 1,528,537 947,513
(Profit/Loss on sale of fixed assets (159,468) (289)
Bad debts written off 9,663,938 --
Provision for doubtful receivables (3,874,822) 2,860,832
Provision for gratuity - Net -- (3,333)
--------------- ---------------
8,691,190 4,919,870
--------------- ---------------
Operating profit before working capital changes 21,460,520 27,674,646
(Increase)/decrease in:
Short term finances (other than provision for doubtful
and current portion) 15,680,939 7,073,591
Advances, deposits, prepayments and other
receivables (other than provision for doubtful) (485,252) (6,875,925)
--------------- ---------------
15,195,687 197,666
Increase/(Decrease) in:
Current liabilities (other than current
maturity of long term loan and dividends) (19,847,120) 35,325,514
--------------- ---------------
NET CASH FROM OPERATING ACTIVITIES 16,809,087 63,197,826
1996 1994
Rupees Rupees
Brought forward 16,809,087 63,197,826
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of fixed assets (1,689,992) 059,043)
Sale proceeds of fixed assets 729,950 201,677
Deferred costs (1,870,677) (415,512)
Net investment in lease finance recovered 220,235,033 109,456,319
Net investment in lease finance provided '(224,213,999) (163,357,735)
Marginal deposits on lease arrangements received 28,905,333 15,549,896
Marginal deposits on lease arrangements repaid (16,620,343) (5,050,052)
Long term investments (1,835,500) (3,752,500)
Long term finances 3,196,706 (22,149,486)
--------------- ---------------
Net Cash used in Investing Activities 6,836,511 (69,976,436)
CASH FLOW FROM FINANCING ACTIVITIES
Dividends
Long term loans 99,069,520 110,947,258
Customers' deposits - COIs 6,650,000 (11,800,000)
Repayment of long term loans (149,470,044) (70,070,491)
--------------- ---------------
Net cash used in financing activities (43,750,524) 29,076,767
--------------- ---------------
Net increase/(decrease)in cash and cash equivalents (20,104,926) 22,298,157
Cash and bank balances at the beginning of the period 47,185,178 24,887,021
--------------- ---------------
Cash and bank balances at the end of the period 27,080,252 47,185,178
=============== ===============
NOTES TO THE ACCOUNTS
FOR THE PERIOD ENDED JUNE 30, 1996
1. THE COMPANY AND ITS OPERATIONS
The company is a public limited company and is listed on the Karachi, Lahore and
Islamabad Stock Exchanges. The Company is engaged in the business of lease financing.
2. COMPLIANCE WITH I A S
These accounts comply with International Accounting Standards in all material respects.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1 Accounting convention
  The financial statements are prepared under the historical cost convention.
3.2 Tangible fixed assets and depreciation
Fixed assets for own use are stated at cost less accumulated depreciation,
Depreciation on these assets is calculated applying the straight line method whereby the cost
of assets is written off over estimated useful lives.
A full one year depreciation is charged in the year of addition and no depreciation is charged
in the year of deletion.
Repairs and maintenance costs are expensed out as and when incurred, however,
major betterments are capitalised.
3.3 Deferred costs
These costs are to be written off over a period of five years from the year of incurrence.
3.4 Taxation
Current tax provision is based on profits as adjusted for tax purposes after taking into account
all available allowances and credits.
The company determines deferred tax on all major timing differences using the
liability method (Note: 24)
3.5 Revenue recognition
The company recognises all "sale and lease back" and "direct leases" as finance leases.
Accordingly, the excess of aggregate lease rentals over the net investments in the cost
of leased assets is deferred and amortised to income over the term of the lease according
to the annuity method. Front end fees (project examination fees) are taken to income
on receipt basis while commitment fees are recorded on accrual basis. Other income
is accounted for when it becomes receivable.
