| Network Leasing Corporation Limited |
|
|
|
|
|
|
|
|
| Annual
Report 2001 |
|
|
|
| Contents |
|
|
| Company
Information |
|
| Directors'
Report |
|
| Operational
Review |
|
| Notice
of the Annual General Meeting |
|
| Auditors'
Report |
|
| Balance Sheet |
|
|
| Profit
and Loss Account |
|
| Cash
flow Statement |
|
| Statement
of Changes in Equity |
|
| Notes
to the Accounts |
|
| Pattern
of Shareholding |
|
|
|
| COMPANY
INFORMATION |
|
|
| Board
of Directors |
|
|
| Mr.
Mohammed Elias |
Dr. Mahfooz Ali |
|
| Ms.
Musaret Siddiqi |
Mr. Abdul Qayyum Bux |
|
| Mr.
Zaigham M. Rizvi |
Mr. Yusuf A. Sattar |
|
| Mr.
Hanif A. Sattar |
Mr. Asif Siddiqi |
|
|
| Company
Secretary |
|
| Mr.
M. Nadeem Ahmed |
|
|
| Registered
& Head Office |
301-302, Gul Tower, |
|
|
|
I.I. Chundrigar Road,
Karachi-74000, Pakistan. |
|
|
|
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| Telephone |
|
(92-21) 242-4616,
242-4655 |
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| Telefax |
|
(92-21) 242-5366,
244-3547 |
|
| e-mail |
|
micleas@artglobal.net |
|
|
| Lahore Office |
|
67-A/2, Gulberg III,
Lahore. |
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| Telephone |
|
(042) 575-0429 |
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| Telefax |
|
(042) 571-1919 |
|
|
|
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| Peshawar
Office |
No.6, 2nd Floor, Fawad
Plaza, |
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|
University Road,
Peshawar. |
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| Telephone |
|
(091) 45 571 |
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| Telefax |
|
(091) 45 571 |
|
|
| Lenders
& Bankers |
The World Bank |
|
|
|
The Asian Development
Bank |
|
|
|
Swiss Agency for
Development and Cooperation |
|
|
|
Pak-Libya Holding Co.
(Pvt.) Limited |
|
|
|
United Bank Limited |
|
|
|
ABN-Amro Bank |
|
|
|
Muslim Commercial Bank
Limited |
|
|
|
Oman International Bank
S.A.O.G. |
|
|
|
Habib Bank Limited |
|
|
|
Allied Bank Limited |
|
|
|
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| Auditors |
|
Ford Rhodes Robson
Morrow, Chartered Accountants |
|
|
|
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| Legal Advisors |
|
Mehrab Gul, Advocates |
|
|
|
| DIRECTORS'
REPORT TO THE SHAREHOLDERS |
|
|
| Your
directors have pleasure in presenting to the shareholders the results and the
Annual Report for |
|
| the
year ended June 30, 2001. |
|
|
| Financials |
|
| Profit
after tax for the year ended June 30, 2001 was Rs. 5,608,820, while the
profit after tax for the |
|
| year
ended June 30, 2000 was Rs. 7,652,925. |
|
|
| The
operating profit decrease considerably due to higher financial charges.
Disbursements of new long |
|
| term
loans negotiated during the year were delayed. In order to continue with the
leasing operations, |
|
| short
term borrowings were obtained at higher rates. Due to difficult economic and
business situation, |
|
| the
corresponding lease rates could not be increased. During the current year
(from July 2001) however, |
|
| long
term Loans have been obtained and the expensive short term borrowings have
been repaid. |
|
|
| Your
directors are hopeful that the business conditions would stabilise soon and
your company's |
|
| profitability
would improve during the financial year ending June 2002. |
|
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| During
the year under review, the company was due to receive technical assistance
from development |
|
| financial
institutions, amounting to Rs. 6,779,683 in respect of micro and small
enterprise development |
|
| costs.
