Pak Gulf Leasing Company Limited
Annual Reports 2003
CONTENTS
Company information
Mission Statement
Notice of the Annual General Meeting
Chairman's Review
Directors' Report to the Shareholders,
Certification in respect of Transfer Pricing
Statement in compliance with the Code of Corporate Governance.
Auditors' Review report to members on statement of compliance
with best practices of Code of Corporate Governance
Auditors' Report to the shareholders
Balance Sheet
Profit & Loss Statement
Cash Flow Statement
Statement of Changes in Equity
Notes to the Accounts
Pattern of Shareholding
Categories of Shareholders
Company Information
Board of Directors			Auditors
Mr. Sohail Inam Ellahi		Chairman	M/s. Taseer Hadi Khalid & Company
Mr. Fawad S. Malik		Vice Chairman	Chartered Accountants
Mr. A. B. Shahid		M.D. & CEO	Sheikh Sultan Trust Building No. 2,
Mr. Inam Ellahi Shaikh		Director	Beaumont Road,
Mr. Shaheed H. Gaylani		Director	Karachi.
Mr. Shaikh Aftab Ahmed		Director	Tel # : 5671761-3, 5685847
Mr. Sheikh Mohammad Jawed		Director	Fax # : 5685095
Mr. Yousuf Jan Mohammad		Director
			Legal Advisor
Company Secretary
			M/s. Mohsin Tayebaly & Company
Mr. S. Azfar All Baqvi			2nd Floor, Dime Centre,
			BC-4, Block # 9, Kehkashan, Clifton,
			Karachi.
Audit Committee			Tel #: 538077, 571653, 5872690
			Fax #: 5870240, 5870468
Mr. Sohail Inam Ellahi		Chairman
Mr. Fawad S. Malik		Member & Secretary
Mr. Shaikh Aftab Ahmed		Member
Mr. Sheikh Mohammad Jawed		Member	Bankers
			Askari Commercial Bank
Senior Management			Bank AI-Falah Ltd.
			Muslim Commercial Bank Ltd.
Mr. A. B. Shahid			National Bank of Pakistan.
Managing Director & Chief Executive			PICIC Commercial Bank Ltd.
			Standard Chartered Grindlays Bank pic
Mr. S. Azfar All Baqvi			Union Bank
Chief Accounting Officer
Mr. Sheikh M. Asghar
Chief Manager Marketing			Registered / Share Transfer Office
Mr. S. Farhan Abbass			Pak-Gulf Leasing Company Limited
Manager Credit & Marketing			THE FORUM:
			Room # 125-127, First Floor,
Credit Rating Agency			G-20, Block # 9, P. 0. Box # 12215,
JCR-VIS Credit Rating Co. Ltd.			Main Khayaban-e-Jami, Clifton,
			Karachi-75600.
Entity rating:			Tel #: 5820301,   5375985-87, 5824401
-   BBB  for medium to long term			Fax #: 5820302
-   A-3 for short term			E-mail: pgl@cyber.net.pk
-   outlook stable
Mission Statement
The Company will:
•     Aim to gain the confidence of all its stakeholders by earning
a credible reputation for being an innovative enterprise that
is prepared to change in the best interests of its stakeholders.
•     Continually monitor structural changes in the various sectors
of the economy, and accordingly alterthe Company's business
strategy to benefit from the emerging opportunities.
•     Focus on changing customer needs and strive to improve
tangible and intangible returns to its customers by providing
service and satisfaction at par with the best in the industry,
which would be reflected in prompt risk evaluation and facility
disbursement procedures and practices.
•     Consciously share, and remain part of all initiatives by the
leasing industry to play a positive role in the evolution of small
and medium-size enterprises to expand the country's industrial
base and support economic growth, higher employment, and
a better future for all.
Notice is hereby given that the 10th Annual General Meeting of Pak-Gulf Leasing Company Limited, will
be held at the Company's Registered Office at THE FORUM, Room Nos. 125 - 127, First Floor, G-20,
Block # 9, Main Khayaban-e-Jami, Clifton, Karachi-75600, on October 29th, 2003 at 2.00 p.m. to transact
the following business:
Ordinary Business
1)       To confirm the minutes of the 9th Annual General Meeting held on October 26, 2002.
2)       To receive, consider and adopt the Audited Accounts of the Company for the year ended June
30, 2003 together with Director's and Auditors' Report thereon.
3)       To approve, as recommended by the Directors in their meeting held on Thursday, the September
18, 2003, the payment of cash dividend @ 7.5% i.e. Rs. 0.75 per share for the year ended June
30, 2003.
4)       To appoint External Auditors of the company for the year July 01, 2003 to June 30, 2004 and
fix their remuneration. The present Auditors M/s. Taseer Hadi Khalid & Co., 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
Syed Azfar Ali Baqvi
Company Secretary
Karachi: September 30th, 2003
Notes:
1.       The Share Transfer Register of the Company will remain closed from October 20th, 2003 to
October 29th, 2003 (both days inclusive) and no transfer of shares will be made during the
period the Register is closed.
2.       A member entitled to attend, speak, and vote at the Company's General Meeting is entitled to
appoint a proxy to attend, speak, and vote on his/ her behalf. A company or corporation may,
by means of a resolution of its Board of Directors appoint a person as its proxy, who is not a
Member of the Company. A proxy must, however, be a member of the Company that appoints
him/her as its proxy. Proxy Forms can be obtained from the Registered office of the Company.
3.       An instrument of proxy and the power of attorney or other authority, if any, under which it is
signed or, in order to be valid, notarially certified copy of the power of attorney must be deposited
at the Registered Office of the Company not less than 48 hours before the time of the General
Meeting.
4.        Members are requested to notify changes in their address, if any, to the Company's Share Transfer
Office at THE FORUM, Room Nos. 125 - 127, First Floor, G-20, Block # 9, Main Khayaban-e-
Jami, Clifton, Karachi-75600.
Dear Shareholders,
The Directors of your company are presenting a review of the operating results of your company
during 2002-03 in the following pages of this report. The results are impressive because they were
achieved in an intensely competitive environment and rapidly changing economic and regulatory scenario,
which I will try to summarize in the following paragraphs.
Impact of fiscal discipline on the economy in 2002-03
Growth in leasing depends on the pace at which investment in capital assets expands. In Pakistan,
investment growth remains slow as various economic sectors adjust their strategies to the fiscal disciplinary
reforms the government introduced during the last three years. Besides, they are also trying to adjust
to interest rate fluctuations for which there are few hedging options available. Tight fiscal discipline
has prevented investment in infrastructure, which has impacted downstream private sector investment
and growth in employment. This trend continues to impact purchasing power and demand. GDP growth,
and a credible revival of investor confidence have therefore been slow.