3.6 Foreign currency translation
Transactions in foreign currencies are accounted for at the rates prevailing on the date ot
transaction. Assets and liabilities in foreign currencies are translated at the rate of exchange
prevailing on the balance sheet date except for foreign currency loans registered under the
Exchange Risk Cover Scheme of the Government of Pakistan which are, if any, recorded at
the rate prevailing on the date of disbursement. Exchange difference, if any, arising from translation
at year end rates is taken to profit and loss account.
3.7 Staff retirement benefits
The company had established an unfunded gratuity scheme for all permanent employees
uptil March, 1992 whereafter the scheme of Recognized Provident Fund has been
introduced in place of gratuity scheme under a trust established for this purpose.
3.8 Provision for doubtful receivables
The company make a provision for doubtful receivables equivalent to 2% (1994: 2%) of net'
lease receivables, including advances against leases and long/short term finances, in pursuance
to loan conditions of Asian Development Bank (Note: 12.5).
Provision for doubtful receivables is made at the higher of SBP's Rules of Business (Prudential
Regulations) or 2% as specified by Asian Development Bank on an aggregate basis.
3.9 Long term investments
These are stated at cost.
4. TANGIBLE FIXED ASSETS
These are for company's own use:-
C 0 S T
To To
December  Additions /  June 30,
31, 1994  (Deletions) 1996
Building - freehold 2,430,520 - 2,430,520
Leasehold improvements 689,651 - 689,651
Air-conditioning plant
and electric installations 815,330 - 815,330
Furniture & fixtures 767,113 6,000 773,113
Office machines and
equipments 1,059,880 877,050 1,861,080
(75,850)
Vehicles 3,321,861 806,942 3,042,214
(1,086,589)
---------- ---------- ----------
Rupees 9,084,355 1,689,992 9,611,908
(1,162,439)
========== ========== ==========
1994 Rupees 8,883,451 459,043 9,084,355
(258,139)
========== ========== ==========
    DEPRECIATION
Accumulated Book Value
Depreciation as at
June 30, June 30,  Charge for     Rate
1996 1996 the period %
Building - freehold 546,867 1,883,653 182,289 5
Leasehold improvements 517,260 172,391 81,655 15
Air-conditioning plant
and electric installations 649,266 166,064 78,659 15
Furniture & fixtures 451,160 321,953 115,328 10
Office machines and
equipments 876,924 1,019,148 331,182 15
(34,992)
Vehicles 2,666,954 932,225 743,892 20
(556,965)
---------- ---------- ----------
Rupees 5,708,431 4,495,434 1,533,005
(591,957)
========== ========== ==========
1994 Rupees 4,232,177 4,908,929 1,115,147
(56,751)
========== ========== ==========
4.1 Detail of fixed assets sold during the year
Accumulated Book Sale
Particulars Cost Depreciation Value Proceeds
Office Machines
& Equipments
Paktel Set 53,850 20,142 33,708 6,500
Printer Seikosha 22,000 14,850 7,150 7,000
Motor Vehicle
Motorcycle 28,848 28,847 1 26,000
Radio/Tape Suzuki 6,800 2,040 4,760 5,450
Toyota Corolla 1,049,725 524,862 524,863 685,000
Bicycle 1,216 1,216 - -
---------- ---------- ---------- ----------
Rupees 1,162,439 591,957 570,482 729,950
========== ========== ========== ==========
Profit/ Mode
Particulars (Loss) of sale Particulars of purchaser
Office Machines
& Equipments
Paktel Set (27,208) Negotiation Dar International
(Pvt) Ltd.
Printer Seikosha (150) Negotiation Electrich
Township, Lahore.
Motor Vehicle
Motorcycle 25,999 Lost due to Claim received from
theft Adamjee Insurance
Co. Ltd.
Radio/Tape Suzuki 690 Lost due to Claim received from
theft Adamjee Insurance
Co. Ltd.
Toyota Corolla 160,137 Lost due to
theft Adamjee Insurance
Co. Ltd.
