| InterAsia Leasing Company Limited |
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| Annual
Report 1998 |
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| CONTENTS |
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| Corporate
Information |
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| Financial
Highlights |
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| Directors'
Report |
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| Auditor's
Report |
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| Balance
Sheet |
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| Profit
and Loss Account |
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| Cash
Flow Statement |
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| Notes
to the Accounts |
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| Pattern
of shareholding |
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| Notice
of Meeting |
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| CORPORATE
INFORMATION |
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| Board
of Directors |
Mr. Inam-ul- Haq |
Chairman |
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|
Mr. Haroon Sharif |
Chief Executive Officer |
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|
Mr. Rauf Baksh Kadri |
Director |
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Mr. Naveed Ahmed Khan |
Director |
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Mr. Ashfaq Yousaf Tola |
Director |
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Mr. Najeeb Samie |
Director |
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|
Ms. Parveen Malik |
(Nominee of Saudi Pak
Industrial & |
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|
Agricultural Investment
Co. (Pvt) Ltd,) |
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| Company
Secretary |
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Mr. Salman Rashid, (ACMA) |
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| Bankers |
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Gulf Commercial Bank Ltd. |
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Crescent Investment Bank
Ltd, |
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Bank of Khyber |
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First Women Bank Ltd. |
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Trust Investment Bank
Ltd, |
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| Legal
Advisors |
Ahmer Bilal Soofi,
Advocates & Solicitors |
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| Auditors |
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Khalid Majid Husain
Rahman, Chartered Accountants, |
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| Registrar
and Share |
Universal Management
Services (Ptv) Ltd. |
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| Transfer
Office |
1st Floor, Finance and
Trade Centre |
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Shahra-e- Faisal,
Karachi, Pakistan |
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Tel: (92 21) 5675311-3 |
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| Registered
Office/ |
107-West, Fazle Haq Road,
Blue Area |
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| Head Office |
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Islamabad- 44000,
Pakistan. |
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Tel: (92 51) 275591-94 |
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Fax: (92 51) 275599 |
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| Liaison
Office Lahore |
State Life Building,
Ground Floor |
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Sir Agha Khan Road,
Lahore, |
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Tel: (92 42) 6303059 |
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Fax: (92 42) 6303069 |
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| FINANCIAL
HIGHLIGHTS |
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|
(Rs. In millions) |
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|
1998 |
1997 |
1996 |
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| Financial
Position |
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|
|
| Total Assets |
|
|
439.90 |
403.04 |
302.38 |
|
| Leased
Assets |
|
|
333.90 |
313.76 |
231.36 |
|
| Current
Liabilities |
|
|
173.22 |
141.24 |
14,498 |
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| Long
Term Debts |
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|
123.00 |
132.23 |
2,962 |
|
| Shareholder's
Equity |
|
|
133.70 |
129.58 |
127.79 |
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|
|
|
|
| Earning
Information |
|
|
|
| Operating
Revenues |
|
60.77 |
60.70 |
38.38 |
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| Net
Income after tax |
|
14.22 |
14.29 |
10.21 |
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| *
Return on Equity |
|
10.97% |
11.18% |
8.68% |
|
| a)
Return on Assets |
|
3.37% |
4.05% |
3.85% |
|
|
| *
Calculated on Opening balance of equity |
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| a)
Calculated on average assets for a year |
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|
| DIRECTORS'
REPORT AND REVIEW BY THE CHAIRMAN |
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| The
directors of InterAsia Leasing Company Limited are pleased to present the
