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Orix Leasing Pakistan Limited
Annual Report 2000
Our Aim To maximize investment potential
with creative intelligent marketing.
Seeds for Future Growth Viewing lease financing as core
business from which it has
branched into many directions.
Nationwide Coverage One-on-one, personal service.
Knowledgeable, Simplified and A well-trained marketing,
Express Service technical and administrative
staff of proven professionals.
Full Service Finance Lessor A single source of standard or
customized finance lease products
for all types of moveable assets.
Rich and Fertile Ground Devoting necessary resources
to nature growth in the area of
customer needs.
Associated Companies
Overseas Joint Ventures
Oman ORIX Leasing Company SAOG
1st Floor, ONIC Building, Al Qurum
P.O. Box 106
Postal Code: 118, Sultanate of Oman
Tel: (968) 565612, 568109
Fax: (968) 565610, 568106
ORIX Leasing Egypt SAE
4th Floor, Cairo Centre
2 Abdel Kader Hamza Street
Garden City, Cairo
Tel: 020-2-5842757, 5842758
Fax: 020-2-5942760
Saudi ORIX Leasing (under formation)
P.O. Box 3533
Riyadh 11481
Kingdom of Saudi Arabia
Tel: 966-1-4778433
Fax: 966-1-4776781
Joint Venture in Pakistan
ORIX Investment Bank Pakistan Limited
3rd Floor, PIC Towers, 32-A Lalazar Drive
Moulvi Tamizuddin Khan Road, Karachi-74000
Tel: 021-5610734, 5610618
Fax: 021-5610510
CONTENTS
COMPANY INFORMATION
ORIX CORPORATION, JAPAN
ASSOCIATED COMPANIES
8 NOTICE OF MEETING
REPORT OF THE DIRECTORS
AUDITORS' REPORT TO THE MEMBERS
FINANCIAL STATEMENTS OF THE COMPANY
PATTERN OF SHAREHOLDING
ORIX GROUP DIRECTORY
COMPANY INFORMATION
BOARD OF DIRECTORS
Mr. Yoshihiko Miyauchi (alternate Mr. Takahisa Sato) Chairman
Mr. Shakirullah Durrani Vice Chairman
Mr. Takeshi Sato (alternate Mr. Kotaro Takamori)
Mr. Masatoshi Yokota (alternate Mr. Nagaaki Esaki)
Mr. Mohammed Mazharuddin
Mr. Shaheen Amin
Mr. Mohammad Qamrul Haq
Mr. Humayun Murad Chief Executive
COMPANY SECRETARY
Mr. Ramon Alfrey - FCA
BANKS AND LENDING INSTITUTIONS
Banks
ABN-AMRO Bank N.V.
Al Faysal Investment Bank Limited
Al Meezan Investment Bank Limited
Citibank N.A.
Emirates Bank International PJSC
Faysal Bank Limited
First International Investment Bank Limited
Habib Bank Limited
Muslim Commercial Bank Limited
Oman International Bank SAOG
Standard Chartered Bank
Standard Chartered Grindlays Bank Limited
The Bank of Tokyo-Mitsubishi Limited
Union Bank Limited
United Bank Limited
DFIs and Lending Institutions
Asian Development Bank
F.M.O., The Netherlands
International Bank for Reconstruction and Development
International Finance Corporation
Pakistan Kuwait Investment Company (Private) Limited
Saudi Pak Industrial & Agricultural Investment Company (Private) Limited
Swiss Agency for Development and Co-operation
AUDITORS
Sidat Hyder Qamar & Co., Chartered Accountants
LEGAL ADVISORS
Mansoor Ahmad Khan & Co.
Walker Martineau & Saleem
REGISTRARS AND SHARE TRANSFER OFFICE
Noble Computer Services (Private) Limited
14, Banglore Town Housing Society
Shahra-e-Faisal, Karachi.
ORIX CORPORATION
Japan's Leading Diversified and Innovative Financial Services Institution
ORIX Corporation is Japan's largest diversified financial services institution with assets in
excess of US $ 50 billion. incorporated in 1964, ORIX is a pioneer of the leasing industry in
Japan. While leasing remains it's core business, ORIX has expanded the financial services
and products it offers to installment loans, real estate, insurance, securities, venture capital,
trust banking and commodity funds. The Company enjoys a global presence and has
established ORIX Group companies in 20 countries. ORIX Corporation's shares are listed in
Japan and on the New York Stock Exchange.
Business Operations:
In Japan, ORIX provides a wide array of office equipment, industrial machinery and transport
equipment under finance and operating leases. ORIX's leasing and loan operations have
established a strong and unique nationwide customer base with a solid core of small and
medium sized companies. ORIX has effectively used this base for cross selling - the
marketing of various additional financial products to existing customers. To further strengthen
it's customer services, the Company is productively developing e-business by utilising IT for
direct provision of services to customers as well as distribution and settlement activities and
auction markets.
ORIX is amongst the leading automobile leasing companies in Japan with approximately
261,000 vehicles under lease. The Company owns and maintains a fleet of Airbus aircraft and
Boeing 737's which are given on operating lease to airlines around the world.
During the current year, ORIX entered into strategic alliances with the American International
Group (AIG) by forming a joint venture to handle casualty insurance; and with Enron
Corporation for investment in companies which market electricity from wind power generating
facilities.
International Activities:
Since entering the Hong Kong market in 1971, ORIX has expanded it's leasing operations and
other business overseas through the establishment of wholly owned subsidiaries and joint
ventures. The ORIX Groups' international presence is represented by 43 companies in 20
countries. The wide geographical spread of the ORIX Group has diversified revenue streams
and Group companies benefit from a deep pool of experience and technological advances
available to them due to a worldwide presence.
ORIX GROUP, JAPAN - FINANCIAL HIGHLIGHTS
(For the year ended March 31, 2000)
Translation into
Japanese Yen (millions) US Dollars (millions)
2000 1999 2000 1999
Total Revenues 616,513 593,941 5,808 5,595
Net Profit After Tax 30,642 25,621 289 241
Shareholders' Equity 425,671 327,843 4,010 3,088
Total Assets 5,341,542 5,347,636 50,321 50,378
========== ========== ========== ==========
Note: The dollar amounts above represent translations of Japanese Yen at an exchange rate of
¥ 106.15 to US $1.
ORIX'S PRINCIPAL ACTIVITIES
DIRECT FINANCE LEASES OTHER OPERATIONS
Aircraft and Marine Vessels Investment Banking
Automobiles Life insurance
Industrial Equipment Trust and Banking
Information related and Office Equipment Securities Brokerage
Securities Investment
Real Estate and Development Brokering
OPERATING LEASES Venture Capital Investment
Futures and Options Trading
Aircraft Commodities Funds
Marine Vessels Computer Software Development
Measuring Analytical Equipment Insurance Agency Services
Information-related Equipment Ship Management
Automobiles Environmental Services
Commercial Mortgage Servicing
INSTALLMENT LOANS
Corporate Finance
Housing Loans
Card Loans
ASSOCIATED COMPANIES
OVERSEAS JOINT VENTURES
1. Oman ORIX Leasing Company SAOG (Oman ORIX)
Oman ORIX, in which ORIX Leasing Pakistan Limited holds 20.25% of equity and provides
management support, continues to show strong growth in volumes and profits. In 1999, net
profit after tax rose by 26% to Rial Omani (RO) 684,989 (Pak Rs. 92.33 million) from
RO 542,403 (Pak Rs. 73.1 million) enabling the Company to declare a dividend of 10% and a
bonus of 2.45%. Purchase cost of new business written during the year increased to
RO 16.9 million (Pak Rs. 2.28 billion) compared to RO 13.6 million (Pak Rs. 1.84 billion) last
year and gross lease receivables increased by 33% to RO 24 million (Pak Rs. 3.24 billion).
As at December 31, 1999, Oman ORIX had total assets of RO 22.37 million (Pak Rs. 3.0
billion) and a net worth of RO 5.397 million (Pak Rs. 727.47 million).
For the half year ended June 30, 2000, the Company earned a pre-tax profit of RO 455,719
(Pak Rs. 61.4 million) and increased its asset base to RO 29.19 million (Pak Rs. 3.9 billion).
Oman ORIX leases all type of assets including motorcars, construction, earthmoving and
transportation equipment, information technology equipment and plant and machinery. The
Company's lessees include individuals, small and medium size companies and large sub
contractors in diverse economic sectors including services, trading and contracting,
construction and manufacturing.
Oman ORIX's Head office is in Muscat and during the year the Company extended its
geographical reach by opening branches in the cities of Sohar and Salalah.
2. ORIX Leasing Egypt SAE (ORIX Egypt)
ORIX Corporation, Japan and ORIX Leasing Pakistan Limited each hold 23% of ORIX Egypt's
equity. The Company started operations in November 1997 and has established a good
business base.
For the year ended December 31, 1999, ORIX Egypt's profit before tax of Egyptian Pounds
(EP) 2.04 million (Pak Rs. 30.8 million) was more than double last year's profit of EP 0.9
million (Pak Rs. 13.6 million). Business volume increased by 57% with disbursements of EP
38.3 million (Pak Rs. 577.9 million) compared to EP 24.4 million (Pak Rs. 368.2 million) last
year. Gross lease receivables increased to EP 47.7 million (Pak Rs. 719.8 million) from EP
30.5 million (Pak Rs. 460.3 million). The Company continues to focus on needs of small and
medium sized businesses, which enables it to diversify risk and earn good spreads.
3. Saudi ORIX Leasing Company (Saudi ORIX)
Saudi ORIX is under formation and is expected to commence commercial operations by the
end of this year. The Company will be a pioneer of leasing in Saudi Arabia. As the largest
economy in the Gulf with the biggest oil production in the world, Saudi Arabia offers immense
potential for leasing.