Bicycle - Lost due to
theft
----------
Rupees 159,468
==========
1996 1994
Rupees Rupees
5. LONG TERM INVESTMENTS
Government securities
Federal Investment Bonds (Note: 5.1) 4,800,000 4,052,500
Listed companies
Muslim Commercial Bank Ltd. (Note: 5.2) 588,000 -
Lease Pak Limited (Note: 5.3) 500,000 -
---------- ----------
5,888,000 4,052,500
========== ==========
5.1 These investments have been made to comply with SBP's Rules of Business (Prudential
Regulations) for Non-Banking Financial Institutions. FIBs have face value of
Rs. 4,800,000 (1994: Rs. 4,100,000) and maturity period range from three to ten years. The
mark-up receivable ranges from 13% to 15% per annum.
5.2 This consists of 11,800 (1994: Nil) shares of Rs. 10/- each in Muslim Commercial Bank Limited
  including 1,800 bonus shares of Rs. 10/- each. The market value of these shares as on balance
  sheet date was Rs. 421,850. No provision for diminution in value of investment has been made
  in view of holding it on long term basis.
5.3 This consists of 50,000 (1994: Nil) shares of Rs. 10/- each in Lease Pak Limited. The market
  value of these shares as on balance sheet date was Rs 195,000. No provision for diminution
  in value of investment has been made in view of holding it on long term basis.
1996 1994
Rupees Rupees
6. LONG TERM FINANCES - SECURED
Morabaha finances 18,952,780 22,149,486
Less: Current portion (Note: 8) (13,463,537) (2,830,017)
---------- ----------
5,489,243 19,319,469
========== ==========
These have been rescheduled from short to long term finances. Rescheduled resale price has been
fixed at Rs. 34,033,705 repayable within two to four years. These are secured by demand promissory
notes and personal guarantees of the directors of the respective 1oanee companies. Particulars are
as follows:
Borrowers
Bilal Fibres Ltd. 12,556,753 12,904,658
Sohail Textiles Mills Ltd. 6,396,027 9,244,828
---------- ----------
18,952,780 22,149,486
========== ==========
7. DEFERRED COSTS
Loan Share
negotiation  issue Total Total
expenses expenses 1996 1994
Rupees Rupees Rupees Rupees
Opening balance 1,617,860 223,864 1,841,724 2,373,725
Add: Incurred during the period 1,705,084 165,593 1,870,677 415,512
Less: Amortised during the period (1,383,396) (145,141) (1,528,537) (947,513)
---------- ---------- ---------- ----------
1,939,548 244,316 2,183,864 1,841,724
========== ========== ========== ==========
1996 1994
Rupees Rupees
8. SHORT TERM FINANCES - SECURED
Short term morabaha finances 6,345,470 22,026,409
Less: Bad debts written off (2,500,000) --
---------- ----------
3,845,470 22,026,409
Add: Current portion of long term morabaha
     finances (Note: 6) 13,463,537 2,830,017
---------- ----------
17,309,007 24,856,426
Less: Provision for doubtful finances (354,803) (2,500,000)
---------- ----------
16,954,204 22,356,426
========== ==========
These have been provided under morabaha agreements with aggregate resale price of
Rs. 18,437,600 (1994: Rs. 38,180,795) repayable within one year. These are secured by demand
promissory notes and personal guarantees of the directors of the respective 1oanee companies.
9. ADVANCES, DEPOSITS, PREPAYMENTS
AND OTHER RECEIVABLES
Advances to employees 687,221 645,277
Advance to Chief Executive (Note: 9.1) 349,061 410,820
Exchange rate difference recoverable from
State Bank of Pakistan 273,909 10,327,039
Advance for purchase of shares - 500,000
Deposits 30,125 45,125
Prepayments 278,023 520,488
Accrued income (Note: 9.2) 7,604.57 8,312,678
Other receivables 8,946,972 281,712
---------- ----------
18,169,876 21,043,139
========== ==========
9.1 This includes the unpaid mark-up of Rs. 118,241 and the balance of loan of Rs. 230,820 due
  from the Chief Executive which is interest fee. Monthly deduction of Rs. 10,000 is made out
  of the salary.