Low private sector investment had an impact on the leasing sector. While industrial asset leasing
rose as a result of import of mostly used plant and equipment, its benefits could not be shared by
thfrleasing-sector because initial depreciation earlier allowed on leasing used equipment, was abruptly
withdrawn by GBR in 2002-03, limiting leasing sector's traditional profitability thereon. It was restored
only in June 2003. Bulk of the growth was therefore in vehicle leasing, a large part of which was
accounted for by higher prices, not as much in the number of units leased. Even in this segment
the aggressive leasing posture adopted by commercial banks squeezed the share of leasing companies
and gave rise to unhealthy market practices that continue unabated.
Commercial banking sector, which remains flush with cheap liquidity, forced the leasing sector to
accept a decline in its profitability. Given banks' massive resource mobilization infrastructure and
inflow of cheap foreign funds in the aftermath of 9/11, they enjoy a clear edge over leasing companies.
This scenario rendered the financial services sector an uneven playing field - a factor ignored for
sometime in spite of representations by leasing companies.
Impediments to demand creation
Although it was hoped that profit rates on bank deposits would not fall further (given their adverse
impact on small savers and criticism thereof in the national press) that trend continues. This trend
will eventually have its impact on consumer demand because most savers are now getting a negative
real rate of return on their savings, which, in due course, will erode their purchasing power, and their
ability to invest in durable assets. Given their cost structures, large commercial banks are finding
it hard to lend to the corporate sector, which initially responded by large TFC issues to replace expensive
bank borrowing. As a consequence, banks are shifting to high yielding consumer finance. Most banks
are gearing up to serve this sector. Given their network reach, they can lift demand in a wide spectrum
of consumers products provided pricing of their consumer loans is right.
Housing sector holds out a promise
A positive new development has been the resurgence of housing finance in a wider spectrum of the
financial services sector. Undoubtedly, housing is the sector that holds the key to reviving and expanding
the base for practically every industry but the absence of interest rate hedging mechanisms and
uncertainties connected with predicting long-term interest rates will prevent its growth at a pace necessary
for building confidence in this sector and creating opportunities for investment construction-related
industries. This is a critical issue that needs to be addressed by the financial services sector and
its regulators. Uninitiated ordinary home buyers are still not prepared to borrow on floating rates
because, given the uncertainties being created by the impending WTO regime change, survival of
their employers, and hence their continuing in their present jobs. They are uncertain about their employment
situation, future remuneration, their capacity to save and their long-term ability to repay housing loans.
Nevertheless, housing finance holds out bright prospects if these uncertainties can be allayed. The
substantially lower cost of borrowing and the opening up of new venues (commercial banks) for obtaining
financing facilities can boost this all important sector with positive spillovers for a wide variety of
industries.
Future challenges for the leasing sector
To a great extent, Pakistan has recovered from the adverse impact of the Afghan and Iraq wars.
Pressure on external sector too has been offset by the re-profiling of Pakistan's external debt and
stabilization of the exchange value of the Pak Rupee. But uncertainty rooted in the unpredictable
impact of WTO regime change, is worrying the business sector. While exporters have to concentrate
on meeting progressively stiffer international quality standards, the prospects of inflow of cheaper
imports, is a challenge that the domestic industry has face up to. There has been a visible move
towards modernization of plants and equipment to face up to this challenge, which augurs well for
the leasing sector.
To support the industry in this endeavour, SBP announced a further hefty cut in its Discount Rate
in November 2002 which the financial services sector initially found difficult to transmit down the line
given Pakistan's decades old culture of borrowing and lending on fixed-rates. It will have a positive
impact on investment climate as the culture of dealing on floating rates gains pace, though the paucity
of yardstick market rates for pegging floating loan rates credibly will continue to distort loan pricing
by the banking sector. In the wake of cuts in the Discount Rate (frequent by Pakistan's standards),
lessees expect a rapid fall in IRR. Leasing companies find it hard to raise funds to finance leases
at continuously falling rates because banks, that are themselves leasing in a big way, do not relish
the idea of lending a helping hand to their competitors. The advantage has clearly shifted to the big
banks, and not surprisingly, they continue to launch ambitious vehicle leasing campaigns.
Allowing banks to undertake consumer financing has shifted a large share of this market to the banking
sector thereby forcing the leasing sector to strive for a bigger share in equipment financing. The
shrinking role of DFIs is forcing the industrial sector to look to leasing companies for financing high-
ticket plant and equipment needs - a void the leasing sector may be able to fill only partly given
its resource base. Besides, it calls for familiarity with the sourcing, supply, and pricing of a wider
variety of industrial technology, and adopting a sophisticated approach to risk assessment. It remains
to be seen whether the leasing sector responds to this challenge appropriately. Your company has
taken a lead in this direction by augmenting its capabilities for risk assessment, and catering to the
needs of the industrial sector on a gradually increasing scale.
Your company also benefited from lower rates to expand its business base through competitive pricing
i.e. by passing on bulk of this advantage to the lessees rather than pocketing it. This is the only way
forward if businesses are to grow - by increasing prosperity at the widest possible scale, which we
consider to be the sole justification for the existence of business and industry. That is why, in spite
of the odds that are likely to become tougher, your company will do well in the ensuing financial year
by sharing the benefits of falling rates with its valued lessees.
Sohail Inam Ellahi
Chairman
Karachi: September 18, 2003
Dear Shareholders,
The Directors are pleased to present to you the 7th Annual
Report of the company for the year ending 30»> June 2003.
In spite of tougher competition, high interest rate volatility,
and the unfortunate trend of pre-mature termination of
contractual legal obligations by lessees, 2002-03 was a
better year for your company. During the year, balance
sheet footing of your company expanded from Rs. 264.7
million in 2001-02 to Rs. 365.8 million reflecting 38%
overall growth. During the year, 271 fresh leases worth
Rs. 207.4 million were written. Besides leases, at year-
end, the company also had on its books advance payment
against leases amounting to Rs. 3 million. Together with
the leases written, the business booked during the year
amounted to Rs. 210.4 million comparedjo Rs. 132.33
transacted last year reflecting a rise of 59% in overall
business. After accounting for leases that matured during
the year, the lease portfolio expanded from Rs. 208.5
million in 2001-02 to Rs. 314.9 million representing a rise
of 51%. Gross revenue for the year amounted to Rs. 38.6
million representing 50.8% increase over last year, and
28.8% rise in net profit compared to 3.64% last year.
Results					June 30, 2003	Mune 30, 2002
Revenue					38.626	25.605
Expenditure					20.527	11.089
Provision for possible lease losses					0.536	1.047
Profit before taxation					17.563	13.469
Provision for taxation					2.035	1.191
Profit after taxation					15.528	12.278
Un-appropriated profit brought forward					0.527	8.702
Profit available for appropriation					16.055	20.98
Appropriations:
Transfer to statutory reserves					3.106	2.353
Transfer to Reserve for Issue of
Bonus Shares					-	18.1
Proposed cash dividend @ 7.5%					12.75	-
Total appropriations					15.856	20.453
Un-appropriated profit carried forward					0.199	0.527
* Restated after adjustments made by External Auditors this year.