sixth Annual Report alongwith the |
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| Audited
Accounts of the company for the year ended June 30, 1998. During this period,
your company has shown |
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| consistent
growth in all areas of business reflecting management's prime focus to
maintain a healthy investment |
|
| portfolio
for the company. |
|
|
| Financial
Results |
|
|
| Lease
Investments: |
|
|
Rs. 333,989,222 |
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| Expenditure: |
|
|
|
Rs. 45,775,197 |
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| Profit
for the year: |
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|
Rs. 14,219,508 |
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| Net Worth: |
|
|
|
Rs. 133,797,465 |
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| Dividend |
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| The
Board of Directors has recommended a cash dividend @ 10% for the year ended
June 30, 1998. |
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|
| Performance
Review |
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| With
the lack of general confidence in Pakistan's economy, the business activities
are at their all time low. This |
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| situation
has resulted into a slow down in all sectors of the economy, and has hampered
the growth of several |
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| leasing
companies as well as other financial institutions. The management of
InterAsia Leasing has adopted a |
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| conservative
and prudent approach to maintain company's growth pattern by putting maximum
emphasis on |
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| recoveries
and by making selective lease investments in performing sectors of the
industry. |
|
|
| During
the year under review, the net investment in leases grew by 11.2% while total
asset size grew by 8.93%. The |
|
| company
has earned a net profit of Rs. 14.3 million. The total revenue for the period
was Rs. 60.77 million. The |
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| company
exercised maximum care in the credit evaluation process. The lease size was
kept smaller and the lease |
|
| portfolio
diversified, in order to spread exposure risk and to minimize the risk of
default. |
|
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| Since
last year InterAsia Leasing has shifted its marketing focus towards small and
medium enterprises (SMEs). The |
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| SMEs
include business houses belonging to relatively unorganized sector with an
average capital base of upto Rs. |
|
| 5.0
million. Based on comprehensive research and in-depth analysis, the
management believes that SMEs with |
|
| reasonable
business history are better credit risk than providing lease financing to
greenfield projects or other larger |
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| sectors
of the industry. |
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|
| Management
Audit |
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| Sensing
the need for improved quality of systems and procedures, the management
appointed independent |
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| consultants
to conduct a comprehensive internal audit. Based on the findings of the audit
report, a number of |
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| changes
have been incorporated in the credit and operational manuals. |
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|
| The Economy |
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| Pakistan's
economy suffered major set-backs in 1997-98. With the imposition of
sanctions, impact of Asian crisis, |
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| and
lack of confidence in the economy, the government is finding it extremely
difficult to arrange required financial |
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| assistance.
All these factors have led to a dangerously high budgetary deficit leading to
a severe liquidity crunch. |
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| Due
to the negative developments at macro level, private sector has also come
under tremendous pressures as its |
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| ability
to raise resources is marred by the low confidence of both local as well as
foreign investors. |
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| However,
there is always a positive side to a crisis situation. The long recession has
moved the market forces to put |
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| pressure
on the government to take mandatory steps towards revival of the economy.
With the possible lifting of |
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| sanctions
and approval of IMF package, the industrial sector is expected to take an
upward shift in the coming year, |
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| The
Leasing Sector |
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| It
has been an extremely difficult year for the financial sector as a whole and
leasing sector in particular. The |