Saudi ORIX will have a paid up capital of SR 60 million (Rs. 900 million). The sponsoring
shareholders of Saudi ORIX Leasing Company are:
Shareholding
Sponsor's Name %
Saudi Investment Bank 28.0
Saudi Business Group 32.0
ORIX Corporation, Japan 20.0
International Finance Corporation 10.0
ORIX Leasing Pakistan Limited 10.0
------------------
100.0
------------------
JOINT VENTURE IN PAKISTAN
ORIX Investment Bank Pakistan Limited (OIB)
ORIX Corporation, Japan and ORIX Leasing Pakistan Limited hold 20% and 15% respectively
of OIB's equity. For the year ended June 30, 2000, OIB's profit before tax rose by 37.5% to Rs.
44.28 million from Rs. 32.2 million last year. The bank continues to concentrate on maintaining
a high quality loan portfolio while seeking to improve fee-based income from advisory services.
OIB is primarily engaged in providing a range of investment banking products, which include
corporate advisory services, project packaging, structuring and placement of capital market
debt products, issuance and discounting of bankers acceptance and treasury operations. At
June 30, 2000, OIB had total assets in excess of Rs. 1.46 billion.
NOTICE OF MEETING
Notice is hereby given that the Fourteenth Annual General Meeting of the Company will be
held at Overseas Investors Chamber of Commerce Building, Talpur Road, Karachi, on Friday,
November 24, 2000 at 10.00 am to transact the following business:
ORDINARY BUSINESS
1. To receive, consider and adopt the audited accounts together with the Directors' and
Auditors' Report for the year ended June 30, 2000.
2. To approve the payment of cash dividend to the Shareholders at the rate of Rs. 4/- per share
of Rs. 10/- each for the year ended June 30, 2000.
3. To appoint Auditors and fix their remuneration. The present Auditors Messrs. Sidat Hyder
Qamar & Co., Chartered Accountants, retire and being eligible, offer themselves for re-
appointment.
SPECIAL BUSINESS (STATEMENT ATTACHED)
4. To approve the remuneration of Executive Directors including the Chief Executive.
5. To transact any other business, with permission of the Chair.
BY ORDER OF THE BOARD
RAMON ALFREY- FCA
Karachi: October 19, 2000 Company Secretary
Notes:
i) The Register of Members of the Company will be closed from November 17, 2000 to
November 24, 2000 (both days inclusive). Transfers received at our registrars, Messrs. Noble
Computer Services (Private) Limited, 14-Banglore Town Housing Society, Shahra-e-Faisal,
Karachi at the close of business on November 16, 2000, will be treated in time for the
purpose of payment of dividend to the transferees.
ii) A Member entitled to attend and vote at the General Meeting of Members is entitled to
appoint a proxy to attend and vote on his behalf. A proxy need not be a Member of the
Company.
iii) The instrument appointing a proxy and the power of attorney or other authority under which it
is signed or a notarially certified copy of the power of attorney must be deposited at the
registered office of the Company at least 48 hours before the meeting. A form of proxy is
enclosed. Shareholders are requested to notify any change of address immediately.
iv) Any individual Beneficial Owner of the Central Depository Company, entitled to vote at this
meeting must bring his/her National Identity Card with him/her to prove his/her identity, and in
case of proxy must enclose an attested copy of his/her National Identity Card. Representatives of
corporate members should bring the usual documents required for such purpose.
Statement under section 160 of the Companies Ordinance, 1984,
in respect of Special business and related draft resolution
Material facts concerning the special business to be transacted at the Annual General Meeting
and the proposed resolution related thereto is given below:
Item no. 4 of Agenda - Remuneration of Chief Executive and Executive Directors
Shareholders' approval is required for the holding of office of profit by any of the Directors as
well as of their remuneration. It is therefore proposed to pass the following as an Ordinary
Resolution.
"Resolved that:
Approval is hereby given for the holding of office of profit with the Company by all the Executive
Directors including the Chief Executive, namely, Mr. Humayun Murad, Mr. Shaheen Amin and
Mr. Mohammad Qamrul Haq, and for payment of remuneration to the Executive Directors
amounting in aggregate to Rs. 6.94 million actual for the year ended June 30, 2000, and
Rs. 8.8 million estimated for the year ending June 30, 2001, together with other benefits in
accordance with rules of the Company."
The Executive Directors are interested to the extent of the remuneration payable to them
individually.
REPORT OF THE DIRECTORS
The Directors are pleased to present the fourteenth Annual Report together with the audited
accounts of the Company for the year ended June 30, 2000.
FINANCIAL RESULTS
RUPEES
Net profit for the year after charging all expenses 156,076,789
Less: Taxation 20,000,000
------------------
136,076,789
Unappropriated profit brought forward 246,564
------------------
136,323,353
Appropriations:
Transfer to Statutory Reserve 7,000,000
Transfer to Capital Reserve for deferred tax-current year 34,081,000
Transfer to Capital Reserve for deferred tax-prior years 36,532,000
Transfer from General Reserve (36,532,000)
Cash Dividend 80,554,764
------------------
121,635,764
------------------
Unappropriated profit carried forward 14,687,589
==========
Earnings per share Rs. 6.76
==========
DIVIDEND
The Directors recommend a cash dividend of 40% (1999: 40%) for the year.
REVIEW OF OPERATIONS
Business conditions remained slow and demand for industrial machinery was weak during the
period under review. However, recent indicators are positive and the revival in the agricultural and
textile sectors will benefit the economy. Borrowing costs fell sharply in the second half of the
financial year providing relief to business.
Lease and installment loan volume increased by 33% to Rs. 2.72 billion (1999: Rs. 2.04 billion),
adding Rs. 3.7 billion of new receivables. Profit before tax increased by 3.7% to Rs. 156.0 million
in comparison to Rs. 150.4 million earned in the previous year. Lease revenue was higher by 9.8%
to Rs. 790.9 million and total revenues reached Rs. 979.9 million. In compliance with the Institute
of Chartered Accountants of Pakistan's directive, from July 1, 1999 the Company changed its
revenue recognition method from "sum of the digit" to the "annuity" method which recognises
income more evenly over the lease period. Consequently, had revenue been recognised on the old
method, income and profits would have been higher by Rs.17.7 million. However, subsequent
years will benefit from increased income recognition under the new method.
Commercial vehicles and motorcars accounted for 64% of the new business volume followed by
machinery's share of 31% and the balance of 5% was for office equipment and computers.
Financial assistance was provided to 1,436 businesses, majority of which were small and medium
sized enterprises. Consumer finance and operating lease divisions achieved growth of 23% and
50% respectively and increasing contribution is expected from these sources in future. Dividend
income from associated companies increased to Rs.12.9 million from Rs.11.8 million in 1999.
These dividends were received from Oman ORIX Leasing Company SAOG and ORIX Investment
Bank Pakistan Limited.
Financial charges represent 68% of the total expenses and show an increase of 2.02% over
the previous year, although the average total borrowings increased by 16%. This reflects the
impact of low cost funds which the Company raised during the year. In turn, the benefit of
lower costs was passed on to lessees in shape of reduced lease rents. A total of Rs. 2.3 billion
were raised through new loans and Rs. 1.7 billion was repaid to banks and financial
institutions.
Selling, general and administrative expenses increased by 17% to Rs. 143.7 million. Islamabad
Branch opened in December 1999 and staff numbers also increased as most departments
were strengthened to cope with the increased volume of business. Direct costs of leases were
higher by 59% and are primarily attributed to insurance premiums. Direct costs of operating
leases reflect maintenance expenditure and depreciation of assets given on short term rental
and these rose by 58% due to a bigger portfolio of assets. The charge for general provision for
potential lease losses was raised to Rs. 39.7 million (1999: Rs. 31.8 million) in light of
enhanced business. The accumulated general provision now amounts to Rs. 145.4 million
which is equal to 3.5% of the net exposure on rent receivables.
CREDIT RATING
Based on results for the year ended June 30, 1999, the Pakistan Credit Rating Agency
(PACRA) upgraded the Company's credit rating to AA- for long term debt and maintained A1+
for short-term debt. Your Company continues to enjoy the highest rating in the leasing sector
for both categories of debt awarded by PACRA.
ASSOCIATED COMPANIES
Oman ORIX Leasing Company SAOG (OOL) continues to demonstrate strong growth. For the
year ended December 31, 1999 it earned a pre-tax profit of Rs. 103.7 million (1998: Rs. 76.5
million) and had total assets of Rs. 3.0 billion. It declared a cash dividend of 10% and a bonus
of 2.45%. For its half year to June 30, 2000 OOL earned a pre-tax profit of Rs. 61.4 million and
increased its asset base to Rs. 3.9 billion.
ORIX Leasing Egypt (OLE) earned a pre-tax profit of Rs. 30.8 million for the year to
December 31, 1999 (1998: Rs. 13.6 million) on an asset base of Rs. 821.8 million. This was
the second full year of operations and OLE is making steady progress.
ORIX Investment Bank Pakistan Limited (OIBP) earned a pre-tax profit of Rs. 21.2 million for
the six months ended December 31, 1999 showing an increase of 87% over the corresponding
period in 1998. OIBP declared its maiden dividend (7.5%) for the year to June 30, 1999.
Saudi ORIX Leasing (SOL) is expected to start operations before the end of this year. The
Government of Saudi Arabia has approved the project and incorporation process has started.
SOL will have a paid-up capital of Rs. 900 million and your Company will hold 10% equity and
will provide management support.
FUTURE PROSPECTS
The Company looks to the future with renewed confidence and expects enhanced business
activity, particularly in the textile sector which should lead to demand for new machinery. The
Company's network of branches is being expanded with the permission given by Securities
and Exchange Commission of Pakistan for opening of branches in Multan and Hyderabad.
Auto finance is an increasing business and marketing teams have been strengthened in all
branches to cope with the demand. Overseas ventures are expected to progress as planned
and work is being undertaken to identify the next overseas joint-venture.