The impact of higher operating costs
Growth in pre-tax profit could be higher but for the squeeze
forced by intense competition from commercial banking
sector. PGL is aware of the new dimensions of competition
and is facing them squarely by reducing its costs and
improving overall resource productivity. However, higher
activity level resulted in larger outlay on promotion, utilities,
communications, transport, administration and
maintenance expenses. Impact of utility expenses was
magnified by continuing increase in these charges. Yet
the growth in earnings has been respectable.
Expenses were also incurred on floatation of second
Right Shares issue and amortization of the Discount
thereon. It is therefore significant that in spite of the
squeeze on profitability and higher expenses, the company
improved its pre- and post-tax profit. Equally important
is the fact that expansion in leasing portfolio was achieved
at an improved rate of profitability.
Management of the rate risk
Your company remains conscious of the rate risk arising out of a significant mismatch between the bases on
which it is built into lease rentals, and paid out on liabilities funding the leases. As a policy, therefore, the
company contains this mismatch to a maximum of 20% of the net investment in leases keeping in view the
fact that the present profile of the money market is devoid of any risk hedging arrangements. This policy is
implemented vigorously.
During the year under review, your company's management focused on optimizing the benefit from falling
funding cost and continually re-structured its bank borrowing lines to contain the narrowing of profit margins.
That it succeeded in this endeavour is reflected in the substantially improved pre- and post-tax profits receded
during 2002-03.
Flotation of Certificates of Investment
In the context of containing the funding cost, the company commenced issuing Certificates of Investment
(COIs) from mid-April 2003, after receiving SECP clearance there for. As on June 30, 2003 investment in COIs
by both individuals and businesses amounted to Rs. 26.443 million, which is a good beginning considering
the fact that an advertisement campaign to introduce the venture widely was postponed until the second quarter
of 2003-04 by which time the company hopes to see clearer signs of investment growth, and a significant rise
in leasing business.
Containment of credit risk
Intense competition by the commercial banking sector forced a significant change in the role of the leasing
sector in terms of the economic sectors to focus on. Your company has therefore gradually been shifting
its focus on to the industrial sector, and has expanded its exposure in selected varieties of industrial machinery.
It is fully conscious of the adverse consequences of inadequacy of investigative effort in validating the cost
and sourcing of technology, and sustained availability of technical and material inputs to keep the financed
plants running. Leasing of such assets is therefore supported by appropriate investigative effort by qualified,
licensed, and reputable engineering surveyors before the company decides to finance components of
integrated industrial units. Your company continues to follow a judicious credit policy and has put in place
an effective monitoring system, and support procedures, that contain the incidence of over due rentals.
The result of this cautious approach is reflected in the good health of the lease portfolio of your company.
Accumulation of the cautionary provision for potential lease delinquency is another prudent initiative in this
direction. Given these ingredients of prudential risk management, and the business momentum generated
last year through promotion of the company's cost efficient leasing services, the company is now on track
for rapid growth. Based on current form and the hope that the investment environment will not become
more sluggish than it is, next year your company should register even higher growth in business and profit.
Dividend Policy
In 2001-02 the Directors concluded that in order to expand the operations of the company, it was imperative
that it retains its post-tax profits to enhance its equity base. Accordingly, in line with SECP advice the
Directors proposed transfer of Rs. 18.1 million of un-appropriated profit to Reserve for Issue of Right Shares.
This fulfilled the SECP requirement of raising company equity to Rs. 200 million. After meeting this prudential
objective, the company considered declaring a cash-cum stock dividend this year and approached SECP
for obtaining exemption from the cumbersome provisions of SRO 110(i)/96 Section 6 (iii) and (iv) whereby
companies intending to issue Right Shares must
Director's Report
to the Shareholders
ensure that their free reserves are equal to 25% of the increased capital. The company applied for
exemption from this rule on the ground that on complying with above restriction it may not be able
to convert the Reserve for issue of Bonus Shares into Paid-up-Capital for several years besides being
unable declare a cash dividend for the same period to build free reserves for complying with the
condition imposed by the SRO. A definite SECP decision on this request was not received until convening
of the Board meeting for approving 2002-03 Annual Accounts.
Credit Rating
On September 6, 2002 JCR-VIS had revised upwards the entity rating your company to BBB for
medium to long-term outlook, and A-3 for the short-term. The outlook of company was rated as stable.
JCR-VIS had noted with satisfaction the successful issuance of Right Shares in the first phase of the
plan. Now that the second phase of the issue of Right Shares has also been completed and the
company has performed much better than last year, the company fairly expects a further upward
revision of its Credit Rating.
Social Responsibility
Your company is conscious of being a part of the society it operates in. This is reflected in its policy
of sharing the benefits of changing market and regulatory scenario with its stakeholders. This year,
as a part of this policy, it will offer few scholarships to university students who achieve good academic
results in the first year of their Master's Degree course but are financially hard put to continue their
education. Details of the scholarship program will be worked out with colleges and universities in
Karachi.
Acknowledgments
The Board gratefully acknowledges the understanding and cooperation extended to the Company by
the SECP in agreeing to a realistic timeframe for enhancement of the Company equity. We also
gratefully acknowledge the co-operation extended to the Company by the State Bank of Pakistan and
the other regulatory authorities. The Board also wishes to place on record its appreciation of the
guidance provided by the Company's External Auditors. Last but not the least, we profusely thank our
valued shareholders, bankers, and other financiers that provided us their support, and for reposing
their confidence in us. We hope to continue to fulfill our commitments to them.
The Board wishes to place on record its appreciation of the hard work and dedication shown by the
management and all staff members of the company. The year under review was tough but they performed
extremely well facing up to the challenges posed by intense competition. The Board Members assure
them of their continued support, and hope that they will do even better next year.
Financial Reporting
To the best of our knowledge and belief, we confirm correctness of the following information in com-
pliance with Code No. XIX of the Code of Corporate Governance of the SECP:
a.        Financial statements prepared by the management of the company present fairly its state of
affairs, the result of its operations, cash flows and changes in equity.
b.        Proper books of account of the listed company have been maintained.
c.        Appropriate accounting policies have been consistently applied in preparation of financial statements
and the accounting estimates presented in the report are based on reasonable and prudent
judgment.
d.        IAS standards, as applicable in Pakistan, were followed in preparation of the financial state-
ments, and there was no departure from these standards, except to the extent required by
SECP Circular No. 22 dated September 11, 2003.
e.       The system of internal control is sound in design, and has been effectively implemented and
monitored. An Internal Audit Committee consisting of Mr. Sohail Inam Ellahi, Director & Chair-
man, Mr. Sheikh Muhammad Jawed, and Director, Mr. Shaikh Aftab Ahmed, Director, has been
formed. Mr. Fawad S. Malik, Director & Vice Chairman will act as its Secretary.
f.        There are no significant doubts upon the company's ability to continue as a going concern.
g.       There has been no material departure from best practices of corporate governance, as detailed
in the listing regulations.
h. Pattern of shareholding (name-wise as per the categories specified in the code of Corporate
Governance) is included as an annexure at the end of the report.
i. Significant deviations from last year in operating results have been highlighted in the Directors'
Report to the Shareholders along with the reasons thereof. The company has not declared
dividend only for the years 2000-01 and 2001-02 nor issued Bonus Shares during these years
because it made a commitment to the SECP that profit for both these years will be retained
in the company in the Reserve for Issue of Bonus Shares until the company equity is raised
to Rs. 200 million. This promise was fulfilled in January 2003.
j. Mr. A.B. Shahid, appointed MD & CEO on September 01, 2001, continues to serve in those
capacities. Strength of Marketing and Internal Audit Departments was increased during the
year. Details on expansion of company business have been provided under the heading Re-
view of operations. The company does not foresee any serious threats to its business except
those outlined under the heading Future challenges for the leasing industry in the Chairman's
review.
