PAK GULF LEASING COMPANY LIMITED
ANNUAL REPORT 2004
Board of Directors				Auditors
Mr. Sohail Inam Ellahi                     Chairman				M/s. Taseer Hadi Khalid & Company
Mr. Fawad S. Malik                        Vice Chairman				Chartered Accountants
Mr. Inam Ellahi Shaikh                    Director				Sheikh Sultan Trust Building No. 2,
Mr. Shaheed H. Gaylani                   Director				Beaumont Road,
Mr. Shaikh Aftab Ahmed                  Director				Karachi.
Mr. Sheikh Mohammad Jawed          Director				Tel # : 5671761-3, 5685847
Mr. Yousuf Jan Mohammad              Director				Fax # : 5685095
Mr. S. Azfar Ali Baqvi                     Chief Executive
Company Secretary				Legal Advisor
Mr. S. Azfar Ali Baqvi				M/s. Mohsin Tayebaly & Company
				2nd Floor, Dime Centre,
				BC-4, Block # 9, Kehkashan, Clifton,
Audit Committee				Karachi.
				Tel #: 538077, 571653, 5872690
Mr. Sohail Inam Ellahi                     Chairman				Fax #: 5870240, 5870468
Mr. Fawad S. Malik                        Member & Secretary
Mr. Shaikh Aftab Ahmed                  Member
Mr. Sheikh Mohammad Jawed          Member
				Bankers
Senior Management				Askari Commercial Bank
				Bank AI-Falah Ltd.
Mr. S. Azfar Ali Baqvi				Muslim Commercial Bank Ltd.
Chief Executive				National Bank of Pakistan.
				PICIC Commercial Bank Ltd.
Mr. Sheikh M. Asghar				Standard Chartered Grindlays Bank pic
Chief Manager Marketing				Union Bank
Mr. Muhammad Aamir Imtiaz Khan
Chief Financial Officer
				Registered / Share Transfer Office
Mr. Tehseen Ahmad
Internal Auditor				Pak-Gulf Leasing Company Limited
				THE FORUM:
Mr. Abdul Sattar Dakhan				Room # 125-127, First Floor,
Manager Administration				G-20, Block # 9, P. 0. Box # 12215,
& Legal Affairs				Main Khayaban-e-Jami, Clifton,
				Karachi-75600.
Credit Rating Agency				Tel #: 5820301,  5375985-87, 5824401
JCR-VIS Credit Rating Co. Ltd.				Fax #: 5820302
				E-mail: pgl@cyber.net.pk
To comply with the requirement of the 'Code', requiring that the existing auditors cannot be appointed
for more than five continuous years, the Audit committee have recommended to the Board the appointment
of M/s. A.F. Ferguson & Co., Chartered Accountants, as auditor of the company for the year 2004 -
2005. This proposal was approved by the Board for presentation in the AGM for final approval by the
shareholders.
The Board appreciates the services of the retiring auditor on reporting to the shareholders of the Company
on its financial statements.
Acknowledgments
The Board would like to place on record its appreciation for the management team of the Company and
each and every member of its staff for the hard work and dedication in turning out a good performance
in a difficult year. We, the Members of the Board, as representatives of shareholders, assure the management
and staff of the Company of our continued support in strengthening the Company. We are sure that the
management and the staff will continue to serve the customers of the Company with the same zeal as
demonstrate last year and will be able to improve the reputation of the Company in financial services sector.
Last but not the least, we would like to thank our valued shareholders, customers, bankers, and financiers
and other stakeholders for their valuable support and look forward to reinforce and build further an
excellent relationship with you in coming years.
Statement in compliance with the Code of Corporate Governance
To the best of our knowledge and belief, we confirm correctness of the following information in compliance
with Code No. XIX of the Code of Corporate Governance of the SECP:
Financial statements prepared by the management of the Pak Gulf Leasing Company Limited, present
fairly its state of affairs, the result of its operations, cash flows and changes in equity.
Proper books of account of the listed company have been maintained.
Appropriate accounting policies have been consistently applied in preparation of financial statements
and the accounting estimates presented in the report are based on reasonable and prudent judgment.
International Accounting Standards (IAS), as applicable in Pakistan, have been followed in preparation
of the financial statements, and any departure there from has been adequately disclosed.
The system of internal control is sound in design, and has been effectively implemented and monitored.
There is no significant doubt upon the company's ability to continue as a going concern.
There was no trade in shares of the company, carried out by its directors, CEO, CFO, Company Secretary
and their spouses and minor children, other than mentioned below.