DIRECTORS
Dr. Najeeb Samie representing State Life Insurance Corporation resigned from the Board on
his transfer and has been replaced by Mr. Mohammed Mazharuddin. Mr. Genichi Fujinaga
relinquished his seat in favour of Mr. Masatoshi Yokota. The Directors place on record their
appreciation of the services of Dr. Najeeb Samie and Mr. Genichi Fujinaga and welcome Mr.
Mohammed Mazharuddin and Mr. Masatoshi Yokota on the Board.
HOLDING COMPANY
The Company is a subsidiary of ORIX Corporation which is incorporated in Japan.
STAFF
The Board places on record its appreciation of the performance of all staff personnel which has
resulted in strong results in challenging market conditions.
AUDITORS
The present auditors, Sidat Hyder Qamar and Company, Chartered Accountants, retire and
being eligible offer themselves for re-appointment.
PATTERN OF SHAREHOLDING
The pattern of shareholding as on June 30, 2000 is shown on page 43.
On behalf of the Board
Humayun Murad
Dated: October 19, 2000 Chief Executive
SIDAT HYDER QAMAR & Co
Chartered Accountants
Progressive Plaza, Beaumont Road
Karachi-75530 Pakistan
(92-21) 5650007-11 Tel 5681965 Fax
Representing
Andersen Worldwide, SC in Pakistan
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet of ORIX Leasing Pakistan Limited as at June 30, 2000
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;
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 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, 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 June 30,
2000 and of the profit, its cash flows and changes in equity for the year then ended; and
d. in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980
(XVIII of 1980), was deducted by the Company and deposited in the Central Zakat Fund established
under Section 7 of that Ordinance.
SIDAT HYDER QAMAR & CO.
Karachi: October 19, 2000 CHARTERED ACCOUNTANTS
FINANCIAL STATEMENTS OF THE COMPANY
BALANCE SHEET
PROFIT AND LOSS ACCOUNT
CASH FLOW STATEMENT
STATEMENT OF CHANGES IN EQUITY
NOTES TO THE ACCOUNTS
BALANCE SHEET AS AT JUNE 30, 2000
NOTE 2000 1999
ASSETS
Fixed assets - tangible 3 210,951,806 147,826,077
Net investment in leases and installment loans
Installment contract receivables 5,245,225,497 4,541,466,561
Add: Residual value 1,198,382,582 956,348,542
------------------ ------------------
6,443,608,079 5,497,815,103
Less: Unearned finance income 1,134,043,434 971,212,297
------------------ ------------------
Net investment 4 5,309,564,645 4,526,602,806
------------------ ------------------
Less: Current portion 2,285,307,020 2,020,003,733
Allowance for potential lease and
installment loan losses 145,416,448 135,157,988
------------------ ------------------
2,430,723,468 2,155,161,721
------------------ ------------------
2,878,841,177 2,371,441,085
Long-term investments 5 285,772,058 280,168,029
Long-term loans 6 39,202,196 26,243,454
Long-term deposits and deferred costs 7 24,376,405 22,847,566
Current assets 8 2,672,005,690 2,379,694,934
------------------ ------------------
Rupees 6,111,149,332 5,228,221,145
========== ==========
SHARE CAPITAL AND LIABILITIES
Share capital and reserves
Authorised
25,000,000 Ordinary shares of Rs. 10/- each 250,000,000 250,000,000
========== ==========
Issued, subscribed and paid-up 9 201,386,910 201,386,910
Reserves 10 724,903,508 669,381,483
------------------ ------------------
Shareholders' equity 926,290,418 870,768,393
Long-term loans 11 1,948,532,805 1,983,877,063
Long-term certificates of investment 12 223,679,542 11,533,308
Deferred liability - gratuity 17,494,524 13,536,985
Long-term advances and deposits 13 911,378,554 679,389,666
Current liabilities 14 2,083,773,489 1,669,115,730
Commitments 15
------------------ ------------------
Rupees 6,111,149,332 5,228,221,145
========== ==========
AUDITORS' REPORT ANNEXED
The annexed notes form an integral part of these accounts.
SHAKIRULLAH DURRANI HUMAYUN MURAD
VICE CHAIRMAN CHIEF EXECUTIVE
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2000
NOTE 2000 1999
REVENUES
Finance leases 16 790,997,617 720,455,539
Installment loans 52,020,406 42,255,279
Operating leases 53,495,044 35,607,248
Other income 17 83,470,127 106,799,885
------------------ ------------------
979,983,194 905,117,951
Less:
EXPENSES
Finance and bank charges 18 562,263,594 551,139,244
Selling, general and administrative expenses 19 143,741,976 122,385,746
Direct cost of leases
Finance lease and installment loans 20.1 45,907,528 28,811,001
Operating Leases 20.2 32,268,671 20,433,625
Allowance for potential lease and
installment loan losses 39,724,636 31,884,583
------------------ ------------------
823,906,405 754,654,199
Profit before taxation 156,076,789 150,463,752
Provision for taxation - current 23 20,000,000 20,000,000
------------------ ------------------
Net profit after taxation 136,076,789 130,463,752
Unappropriated profit brought forward 246,564 6,037,576
------------------ ------------------
136,323,353 136,501,328
APPROPRIATIONS
Transfer to Statutory reserve 7,000,000 7,000,000
Transfer to Capital reserve for deferred tax - current year 34,081,000 14,500,000
Transfer to Capital reserve for deferred tax - prior years 36,532,000 34,200,000
Transfer from General reserve (36,532,000) --
Proposed dividend @ 40% (1999: @40%) 80,554,764 80,554,764
------------------ ------------------
121,635,764 136,254,764
------------------ ------------------
Unappropriated profit carried forward Rupees 14,687,589 246,564
========== ==========
Earnings Per Share - Basic and Diluted 28 6.76 6.48
========== ==========
The annexed notes form an integral part of these accounts.
SHAKIRULLAH DURRANI HUMAYUN MURAD
VICE CHAIRMAN CHIEF EXECUTIVE
CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2000
NOTE 2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 24 663,473,669 576,458,458
Mark-up paid (497,602,193) (470,335,650)
Profit paid on certificates of investment (44,070,116) (43,917,682)
Deposits from lessees - net 246,656,621 167,878,799
Income taxes paid (30,349,205) (36,789,403)
Investment in leases - net (782,961,839) (363,115,114)
Long-term loans- net (13,309,229) (3,217,506)
------------------ ------------------
(1,121,635,961) (749,496,556)
------------------ ------------------
Net cash used in operating activities (458,162,292) (173,038,098)
CASH FLOWS FROM INVESTING ACTIVITIES
Investments (5,604,029) (153,755,410)
Capital expenditure (101,730,283) (88,712,496)
Proceeds from sale of fixed assets 6,384,000 4,299,072
Dividend received 12,994,874 11,836,059
------------------ ------------------
Net cash used in investing activities (87,955,438) (226,332,775)
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term loans 1,077,286,375 1,515,200,218
Short-term loans and running finance 236,798,443 (48,494,182)
Certificates of investment 480,476,972 (186,940,016)
Repayment of long term loans (1,195,256,991) (892,187,714)
Long-term deposits and deferred cost (19,583,284) (7,892,125)
Payment of dividend (80,121,120) (32,285,353)
------------------ ------------------
Net cash generated from financing activities 499,600,395 347,400,828
------------------ ------------------
Net (decrease) in cash activities (46,517,335) (51,970,045)
Cash and bank balances at beginning of the year 159,181,157 211,151,202
------------------ ------------------
Cash and bank balances at end of the year Rupees 112,663,822 159,181,157
========== ==========
SHAKIRULLAH DURRANI HUMAYUN MURAD
VICE CHAIRMAN CHIEF EXECUTIVE
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2000
2000 1999
Share capital
Balance at beginning 201,386,910 161,109,530
Bonus shares issued during the year -- 40,277,380
------------------ ------------------
Balance at end of the year 201,386,910 201,386,910
Share premium 287,216,909 287,216,909
Reserve for issue of bonus shares
Balance at beginning -- 40,277,380
Bonus shares issued during the year -- (40,277,380)
------------------ ------------------
Balance at end of the year -- --
General reserve
Balance at beginning 117,118,010 326,218,010
Transfer to Statutory reserve during the year -- (209,100,000)
Transfer to Capital reserve for deferred tax-prior years (36,632,000) --
------------------ ------------------
Balance at end of the year 80,586,010 117,118,010
Statutory reserve
Balance at beginning 216,100,000 --
Transfer from General reserve -- 209,100,000
Appropriation during the year 7,000,000 7,000,000
------------------ ------------------
Balance at end of the year 223,100,000 216,100,000
Capital reserve for deferred tax
Balance at beginning 48,700,000 --
Transfer from General reserve-prior years 36,532,000 --
Appropriation during the year 34,081,000 48,700,000
------------------ ------------------
Balance at end of the year 119,313,000 48,700,000
Unappropriated profit
Balance at beginning 246,564 6,037,576
Profit for the year 136,076,789 130,463,752
Dividend (80,554,764) (80,554,764)
Transfer to Capital reserve for deferred tax (34,081,000) (48,700,000)
Transfer to Statutory reserve during the year (7,000,000) (7,000,000)
------------------ ------------------
Balance at end of the year 14,687,589 246,564
------------------ ------------------
Shareholders' equity Rupees 926,290,418 870,768,393
========== ==========
SHAKIRULLAH DURRANI HUMAYUN MURAD
VICE CHAIRMAN CHIEF EXECUTIVE
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED JUNE 30, 2000
1. LEGAL STATUS AND NATURE OF BUSINESS
The Company was incorporated in Pakistan as a private limited company on July 1, 1986 and was
converted into a public limited company on December 23, 1987. The Company is listed on Karachi,
Lahore and Islamabad Stock Exchanges. The main business activity is leasing of moveable assets.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Accounting convention
These financial statements have been prepared under the historical cost convention.
2.2 Basis of preparation
These financial statements have been prepared in accordance with the requirements of the
Companies Ordinance, 1984 and International Accounting Standards as applicable in Pakistan.