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| leasing
companies suffered a direct set back due to severe liquidity crunch in the
market coupled with an all time |
|
| low
industrial growth. The scarcity of long-term funds is a major impediment for
the growth of the leasing industry.. |
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| Most
of the leasing companies depend upon international credit agencies for
support and funds, but this avenue |
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| has
as also come under pressure due to sanctions and dawn grading of Pakistan's
credit rating. |
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| Recovery
of lease finance and loans is a major problem, not only for the leasing
companies but also for the entire |
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| financial
sector. Low rate of recovery is affecting the financial position of the
leasing companies, The Government of |
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| Pakistan
is using all its efforts to formulate stringent laws of the recovery of
overdues and defaults, Due to these |
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| steps,
it is hoped that recovery of bad debts will improve in future, In general,
leasing sector is passing through a |
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| transitionary
phase of consolidation where companies are required to take several steps
towards structural changes |
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| for
an effective and profitable business, |
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| Future
Direction |
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| The
management of InterAsia Leasing Company is consciously exploring several
possibilities to restructure the |
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| company
as a leading financial institution of the country, It is hoped that line of
credit approved by the Netherland |
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| Development
Finance Company (FMO) will be utilized in the coming year. Apart from
improved internal systems for |
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| operations
and recoveries, the management wishes to enhance equity base of your company
in future, |
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| In
the end, the directors would like to acknowledge commitment and hard work of
the employees and support from |
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| other
LTV group companies which contributed towards smooth operations of the
company. We are also grateful to |
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| our
shareholders for their confidence, regulatory agencies for their support, and
to our clients for their trust in our |
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| services. |
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For and on behalf of |
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|
the Board of Directors |
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| Islamabad |
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|
-Sd- |
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| December 08, 1998 |
|
Inam-ul-Haq |
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|
Chairman |
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| AUDITOR'S
REPORT TO THE MEMBERS |
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| We
have audited the annexed balance sheet of InterAsia Leasing Company Limited
as at June 30, 1998 and the |
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| related
profit and loss account and cash flow statement together with the notes
forming part thereof, for the period |
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| then
ended and we state that we have obtained all the information and explanations
which to the best of our |
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| knowledge
and belief were necessary for the purposes of our audit and, after due
verification thereof, we report that: |
|
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| a)
in our opinion, proper books of accounts have been kept by the Company as
required by the Companies |
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| Ordinance,
1984; |
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| b)
in our opinion: |
|
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| (i)
The balance sheet and profit and loss account and cash flow statement
together with the notes thereon |
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| 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 purposes of the
Company's business; and |
|
|
| (iii)
The business conducted, investments made and the expenditure incurred during
the period were in |
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| 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 |
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| sheet,
profit and loss account and cash flow statement, 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 |
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| and
fair view of the state of the Company's affairs as at June 30, 1998 and of
the profit and the cash flow |
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| statement