The amount is expected to be re-imbursed in the current financial year. |
|
|
| The
profit is proposed to be appropriated as under: |
|
|
|
|
|
2001 |
2000 |
|
|
|
|
Rupees |
Rupees |
|
|
| Operating profit |
|
|
|
1,127,338 |
10,083,420 |
|
|
| Taxation: |
|
| Deferred |
|
(6,500,353) |
-- |
|
| Current |
|
1,424,536 |
2,430,495 |
|
| Prior |
|
594,335 |
-- |
|
|
|
------------------ |
------------------ |
|
|
|
(4,481,482) |
2,430,495 |
|
|
|
------------------ |
------------------ |
|
| Profit after tax |
|
|
5,608,820 |
7,652,925 |
|
| Unappropriated
profit brought forward |
|
1,250,848 |
3,668,073 |
|
|
|
------------------ |
------------------ |
|
|
|
6,859,668 |
11,320,998 |
|
|
|
| Appropriations: |
|
| Transfer
to special reserve |
|
|
1,121,764 |
1,530,585 |
|
| Capital
reserve for deferred taxation |
|
-- |
1,039,565 |
|
| Proposed
dividend |
|
|
-- |
7,500,000 |
|
|
|
|
|
------------------ |
------------------ |
|
|
|
1,121,764 |
10,070,150 |
|
|
|
------------------ |
------------------ |
|
| Unappropriated
profit carried forward |
|
5,737,904 |
1,250,848 |
|
|
========== |
========== |
|
|
| Directors |
|
| Mr.
Emile H.J. Groot (nominee director of FMO) resigned during the year under
review. FMO's normal |
|
| period
of investment in financial institutions is six years which were completed in
August 2000 and the |
|
| shares
sold in February 2001 .The board wishes to put on record its deep
appreciation for the services |
|
| rendered
by Mr. Groot and the support extended by FMO in the development of your
company. |
|
| Since
the number of the remaining directors is eight, no new appointment was
considered necessary. |
|
|
| Share
capital enhancement |
|
| As
per the approval of Securities and Exchange Commission of Pakistan, your
company will increase |
|
| its
capital to Rs. 200 million by: |
|
|
| i)
issuing 7.5 million ordinary right shares at Rs. 7/- (at a discount of 30%). |
|
| ii)
utilizing the reserves towards the enhancement of the capital. |
|
|
| Auditors |
|
| Notice
has been received under section 253(2) of the Companies Ordinance, 1984, from
a shareholder, |
|
| proposing
the name of M/s Muniff Ziauddin & Co., Chartered Accountants to be
appointed as the |
|
| Auditors
at the forthcoming Annual General Meeting, in place of the retiring Auditors
M/s Ford Rhodes |
|
| Robson
Morrow. |
|
|
| Shareholding
pattern |
|
| A
statement reflecting the pattern of shareholding is attached to the Annual
Report 2001. |
|
|
| Acknowledgment |
|
| The
directors wish to place on record their appreciation for the hard work put in
and the dedication |
|
| displayed
by the staff and the management in performance of their duties. |
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|
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|
On behalf of the Board |
|
|
|
|
|
| Karachi. |
|
Mohammed Elias |
|
| 21st November, 2001 |
|
Chairman |
|
|
|
|
| OPERATIONAL
REVIEW |
|
|
| Overview |
|
| On
30th June 2001, the company completed its 6th year of full operations. With
everyone's |
|
| support
and understanding, we have managed to make steady progress. We are cautiously |
|
| optimistic
that the economic situation would improve and we would be able to expand our
outreach |
|
| further
during the current year. |
|
|
| Leasing
Operations |
|
| In
accordance with our mission, leasing to micro and small enterprises (MSE) has
been progressing |
|
| reasonably
well on a nationwide basis. |
|
|
| Health
and education have been identified as the two key areas which not only effect
the present |
|
| but
coming generations as well. Consequently, considerable efforts are directed
towards these |
|
| sectors
in all low income areas. Women and children are the main beneficiaries in
these sectors. |
|
|
| The
separate Women Division established is now functioning reasonably
satisfactorily. Our |
|
| endeavour
during the period has been to reach the women at the grass root level. We
have |
|
| succeeded
to a certain extent by extending our outreach to the main cities and
surrounding |
|
| villages,
but this process will take time since we accord high priority to the clients'
income |
|
| generating
capabilities in order to make the operation sustainable. |
|
|
| Geographical
Coverage |
|
| During
the period under review, regular visits were made by our senior executives as
well as the |
|
| program
officers to the villages and semi-urban areas in Sindh, Punjab and NWFR |
|
|
| The
Lahore office has now been functioning for over 4 years and the client base
there is expanding. |
|
| The
Peshawar office is gradually being re-inforced and activated further as we
are endeavoring to |
|
| increase
the operations in the NWFR |
|
|
| Institutional
Development |
|
| The
internal systems and controls for monitoring the clients were further
strengthened during the |
|
| period.