2.3 Revenue recognition
2.3.1 Finance lease and installment loans
The Company follows the 'financing method' in accounting for recognition of lease and
installment loan income.
At the commencement of a lease, the total unearned lease income consists of the excess of
aggregate lease contract receivables over the cost of the leased equipment. At the time a lease is
executed, a portion of unearned lease income which approximates the initial costs directly
associated with negotiating and consummating the lease plus an amount equal to the allowance
for potential lease losses is taken into income. The remainder of the unearned lease income is
taken into income over the term of the lease, applying the annuity method, so as to produce a
systematic return on the net investment in lease. This method is applicable with effect from July 1,
1999. Income on leases disbursed prior to July 1, 1999 is recognised on the sum of digit method.
The change in accounting method is in compliance with the directive of the Institute of Chartered
Accountants of Pakistan issued through its Circular no. 9/99 of August 10, 1999.
Front end fee and other lease related income is recognised as income when realized.
2.3.2 Operating lease
Rental income from assets given on operating lease is recognised on accrual basis over the
lease period.
2.4 Allowance for potential lease and installment loan losses
The allowance for potential lease and installment loan losses is maintained at a level which, in
the judgement of management, is adequate to provide for potential losses on lease portfolio
that can be reasonably anticipated. The allowance is increased by provisions charged to
income and is decreased by charge offs, net of recoveries.
2.5 Tangible fixed assets and depreciation
2.5.1 Operating assets - own use
Operating assets are stated at cost less accumulated depreciation. Depreciation is charged to
income applying the straight line method, whereby cost of an asset is written-off over its
estimated useful life. In respect of additions and deletions of an asset during the year,
depreciation is charged from the month of acquisition and upto the month preceding the
deletion respectively.
Maintenance and repairs are charged to income as and when incurred. Major renewals and
improvements are capitalised and the assets so replaced, if any, are retired. Gains and losses
on disposal of assets, if any, are included in income currently.
2.5.2 Operating lease assets
Operating lease assets are stated at cost less accumulated depreciation. Depreciation is
charged to income applying straight line method, whereby the depreciable values of assets are
written-off over their estimated useful life.
Maintenance and repairs are charged to income as and when incurred. Major renewals and
improvements are capitalised and the assets so replaced, if any, are retired. Gains and losses
on disposal of assets, if any, are included in income currently.
2.6 Long-term investments
These are stated at cost. Investment made in foreign currency other than investment in
associates are translated into rupees at the rate of exchange prevailing at the balance sheet
date. Realised and unrealised exchange gains and losses are dealt within the profit and loss
account. Return on investment is recognised at rates specified in the respective investment
schemes and accrued for the period. Income is recognised on the assumption that such
investments will be held till the terminal date.
Investment in associated companies is stated at cost. Provision for diminution in value of
investments other than temporary, if any, is made in income in the year of occurrence.
Dividend income is recognised when the right to receive the dividend is established.
2.7 Deferred costs
2.7.1 Loans
Loan originating costs, front-end fee and documentation costs are amortised over the loan
period or five years, whichever is shorter.
2.7.2 Project development costs
Expenditure incurred in connection with development of various projects and joint ventures are
classified as project development costs and upon completion of such projects or joint ventures
are amortised over a period of five years.
2.8 Staff retirement benefits
2.8.1 Gratuity
The Company operates an unfunded gratuity scheme covering all its permanent employees
who have completed the minimum qualifying period of six months. Provision is made annually
to cover obligation under the scheme.
2.8.2 Employees' accumulating compensated absences
The revised International Accounting Standard (IAS) 19 "Employee benefits" requires that the
liability in respect of employees expected cost of accumulating compensated absences should
be recognised. IAS 19 is applicable in Pakistan for accounting periods beginning on or after
January 1, 1999. Circular 14 of August 26, 2000 issued by the Securities and Exchange
Commission of Pakistan (SECP) states that in order to achieve compliance with IAS 19,
companies may provide for accumulated absences in three equal annual installments. The
Company has adopted a policy for accumulating absences to the extent of 30 days. Full
provision will be made over three years.
2.9 Foreign currencies
Transactions in foreign currencies are accounted for in rupees at the rate prevailing on the
date of transaction. Monetary assets and liabilities in foreign currencies are translated into
rupees at the rate of exchange prevailing at the balance sheet date. Realised and unrealised
exchange gains and losses are dealt within the profit and loss account. Foreign currency loans
registered under Exchange Risk Coverage Scheme of the State Bank of Pakistan (SBP) are
translated into rupees at the rate prevailing on the date of disbursement.
2.10 Financial instruments
2.10.1 Financial assets
Financial assets comprise of net investment in leases and installment loans net of related
deposits, long term investments in government securities, long term loans and advances, short
term loans and investments and cash and bank balances on deposits. Net investment in
leases and installment loans are stated at their nominal value as reduced by appropriate
allowances for estimated irrecoverable amount, while other financial assets are stated at cost.
2.10.2 Financial liabilities
Financial liabilities are classified according to the substance of the contractual arrangements
entered into. Significant financial liabilities are long term loans, short term loans, certificates of
investment and running finances under mark-up arrangement.
Gain or loss if any on recognition and settlement of financial assets and liabilities is included in
net profit or loss in the period in which it arises.
2.10.3 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 a legal enforceable right to set off the transaction and also intends
either to settle on a net basis or to realise the asset and settle the liability simultaneously.
2.11 Taxation
2.11.1 Current
Income for the purposes of computing current taxation is determined under the provisions of
tax law whereby lease rentals received or receivable by the Company are deemed to be
income. Provision for taxation is thus based on income determined in accordance with the
accounting policy explained in Note 2.3 and adjusted in accordance with the requirements of
the tax law.
2.11.2 Deferred
The Company accounts for deferred taxation using the liability method on timing differences
arising from using the different methods in the recognition of lease income for tax purposes
and accounting purposes as well as for all other significant timing differences.
3 FIXED ASSETS - Tangible
Operating assets-own use 3.1 59,301,585 34,446,408
Operating tease assets 3.2 151,650,221 113,379,669
------------------ ------------------
Rupees 210,951,806 147,826,077
========== ==========
3.1 Operating assets - own use
Additions/ Accumulated Book Depreciation
Cost at (Deletions)/ Cost at depreciation at value at For Rate
July 1, 1999 (Transfer)* June 30, 2000 June 30, 2000 June 30, 2000 the year (%)
Leasehold
improvements 15,538,035 7,984,500 23,522,535 13,631,291 9,891,244 1,663,450 15
Furniture and
office equipment 32,352,788 14,123,881 46,033,821 24,198,913 21,834,908 6,041,692 15 - 25
(442,848)
Motor vehicles 40,146,029 22,591,716 52,444,326 24,868,893 27,575,433 8,783,705 20
(10,293,419 )
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Rupees 88,036,852 44,700,097 122,000,682 62,699,097 59,301,585 16,488,847
(10,736,267)
========== ========== ========== ========== ========== ==========
1999-Rupees 82,612,157 10,201,254 88,036,852 53,590,444 34,446,408 12,453,664
(4,280,532)
(496,027) *
========== ========== ========== ========== ========== ==========
* Represents assets transferred to operating lease assets.
3.1.1 Movement of accumulated depreciation during the year:
Accumulated Depreciation Adjustment Accumulated
depreciation charged on disposal depreciation
as at during the during as at
July 1, 1999 year the year June 30, 2000
Leasehold improvements 11,967,841 1,663,450 -- 13,631,291
Furniture & office equipment 18,519,247 6,041,692 362,026 24,198,913
Motor vehicles 23,103,356 8,783,705 7,018,168 24,868,893
Rupees 53,590,444 16,488,847 7,380,194 62,699,097
1999-Rupees 43,282,467 12,453,664 2,145,687 53,590,444
3.1.2 Assets deleted during the year:
Accumulated Book Sale Mode of Sold
Description Cost depreciation Value Proceeds Disposal to
Motor Cycle 33,910 26,563 7,347 30,000 Insurance Claim E.F.U General Insurance Co. Ltd.