Key operating and financial data of last six years is summarized below:
	Total	Inv.	Pre-tax	Net	Total	Bank	Cash	Right
Year	Assets	Leases	Inc.	Income	Equity	Credit	Dlv.	Share
1998	126,638,823	90,618,196	10,706,048	8,206,048	104,140,311	-	10,000,000	-
1999	134,335,219	113,867,736	12,603,526	10,355,026	104,995,337	-	9,500,000	-
2000	143,336,155	121,495,070	13,805,897	11,564,897	107,560,234	-	9,000,000	-
2001	187,775,027	161,979,589	14,005,441	11,681,241	119,241,475	28,055,554	-	-
2002	*264,653,108	208,478,228	13,469,023	'12,278,265	•170,528,485	26,616,568	-	40,000,000
2003	365,767,357	314,944,473	17,563,069	15,527,950	"•203,306,435	"55,262,935	12,750,000	30,000,000
*      To render them comparable, figures are reported net o all expenses, provisions and statutory transfers except appropriation for dividend.
"     Inclusive of Rs. 26,443,273 raised through certificates of Investment.
"*    Net of cash dividend recommended for 2002-03.
k.       Six Board Meetings were held during the year under review. Details of Board Meetings and
attendance by each Director are detailed below:
No.     Particulars of the meeting			Directors		Meetings attended
1         66th Meeting on July 31, 2002			Mr. A. B. Shahid		6
2         67th Meeting on September 21 , 2002			Mr. Shikh Aftab Ahmed*		6
3         68th Meeting on October 26, 2002			Mr. Sohail Inam Ellahi		5
4         69th Meeting on December 27, 2002			Mr. Inam Ellahi Shaikh		5
5         70" Meeting on February 24, 2003			Mr. Fawad S. Malik		4
6        71s Meeting on April 18, 2003			Mr. Sheikh M. Jawed		4
			Mr. Shaheed H. Gaylani		3
			Mr. Yusuf Jan Muhammad		2
I. No statutory payment on account of taxes, duties, levies and charges was outstanding against
the company on June 30, 2003.
m. Significant plans and decisions, such as corporate restructuring, business expansion and dis-
continuance of operations, have been outlined along with future prospects, risks and uncer-
tainties present in detail in the Directors' Report to the Shareholders contained in the earlier
paragraphs of the document.
n.       On June 30, 2003 company investment reported in the Balance Sheet and under Provident
Fund had following values:
Long-term investments represent: investment in:
WAPDA Bonds with a face value of Rs. 5,000,000. We believe that their book value
represented their fair market value on June 30, 2003.
National Investment Trust (NIT) Units with a face value of Rs. 200,200. As on June
30, the quoted market value of these units was Rs. 322,465.
o. The figure of Rs. 484,000 reported under Provident Fund represents investment in Defence
Saving Certificates. We believe that their book value represented their fair market value on
June 30, 2003.
p. There was no trade in shares of the company, carried out by its directors, CEO, CFO, Company
Secretary and their spouses and minor children.
Dear Shareholders,
It is hereby certified that the Company has:
(i) Recorded all transactions with related parties undertaken during the financial
year on arm's length price using valuation modes, as admissible, in the best
interests of the Company in the books of account of the Company and the
Record of Related Party Transactions;
(ii) Duly filed with the Commission all required periodic returns in respect of related
parties, which completely and fully disclosed all related parties and transac-
tions with those related parties during the financial year;
(iii) Provided all the aforesaid information, together with the minutes of the Board
of Directors meetings wherein the valuation policy and the related party
transactions were approved and the decisions of the Audit Committee ratifying
the related party transactions, to the statutory auditor for the purposes of the
audit; and
(iv) That the statutory auditors of the Company have made no adverse remarks
with regard to the above and the transfer pricing policy of the Company in their
audit report on the financial Statements for the year under review.
Statement of compliance with
The Code of Corporate Governance Clause (xiv)
For the year ended June 30, 2003
This statement is being presented to comply with Regulation 37, (xiii) and 36 of Listing Regulations
of Karachi, Lahore and Islamabad Stock Exchanges for the purpose of establishing a framework of
good governance as stated in the Code of Corporate Governance whereby a listed company is
managed in compliance with the best practices of corporate governance.
The Company has applied the principles contained in the Code in the following manner:
1.       The Company encourages representation of independent non-executive directors and directors
representing minority interests on its Board of Directors. At present the Board includes seven
independent non-executive directors, two Directors representing minority shareholders.
2.       The directors have confirmed that none of them is serving as a director in more than ten listed
companies, including this Company.
3.       All the resident directors of the Company are registered as tax payers and none of them has
defaulted in payment of any loan to a banking company, DPI or an NBFI or, being a member
of a stock exchange, has been declared as defaulter by that stock exchange.
4.        During the year 2002-03 no casual vacancy occurred in the Board of the company.
5.       The Company has prepared a "Statement of Ethics and Business Practices", which has been
signed by all the directors and employees of the Company.
6.       The Board has developed a vision/mission statement, overall corporate strategy and significant
policies of the Company. A complete record of particulars of significant policies along with the
dates on which they were approved or amended has been maintained.
7.       All the powers of the Board have been duly exercised and decisions on material transactions
including, the appointment and determination of remuneration and terms and conditions of
employment of the CEO, have been taken by the Board. At present, other than the CEO the
company doesn't have any Director working in executive capacity.
8.       The meetings of the Board were presided over by the Chairman and, in his absence, by a director
elected by the Board for this purpose and the Board met at least once in every quarter. Written
notices of the Board meetings, along with agenda and working papers, were circulated at least
seven days before the meetings. The minutes of the meetings were appropriately recorded
and circulated.
9.       The Board Members have been explained at length their responsibilities, obligations and the
supervisory they will be expected to play as Directors each time a new directive was issued
by the SECP. All non-Executive Directors being businessmen or career professionals are
conversant with their role. A formal comprehensive orientation course will be organized for them
during the coming year to up-date them on their duties and responsibilities.
10.     The Board has approved appointment of CFO, Company Secretary and Head of Internal Audit,
including their remuneration and terms and conditions of employment, as determined by the
CEO.
11.     The directors' report for this year has been prepared in compliance with the requirements of
the Code and fully describes the salient matters required to be disclosed.
12.     The financial statements of the Company were duly endorsed by CEO and CFO before approval
of the Board.