Since the number of clients had increased, a number of tasks that were
previously done |
|
| manually,
had to be computerized. Special emphasis was laid on the recovery systems and |
|
| clients
monitoring. Due to increase in the number of clients, the number of late
payers and |
|
| problem
cases naturally increased. In order to cope with that, additional staff was
hired and |
|
| trained. |
|
|
| Support
and Training to MSE Clients |
|
| Assisting
the client in preparing the financial statements remains standardized. |
|
|
| Our
staff prepare the client's financial statements for the last 3 years, with
the help of the |
|
| information
and figures provided by the clients. The procedure is followed in each and
every case |
|
| where
the clients cannot prepare the statements themselves. In cases where the
clients have a |
|
| little
knowledge but have not prepared the accounts, our staff help them prepare the
statements. |
|
|
| Recoveries |
|
| The
rental recovery continues to be satisfactory. The overdue rental position of
over 3 months on |
|
| 30
June 2001 was 3.47% of the total portfolio. |
|
|
| There
were some willful default cases. These lessees have been taken to the banking
court. We |
|
| are
reasonably hopeful that in the end the amounts will be recovered. In other
cases the assets |
|
| were
repossessed. |
|
|
| Resource
Mobilization |
|
| During
the year we mobilized Rs. 130 million on short term basis from various
financial institutions. |
|
| In
addition we raised Rs. 100 million through the issuance of Term Finance
Certificates. |
|
|
| Credit Rating |
|
| Pakistan
Credit Rating Agency (PACRA) who are the affiliates of Fitch Inc., in
February 2001, |
|
| maintained
their assigned A-3, short term and BBB long term for our entity rating. |
|
|
| Acknowledgement |
|
| We
are grateful to FMO, SDC (the Government of Switzerland), the World Bank
Group, the Asian |
|
| Development
Bank and the Ministry of Finance for their continued support. |
|
|
| We
owe special gratitude to our shareholders and the clients for their kindness
and support. |
|
|
| We
take this opportunity to thank the Securities and Exchange Commission of
Pakistan and the |
|
| State
Bank of Pakistan for their support and understanding. |
|
|
| Karachi. |
|
Musaret Siddiqi (Ms.) |
|
| 22nd
November, 2001 |
|
Executive Director - Operations |
|
|
|
|
| NOTICE
OF THE ANNUAL GENERAL MEETING |
|
|
| Notice
is hereby given that the Eighth Annual General Meeting of Network Leasing
Corporation |
|
| Limited
will be held at Beach Luxury Hotel, Moulvi Tamizuddin Khan Road, Karachi, on
Friday 21 |
|
| December
2001 at 9.00 a.m. to transact the following business: |
|
|
| 1.
To confirm the Minutes of the Extra Ordinary General Meeting held on 13 March
2001. |
|
|
|
|
| 2.
To receive, consider and adopt the Audited Accounts of the Company for the
year ended 30 |
|
| June
2001, together with the Directors' and Auditors' Reports thereon. |
|
|
|
|
| 3.
To appoint auditors. |
|
|
|
| Notice
has been received under section 253(2) of the Companies Ordinance, 1984, from
a |
|
| shareholder,
proposing the name of M/s Muniff Ziauddin & Co., Chartered Accountants,
to be |
|
| appointed
as the Auditors in place of the retiring Auditors M/s Ford Rhodes Robson
Morrow. |
|
|
|
|
| 4.