Suzuki Margalla 491,000 351,869 139,131 244,558 Company Policy Arshi Islam (Employee)
Suzuki Mehran 315,000 199,500 115,500 115,500 Company Policy Babar Malik (Employee)
Suzuki Khyber 396,500 290,752 105,748 105,748 Company Policy Mujahid Ali Mirza (Employee)
Suzuki Khyber 433,800 274,740 159,060 209,530 Company Policy Aseya Qasim (Employee)
Suzuki Margalla 470,750 368,762 101,988 210,994 Company Policy Ismail Khan (Employee)
Suzuki Mehran 272,264 222,362 49,902 51,870 Company Policy Hamood Ahmed (Employee)
Suzuki Mehran 280,000 65,338 214,662 214,662 Company Policy S. Waheedullah Shah (Employee)
Honda Civic 639,000 447,300 191,700 337,946 Company Policy Ramon Alfrey (Employee)
Suzuki Khyber 400,000 286,681 113,319 201,659 Company Policy Saba Ahmed (Employee)
Suzuki Mehran 317,000 200,754 116,246 116,246 Company Policy Shah Suleman Fareed (Employee)
Suzuki Mehran 305,000 50,830 254,170 254,170 Company Policy Taimur Ali (Employee)
Suzuki Mehran 272,264 222,362 49,902 49,902 Company Policy Anis Imam (Employee)
Suzuki Mehran 290,000 120,825 169,175 189,587 Company Policy Samiullah Durrani (Employee)
Suzuki Jeep 183,060 183,059 1 122,000 Negotiation Mahreen Khan
Suzuki Van 165,300 165,299 1 156,000 Negotiation Mahreen Khan
Suzuki Khyber 393,750 321,563 72,187 157,505 Company Policy Ali Azhar Kazmi (Employee)
Suzuki Margalla 475,800 412,360 63,440 259,610 Company Policy Arshad Abbas (Employee)
Suzuki Mehran 181,937 181,936 1 85,000 Negotiation Manzoor Ahmed
Suzuki Khyber 400,000 320,016 79,984 178,603 Company Policy Omer Farooq Sheikh (Employee)
Suzuki Margalla 521,850 260,940 260,910 334,916 Company Policy Aijaz A. Butt (Employee)
Suzuki Khyber 400,000 320,022 79,978 185,116 Company Policy Alnoor A. Aziz (Employee)
Motor Cycle 46,900 46,899 1 42,000 Insurance Claim Adamjee Insurance Co. Ltd
Suzuki Khyber 467,000 38,915 428,085 432,000 Negotiation Anwar Kazmi
Suzuki Mehran 328,000 71,071 256,929 268,009 Company Policy Jamal Laique (Employee)
Suzuki Khyber 398,974 339,150 59,824 144,174 Company Policy Nargis A. Mirza (Employee)
Suzuki Mehran 290,000 135,324 154,676 168,171 Company Policy Khalid Rehman (Employee)
Suzuki Margalla 470,750 439,367 31,383 346,000 Negotiation Naeem Ahmed Sheikh
Toyota Corolla 653,610 653,609 1 238,000 Negotiation Alamgir
Mobile Phone 6,550 1,638 4,912 600 Trade-in Cellular Links
Photocopier 140,000 112,000 28,000 45,000 Trade-in Shirazi Trading Company
Type Writer 42,000 35,175 6,825 6,000 Trade-in Multiline System
Air Conditioners 45,164 44,571 593 8,500 Negotiation National Airconditioning
Refrigerator 8,410 8,409 1 3,200 Negotiation Muhammad Ali
Computer 65,904 65,903 1 13,000 Negotiation Computer International
Computer 20,800 20,799 1 4,000 Negotiation Mars Associates
Computer 31,520 29,156 2,364 3,000 Negotiation Zeeshan
Computer 50,000 11,876 38,124 38,124 Company Policy Shafqat Parvez (Employee)
Computer 32,500 32,499 1 1,600 Negotiation Mussarrat Jabeen
------------------ ------------------ ------------------ ------------------
Rupees 10,736,267 7,380,194 3,356,073 5,572,500
========== ========== ========== ==========
3.2 Operating lease assets
Additions Accumulated Book Depreciation
Cost at Cost at Cost at depreciation at value at For Rate
July 1, 1999 June 30, 2000 June 30, 2000 June 30, 2000 June 30, 2000 the year (%)
Machinery 70,904,622 15,002,322 85,906,944 12,441,612 73,465,332 7,889,012 10 - 15
Communication
equipment 20,501,702 38,936,936 59,438,638 6,668,204 52,770,434 5,552,410 15
Office equipment 881,027 2,226,927 3,107,954 786,651 2,321,303 451,579 33.33
Motor vehicles 31,798,868 864,000 31,794,868 8,701,716 23,093,152 4,086,241 15
(868,000)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Rupees 124,086,219 57,030,185 180,248,404 28,598,183 151,650,221 17,979,242
(868,000)
========== ========== ========== ========== ========== ==========
1999-Rupees 47,587,250 78,511,242 124,086,219 10,706,550 113,379,669 9,344,611
496,027*
(2,508,300)
========== ========== ========== ========== ========== ==========
*Represents assets transferred from operating assets.
3.2.1 Movement of accumulated depreciation during the year:
Accumulated Depreciation Adjustment Accumulated
depreciation charged on disposal depreciation
as at during the during as at
July 1, 1999 year the year June 30, 2000
Machinery 4,552,600 7,889,012 -- 12,441,612
Communication equipment 1,115,794 5,552,410 -- 6,668,204
Office equipment 335,072 451,579 -- 786,651
Motor vehicles 4,703,084 4,086,241 (87,609) 8,701,716
------------------ ------------------ ------------------ ------------------
Rupees 10,706,550 17,979,242 (87,609) 28,598,183
========== ========== ========== ==========
1999-Rupees 1,703,986 9,344,611 (342,047) 10,706,550
========== ========== ========== ==========
3.2.2 Assets deleted during the year:
Accumulated Book Sale Mode of Sold
Description Cost depreciation Value Proceeds Disposal to
Suzuki Khyber 434,000 41,499 392,501 426,500 Leased Transfer to finance lease
Suzuki Khyber 434,000 46,110 387,890 385,000 Leased Transfer to finance lease
------------------ ------------------ ------------------ ------------------
Rupees 868,000 87,609 780,391 811,500
========== ========== ========== ==========
2000 1999
Less than One year to Total Less than One year to Total
one year five years one year five years
Installment contract receivables 2,917,461,847 3,526,146,232 6,443,608,079 2,570,893,014 2,926,922,089 5,497,815,103
Less: Unearned finance income 632,154,827 501,888,607 1,134,043,434 550,889,281 420,323,016 971,212,297
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Rupees 2,285,307,020 3,024,257,625 5,309,564,645 2,020,003,733 2,506,599,073 4,526,602,806
========== ========== ========== ========== ========== ==========
There are no installment contract receivables over five years. The Company's mark-up rate on
leases and installment loans essentially ranges between 17.5 percent to 24 percent.
Federal investment bonds 5.1 7,915,000 7,915,000
Special US dollar bonds 5.2 70,821,269 65,217,240
In associated companies
- Quoted 5.3 152,512,222 152,512,222
- Unquoted 5.4 54,523,567 54,523,567
------------------ ------------------
207,035,789 207,035,789
------------------ ------------------
Rupees 285,772,058 280,168,029
========== ==========
5.1 Represents investment made in Government Securities as required under the relevant
provision of the State Bank of Pakistan's Rules for Non-Bank Financial Institutions to maintain
liquidity against certain liabilities. The securities are redeemable within a period of six months
(included in short-term investments as per note 8) to ten years and earn mark-up varying from
7.25% per annum to 15% per annum receivable half yearly from the date of issue.
5.2 Represents investment made in special US dollar bonds issued by the Government of
Pakistan upon conversion of the Company's frozen foreign currency accounts. The bonds have
maturity period of three years, are tradable at Stock Exchanges in Pakistan and carry a
markup of LIBOR plus one percent per annum receivable half yearly from the date of issue.
5.3 Quoted
Name of Equity held No. of Currency of Cost price Cost of Cost of Market value
associated (%) shares investment per share investment investment of investment
company held as at as at as at
June 30, 2000 June 30, 2000 June 30, 2000
Oman ORIX Leasing
Company SAOG 20.25 1,012,320 Rial Omani RO 1 each RO 1,000,000 122,512,222 259,259,540
ORIX Investment Bank
Pakistan Limited 15.00 3,000,000 Pak Rupee Rs. 10 each Rs.30,000,000 30,000,000 20,100,000
------------------ ------------------
Rupees 152,512,222 279,359,540
========== ==========
5.4 Unquoted
Name of Equity held No. of Currency of Cost price Cost of Cost of
associated (%) shares investment per share investment investment
company held as at as at June 30, 2000
June 30, 2000 (Rupees)
ORIX Leasing Egypt SAE 23.00 46,000 Egyptian Pound EP. 100 each EP. 4,600,000 54,523,567
The net asset value was EP.120 per share (Rs. 1,798/-) [1999:EP.113 per share (Rs. 1,640/- share)].
5.5 Investments in associated companies are stated at cost. Had the equity method been applied, the
total profit for the year would have increased by Rs. 15,379,814/- (1999: Rs. 12,913,243/-) while
the unappropriated profit brought forward would have been higher by Rs. 24,601,783/- (1999:
Rs. 11,688,543). In addition, unrealised exchange gains on investments in foreign associates
would have increased shareholders equity by Rs. 29,537,069/- (1999: Rs. 24,975,635) and
long-term investment would have increased by Rs. 69,518,667/- (1999: Rs. 49,577,421/-).
6. LONG-TERM LOANS - Secured, considered good
Loans to employees:
Chief Executive 3,235,962 3,401,722
Directors 7,498,652 3,004,117
Executives 31,291,941 22,426,615
Other employees 797,389 682,261
------------------ ------------------
42,823,944 29,514,715
Less: Current portion 3,621,748 3,271,261
========== ==========
Rupees 39,202,196 26,243,454
========== ==========
Recoverable after three years Rupees 33,429,319 23,046,570
Others Rupees 5,772,877 3,196,884
========== ==========
Loans to Chief Executive, Working Directors and Executives include house loans in
accordance with terms of the Company's employment policy, repayable within a period of
20 years or retirement date whichever is earlier except for loans to the Chief Executive and
a Working Director which are repayable within ten years. The loans to the Chief Executive
and a Working Director were disbursed in 1992 and 2000 respectively with prior approval of
the Securities and Exchange Commission of Pakistan (SECP). A loan to a Working Director
was made prior to his becoming a Director and has been duly notified to the SECP. The
loans are secured against equitable mortgage on the property by depositing the title
documents of the property with the Company and carry mark-up of 5% per annum. Loans
to other employees includes motor cycle loans, repayable within a period of five years and
do not carry any mark-up.
Maximum amount outstanding at the end of any month during the year against loans to Chief
Executive, Working Directors and Executives is Rs. 42,026,555/- (1999: Rs. 29,687,301/-).
7. LONG-TERM DEPOSITS AND DEFERRED COSTS
Deposits 2,842,767 3,223,313
Deferred costs 7.1 21,533,638 19,624,253
------------------ ------------------
Rupees 24,376,405 22,847,566
========== ==========
7.1 Deferred costs
Loan originating cost 7.1.1 3,392,043 5,495,390
Exchange differences on:
- Repayment of foreign currency loans 7.1.2 1,124,037 2,492,512
- Hedging of foreign currency loans 7.1.3 3,624,393 6,022,449
------------------ ------------------
4,748,430 8,514,961
Project development costs 7.1.4 13,393,165 5,613,902
------------------ ------------------
Rupees 21,533,638 19,624,253
========== ==========
7.1.1 Represents loan originating cost paid to lending institutions on signing of various loans. These
are being written off over loan period or five years, whichever is shorter.