for the period then ended and |
|
|
| d)
In our opinion Zakat deductible at source under Zakat and Ushr Ordinance,
1980 was deducted by the company |
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| and
deposited in central Zakat fund establishment under section 7 of the
ordinance. |
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|
KHALID MAJID HUSAIN RAHMAN |
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| Islamabad |
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|
Chartered Accountants |
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| December
08, 1998 |
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|
| BALANCE
SHEET AS AT JUNE 30, 1998 |
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|
June 30, |
June 30, |
|
|
|
1998 |
1997 |
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|
Note |
Rupees |
Rupees |
|
|
|
|
| SHARE
CAPITAL AND RESERVES |
|
|
|
|
|
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| Authorised
Capital |
|
|
|
| 20,000,000
ordinary |
|
|
|
| shares
of Rs. 10/- each |
|
|
200,000,000 |
200,000,000 |
|
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| Issued,
subscribed and paid up capital |
|
| 10,000,000
ordinary shares of |
|
|
| Rs.
10/- each fully paid in cash |
|
|
100,000,000 |
100,000,000 |
|
| Revenue
reserves |
|
|
| Statutory |
|
|
13,759,493 |
10,915,591 |
|
| General |
|
|
10,000,000 |
10,000,000 |
|
| Contingencies |
|
3 |
3,339,892 |
3,137,650 |
|
| Un-appropriated
profit |
|
|
6,698,080 |
5,524,716 |
|
|
|
|
---------- |
---------- |
|
|
|
133,797,465 |
129,577,957 |
|
| LONG
TERM DEPOSITS |
|
4 |
42,655,868 |
45,285,274 |
|
| LONG
TERM CERTIFICATES |
|
|
|
|
| OF
INVESTMENT |
|
5 |
62,510,000 |
62,230,001 |
|
|
|
|
|
|
| LONG
TERM FINANCES |
|
6 |
17,728,401 |
24,708,401 |
|
| CURRENT
LIABILITIES |
|
|
|
|
| Current
portion of long term deposits |
|
15,937,645 |
8,622,913 |
|
| Current
portion of Certificates of Investment |
|
14,266,800 |
14,504,635 |
|
| Current
maturity of long term finances |
|
14,546,000 |
9,240,000 |
|
| Finances
under mark-up arrangements |
7 |
85,481,336 |
58,913,378 |
|
| Accrued
and other liabilities |
|
8 |
41,984,042 |
37,301,995 |
|
| Dividend
payable |
|
|
11,010,229 |
12,658,966 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
183,226,052 |
141,241,887 |
|
|
|
|
---------- |
---------- |
|
|
|
|
439,917,786 |
403,043,520 |
|
|
|
|
========== |
========== |
|
|
| OPERATING
FIXED ASSETS |
|
|
|
| -TANGIBLE |
|
9 |
3,645,171 |
3,227,299 |
|
| NET
INVESTMENT IN LEASES |
|
|
|
|
|
| Minimum
lease payment receivables |
|
|
417,147,817 |
364,295,489 |
|
| Add:
Residual value of leased assets |
|
58,593,513 |
53,908,187 |
|
|
|
|
---------- |
---------- |
|
|
|
|
475,741,330 |
418,203,676 |
|
| Less:
Unearned lease income |
|
|
(141,752,108) |
(104,438,631 |
|
|
|
|
---------- |
---------- |
|
| Net
investment in leases |
|
333,989,222 |
313,765,045 |
|
| Less:
Current portion of net |
|
|
| investment
in leases |
|
|
(85,204,774) |
(81,077,932) |
|
|
|
|
---------- |
---------- |
|
|
|
|
248,784,448 |
232,687,113 |
|
|
|
|
|
|
| LONG
TERM INVESTMENTS |
|
10 |
40,353,608 |
42,503,528 |
|
| LONG
TERM DEPOSITS |
|
|
188,070 |
188,070 |
|
| DEFERRED
COSTS |
|
11 |
2,078,198 |
3,619,044 |
|
|
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
|
| Current
portion of net investment in leases |
12 |
85,204,774 |
81,077,932 |
|
| Advances,
prepayments and other |
|
|
|
| receivables |
|
13 |
54,729,992 |
34,635,284 |
|
| Cash
and bank balances |
|
14 |
4,933,525 |
5,105,250 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
144,868,291 |
120,818,466 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
439,917,786 |
403,043,520 |
|
|
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these financial statements. |
|
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|
|
|
-Sd- |
|
|
-Sd- |
|
|
Chief Executive |
|
|
Director |
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE PERIOD ENDED JUNE 30, 1998 |
|
|
|
|
|
June 30, |
June 30, |
|
|
|
|
1998 |
1997 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| REVENUES |
|
|
|
| Income
from leasing operations |
|
15 |
62,078,422 |
55,280,694 |
|
| Income/(Loss)
from investments |
|
16 |
(1,998,770) |
3,042,128 |
|
| Other
Income/(charges) |
|
|
17 |
692,382 |
2,373,464 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
60,772,034 |
60,696,286 |
|
| EXPENSES |
|
|
|
|
| Administrative
and operating expenses |
18 |
11,141,898 |
12,004,606 |
|
| Financial
charges |
|
|
19 |
34,633,299 |
32,071,965 |
|
|
|
|
---------- |
---------- |
|
|
|
|
45,775,197 |
44,076,571 |
|
|
|
|
---------- |
---------- |
|
| Profit
before provisions |
|
|
14,996,837 |
16,619,715 |
|
|
|
|
|
| Provision
for contingencies related to Investments |
- |
1,453,497 |
|
| Provision
for potential lease losses |
|
463,881 |
599,517 |
|
|
|
|
---------- |
---------- |
|
| Profit/(Loss)
before taxation |
|
|
14,532,956 |
14,566,701 |
|
| Provision
for taxation |
|
|
| Current Year |
|
22 |
313,448 |
277,202 |
|
|
|
|
---------- |
---------- |
|
|
|
14,219,508 |
14,289,499 |
|
| Un-appropriated
profit |
|
|
| brought
forward |
|
5,524,716 |
7,338,166 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
19,744,224 |
21 627,665 |
|
| Appropriations: |
|
|
|
|
|
|
| Transfer
to statutory reserve |
|
2,843,902 |
2,778,899 |
|
| Transfer