13.     The Directors, CEO and executives do not hold any interest in the shares of the Company other
than that disclosed in the pattern of shareholding.
14.     The Company has complied with all the corporate and financial reporting requirements of the
Code.
15.     The Board has formed an audit committee. It comprises four members, and all members are
non-Executive Directors including the Chairman of the Committee.
16.     The meetings of the audit committee were held at least once every quarter prior to approval
of interim and final results of the Company and as required by the Code. The terms of reference
of the committee have been formed and advised to the committee for compliance.
17.     The Board has set-up an effective internal audit function and the personnel involved are
considered suitably qualified and experienced for the purpose and are conversant with the
policies and procedures of the Company and they are involved in the internal audit function
on a full time basis.
18.      The statutory auditors of the Company have confirmed that they have been given a satisfactory
rating under the Quality Control Review Program of the Institute of Chartered Accountants of
Pakistan, that they or any of the partners of the firm, their spouses and minor children do not
hold shares of the Company and that the firm and all its partners are in compliance with
International Federal of Accountants (IFAC) guidelines on code of ethics as adopted by Institute
of Chartered Accountants of Pakistan.
19.      The statutory auditors or the persons associated with them have not been appointed to provide
other services except in accordance with the listing regulations and the auditors have confirmed
that they have observed IFAC guidelines in this regard.
20.      We confirm that all other material principles contained in the Code have been complied with
except for the following, towards which reasonable progress is being made by the Company
to seek compliance by the end of next accounting year.
Review report to the members on statement of compliance with
best practices of code of corporate governance
We have reviewed the Statement of Compliance with the best practices contained in the Code of
Corporate Governance prepared by the Board of Directors of Pak-Gulf Leasing Company
Limited to comply with the Listing Regulation No. 37,36 and Chapter Xin of the Karachi,
Islamabad and Lahore Stock Exchanges respectively where the Company is listed.
The responsibility for compliance with the Code of Corporate Governance is that of the Board of
Directors of the Company. Our responsibility is to review, to the extent where such compliance
can be objectively verified, whether the Statement of Compliance reflects the status of the
Company's compliance with the provisions of the Code of Corporate Governance and report if it
does not. A review is limited primarily to inquiries of the Company personnel and review of
various documents prepared by the Company to comply with the Code.
As part of our audit of financial statements we are required to obtain an understanding of the
accounting and internal control systems sufficient to plan the audit and develop an effective audit
approach. We have not carried out any special review of the internal control system to enable us
to express an opinion as to whether the Board's statement on internal control covers all controls
and the effectiveness of such internal controls.
Based on our review, nothing has come to our attention, which causes us to believe that the
Statement of Compliance does not appropriately reflect the Company's compliance, in all
material respects, with the best practices contained in the Code of Corporate Governance
effective as at 30 June 2003.
Auditors' Report to the Members
We have audited the annexed balance sheet of Pak-Gulf Leasing Company Limited as at
30 June 2003 and the related profit and loss account, cash flow statement and statement of
changes in equity together with the notes forming part thereof, for the year 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.
It is the responsibility of the company's management to establish and maintain a system of
internal control, and prepare and present the above said statements in conformity with the
approved accounting standards and the requirements of the Companies Ordinance, 1984. Our
responsibility is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan.
These standards require that we plan and perform the audit to obtain reasonable assurance about
whether the above said statements are free of any material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the above said
statements. An audit also includes assessing the accounting policies and significant estimates
made by management, as well as, evaluating the overall presentation of the above said
statements. We believe that our audit provides a reasonable basis for our opinion and, after due
verification, we report that:
a)       in our opinion, proper books of account 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, except for the change as stated in note 2.10 with which
we concur;
ii)      the expenditure incurred during the year was for the purpose of the company's
business; and
iii)     the business conducted, investments made and the expenditure incurred during the
year were in accordance with the«bjeets«ftheeempany
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, cash flow statement and statement of
changes in equity together with the notes forming part thereof conform with approved
accounting standards as applicable in Pakistan, and, 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 30 June 2003 and of the profit, its cash
flows'and changes in equity for the year then ended; and
d)      in our opinion no zakat was deductible at source under the Zakat and Ushr Ordinance,
1980 (XVIII of 1980).
				NOTE	2003	2002
					Rupees	Rupees
						(Re-stated)
ASSETS
CURRENT ASSETS
Cash and bank balances				3	1,216,748	2,927,617
Advances, prepayments and other receivables				4	10,430,883	24,758,344
Net investment in lease finance - current portion				5	96,750,283	67,473,661
					108,397,914	95,159,622
LONG-TERM LOANS AND DEPOSITS				6	982,774	522,625
NET INVESTMENT IN LEASE FINANCE				5	218,194,190	141,004,567
INVESTMENTS				7	5,580,773	1,173,030
DEFERRED COST				8	17,450,000	11,600,000
TANGIBLE FIXED ASSETS				9	15,161,706	15,193,264
					365,767,357	264,653,108
LIABILITIES
CURRENT LIABILITIES
Accrued expenses and other liabilities				10	4,806,627	5,073,526
Short-term finances under markup arrangements				11	1,041,886	2,760,706
Short-term loans				12	20,000,000	25,000,000
Certificates of investments				13	26,443,274	-
Dividend payable					50,109	380,109
Current portion of liabilities against assets
subject to finance lease					555,442	368,589
Current portion of long term loan					3,333,336	3,333,336
Proposed dividend					12,750,000	—
					68,980,674	36,916,266
LIABILITIES AGAINST ASSETS SUBJECT TO
FINANCE LEASE				14	1,067,899	389,991
LONG-TERM LOAN				15	4,444,440	1 ,388,882
LONG-TERM DEPOSITS				16	80,596,090	46,942,226
DEFERRED TAXATION				17	7,371,819	8,487,258
					162,460,922	94,124,623
NET ASSETS					203,306,435	170,528,485
REPRESENTED BY
Share capital				18	170,000,000	140,000,000
Statutory reserve				19	15,007,338	11,901,748
Reserve for bonus shares					18,100,000	18,100,000
Unappropriated profit					199,097	526,737
					203,306,435	170,528,485
Commitments				20
The annexed notes from 1 to 34 form an integral part of these financial statements.
Profit and Loss Account
For the year ended June 30, 2003
				NOTE	2003	2002
					Rupees	Rupees
						(Re-stated)
INCOME
Income from leasing operations				21	36,356,568	24,310,244
Mark-up on placements / deposits
and return on investments				22	737,865	679,657
Other income				23	1,531,215	614,720
					38,625,648	2P. 604,621
EXPENSES
Administrative and operating expenses				24	-14,720,593	-8,760,061
Financial charges				25	-5,806,356	-2,328,517
Provision for potential lease losses					-535,630	-1,047,020
PROFIT BEFORE TAXATION					17,563,069	13,469,023
Taxation				26	-	-
- Current					-600,000	-415,000
- Prior years					-2,550,558	-
- Deferred					1,115,439	-775,758
					-2,035,119	-1,190,758
NET PROFIT FOR THE YEAR AFTER TAXATION					15,527,950	12,278,265
EARNINGS PER SHARE				27	1.01	1.12
The annexed notes from 1 to 34 form an integral part of these financial statements.