There has been no material departure from best practices of corporate governance, as detailed in the
listing regulations.
Pattern of shareholding (name-wise as per the categories specified in the code of Corporate Governance)
as on 30th June 2004 is attached at the end of this Report.
Significant deviations from last year in operating results have been highlighted in the Directors' Report
to the Shareholders along with the reasons thereof.
				2004	2003
Revenue				45.598	38.626
Expenditure				24.452	20.527
Provision for possible lease losses				1.007	0.536
Profit before taxation				20.139	17.563
Provision for taxation				3.352	2.035
Profit after taxation				16.787	15.528
Un-appropriated profit brought forward				0.199	0.527
Profit available for appropriation				16.986	16.055
Appropriations:
Transfer to statutory reserves				3.357	3.106
Proposed cash dividend				-	12.75
Total appropriations				3.357	15.856
Un-appropriated profit carried forward				13.629	0.199
Appropriations:
Transfer to statutory reserves				3.357	3.106
Proposed cash dividend				-	12.75
Total appropriations				3.357	15.856
Un-appropriated profit carried forward				13.629	0.199
Auditors' Report to the Members
We have audited the annexed balance sheet of Pak-Gulf Leasing Company Limited as at
30 June 2004 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;
Board Of Directors
In July 2004, Mr.A.B. Shahid resigned from the position of Chief Executive Officer of the Company, and
in September 2004 as a Director of the Company.
The Board appointed Syed Azfar Ali Baqvi as the Chief Executive of the Company. The incoming CEO
has been associated with the Company for more than 7 years in a key managerial position. The Board
of Directors, on behalf of shareholders, welcome the incoming CEO and express absolute confidence
in his capabilities to take the Company to new heights.
Mr. Syed Masood Hatif (Retd. Air Marshal) have joined the board in place of Mr. Shahid for the remaining
term. The board welcomed Mr. Hatif and hopes that the Board and the Management team will continue
to benefit from his contributions.
Corporate Governance
The company has implemented the "The Code of Corporate Governance" (the 'Code') in it's letter & spirit.
The review report of the external auditor to the members on statement of compliance with best practices
of code of corporate governance is enclosed in this report.
Social Responsibility
Your company is conscious of being a part of the society it operates in. This is reflected in its policy of
sharing the benefits of changing market and regulatory scenario with its stakeholders. This year, as a
part of the policy, it offered few scholarships to the Karachi and NED university students who achieved
good academic results in the first year of their Master's Degree course but are financially hard put to
continue their education.
Audit Committee
The Board of Directors in compliance with the Code of Corporate Governance has established an Audit
Committee consisting of the following directors: Audit committee comprises of the Following;
Mr.Sohail Inam Ellahi                 -    Chairman
Mr.Fawad S. Malik                      -    Vice Chairman
Mr.Shaikh Aftab Ahmed              -     Member
Mr.Sheikh Mohammad Jawed    -     Member
Credit Rating
On September 6, 2003 JCR-VIS had upgraded the entity rating to BBB+ for medium to long-term, and
A-2 for the short-term. The outlook of company was rated as stable.
Auditor
The appointment of auditors M/s. Taseer Hadi Khalid & Co., Chartered Accountants, was approved by
the shareholders in the last Annual General Meeting. The assignment being completed the auditors would
stand retire at the end of the coming AGM.