7.1.2 Represents the increase in the amount of foreign currency loans resulting from the difference
in buying and selling rates of foreign currency as determined by the SBP. Receipts of loans are
at buying rates and are the actual amount realised in Pak rupees. Repayments, when due, will
be made at selling rates in accordance with the SBP rules. The difference arising from the use
of above mentioned rates is treated as deferred costs to be written off over loan period or five
years, whichever is shorter.
7.1.3 In the absence of Exchange Risk Cover by the SBP, the Company had adopted an alternative
method to hedge foreign exchange risk associated with its foreign currency borrowings. This
involved purchasing foreign currency from the secondary market, placing the foreign currency
on deposit and obtaining credit facilities against these deposits in local currency on matching
basis. Premium paid on purchase of foreign currency from the secondary market is deferred
and is written off over the loan period or five years whichever is shorter.
7.1.4 This represents expenditure in connection with development of projects already completed and
new joint ventures. Project development costs are being amortised in accordance with the
policy mentioned in Note 2.7.2.
NOTE 2000 1999
8. CURRENT ASSETS
Current portion of net investment in leases,
instalment loans and long-term loans 8.1 2,288,928,768 2,023,274,994
Short-term loans - secured, considered good 8.2 24,550,000 14,500,000
Short-term investments 5.1 9,326,000 8,766,360
Other current assets 8.3 236,537,100 173,972,423
Cash and bank balances 8.4 112,663,822 159,181,157
------------------ ------------------
Rupees 2,672,005,690 2,379,694,934
========== ==========
8.1 Current maturity
Net investment in leases and Instalment loans 2,285,307,020 2,020,003,733
Long-term loans - considered good 3,621,748 3,271,261
------------------ ------------------
Rupees 2,288,928,768 2,023,274,994
========== ==========
8.2 Represents short-term finance facilities provided on secured basis in the normal course of
business.
8.3 Other current assets
Advances - unsecured considered good 2,474,099 2,316,348
Advance to suppliers 6,855,000 --
Advance payment of wealth tax 40,000 40,000
Short-term prepayments
Insurance:
Leased assets 30,698,688 19,354,468
Own assets 2,732,174 1,810,790
Rent 387,236 154,000
Others 4,840,894 4,759,241
------------------ ------------------
38,658,992 26,078,499
Accrued return on investments and deposits 21,971,869 30,421,618
Net receivable against foreign loan
payments covered under foreign
exchange risk cover scheme 8.3.1 151,757,259 86,375,178
Operating lease rents receivable 5,910,478 12,450,265
Central Excise Duty (CED) receivable 8.3.2 6,623,180 14,196,776
Other receivables 2,246,223 2,093,739
------------------ ------------------
Rupees 236,537,100 173,972,423
========== ==========
8.3.1 Represents net amount receivable from the State Bank of Pakistan (SBP) on account of
repayments of foreign currency loans registered under foreign exchange risk cover scheme.
This amount is a net balance of exchange differences refundable from SBP and exchange risk
fee payable to the SBP.
8.3.2 Represents amount paid on account of CED recoverable from lessees.
8.4 Cash and bank balances
Balances with banks on:
Current accounts 10,977,571 19,046,845
Deposit accounts 8.4.1 3,196,113 20,302,714
Foreign currency deposit
accounts under lien - net 8.4.2 97,806,788 119,502,960
------------------ ------------------
111,979,472 158,852,519
Cash in hand 684,350 328,638
------------------ ------------------
Rupees 112,663,822 159,181,157
========== ==========
8.4.1 Includes a mark-up free deposit of Rs. 1,650,000/- (1999: Rs. 1,400,000/-) with the State Bank of
Pakistan (SBP) as required under the relevant provision of the SBP's Rules for Non-Bank
Financial Institutions to maintain liquidity against certain liabilities. The rate of profit on deposits,
other than deposits with SBP, ranges from 5% to 8.25% per annum on these accounts.
8.4.2 Foreign currency deposit account under lien
Foreign currency deposits 362,433,374 459,755,918
Credit facilities availed 8.4.2.1 (264,627,586) (340,252,958)
------------------ ------------------
Rupees 97,805,788 119,502,960
========== ==========
8.4.2.1 As explained in Note 7.1.3 foreign currency deposits were created as a hedge against exchange
risks associated with foreign currency borrowings. Credit facilities in Rupees have been availed
against security of the foreign currency deposits and have been offset in accordance with the
policy stated in Note 2.10.3. The rate of mark-up ranges from 14.1% to 15.14% per annum while
the rate of interest on foreign currency deposits ranges from 7.1% to 7.8% per annum. Maturity
of credit facilities and foreign currency deposits are upto September 2003.
9. ISSUED, SUBSCRIBED AND PAID-UP SHARE CAPITAL
2000 1999 2000 1999
Number of Shares Rupees
Ordinary Shares of Rs. 10/- each
Fully paid in cash 13,106,249 13,106,249 131,062,490 131,062,490
Fully paid bonus shares
7,032,442 3,004,704 Beginning of the year 70,324,420 30,047,040
-- 4,027,738 Issued during the year -- 40,277,380
------------------ ------------------ ------------------ ------------------
7,032,442 7,032,442 70,324,420 70,324,420
------------------ ------------------ ------------------ ------------------
20,138,691 20,138,691 201,386,910 201,386,910
========== ========== ========== ==========
ORIX Corporation, Japan and its nominees held 11,494,558 (1999: 11,494,558) Ordinary
shares of Rs. 10/- each at June 30, 2000.
10. RESERVES
Capital reserves:
Share premium 287,216,909 287,216,909
Statutory reserve 10.1 223,100,000 216,100,000
Reserve for deferred tax 10.2 119,313,000 48,700,000
------------------ ------------------
629,629,909 552,016,909
Revenue reserves:
General reserve 80,586,010 117,118,010
Unappropriated profit 14,687,589 246,564
------------------ ------------------
95,273,599 117,364,574
------------------ ------------------
Rupees 724,903,508 669,381,483
========== ==========
10.1 Represents profit set aside as required under the State Bank of Pakistan rules for Non-Bank Financial
Institutions(NBFIs).
10.2 International Accounting Standard 12 "Income Taxes" (revised) requires that full liability against deferred taxation should be
provided in the year to which it relates. Circular no 16 of September 10, 1999 issued by the Securities and Exchange
Commission of Pakistan (SECP) states that in order to achieve compliance with the revised IAS-12, all leasing companies, during
each of the five financial years beginning July 1, 1998 and ending June 30, 2003, shall provide deferred tax liability arising in that
year together with a further amount equal to one fifth of the unprovided deferred tax liability at the beginning of the financial year
ending June 30, 1999. Deferred tax will be deemed to have been provided if a leasing company transfers such amount to a
Capital Reserve account which would not be available for utilisation for any purpose other than to provide for deferred tax liability.
Deferred taxation arising due to timing differences between book and income tax revenue or charges is estimated at Rs. 228.9
million (1999: Rs. 185.5 million) of which Rs. 180.2 million relates to accounting periods prior to July 1, 1998. As at June 30,
2000, the Company has transferred an amount of Rs. 119.3 million (Rs. 48.7 million for the accounting periods beginning on or
after July 1, 1998 and Rs. 70.6 million for accounting periods before July 1, 1998) to comply with the SECP's requirement for
creating Capital reserve for deferred tax. Unprovided deferred tax amounting to Rs. 109.6 million (1999: Rs. 136.8 million) shall
be appropriated to Capital reserve for deferred tax in equal annual instalments by June 30, 2003.