to contingencies reserve |
|
202,242 |
824,050 |
|
| Transfer
to general reserve |
|
- |
- |
|
| Proposed
dividends |
|
10,000,000 |
12,500,000 |
|
|
|
|
---------- |
---------- |
|
|
|
|
13,046,144 |
16,102,949 |
|
|
|
|
---------- |
---------- |
|
| Un-appropriated
profit carried to balance sheet |
|
6,698,080 |
5,524,716 |
|
|
|
|
========== |
========== |
|
|
|
-Sd- |
|
|
-Sd- |
|
|
Chief Executive |
|
|
Director |
|
|
|
| CASH
FLOW STATEMENT FOR THE PERIOD FROM JULY 01, 1997 TO JUNE 30, 1998 |
|
|
|
|
|
|
|
|
1998 |
1997 |
|
|
|
|
|
Rupees |
Rupees |
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
| Net
profit after taxation |
|
14,219,508 |
14,289,499 |
|
| Adjustments
for: |
|
|
|
| Depreciation |
|
1,024,163 |
750,923 |
|
| Deferred
costs amortized |
|
1,675,846 |
2,266,578 |
|
| (Income)/loss
from Investments |
|
1,998,770 |
(3,042,128) |
|
| (Gain)/loss
on sale of fixed assets |
|
32,439 |
(293,774) |
|
| Provision
for diminution in value of investments |
- |
1,453,497 |
|
|
|
---------- |
---------- |
|
| Operating
profit before working capital changes |
|
18,950,726 |
15,424,595 |
|
|
|
|
| Increase
in advances, prepayments and |
|
|
| other
receivables |
|
(20,094,708) |
(13,823,456) |
|
| Increase
in investment in leases |
|
(108,051,028) |
(138,915,351) |
|
| Recoveries
from investment in leases |
|
87,826,851 |
56,510,310 |
|
| Increase
in long term deposits received |
|
4,727,490 |
66,735,562 |
|
| Increased(decrease)
in accrued & other liabilities |
4,682,047 |
25,454,196 |
|
| Increase
in long term deposits |
|
- |
(26,920) |
|
|
|
---------- |
---------- |
|
| Cash
generated from operations |
|
(30,909,348) |
(4,065,659) |
|
|
|
---------- |
---------- |
|
| Net
cash generated/(used)in operating activities |
(11,958,622) |
11,358,936 |
|
|
|
|
|
| CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
| Increase
in deferred cost |
|
(135,000) |
(2,950,000) |
|
| Purchase
of fixed assets |
|
(2,440,631) |
(1,768,333) |
|
| Proceeds
from sale of fixed assets |
|
966,157 |
1,112,000 |
|
| (Increase)/Decrease
in long term investments |
|
2,149,920 |
(2,605,257) |
|
| Income/(loss)
from investments |
|
(1,998,770) |
3,042,128 |
|
| Dividend
paid |
|
(11,648,737) |
(1,699) |
|
|
|
---------- |
---------- |
|
| Net
cash generated/(used) in investing activities |
(13,107,061) |
(3,171,161) |
|
|
|
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
| Finances
under mark-up arrangements |
|
24,893,958 |
(5,820,060) |
|
|
|
|
|
---------- |
---------- |
|
| NET
(DECREASE)/INCREASE IN CASH AND |
|
|
| CASH
EQUIVALENTS |
|
(171,725) |
2,367,715 |
|
|
|
|
|
| CASH
AND CASH EQUIVALENTS AT JULY 01 |
|
5,105,250 |
2,737,535 |
|
| CASH
AND CASH EQUIVALENTS AT JUNE 30,1998 |
|
---------- |
---------- |
|
| AND
JUNE 30, 1997 RESPECTIVELY |
|
4,933,525 |
5,105,250 |
|
|
|
========== |
========== |
|
|
|
-Sd- |
|
-Sd- |
|
|
Chief Executive |
|
Director |
|
|
|
| NOTES
TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 1998 |
|
|
| 1.
THE COMPANY AND ITS OPERATIONS |
|
|
| The
Company was incorporated in Pakistan on November 30, 1992, as a public
limited company and is |
|
| listed
on the Karachi and Islamabad Stock Exchanges, The licence to carry on leasing
business was |
|
| granted
on April 26, 1993 and the certificate of commencement of business was
obtained on May 2, 1993 |
|
| The
main business activity of the Company is leasing. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
|
| 2.1
Overall valuation policy |
|
|
| These
financial statements have been prepared under the historical cost convention. |
|
|
| 2.2
Revenue recognition |
|
|
| 2.2.1 Lease |
|
|
|
| The
Company follows "financial method" in accounting for recognition of
lease income |
|
| Accordingly
unearned lease income is taken over the term of the lease, starting with the |
|
| period
in which the lease is executed, so as to produce a constant return on the net |
|
| investment
in the lease. |
|
|
|
| Front
end fee, commitment fee and other commissions are taken to income when |
|
| realised. |
|
|
|
|
| 2.2.2
Investments |
|
|
| Dividend
income is recognised when the right to receive payment is established. |
|
| Gain/profit
on trading of investments are taken to income when it is realised. |
|
|
| 2.2.3 Other |
|
|
|
| Other
income is recognised when earned. |
|
|
| 2.3
Operating fixed assets- tangible and depreciation |
|
| Operating
assets are stated at cost less accumulated depreciation. Depreciation is
charged to |
|
| income
applying the straight line method. In respect of additions and deletions of
assets during the |
|
| year,
depreciation is charged proportionately from/to the month of acquisition and
deletion |
|
| respectively. |
|
|
|
|
| Major
extensions, renewals and improvements are capitalised. |
|
|
|
|
| Maintenance
and minor improvements are charged to income as and when incurred. Gains and |
|
| losses
on disposal of fixed assets are included in current income. |
|
|
| 2.4
Investments |
|
| 2.4.1
Long term investments are carried at cost. Provision is made for permanent
diminution in |
|
| value
of investments, if any. |
|
|
|
| 2.4.2
Short term investments are valued at the lower of average cost and market
value |
|
| determined
on an aggregate portfolio basis in total, using Karachi Stock Exchange |
|
| quotations. |
|
|
|
| 2.5 Taxation |
|
|