					2003	2002
					Rupees	Rupees
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation					17,563,069	13,469,023
Adjustments for:
Depreciation					1,694,958	1 ,380,855
Amortization of deferred costs and premium on investment;				;	3,154,278	400,000
Financial charges					5,806,356	2,328,517
Gain on remeasurement of investments					-149,436	-33,605
Gain on disposal of fixed assets					-513,247	-91,118
Provision for potential lease losses					535,630	1,047,020
					28,091 ,608	18,500,692
Changes in operating assets and liabilities
Advances, prepayments and other receivables
excluding advance income tax					12,149,667	-14,188,150
Net investment in lease finance					-107,001,875	-47,545,659
Accrued expenses and other liabilities					-634,326	3,028,218
Deposits from lessees					33,653,864	16,691,740
Long-term loans and deposits					-460,149	-67,292
Long-term investments					-4,262,586	—
					-66,555,405	-42,081,143
Cash used in operations					-38,463,797	-23,580,451
Payments for:
Financial charges					-5,269,685	-2,618,691
Taxation					-972,764	-718,607
					-6,242,449	-3,337,298
Net cash flows from operating activities					-44,706,246	-26,917,749
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for capital expenditure					-640,253	-4,813,312
Proceeds from disposal of fixed assets					994,100	169,000
Net cash flows from investing activities					353,847	-4,644,312
CASH FLOWS FROM FINANCING ACTIVITIES
Dividend paid					-330,000	-28,710
Proceeds from issue of certificates of investments					26,443,274	-
Proceeds from issue of right shares					21 ,000,000	28,000,000
Proceeds from borrowings					5,000,000	5,000,000
Repayment of long-term loan					-6,944,442	-3,333,336
Repayment of liability against assets subject to finance lea				ses	-808,482	-639,131
Net cash flows from financing activities					44,360,350	28,998,823
Net increase / (decrease) in cash and cash equivalents					7,951	-2,563,238
Cash and cash equivalents at beginning of the year					166,911	2,730,149
Cash and cash equivalents at the end of the year				28	174,862	166,911
The annexed notes from 1 to 34 form an integral part of these financial statements.
Statement of Changes in Equity
For the year ended June 30, 2003
					Reserve for	Unappro-
			Share	Statutory	Bonus	priated
			Capital	Reserve	Shares	Profit	Total
Balance as at 30 June 2001			100,000,000	9,548,295	-	9,693,180	119,241,475
Adjustment resulting from
change in accounting policy
due to application of IAS-39			-	-	-	30,745	30,745
Re-stated balance as on 1 July 2001			100,000,000	9,548,295	-	9,723,925	119,272,220
Adjustment resulting from
change in accounting policy
relating to deferred tax			-	-	-	-1,022,000	-1,022,000
Re-stated balance as on 1 July 2001			100,000,000	9,548,295	-	8,701,925	118,250,220
Right issue (4,000,000 ordinary
shares @ Rs. 10 each)			40,000,000	-	-	-	40,000,000
Profit for the year			-	-	-	12,278,265	12,278,265
Transferred during the year			-	2,353,453	18,100,000	-20,453,453	-
Re-stated balance as at 30 June 2002			140,000,000	11,901,748	18,100,000	526,737	170,528,485
Right issue (3,000,000 ordinary
shares @ Rs. 10 each)			30,000,000	-	-	-	30,000,000
Profit for the year			-	-	-	15,527,950	15,527,950
Transferred during the year			-	3,105,590	-	-3,105,590	-
Proposer cash dividend @7.5% (2002: Nil)			-	-	-	-12,750,000	-12,750,000
Balance as at 30 June 2003       Rupees			170,000,000	15,007,338	18,100,000	199,097	203,306,435
The annexed notes from 1 to 34 form an integral part of these financial statements.
Notes to the Financial Statements
For the year ended June 30, 2003
1.        THE COMPANY AND ITS OPERATIONS
Pak-Gulf Leasing Company Limited ("the Company") was incorporated in Pakistan on 27 December
1994 having its registered office in Karachi, Sindh and commenced its operations on 16 September
1996. The Company is principally engaged in the business of leasing and is listed on all three
Stock Exchanges of Pakistan.
2.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1      Statement of compliance
These accounts have been prepared in accordance with approved accounting standards
as applicable in Pakistan and the requirements of the Companies Ordinance, 1984. Approved
accounting standards comprise of such International Accounting Standards as notified
under the provisions of the Companies Ordinance, 1984. Wherever the requirements of
the Companies Ordinance, 1984 or directives issued by the Securities and Exchange
Commission of Pakistan differ with the requirements of these standards, the requirements
of the Companies Ordinance, 1984 or the requirements of the said directives take precedence.
2.2      Accounting convention
These financial statements have been prepared under the historical cost convention, except
for revaluation of available for sale securities.
2.3      Revenue recognition
The Company follows the finance method in accounting for recognition of lease income.
Under this method the unearned lease income i.e., the excess of aggregate lease rentals
and the estimated residual value over the cost of leased assets is deferred and taken to
income over the term of the lease, so as to produce a systematic return on net investment
in leases.
Unrealised income is suspended where necessary in accordance with the requirements
of the Prudential Regulations for Non-Banking Finance Companies Undertaking the Business
of Leasing.
Front-end fee is taken to income on receipt basis.
Dividend income and profit on other investments are accounted for on accrual basis.
2.4      Investments
Investmets held by the company are clasifies as held to maturity and  available for sale.
Held to maturity investments are securities with fixed payments that the Company has
positive intent and ability to hold to maturity and are stated at amortized cost less provision
for permanent diminution in value, if any.
Investments that could not be classified as held for trading or held to maturity are classified
as available for sale and are stated at fair value, with any resultant gain or loss being
recognized directly in the profit and loss account. Fair value is determined on the basis
of year-end quoted prices.
Investments classified as either held to maturity or available for sale are initially recognized
at cost.
2.5     Tangible fixed assets and depreciation
Fixed assets are stated at cost less accumulated depreciation and impairment losses.
Depreciation is charged applying the straight-line method at the rates specified in note 9.
In respect of additions during the year, depreciation is charged from the month of acquisition
while no depreciation is charged in the month of disposal.
Normal repairs and maintenance are charged to income as and when incurred; major
renewals and improvements are capitalized and the asset so replaced, if any, are retired.
Gains and losses on disposal of assets, if any, are taken to profit and loss account.
2.6      Assets subject to finance lease
Asset subject to finance lease is accounted for by recording the asset at the lower of
present value of minimum lease payments under the lease agreements and the fair value
of asset acquired. The related obligation under the lease is accounted for as liability. Financial
charges are allocated to accounting period in a manner so as to provide a constant periodic
rate of charge on the outstanding liability.
2.7      Deferred cost
Deferred costs representing discount on issue of shares are amortized over a period of
sixty months from the date of allotment of shares.