The loan is secured against equitable mortgage of property and is approved by the CLA
1996 1994
Rupees Rupees
9.2 Accrued income
Long term investment 174,828 232,512
Bank deposits 2,211,967 2,303,172
On lease operations 10,510,305 9,715,426
On morabaha finances and advances 3,007,190 1,051,609
---------- ----------
15,904,290 13,302,719
Less: Bad debts - income
Lease operations 2,345,940 --
Morabaha finances 1,145,260 --
---------- ----------
3,491,200 --
Provision against doubtful income
Lease operations 3,226,325 4,083,118
Morabaha finances 1,582,200 906,923
---------- ----------
8,299,725 4,990,041
---------- ----------
7,604,565 8,312,678
========== ==========
10. CASH AND BANK BALANCES
On deposit accounts 17,001,827 38,784,567
On current accounts (Note: 10.1) 10,020,786 8,319,030
Cash in hand 57,639 81,581
---------- ----------
27,080,252 47,185,178
========== ==========
10.1 It includes an interest free deposit of Rs. 509,950 maintained with State Bank of Pakistan
  under Rule 6 of SBP's Rules of Business (Prodential Regulations) for Non-Banking
  Financial Institutions.
11. CURRENT LIABILITIES
Current maturity of long term loans (Note: 12) 111,972,050 84,653,826
Current portion of customers' deposits - COIs (Note: 13) 16,250,000 10,700,000
Short term loans - secured (Note: 11.1) 7,500,000 15,000,000
Accrued liabilities 338,942 291,160
Mark-up accrued on secured loans 4,643,292 25,106,589
Mark-up accrued on Certificates of Investment 399,215 1,458,780
Provision for taxation 13,467,542 4,351,627
Central Excise duty payable 11,714 -
Others 1,395 1,064
Dividends (Note: 11.2) 10,474,750 20,350
---------- ----------
165,058,900 141,583,396
========== ==========
11.1 Short term loan has been obtained from AI Towfeeq Investment Bank Limited under a
  Morabaha agreement. The sale price of Rs. 7,500,000 has a repurchase price of
  Rs. 8,406,550 which is repayable in four quarterly instalments starting from August 08, 1996.
The loan is secured against pari passu charge on assets of the company to the extent of
Rs. 8.407 million and assignment of rentals receivable by the company.
1996 1994
Rupees Rupees
11.2 Dividends
Unclaimed dividends 20,350 20,350
Proposed dividend 10,454,400 -
---------- ----------
10,474,750 20,350
========== ==========
12. LONG TERM LOANS - SECURED
National Development Finance Corporation -
Loan No. 3 (Note: 12.1) - 7,500,000
Loan No. 4 (Note: 12.2) 10,000,000 17,500,000
Loan No. 5 (Note: 12.3) 16,363,636 -
Loan No. 6 (Note: 12.4) 25,000,000 -
Asian Development Bank -
Loan No. 1 (US$ 1,500,000) (Note: 12.5) 16,796,261 33,592,520
Loan No. 2 (US$ 1,166,670) (Note: 12.6) 15,508,550 27,139,829
Loan No. 3 (US$ 5,833,334) (Note: 12.7) 113,291,327 161,844,524
Crescent Investment Bank Ltd.
Loan No. 1 (Note 12.9) 4,999,997 14,999,999
Loan No. 2 (Note 12.10) 8,333,334 -
Loan No. 3 (Note 12.11) 9,166,667 -
Al-Faysal Investment Bank Limited (Note: 12.8) 9,534,761 -
Allied Bank of Pakistan Ltd. (Note 12.12) 15,000,000 30,000,000
Fidelity Investment Bank Ltd. (Note: 12.13) 9,999,998 20,000,000
Muslim Commercial Bank Ltd. (Note: 12.14) 8,181,818 -
---------- ----------
262,176,349 312,576,872
Less: Current Maturity (Note: 11) 111,972,050 84,653,826
---------- ----------
150,204,299 227,923,046
========== ==========
12.1 N.D.F.C. Loan No. 3
The loan was obtained under a sale and repurchase agreement for financing the leasing
operations of the company.