To transact any other business with the permission of the Chairman. |
|
|
|
|
|
|
|
By Order of the Board |
|
|
|
|
|
|
|
|
|
|
M. Nadeem Ahmed |
|
| Karachi:
24th November 2001 |
|
|
Company Secretary |
|
|
|
| Notes: |
|
|
| a)
The Share Transfer Books of the Company will remain closed from December 15,
2001 to |
|
| December
21,2001 (both days inclusive).The Share Department of the company is located |
|
| at
404,TradeTower, Abdullah Haroon Road, Karachi. (Phone No. 568-7839 and
568-5930). |
|
|
|
|
| b)
A member entitled to attend and vote at the meeting may appoint another
member as his/ |
|
| her
proxy to attend and vote on his/her behalf. Proxies, in order to be
effective, must be |
|
| received
at the Registered Office of the Company located at 301- 302, Gul Tower, I.I. |
|
| Chundrigar
Road, Karachi, (Phone No. 242-4655 and 242-4616) duly stamped, signed |
|
| and
witnessed, not later than 48 hours before the meeting. |
|
|
|
|
| c)
Members are requested to notify any changes in their addresses immediately. |
|
|
|
|
| d)
Account holders and sub-account holders holding book entry securities of the
Company |
|
| in
Central Depository Company of Pakistan Limited, who wish to attend the Annual
General |
|
| Meeting,
are requested to bring original National Identity Card for identification
purpose. |
|
|
|
| AUDITORS
REPORT TOTHE MEMBERS |
|
|
| We
have audited the annexed balance sheet of Network Leasing Corporation Limited
as at |
|
| June
30, 2001 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 accounts have been kept by the company as
required by |
|
| the
Companies Ordinance, 1984. |
|
|
|
|
|
| (b)
in our opinion - |
|
|
|
| (i)
the balance sheet and profit and loss account together with the notes thereon
have |
|
| been
drawn up in conformity with the Companies Ordinance, 1984, and are in |
|
| agreement
with the books of account and are further in accordance with accounting |
|
| policies
consistently applied; |
|
|
|
| (ii)
the expenditure incurred during the 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, 2001 and of the
profit, its cash |
|
| flow
and changes in equity for the year then ended; |
|
|
| 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; and |
|
|
|
| e)
without qualifying our opinion we draw attention to note 9.6 of the financial
statements |
|
| which
indicates that there is uncertainty with respect to the extent and timing of
recovery |
|
| in
respect of which no provision has been made in the annexed financial
statements. |
|
|
| Karachi. |
|
|
FORD, RHODES, ROBSON, MORROW |
|
| 19th
November, 2001 |
|
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 2001 |
|
|
|
|
|
2001 |
2000 |
|
|
|
Note |
Rupees |
Rupees |
|
|
|
| ASSETS |
|
|
|
| Tangible
fixed assets |
|
3 |
47,026,027 |
14,102,467 |
|
| Investment
in leases |
|
4 |
|
|
|
| Minimum
lease payments receivable |
|
482,179,061 |
394,922,565 |
|
| Residual
value of leased assets |
|
|
69,431,183 |
52,498,565 |
|
|
|
|
------------------ |
------------------ |
|
| Installment
contracts receivable |
|
|
551,610,244 |
447,421,130 |
|
| Unearned
finance income |
|
|
(91,008,714) |
(90,805,679) |
|
|
|
|
------------------ |
------------------ |
|
| Net
investment in leases |
|
|
460,601,530 |
356,615,451 |
|
| Current
maturity of net investment in leases |
|
(189,155,582) |
(136,610,961) |
|
| Provision
for potential lease losses |
5 |
(8,751,429) |
(2,336,964) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
262,694,519 |
217,667,526 |
|
| Long
term investments |
|
6 |
34,170,000 |
6,685,000 |
|
| Long
term loans, deposits and deferred costs |
7 |
12,830,791 |
9,440,362 |
|
| Deferred
taxation |
|
26 |
6,500,353 |
-- |
|
|
| CURRENT
ASSETS |
|
| Current
maturity of net investment in leases |
|
189,155,582 |
136,610,961 |
|
| Short
term investments |
|
8 |
25,698,000 |
700,000 |
|
| Advances,
deposits, prepayments and |
|
|
| other
receivables |
|
9 |
26,796,746 |
25,079,724 |