11. LONG -TERM LOANS - Secured
Name of lending institution Note Commencement Mode of loan repayment 2000 1999 Mark up Exchange
of repayment rate risk fee
Rupees (%) (%)
Foreign currency loans
US Dollars
11.1 Asian Development Bank 15-Jan-1994 12 equal semi annual instalments -- 23,176,033 9.4 7.08
Loan 1133 Pak (PS)
11.2 Asian Development Bank 11.2.1 15-Mar-1999 10 equal semi annual instalments 357,094,499 453,861,361 2.13 --
Loan 1394 Pak (PS) over LIBOR
11.3 International Finance Corporation 15-Jun-1996 16 equal semi annual instalments 155,949,870 200,506,975 8.5 6.66
Loan INT/PK 4252(A)
11.4 International Bank for 11.4.1 14-Sep-1996 Repayment in ten yearn after three 524,276,328 579,814,263 16.0 inclusive in
Reconstruction and Development years grace period mark-up
------------------ ------------------
1,037,320,697 1,257,358,632
------------------ ------------------
Netherland Guilders
11.5 FMO Loan INT/PK 93033 01-Apr-1996 10 equal semi annual instalments  17,215,150 51,645,950 10.2 5.0
11.6 FMO Loan INT/PK 93032 01 -Apr-1996 8 equal semi annual instalments -- 8,738,050 10.2 5.0
------------------ ------------------
17,215,150 60,384,000
------------------ ------------------
Local currency loans
Rupees
11.7 Swiss Agency for Development 0l-Nov-2000 5 equal annual instalments 33,000,000 -- 17.00
and Co-operation (SADC)
11.8 Saudi Pak Industrial & Agricultural 01-Oct-1996 Quarterly repayments -- 2,639,237 18.50
Investment Company (Private) Limited
11.9 Standard Chartered Grindlays Bank Limited 10-May-1998 3 equal annual installments -- 16,666,666 19.00
11.10 Oman International Bank SAOG 31-Ju1-1998 9 equal quarterly instalments -- 16,666,668 18.00
11.11 Standard Chartered Bank 28-Apr-1998 8 equal quarterly instalments -- 37,500,000 17.25
11.12 Pakistan Kuwait Investment Company 30-Mar-2000 2 equal quarterly instalments -- 50,000,000 17.65
(Private) Limited
11.13 Standard Chartered Bank 01-Mar-1998 12 equal quarterly installments 6,666,669 20,000,002 16.50
11.14 The Bank of Tokyo-Mitsubishi Limited 26-Jun-1999 4 equal semi annual instalments -- 37,500,000 18.50
11.15 Al-Faysal Investment Bank Limited 03-Dec-2000 Full repayment on due date 100,000,000 100,000,000 18.50
11.16 Faysal Bank Limited 30-Dec-1999 Full repayment on due date -- 50,000,000 17.50
11.17 Standard Chartered Grindlays Bank Limited 30-Ju1-1999 Full repayment on due date -- 50,000,000 17.75
11.18 Habib Bank Limited 26-Apr-1999 6 equal semi annual instalments 200,000,000 333,333,333 Note 11.18 (a)
11.19 AI Meezan Investment Bank Limited 05-Mar-2000 Full repayment on due date -- 50,000,000 17.25
11.20 Al-Faysal investment Bank Limited 30-Dec-1999 20% loan repayable after 1 year & 135,983,029 169,978,786 18.25
balance payable t year thereafter
11.21 Muslim Commercial Bank Limited 29-Jun-1999 6 equal semi annual instalment 25,000,000 41,666,667 Note 11.21 (a)
11.22 Citibank N.A. 11 -Jan-1999 2 instalments of Rs.10 million and -- 70,000,000 18.00
balance payable after 6 months
11.23 Saudi Pak Industrial & Agricultural 13-Jun-1999 6 quarterly installments 9,289,635 42,567,772 18.25
Investment Company (Private) Limited
11.24 First International Investment Bank 30-Sep-1999 6 equal semi annual instalments 33,333,333 50,000,000 18.50
Limited
11.25 United Bank Limited 28-Ju1-1999 8 equal quarterly instalments -- 200,000,000 Note 11.25 (a)
11.26 Emirates International Bank PJSC 01-Sep-1999 12 quarterly installments 10,659,604 15,176,970 16.00
11.27 Muslim Commercial Bank Limited 29-Dec-1999 6 equal semi annual installments 100,000,000 150,000,000 Note 11.27 (a)
11.28 Pakistan Kuwait Investment Company 22-Jun-2001 2 equal annual instalments 100,000,000 100,000,000 17.00
(Private) Limited
11.29 Oman international Bank SAOG 30-Dec-1999 6 equal semi annual installments 40,000,000 60,000,000 15.00
11.30 ABN - AMRO Bank N.V. 29-Jul-2001 Full repayment on due date 120,000,000 60,000,000 12.00
11.31 ABN - AMRO Bank N.V. 29-Mar-2001 4 equal semi annual instalments 80,000,000 -- 16.50
11.32 Standard Chartered Grindlays Bank Limited 26-Oct-2000 5 equal semi annual instalments 150,000,000 -- Note 11.32 (a)
11.33 Standard Chartered Bank 30-Jun-2000 6 equal semi annual installments 125,000,000 -- Note 11.33 (a)
11.34 Standard Chartered Bank 06-Sep-2000 6 equal semi annual instalments 50,000,000 -- Note 11.34 (a)
11.35 Muslim Commercial Bank Limited 28-Jan-2002 7 equal semi annual instalments 200,000,000 -- Note 11.35 (a)
11.36 Faysal Bank Limited 26-Apr-2004 Full repayment on due date 50,000,000 -- Note 11.36 (a)
11.37 Standard Chartered Grindlays Bank Limited 09-Jun-2001 5 equal semi annual instalments 200,000,000 -- Note 11.37 (a)
11.38 ABN - AMRO Bank N.V. 29-Dec-2001 4 equal semi annual instalments 100,000,000 -- Note 11.38 (a)
------------------ ------------------
1,868,932,270 1,723,696,101
------------------ ------------------
Total long-term loans 2,923,468,117 3,041,438,733
Less: Current maturity 974,935,312 1,057,561,670
------------------ ------------------
Rupees 1,948,532,805 1,983,877,063
========== ==========
The above loans are secured by hypothecation of leased assets and related lease receivables and the exchange
risk fee is further secured by guarantees from commercial banks.
All loans have been obtained for financing of lease operations except for loans from IBRD, FMO loan INT/PK 93032
and SADC which have been obtained for financing of small scale and micro enterprises.
The local currency loans are obtained under sale and purchase agreements for financing of lease operations.
11.2.1 Represents a foreign currency loan from ADB of US$ 20.0 million to be used for financing of lease operations. Due
to difficulty in arranging satisfactory hedge for exchange rate risk, an undrawn amount of US $10.2 million was
cancelled during the year. As explained in Note 7.1.3 exchange risk is hedged by use of an alternative method.
11.4.1 The International Bank for Reconstruction and Development (IBRD) sanctioned a foreign currency pool loan
equivalent to USS 26.0 million to Government of Pakistan (GOP) for on-lending to approved leasing companies in
local currency for financing small scale and micro enterprises. The loan carries charges at the rate of 16% per
annum which includes interest, administration charge, guarantee commission and foreign exchange fee.
11.18(a) This loan carries a mark-up of 3 percent over six months weighted average auction rate of Government treasury bills
with a minimum of 15 percent and a maximum of 20 percent.
11.21(a) This loan carries a mark-up of 2 percent over six months auction rate of Government treasury bills with a minimum
of 16.5 percent and a maximum of 19 percent.
11.25(a) This loan carries a mark-up of 2.5 percent over six months weighted average auction rate of Government treasury
bills with a minimum of 16 percent and a maximum of 20 percent.
11.27(a) This loan carries a mark-up of 2 percent over six months auction rate of Government treasury bills with a minimum
of 14.5 percent and a maximum of 19 percent.
11.32(a) This loan carries a mark-up of 3.5 percent over six months auction rate of Government treasury bills with a minimum
of 15.5 percent and a maximum of 18 percent.
11.33(a) This loan carries a mark-up of 3 percent over six months auction rate of Government treasury bills with a minimum
of 15.5 percent and a maximum of 19 percent.
11.34(a) This loan carries a mark-up of 3 percent over six months auction rate of Government treasury bills with a minimum
of 15.5 percent and a maximum of 19 percent.
11.35(a) This loan carries a mark-up of 3 percent over one year auction rate of Government treasury bills with a minimum of
13 percent and a maximum of 17.5 percent.
11.36(a) This loan carries a mark-up of 2.5 percent over six months average of last six months auction rate of Government
treasury bills with a minimum of 12.75 percent and a maximum of 17 percent.
11.37(a) This loan carries a mark-up of 3 percent over six months auction rate of Government treasury bills with a minimum
of 12.5 percent and a maximum of 18 percent.
11.38(a) This loan carries a mark-up of 3.5 percent over three months auction rate of Government treasury bills with a
minimum of 12.5 percent and a maximum of 17.5 percent.
NOTE 2000 1999
12. LONG - TERM CERTIFICATES OF INVESTMENT
Certificates of Investment 225,386,225 14,456,602
Less: Current maturity 14.1 1,706,683 2,923,294
------------------ ------------------
Rupees 223,679,542 11,533,308
========== ==========
Represents long term certificates of investment issued under profit and loss sharing basis at
expected rates of profit ranging from 11.5% to 18% per annum. The certificates of investment
are for terms of two to five years.
13. LONG - TERM ADVANCES AND DEPOSITS
Security deposit on leases 13.1 1,137,654,659 888,752,920
Less: Repayable/adjustable within 12 months 226,742,920 212,075,187
------------------ ------------------
910,911,739 676,677,733
Advance lease rentals received 13.2 466,815 2,711,933
------------------ ------------------
Rupees 911,378,554 679,389,666
========== ==========
13.1 Represents sums received from lessees under lease contracts and are repayable/adjustable at
the expiry of the lease period.
13.2 Represents sums received in advance and are adjustable against last rents due as per the
lease agreement.
14. CURRENT LIABILITIES
Current maturity of long-term loans,
certificates of investment and security deposit 14.1 1,203,384,915 1,272,560,151
Running finance under mark-up
arrangements - secured 14.2 241,666,065 4,867,621
Short-term certificates of investment 14.3 401,214,058 131,666,709
Accrued financial and related charges 14.4 124,291,390 130,692,332
Creditors 12,665,033 18,630,442
Accrued expenses 8,405,188 8,590,633
Other liabilities 14.5 9,469,009 9,080,804
Provision for taxation - net 23 2,123,067 12,472,274
Proposed dividend 80,554,764 80,554,764
------------------ ------------------
Rupees 2,083,773,489 1,669,115,730
========== ==========
14.1 Current maturity
Long-term loans 11 974,935,312 1,057,561,670
Certificates of investment 12 1,706,683 2,923,294
Security deposit on leases 13 226,742,920 212,075,187
------------------ ------------------
Rupees 1,203,384,915 1,272,560,151
========== ==========
14.2 Represents running finance utilised against aggregate facilities from commercial banks of
Rs. 344 million (1999 · Rs 289 million) for one year and are renewable. The average rate of
mark-up is 34 paisas per Rs.l,000/- per day on daily product basis. These arrangements are
secured by hypothecation of leased assets and related lease receivables.
14.3 Represents short-term certificates of investment issued under profit and loss sharing basis at
expected rates of profit ranging from 10% to 15% per annum. The certificates of investment
are for terms of three to twelve months.
14.4 Accrued financial and related charges
Mark-up on secured loans.
Long-term loans 101,101,046 115,776,516
Short-term loans 1,095,891 48,573
Running finance 2,284,527 3,586,297
Profit on certificates of investment 18,476,596 10,156,103
Commitment charges 1,333,330 1,124,843
------------------ ------------------
Rupees 124,291,390 130,692,332
========== ==========
14.5 Other liabilities
Advance from customers pending lease execution 3,960,588 4,407,166
Unclaimed dividend 1,381,005 947,361
Others 4,127,416 3,726,277
------------------ ------------------
Rupees 9,469,009 9,080,804
========== ==========
15. COMMITMENTS
Leasing contracts committed but not executed at the balance sheet date were Rs. 34.8 million
(1999: Rs. 10.3 million).