The sale price of Rs. 20,000,000 had a repurchase price of Rs.30,425,907 which was repayable
in 8 equal half-yearly instalments commencing from December 31, 1992.
The payment of the repurchase price was secured by an agreement to (a) create a floating
charge on the undertaking and all properties and assets of the company, (b) pledge/hypoth-
ecation of all fixed assets, book debts and benefits of the contracts for supply of goods for
the purposes of business and (c) demand promissory note. The loan was fully repaid during
the period.
12.2 N.D.F.C. Loan No. 4
The loan has been obtained under a sale and repurchase agreement for financing the leasing
operations of the company,
The sale price of Rs. 20,000,000 has a repurchase price of Rs. 31,509,608 which is repayable
in 8 equal half-yearly instalments commencing from August 08, 1994.
The payment of the repurchase price is secured by an agreement to (a) mortgage of
immovable properties including building, plant, machinery and equipment and replace-
ments thereof and additions thereto plus other properties as N.D.F.C. may determine, (b)
create a floating charge on the business, undertaking and all properties and assets of
the company, (c) pledge/hypothecation of all fixed assets, book debts. and benefits of
contracts for supply of goods for the purposes of business, (d) hypothecation of assets
acquired by the company from the finance provided by N.D.F.C. and (e) demand promissory
note.
12.3 N.D.F.C. Loan No. 5
The loan has been obtained trader a sale and repurchase agreement for financing the leasing
operations of the company.
The sale price of Rs. 20,000,000 has a repurchase price of Rs. 27,380,540 which is repayable
in 11 equal quarterly instalments commencing from January 02, 1996.
The payment of the repurchase price is secured by way of (a) hypothecation charge on the
entire assets and undertakings of the company, (b) mortgage charge on all the present and
future fixed assets of the company and (c) demand promissory note. The charge so created
shall rank pari passu with all other existing loan creditors.
12.4 N.D.F.C. Loan No. 6
This loan has been obtained under a sale and repurchase agreement for financing the leasing
operations of the company.
The sale price of Rs. 25,000,000 has a repurchase price of Rs. 33,937,900 which is repayable
in 6 equal half-yearly instalments convnencing from November 26, 1996.
The payment of the repurchase price is secured by way of (a) hypothecation charge on the
entire assets and undertakings of the company, (b) mortgage charge on all the present and
future fixed assets of the company and (c) demand promissory note and personal guarantees
of the Chairman.
12.5 A.D.B. Loan No. 1
This represents the balance of a loan of USS 3,000,000 sanctioned by Asian
Development Bank for financing of lease operations.
The loan carries interest at the rate of 10.8% p.a. payable semi-annually on 15th June and
15th December in each year.
The loan is repayable in 12 equal semi-annual instalments of US$ 250,000 each commencing
on June 15, 1992.
The loan is secured by (i) a pari-passu floating charge on the leased assets purchased
out of the proceeds of the loan, (ii) hypothecation of moveable assets and receivables
of the company and (iii) demand promissory note.
The conditions of the loan agreement requires the company to, inter alia, maintain (i)
a debt equity ratio not exceeding 10:1, (ii) a debt service coverage ratio equalling or
exceeding 1.25:1, (iii) a provision for doubtful accounts equivalent to 2% of the total risk
assets as defined in the agreement and (ix,) not to distribute more than 60% of the
unrestricted after tax profits of any year.
12.6 A.D.B. Loan No. 2
This represents the balance of a loan of US$ 2,000,000 sanctioned by Asian
Development Bank for financing of lease operations.