			NOTE	2004	2003
ASSETS				Rupees	Rupees
CURRENT ASSETS			3	1,565,787	1,216,748
Cash and bank balances			4	10,225,486	10,430,883
Advances, prepayments and other receivables			5	175,509,662	96,750,283
Net investment in lease finance - current portion				187,300,935	108,397,914
			6	1,451,165	982,774
LONG-TERM LOANS AND DEPOSITS			5	315,545,035	218,194,190
NET INVESTMENT IN LEASE FINANCE			7	6,996,669	5,580,773
INVESTMENTS			8	13,250,000	17,450,000
DEFERRED COST			9	13,548,390	15,161,706
TANGIBLE FIXED ASSETS				538,092,194	365,767,357
LIABILITIES
CURRENT LIABILITIES			10	7,533,298	4,806,627
Accrued expenses and other liabilities			11	41,412,156	1,041,886
Short-term finances under markup arrangements			12	28,333,335	20,000,000
Short-term loans			13	16,736,675	26,443,274
Certificates of investments				99,987	50,109
Dividend payable			14	805,697	555,442
Current portion of liabilities against assets subject to finance lease			15	32,105,272	3,333,336
Current portion of long term loan			16	15,661,436	11,243,844
Current portion of long term deposits					12,750,000
Proposed dividend				142,687,856	80,224,518
LIABILITIES AGAINST ASSETS SUBJECT TO
FINANCE LEASE			14	682,328	1,067,899
LONG-TERM LOAN			15	55,168,754	4,444,440
LONG-TERM DEPOSITS			16	110,017,885	69,352,246
DEFERRED TAXATION			17	9,441,817	7,371,819
				317,998,640	162,460,922
NET ASSETS				220,093,554	203,306,435
REPRESENTED BY
Share capital Statutory reserve Reserve for bonus shares Unappropriated profit	18 19			13,628,792	199,097
				220,093,554	203,306,435
Total Assets	2004	2003		2001	2000	1999
Inv. Leases	538,092,194	365,767,357	264,653,108	187,775,027	143,336,155	134,335,219
Pre-tax Inc.	491,054,697	314,944,473	208,478,228	161,979,589	121,495,070	113,867,736
Net Income	20,139,441	17,563,069	13,469,023	14,005,441	13,805,897	12,603,526
Total Equity	16,787,119	15,527,950	12,278,265	11,681,241	11,564,897	10,355,026
Cash Div.	220,093,554	203,306,435	170,528,485	119,241,475	107,560,234	104,995,337
Right Share	-	7.50%	-	-	9.00%	9.50%
	-	-	30%	40%	-	-
Board Meetings:
Eight Board Meetings were held during the year under review. Details of Board Meetings and attendance
by each Director is detailed below:
No.      Directors			Meetings attended
1         Mr. A. B. Shahid			7
2         Mr. Shaikh Aftab Ahmed			7
3         Mr. Sohail Inam Ellahi			8
4         Mr. Inam Ellahi Shaikh			6
5         Mr. Fawad S. Malik			7
6         Mr. Sheikh M. Jawed			5
7.        Mr. Shaheed H. Gaylani			5
8.        Mr. Yousuf Jan Muhammad			3
Review report to the members on statement of compliance with
best practices of code of corporate governance
THE COMPANY AND ITS OPERATIONS
Pak-Gulf Leasing Company Limited ("the Company") was incorporated in Pakistan on 27 December
1994 having its registered office in Karachi, Sindh and commenced its operations on 16 September
1996. The Company is principally engaged in the business of leasing and is listed on all three
Stock Exchanges of Pakistan.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1    Statement of compliance
These accounts have been prepared in accordance with approved accounting standards as
applicable in Pakistan and the requirements of the Companies Ordinance, 1984. Approved
accounting standards comprise of such International Accounting Standards as notified under
the provisions of the Companies Ordinance, 1 984. Wherever the requirements of the Companies
Ordinance, 1 984 or directives issued by the Securities and Exchange Commission of Pakistan
differ with the requirements of these standards, the requirements of the Companies Ordinance,
1 984 or the requirements of the said directives take precedence.
2.2   Accounting convention
These financial statements have been prepared under the historical cost convention, except
for revaluation of available for sale securities.
2.3   Revenue recognition
The Company follows the finance method in accounting for recognition of lease income. Under
this method the unearned lease income i.e., the excess of aggregate lease rentals and the
estimated residual value over the cost of leased assets is deferred and taken to income over
the term of the lease, so as to produce a constant periodic rate of return on net investment
in leases.
Unrealised income is suspended where necessary in accordance with the requirements of
the Prudential Regulations for Non-Banking Finance Companies undertaking the business of
leasing.
Front-end fee is taken to income on receipt basis.
Profit on investments are accounted for on accrual basis at rate of return implicit in the instrument.
Dividend income is recognized when the right to receive is established.
2.4   Investments
Investments held by the Company are classified as held to maturity and available for sale.
Held to maturity investments are securities with fixed payments that the Company has positive
intent and ability to hold to maturity and are stated at amortized cost less provision for impairment
in value, if any.
Investments that could not be classified as held for trading or held to maturity are classified
as available for sale and are stated at fair value, with any resultant gain or loss being recognized
directly in the profit and loss account. Fair value is determined on the basis of year-end
quoted prices.
Investments classified as either held to maturity or available for sale are initially recognized
at cost.
A deferred tax asset is recognised only to the extent that it is probable that future taxable
profits will be available against which the asset can be utilised. Deferred tax assets are reduced
to the extent that it is no longer probable that the related tax benefit will be realised.
Financial instruments
At the time of initial recognition, all financial assets and liabilities are measured at cost, which