|
| Cash
and bank balances |
|
10 |
45,100,991 |
86,181,852 |
|
|
|
|
|
------------------ |
------------------ |
|
|
|
|
286,751,319 |
248,572,537 |
|
|
|
|
------------------ |
------------------ |
|
| TOTAL
ASSETS |
|
649,973,009 |
496,467,892 |
|
|
|
========== |
========== |
|
|
|
|
|
| EQUITY
AND LIABILITIES |
|
|
|
| SHARE
CAPITAL AND RESERVE |
|
| Authorised
capital |
|
| 30,000,000
(2000: 20,000,000) ordinary |
|
| shares
of Rs. 10/- each |
|
300,000,000 |
200,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up capital |
11 |
100,000,000 |
100,000,000 |
|
| Reserves |
|
|
18,944,446 |
13,335,626 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
118,944,446 |
113,335,626 |
|
|
|
|
| Redeemable
capital |
|
12 |
99,940,000 |
-- |
|
| Long
term loans and finances |
|
13 |
150,431,797 |
164,627,748 |
|
| Deposits
on lease contracts |
|
14 |
52,042,659 |
39,084,465 |
|
|
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
| Current
maturity of long term liabilities |
15 |
51,972,166 |
38,157,384 |
|
| Short
term loans and finances |
|
16 |
95,000,000 |
95,000,000 |
|
| Short
term running finances |
|
17 |
58,302,566 |
22,332,730 |
|
| Creditors,
accrued and other liabilities |
18 |
23,339,375 |
23,929,939 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
228,614,107 |
179,420,053 |
|
| COMMITMENTS |
|
19 |
|
|
|
|
|
------------------ |
------------------ |
|
| TOTAL
EQUITY AND LIABILITIES |
|
649,973,009 |
496,467,892 |
|
|
|
========== |
========== |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Mohammed Elias |
|
Asif Siddiqi |
|
|
Chairman |
|
Chief Executive |
|
|
|
|
| PROFIT
AND LOSS ACCOUNT FORTHEYEAR ENDED JUNE 30, 2001 |
|
|
|
|
2001 |
2000 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| INCOME |
|
|
|
| Income
from lease operations |
|
20 |
83,957,387 |
59,929,541 |
|
| Investment
income |
|
21 |
5,753,198 |
2,657,247 |
|
| Other income |
|
|
22 |
7,649,284 |
5,972,803 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
97,359,869 |
68,559,591 |
|
|
| EXPENDITURE |
|
| Direct
cost of leases |
|
|
4,364,634 |
4,478,460 |
|
| Administrative
and operating expenses |
23 |
19,885,823 |
16,426,140 |
|
| Financial
charges |
|
24 |
63,644,522 |
35,724,720 |
|
| Amortization
of deferred costs |
|
|
1,226,669 |
770,647 |
|
| Provision
and write offs on lease portfolio |
25 |
7,110,883 |
1,076,204 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
96,232,531 |
58,476,171 |
|
|
|
|
------------------ |
------------------ |
|
| Operating
profit for the year |
|
|
1,127,338 |
10,083,420 |
|
|
| Taxation |
|
|
|
|
| Deferred |
|
|
|
(6,500,353) |
-- |
|
| Current |
|
|
|
1,424,536 |
2,430,495 |
|
| Prior |
|
|
|
594,335 |
-- |
|
|
|
|
------------------ |
------------------ |
|
|
|
26 |
(4,481,482) |
2,430,495 |
|
|
|
|
------------------ |
------------------ |
|
| Profit
for the year |
|
|
5,608,820 |
7,652,925 |
|
| Unappropriated
profit brought forward |
|
1,250,848 |
3,668,073 |
|
|
|
|
------------------ |
------------------ |
|
| Profit
available for appropriation |
|
|
6,859,668 |
11,320,998 |
|
|
|
| Appropriations |
|
| Transfer
to special reserve |
|
|
1,121,764 |
1,530,585 |
|
| Transfer
to capital reserve for deferred taxation |
|
-- |
1,039,565 |
|
| Proposed
final dividend - Re. Nil |
|
|
|
|
| [2000:
Re. 0.75 (7.5%) per share] |
|
|
-- |
7,500,000 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
1,121,764 |
10,070,150 |
|
|
|
|
------------------ |
------------------ |
|
| Unappropriated
profit carried forward |
|
5,737,904 |
1,250,848 |
|
|
|
|
|
========== |
========== |
|
| Basic
earnings per share |
|
27 |
0.56 |
0.77 |
|
|
|
|
|
========== |
========== |
|
| Diluted
earnings per share |
|
27 |
0.52 |
0.70 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
|
Mohammed Elias |
|
Asif Siddiqi |
|
|
Chairman |
|
Chief Executive |
|
|
|
| CASH
FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2001 |
|
|
|
|
2001 |
2000 |
|