The loan carries interest at the rate of 1.5% p.a. above libor, payable semi-annually on 15th
June and 15th December in each year.
The loan is repayable in 11 equal semi-annual instalment. s of US$ 166,666 each commencing
on December 15, 1992 and one final instalment of US$ 166,674.
Other conditions of security and financial restriction are the same as of Loan No. 1.        23
12.7 A.D.B. Loan No. 3
This represents the balance of a loan of US$ 7,00O,000 sanctioned by Asian Development
Bank for financing of lease operations.
The loan carries interest at the rate of 9.4% per annum, payable semi-annually on 15th June
and 15th December in each year.
The loan is repayable in 11 equal semi-annual instalments of US$ 583,333 each commencing
on June 15, 1994 and one final instalment of US$ 583,337.
Other conditions of security and financial restrictions are the same as in Loan No. 1 except
financial restrictions as extended by (v) to maintain, at all times, a current ratio equal to at
least 1.25:1 and (vi) to maintain, at all times, in cash or Government Securities an amount
equalent in value at least 10% of the principal amount of outstanding Certificates of Investment.
12.8 Al-Faysal Investment Bank Ltd.
The loan has been obtained under a sale and repurchase agreement for financing the leasing
operations of the company.
The sale price of Rs. 19,069,520 has a repurchase price of Rs. 22,221,216 which is repayable
in 6 quarterly installments commencing from December 16, 1995. The loan is secured against
a charge on leased assets of the company.
12.9 Crescent Investment Bank Ltd. - 1
The loan of Rs. 20,000,000 has been obtained under a sale and repurchase agreement for
financing the leasing operations of the company. The repurchase price is Rs.26,163,289 which
is repayable in 12 equal quarterly instalments commencing from May 12, 1994.
The payment of the repurchase price is secured by an agreement to (a) create first charge
over fixed assets of the company (b) an undertaking by the company to maintain a minimum
credit balance of Rs. 5.0 million with Cres Bank during the currency of the facility. (c) undertaking
that if the promissory note is not paid upon maturity, company shall become liable to pay
liquidated damages @ 20% per annum for each day the payment is delayed, (d) demand
promissory note.
12.10 Crescent Investment Bank Ltd. - 2
The loan of Rs. 10,000,000 has been obtained under a sale and repurchase agreement for
Financing the leasing operations of the company. The repurchase price is Rs. 13,057,786 which
is repayable in 12 equal quarterly instalments commencing from January 09, 1996.
The payment of the repurchase price is secured by an agreement to (a) create first charge
over fixed assets of the company with other creditors, (b) undertaking that if the promissory
note is not paid upon maturity, company shall become liable to pay liquidated damages
@ 20% per annum for each day the payment is delayed, (c) demand promissory note.
12.11 Crescent Investment Bank Ltd- 3
The loan of Rs. 10,000,000 has been obtained under a sale and repurchase agreement for
financing the leasing operations of the company. The repurchase price is Rs. 3,005,617, which
is repayable in 12 equal quarterly instalments commencing from May 27, 1996.
The payment of the repurchase price is secured by an agreement to (a) to create first charge
over Fixed assets of the company, (b) an undertaking that if the promissory note is not paid
upon maturity, company shall become liable to pay liquidated damages @ 19.5% per annum
for each day the payment is delayed.
12.12 Allied Bank of Pakistan Limited
This loan has been obtained under a sale and repurchase agreement for financing the leasing
operations of the company.
The sale price of Rs. 30,000,000 has a repurchase price of Rs 39,200,000 which is repayable
in 6 equal half-yearly instalments commencing from December 25, 1995.
The payment of the repurchase price is secured by an agreement to (a) registration of first
charge on present and future assets of the company ranking pari passu with the senior
creditors. (b) registered hypothecation charge on the leased assets of the company.