16. INCOME FROM FINANCE LEASES
Represents lease income recognised in accordance with the accounting policy as explained in
Note 2.3.1, against lease rentals received and receivable for the year, amounting to
Rs. 2,197,198,171/- (1999 · Rs. 2,014,579,679/-). As explained in the aforementioned note,
with effect from July 01, 1999, the Company is using the annuity method to recognise income.
Had the income been recognised under the sum of digits method as consistent with prior
years, the income recognised for the year would have been higher by Rs. 17.7 million and
accordingly profit would have been higher by the same amount.
17. OTHER INCOME
Return on foreign currency deposits 35,287,596 41,749,753
Return on deposits and investments 12,139,403 20,061,885
Gain / (Loss) on disposal of operating and leased assets 2,247,536 (2,024)
Other fees and income 14,836,168 14,267,912
Exchange gain 5,964,550 18,886,300
Dividend income 12,994,874 11,836,059
------------------ ------------------
Rupees 83,470,127 106,799,885
========== ==========
18. FINANCE AND BANK CHARGES
Mark-up on
Long-term loan 470,653,039 429,199,560
Short-term loan 5,927,206 16,555,776
Running finance 6,092,026 9,247,938
Profit on certificates of investment 52,390,609 52,683,149
Commitment charges 1,537,881 3,234,037
Exchange risk fee 14,368,502 23,832,667
Amortisation of deferred financial costs 10,101,732 15,095,170
Bank charges and commission 1,192,599 1,290,947
------------------ ------------------
Rupees 562,263,594 551,139,244
========== ==========
19. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Salaries, allowances, welfare and training 19.1 73,762,928 63,502,476
Rent and utilities 18,054,445 14,613,829
Travelling 4,401,758 4,703,230
Vehicle running and maintenance 6,233,595 4,641,803
Insurance on operating assets 2,708,933 2,221,645
Legal and professional charges 3,207,192 3,035,271
Communication 6,599,377 5,523,726
Subscriptions 740,275 548,636
Auditors' remuneration 19.2 1,413,760 1,257,400
Advertising 956,821 1,881,871
Printing and stationery 3,703,910 2,767,898
Depreciation 16,488,847 12,453,664
Office repairs and maintenance of equipment 3,372,726 3,518,818
Donations 19.3 1,847,874 1,460,566
Office general expenses 249,535 254,913
------------------ ------------------
Rupees 143,741,976 122,385,746
========== ==========
19.1 Includes Rs. 4.3 million (1999 · Rs. 3.3 million) in respect of defined benefit gratuity scheme. in
addition, as explained in note 2.8.2 the Company will provide for accumulated compensated
absences over three years. The liability on this account is Rs. 2.17 million of which Rs. 0.7
million has been provided this year and the unprovided liability amounting to Rs. 1.47 million
will be provided over the next two years.
19.2 Auditors' remuneration
Audit fee 200,000 150,000
Fee for special audit and certificates 200,000 150,000
Tax and corporate advisory services 971,600 929,000
Out of pocket expenses 41,950 28,400
------------------ ------------------
Rupees 1,413,760 1,257,400
========== ==========
19.3 Donations
Donations include payments of Rs. 100,000/- each to the Patients' Aid Foundation and Marie
Adelaide Leprosy Centre respectively. The Chief Executive, Mr. Humayun Murad, is a member
of the Board of Governors of these registered charities.
19.4 The average number of employees during the year were 224 (1999 · 195).
20. DIRECT COST OF LEASES
20.1 Finance lease and Instalment loans
Insurance 43,610,056 27,227,778
Court fee and stamp duty 2,297,472 1,583,223
------------------ ------------------
Rupees 45,907,528 28,811,001
========== ==========
20.2 Operating Lease
Maintenance and insurance 14,289,429 11,089,014
Depreciation 17,979,242 9,344,611
------------------ ------------------
Rupees 32,268,671 20,433,625
========== ==========
2000 1999
Chief Chief
Executive Directors Executives Total Executive Directors Executives Total
Managerial remuneration 2,850,000 1,675,000 29,280,786 33,805,786 2,250,004 1,429,996 23,270,672 26,950,672
Housing, utilities and others  1,300,000 863,698 15,213,556 17,377,254 999,996 686,069 12,175,964 13,862,029
Gratuity 142,464 107,396 1,666,737 1,916,597 109,589 92,053 1,415,822 1,617,464
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Rupees 4,292,464 2,646,094 46,161,079 53,099,637 3,359,589 2,208,118 36,862,458 42,430,165
========== ========== ========== ========== ========== ========== ========== ==========
Number 1 2 107 1 2 91
========== ========== ========== ========== ========== ========== ========== ==========
The Chief Executive, a working Director and certain Executives are also provided with free use
of Company owned and maintained cars.
2000 1999
22. TRANSACTIONS WITH A S~IATED COMPANIES
Dividend Income Rupees 12,994,874 11,836,059
Subscription to right issue
of an associated company Rupees -- 88,538,170
Advisory, placement and
loan arrangement fee Rupees -- 1,000,000
23. TAXATION
Assessments have been finalized upto assessment year 1999-2000 by the Deputy
Commissioner of Income Tax (DCIT). However, certain disallowances including initial
depreciation claimed on certain leased assets have been made by the DCIT against which the
Company has preferred appeals before the appropriate appellate forums.
Expenses, including initial depreciation claimed, which were disallowed by the DCIT for the
assessment year 1996-97, have been set aside by the Income Tax Appellate Tribunal and
directed to be re-assessed according to the law.
While finalising the Company's assessment for the assessment year 1998-99, the DCIT had
made certain disallowances amounting to Rs. 403.8 million which include initial depreciation
and lease key money. On appeal, items amounting to Rs. 116.1 million have been allowed by
the Commissioner of Income Tax (Appeals) and the remaining items except for disallowances
of certain profit and loss expenses, have been set aside for re-examination. The department
appeal against the decision of CIT (Appeal) is pending with the Income Tax Appellate Tribunal.
The Ministry of Finance and Economic Affairs (Revenue Division) has issued clarification
regarding lease key money, stating that it should not be treated as part of income if it is
refundable to lessees. In addition, in a recent order passed by the DCIT for the assessment
year 1997-98, initial depreciation which had been set aside by the income Tax Appellate
Tribunal has been allowed to the Company. Based on the above, management is confident
that the ultimate decisions will be in favour of the Company. Accordingly, no provision has
been made in the accounts in respect of the aforementioned disallowances.
24. CASH GENERATED FROM OPERATIONS
Profit for the year 156,076,789 150,463,752
Add / (Less): Adjustment for non-cash charges and other items:
Depreciation and amortisation 52,522,534 36,893,445
Allowance for potential lease and instalment loans losses-net 10,258,460 2,589,544
Provision for staff retirement benefits-net 3,957,539 2,932,410
Mark-up expenses 482,672,271 455,003,274
Profit on certificates of investment 52,390,609 52,683,149
Dividend income (12,994,874) (11,836,059)
(Gain) / Loss on sale of fixed assets (2,247,536) 2,024
------------------ ------------------
586,559,003 538,267,787
------------------ ------------------
742,635,792 688,731,539
========== ==========
Movement in working capital
(Increase) / decrease in current assets:
Advances, prepayments and other receivables (62,564,677) (117,987,042 )
Short-term loans (10,050,000) --
Short-term investment (559,640) 1,233,640
------------------ ------------------
(73,174,317) (116,753,402)
(Decrease) / increase in creditors, accrued
expenses and other liabilities (5,987,806) 4,480,321
------------------ ------------------
(79,162,123) (112,273,081)
------------------ ------------------
Rupees 663,473,669 576,458,458
========== ==========
25. CREDIT RISK AND CONCENTRATION OF CREDIT RISK
Credit risk arises from the possibility of asset impairment occurring because counter parties
cannot meet their obligations in transactions involving financial instruments. The Company has
established procedures to manage credit exposure including credit approvals, credit limits,
collateral and guarantee requirements. These procedures incorporate both internal guidelines
and the NBFI's regulations. The Company also manages risk through an independent credit
department which evaluates lessees credit worthiness and growth potential.
Concentration of credit risk arises when a number of counter parties are engaged in similar
business activities or activities in the same geographic region, or have similar economic
features which would cause their ability to meet contractual obligations to be similarly affected
by changes in economic, political or other conditions. Concentration of credit risk indicates the
relative sensitivity of the Company's performance to developments affecting a particular
industry or geographic location.
The Company manages concentration of credit risk exposure through diversification of
activities to avoid undue concentration of risks with individuals, groups or specific industry
segments. For such purpose, the Company has established exposure limits for single lessees
and industrial sectors. The Company has an effective rental monitoring system which allows it
to evaluate customers credit worthiness and identify potential problem accounts. An allowance
for potential lease losses is maintained at a level which, in the judgment of management, is
adequate to provide for potential losses on lease portfolio that can be reasonably anticipated.
An analysis by industrial sector of the Company's investment in leases and instalment loans is
given below:
2000 1999
Sector Rupees Percentage Rupees Percentage
Textile and allied 733,143,780 13.81 690,103,657 15.24
Services 706,617,362 13.31 637,337,833 14.08
Trading 420,343,920 7.91 290,417,099 6.42
Food and allied 314,878,229 5.93 272,445,872 6.02
Steel and engineering 267,678,909 5.04 274,671,135 6.07
Chemical and pharmaceutical 259,630,357 4.89 273,300,090 6.04
Sugar 228,060,134 4.30 220,933,456 4.88
Transport and communication 190,753,957 3.59 148,624,741 3.28
Paper board and printing 155,064,681 2.92 150,221,442 3.32
Manufacturers of consumer goods 144,236,445 2.71 118,237,728 2.61
Fuel and energy 110,864,289 2.09 164,470,337 3.63
Financial institutions 88,416,421 1.67 125,927,335 2.78
Installment  loans - consumer and auto finance 1,031,549,781 19.43 571,121,743 12.62
Miscellaneous 658,326,380 12.40 588,790,138 13.01
------------------ ------------------