2.8      Net investment in lease finance
These are stated at present value of minimum lease payments under the lease agreements.
Impairment losses on non-performing leases are recognized at the higher of provision
required in accordance with Prudential Regulations for Non-Banking Finance Companies
Undertaking the Business of Leasing and the difference between carrying amount of receivable
and present value of expected cash flows discounted at the rate implicit in the lease agreement.
2.9      Employees' retirement benefits
The Company operates a defined contributory provident fund for all its regular permanent
employees and contributions are made monthly to the fund equally by the Company and
the employees in accordance with the fund's rules to cover the obligations.
2.10   Taxation
Current
Provision for current taxation is based on taxable income at the current rates of taxation
after taking into account available tax credits and rebates, if any, or one-half of one percent
of turnover, whichever is higher.
Deferred
Deferred tax is provided using balance sheet liability method, providing for temporary
differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The amount cf deferred tax provided
is based on the expected manner of realization or settlement of the carrying amount of
assets and liabilities, using the current rates of taxation.
A deferred tax asset is recognised only to the extent that it is probable that future taxable
profits will be available against which the asset can be utilised. Deferred tax assets are
reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Up to 30 June 2002, the Company accounted for deferred taxation on all major timing
differences using the liability method. Deferred tax was not provided if it could be established
that these timing differences will not reverse in the foreseeable future. However, in accordance
with the directives of Securities and Exchange Commission of Pakistan, the Company
beginning from 1998-99 was providing unrecognised deferred tax liability as at 30 June
1998 in five equal annual installments together with any liability arising in that year.
During the year the Company has changed its accounting policy in respect of deferred tax to
comply with the requirements of International Accounting Standard: IAS - 12 "Incomes Taxes".
The above change in accounting policy has been applied retrospectively and the comparative
.  information has been restated. Had the accounting policy not been changed, the profit
after taxation for the year would have been lower by Rs. 511,000.
2.11    Financial instruments
At the time of initial recognition, ail financial assets and liabilities are measured at cost,
which is the fair value of the consideration given or received for it. Subsequent to initial
recognition financial assets which are tradable in open market are revalued at the market
prices prevailing on the balance sheet date. The estimated fair value of all other financial
assets and liabilities are considered not significantly different from book value.
2.12    Offsetting of financial assets and financial liabilities
A financial asset and a financial liability is offset and the net amount reported in the balance
sheet, if the Company has the enforceable legal right to set off the transaction and also
intends either to settle on net basis or to realize the asset and settle the liability simultaneously.
2.13    Provisions
A provision is recognised in the balance sheet when the Company has a legal or constructive
obligation as a result of a past event, and it is probable that an outflow of economic benefits
will be required to settle the obligation.
2.14    Cash and cash equivalents
Cash and cash equivalents comprise cash balances and bank deposits. Bank borrowings
that are repayable on demand and form an integral part of the Company's cash management
are included as a component of cash and cash equivalents for the purpose of the statement
of cash flows.
					2003	2002
					Rupees	Rupees
3.        CASH AND BANK BALANCES
Cash in hand					4,687	25,815
Cash at bank - deposit account					3.1               1,212,061	2,901,802
					1,216,748	2,927,617
3.1      It includes Rs. 91,245 (2002: Rs. 74,570) deposited with the State Bank of Pakistan.
					2003	2002
					Rupees	Rupees
4.        ADVANCES, PREPAYMENTS
AND OTHER RECEIVABLES
Advance income tax (net of provision)					4,596,899	6,774,694
Advance against lease					2,620,000	12,526,000
Prepayments					256,234	316,084
Accrued return on investments					87,514	173,297
Net receivable against terminated leases					166,906	2,148,795
Other receivables					2,588,330	2,759,474
Others					115,000	60,000
					10,430,883	24,758,344
5.       NET INVESTMENT IN LEASE FINANCE - secured
		2003			2002
			Later than			Later than
			one year and			one year and
		Not later than	less than five		No later than	less than five
		one year	years	Total	one year	years	Total
Lease rentals receivables		116,014,019	166,478,446	282,492,465	80,386,228	120,876,006	201,262,234
Estimated residual value of
leased assets		10,138,038	72,172,625	82,310,663	10,893,364	37,940,835	48,834,199
Minimum lease payments		126,152,057	238,651,071	364,803,128	91,279,592	158,816,841	250,096,433
Unearned lease income		-29,401,774	-18,874,231	-48,276,005	-23,805,931	-16,765,254	-40,571,185
Provision for potential
lease losses		-	-1,582,650	-1,582,650	-	-1,047,020	-1,047,020
Rupees		96,750,283	218,194,190	314,944,473	67,473,661	141,004,567	208,478,228
The Company has entered into various lease agreements with mark-up rates ranging from 22.53 percent
to 10.44 percent per annum. The agreements usually are for a period ranging from three to five years.
In certain leases, the Company has security, in addition to leased assets, in the form of corporate /
personal guarantee of associated companies / directors.
6.        LONG TERM LOANS AND DEPOSITS
Deposits					537,900	485,000
Loans to employees - considered good					444,874	37,625
					982,774	522,625
Notes to the Financial Statements
For the year ended June 30, 2003
					2003	2002
					Rupees	Rupees
7.        INVESTMENTS
Held to maturity investments:
-     WAPDA Bonds					5,258,308	-
-     Federal Investment Bonds					-	1 ,000,000
Available for sale:
National Investment Trust Units					322,465	173,030
					5,580,773	1,173,030
8.        DEFERRED COST
Balance as at 1 July					11,600,000	—
Discount on right shares issued during the year					9,000,000	12,000,000
Amortisation of discount on issue of right shares					-3,150,000	-400,000
Balance as at 30 June					17,450,000	11,600,000
9.        TANGIBLE FIXED ASSETS
		COST			DEPRECIATION
						Charge for
		As at		As at	As at	the year/ (accumulated depreciation	As at	Book value value as	Depreciation
		Uuly	Additions/	Adjust-        30 June	Uuly	on	Adjust-        30 June	at 30 June	rate
		2002	(disposals)	rents           2003	2002	disposals)	merits            2003	2003	%
Owned Assets
Leasehold premises		12,250,262	-	-12,250,262	477,902	612,516	-1,090,418	11,159,844	5
Leasehold
improvement		548,846	122,135	670,981	213,416	186,320	399,736	271,245	33.33
Furniture and fixtures		1,392,440	148,518	-1,540,958	589,212	126,614	715,826	825,132	10
Equipments		2,107,987	369,600	-2,325,687	1,543,902	232,579	-1,649,406	676,281	20
			-151,900	680,000		-127,075
Vehicles		1,670,773	-	1,062,570	953,312	164,493	306,000       591,630	470,940	20
			-1,288,203			-832,175
Leased Assets
Vehicles		1,284,000	1,504,000	(680,000)     2,108,000	283,300	372,436	(306,000)       349,736	1,758,264	20
2003         Rupees		19,254,308	2,144,253	-19,958,458	4,061,044	1,694,958	-4,796,752	15,161,706
			-1,440,103			-959,250
2002         Rupees		14,148,521	5,417,312	-19,254,308	2,913,832	1,380,855	-4,061,044	15,193,264
			-311,525			-233,643
9.1     Details of deletions during the year
	Accumulated		Book	Sale	Mode of	Particulars of
Description	Cost	Depreciation	Value	Proceeds	disposal	Purchasers
Vehicle	992,000	595,200	396,800	763,000	Tender	Mr. M. Asad Khan, Karachi.