12.13 Fidelity Investment Bank Limited
This loan has been obtained under a sale and repurchase agreement for financing the leasing
operations of the company.
The sale price of Rs. 19,069,520 has a repurchase price of Rs. 22,221,216 which is repayable
in 6 equal quarterly instalments commencing from December 16, 1995. The loan is secured
against a charge on leased assets of the company.
12.14 Muslim Commercial Bank Ltd.
This loan has been obtained under a sale and repurchase agreement for financing the leasing
operations of the company.
The sale price of Rs. 10,000,000 has a repurchase price of Rs. 12,675,739 which is repayable
in 11 equal quarterly instalments commencing from March 31, 1996. The loan is secured
against a charge on the current/fixed asset including leased assets of the company to the extent
of Rs. 12,000,000.
1996 1994
Rupees Rupees
13. CUSTOMERS' DEPOSITS - COIs
Certificates of investment 19,850,000 13,200,000
Less: Current portion (Note: 11) 16,250,000 10,700,000
--------------- ---------------
3,600,000 2,500,000
=============== ===============
These represent deposits accepted by the company from other companies and individuals in
accordance with the permission to issue registered certificates of deposit granted by the Corporate
Law Authority.
The certificates are of a term ranging from three months to three years and the return is paid
on predetermined rates as negotiated with respective customers and range from 14% to 18%
per annum.
14. SHARE CAPITAL
Authorised -
25,000,000 (1994: 10,000,000) ordinary shares
of Rs. 10/- each 250,000,000 100,000,000
=============== ===============
Issued, subscribed and paid up-
5,000,000 (1994: 5,000,000) ordinary shares of
Rs. 10/- each fully paid up in cash 50,000,000 50,000,000
5,454,400 (1994: 3,640,000) ordinary shares of
Rs. 10/- each issued as fully paid bonus shares 54,544,000 36,400,000
--------------- ---------------
104,544,000 86,400,000
=============== ===============
14.1 The company issued 1,814,400 (1994: 1,440,000) fully paid bonus shares on June 29, 1995.
15. SPECIAL RESERVE 7,104,821 4,550,955
=============== ===============
This represents special reserve created under Rule-3 of SBP's Rules of Business (prudential
Regulations) for Non-Banking Financial Institutions.
16. GENERAL RESERVE
Opening balance 31,491,000 31,491,000
Transfer to Profit and Loss Account (154,523) -
--------------- ---------------
31,336,477 31,491,000
=============== ===============
1996 1994
Rupees Rupees
17. RESERVE FOR ISSUE OF BONUS SHARES
Opening balance 18,144,000 14,400,000
Transfer from Profit and Loss Account - 18,144,000
18,144,000 32,544,000
Bonus shares issued 18,144,000 14,400,000
--------------- ---------------
Closing balance - 18,144,000
=============== ===============
18. INCOME FROM LEASE OPERATIONS
Mark-up on lease operations 111,235,560 74,875,463
Front end fee 1,516,418 604,636
Commitment fee 265,358 171,661
--------------- ---------------
3,017,336 75,651,760
=============== ===============
19. MARK-UP INCOME
Federal Investment Bonds 635,535 545,990
Banks deposits 7,036,654 4,697,996
Morabaha finance 14,214,042 10,077,955
--------------- ---------------
21,886,231 15,321,941
=============== ===============
20. OTHER INCOME
Miscellaneous and Documentation charges recovered 910,189 527,749
Profit on sale of fixed assets (Note 4.1) 159,468 289
--------------- ---------------
1,069,657 528,038
=============== ===============
21. DIRECT COST OF LEASES
Lease executory expenses 77,198 39,035
Insurance expenses - Leased vehicles 98,456 104,855
--------------- ---------------
175,654 143,890
=============== ===============
1996 1994
Rupees Rupees
22. FINANCIAL CHARGES
Mark-up on long term secured loans 68,123,594 34,012,904
Mark-up on short term secured loans 2,744,527 330,184
Mark-up on certificates of investment 2,426,899 1,488,369
Foreign exchange risk coverage fee 6,364,237 14,768,429
Excise duty on loan 50,000 74,584
--------------- ---------------
79,709,257 50,674,470
=============== ===============
23. ADMINISTRATIVE AND OPERATING EXPENSES
Salaries and benefits 8,084,602 5,026,356
Rent 483,701 344,932
Utilities 442,063 257,245
Stationery and supplies 470,401 325,614
Repairs and maintenance 707,168 541,428
Insurance 342,932 223,334
Telephone, telex and postage 990,840 640,960
Travelling 150,835 7,400
Boarding and lodging 415,323 91,377
Legal and professional charges 607,252 236,207
Advertise me n t 298,840 178,115
Auditors' remuneration (Note: 23.1) 209,611 90,132
Donations (Note: 23.2) 20,700 30,000
Corporate expenses 465,740 140,728
Zakat 5,002 5,284
Other expenses 1,242,815 665,999
Credit rating fee 130,500 -
--------------- ---------------
15,068,325 8,805,111
=============== ===============
23.1 Auditors' Remuneration-
Audit fee 110,000 50,000
Tax consultancy 40,000 20,000
Special audits 35,000 12,132
Expenses reimbursed 24,611 8,000
--------------- ---------------
209,611 90,132
=============== ===============
23.2 None of the directors or their spouses had any interest in any of the donees.
1996 1994
Rupees Rupees
24. TAXATION
Provision for the year
- Normal 19,400,000 4,200,000
=============== ===============
24.1 Tax provision is based on taxable profits as adjusted for tax purposes after taking into account
  available rebates and credits.
24.2 Deferred taxation arising due to timing differences computed under the liability method is
  estimated at Rs. 46 million out of which Rs. 5.6 million debt is in respect of the current period.
  (1994: Rs. 50 million for the year Rs. 3.4 million). The liability for deferred taxation is not
  likely to reverse in the foreseeable future end, therefore, no provision has been made
  there against.
25. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES
         Chief
       Executive         Directors
1996 1994 1996 1994
Managerial remuneration 810,000 551,613 - 293,548
Bonus 180,000 80,000 - 100,000
Accommodation 324,000 220,645 - -
Utilities 90,000 61,290 - -
Medical expenses 45,335 44,746 - -
Club subscription 17,390 - - -
Conveyance provided 280,641 199,806 - 149,606
Residential telephone
bills reimbursed 56,093 37,790 - -
---------- ---------- ---------- ----------
Rupees 1,803,459 1,195,890 - 543,154
---------- ---------- ---------- ----------
Number of persons 1 1 - 1
========== ========== ========== ==========
      Executives
1996 1994
Managerial remuneration 333,000 293,484
Bonus 79,000 45,000
Accommodation 233,100 205,438
Utilities 43,800 50,400
Medical expenses 43,151 39,466
Club subscription 6,980 4,810
Conveyance provided 156,084 129,502
Residential telephone
bills reimbursed 16,076 15,281
---------- ----------
Rupees 911,191 783,381
---------- ----------
Number of persons 2 2 2
========== ==========
Fees paid to 5 non-executive Directors for attending meetings during 18 Months. Rs. 43,500 (1994:
5 Directors; fee paid Rs. 5,500)
26. LEASES AND ADVANCES IN EXCESS OF 20% OF
PMD-UP CAPITAL AND FREE RESERVES
Following are the parties to whom net investment in lease finance exceeded 20%
(i.e. Rs.27,176,095) of the paid-up capital and free reserves of the company.
Group name 1996 1994
Rupees Rupees
Gulistan group - 28,798,277
Kohinoor group - 29,471,077
Nishat group 28,266,726 38,361,408
27. CONTINGENCIES AND COMMITMENTS
Nil (1994: Nil)
28. GENERAL
Previous year's figures have been re-arranged wherever necessary for the purposes
of comparison.
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