Vehicle	296,203	236,975	59,228	182,000	Tender	Ms. Anila Shaukat, Karachi
Equipment	151,900	127,075	24,825	49,100	Settled	M/s. Unibro House, Karachi
					against
					rent
2003    Rupees	1,440,103	959,250	480,853	994,100
2002   Rupees	311,525	233,643	77,882	169,000
					2003	2002
					Rupees	Rupees
10.      ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses					424,765	319,182
Advance rentals					851,127	269,315
Accrued financial charges					689,607	322,180
Other liabilities					2,841,128	4,162,849
					4,806,627	5,073,526
11.      SHORT-TERM FINANCES UNDER MARK-UP
ARRANGEMENTS - Secured
This represent a running finance facility of Rs. 10 million obtained from a commercial bank. The
facility is secured by first charge on specific leased assets and related lease rentals receivable.
The facility carries a mark-up of 8.5 percent per annum payable quarterly. The facility is maturing
on 2 June 2004.
12.      SHORT-TERM LOANS
Short-term loan 1 - secured					_	10,000,000
Short-term loan 2 - secured					—	5,000,000
Short-term loan 3 - unsecured					—	5,000,000
Short-term loan 4 - unsecured					-	5,000,000
Short-term loan 5 - unsecured				12.1	10,000,000	-
Short-term loan 6 - unsecured				12.2	5,000,000	-
Short-term loan 7 - unsecured				12.3	5,000,000	-
					20,000,000	25,000,000
12.1    This represent unsecured facilities obtained from a Non Banking Finance Company. These
facilities carries mark-up at rates ranging from 9.5 percent to 9.75 percent per annum.
These facilities are repayable by 11 July 2003 and  28 July 2003 respectively.
12.2    This represent unsecured facility obtained from a Non Banking Finance Company. The
facility carries mark-up at the rate of 11 percent per annum. The facility is repayable by
4 July 2003.
12.3    This represent unsecured facility obtained from a Non Banking Finance Company.  The
facility carries mark-up at the rate of 11.25 percent per annum.  The facility is repayable
by 7 July 2003.
13.     CERTIFICATE OF INVESTMENTS - Unsecured
13.1    These represents Certificates of Investments issued during the year by the Company with
the permission of the Securities and Exchange Commission of Pakistan. These certificates
are for a period ranging from three months to onr year with mark-up at the rates ranging
from 6.5 percent to 7.5 percent per annum.
13.2    This include Rs. 10.043 million subscribed by a director of the Company and also includes
Rs.5 million subscribed by a related party.
14.      LIABILITIES AGAINST ASSETS SUBJECT
TO FINANCE LEASE - secured
	2003			2002
	Minimum	Financial	Principal	Minimum	Financial	Principal
	lease	charges	outstanding	lease	Charges	outstanding
	payments	for future		payments	for future
		periods			periods
Not later than one year	698,076	142,634	555,442	434,316	65,727	368,589
Later than one year and
not later than five years	1,128,642	60,743	1,067,899	422,221	32,230	389,991
Rupees	1,826,718	203,377	1,623,341	856,537	97,957	758,580
This represents vehicles acquired under lease agreements from leasing companies. Lease rentals
include financial charges ranging between 15 percent to 17.9 percent per annum which have
been used as discounting factor and are payable on monthly basis. The Company has an option
to purchase the assets upon completion of lease period by adjusting the security deposits and
has intention to exercise the option.
15.      LONG-TERM LOAN
This represents long-term finance facility of Rs. 10 million obtained from a commercial bank for
a period of three years. The facility is secured by hypothecation charge over specific leased
assets and related receivables of the Company. The facility carries mark-up of approximately 9.5
percent per annum. The loan is repayable in 36 equal monthly installments commencing from
28 November 2002.
16.     LONG-TERM DEPOSITS
These represent interest free security deposits received against lease contracts and are refundable
/ adjustable at the expiry / termination of the respective leases.
					2003	2002
					Rupees	Rupees
1 7.      DEFERRED TAX (LIABILITIES) / ASSETS
Deferred debits arising in respect of:
-   Assessed losses					6,277,653	2.390.984
-   Unassessed losses					5,381,263	4.470,445
-   Suspense income					245,306	503,113
Deferred (credits) arising in respect of:
-   Difference between investment in lease and tax
book value of assets given on lease					-19,221,126	-15,660,546
-   Difference between accounting book value of
fixed assets and tax base					-54,915	-191,254
Net deferred tax (liabilities) / assets					-7,371,819	-8,487,258
18.     SHARE CAPITAL
2003	2002			2003	2002
				Rupees	Rupees
		Authorised
20,000,000	20,000,000	Ordinary shares of Rs. 10 each		200,000,000	200,000,000
		Issued, subscribed and paid-up
		Ordinary shares of Rs. 10 each
17,000,000	14,000,000	fully paid in cash		170,000,000	140,000,000
19.      STATUTORY RESERVE
In accordance with the Prudential Regulations For Non-Banking Finance Companies Undertaking
the Business of Lease Only, the Company is required to transfer twenty percent of its after tax
profit to statutory reserve until the reserve equals its paid-up capital. Thereafter, five percent of
after tax profit is required to be transferred to reserve.
20.     COMMITMENTS
Leasing contracts committed but not executed at the balance sheet date amounted to Rs. 4.02
million (2002: Rs. 12.5 million).
					2003	2002
					Rupees	Rupees
21.      INCOME FROM LEASING OPERATIONS
Income on lease contracts					34,923,638	23,449,272
Front end fee					92,517	166,771
Documentation income					392,127	190,180
Gain on lease termination					268,803	36,297
Other income					679,483	467,724
					36,356,568	24,310,244
22.      MARK-UP ON PLACEMENTS / DEPOSITS
AND RETURN ON INVESTMENTS
Profit on bank accounts					350,594	515,715
Return on investments					387,271	163,942
					737,865	679,657
23.     OTHER INCOME
Gain on disposal of fixed assets					513,247	91,118
Miscellaneous income					1,017,968	523,602
					1,531,215	614,720
					2003	2002
					Rupees	Rupees
24.     ADMINISTRATIVE AND
OPERATING EXPENSES
Directors' fee					12,000	28,500
Salaries, allowances and benefits				24.2	4,846,800	3,583,081
[including Provident Fund contribution
Rs. 177,954 (2002: Rs.122,107)]
Amortization of deferred costs				8	3,150,000	400,000
Depreciation				9	1,694,958	1 ,380,855
Office rent and utilities					1,086,992	456,927
Professional charges					838,945	587,738
Subscriptions, printing and stationery					673,600	515,929
Vehicle