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Capital Assets Leasing Corporation Limited
Annual Report 1999
CONTENTS
Company Information
Notice of Meeting
Directors' Report
Auditors' Report
Balance Sheet
Profit & Loss Account
Cash Flow Statement
Notes to the Accounts
Pattern of Shareholding
COMPANY INFORMATION
Board of Directors Mr. Salman Qureshi (Chairman)
Mr. Nisar A. Memon
Mr. Mohammad Kalim
Chaudhry Fazal-i-Husain
Mr. Aamir Qureshi
Mr. Anwar Shafi
Mr. Jehangir Shah
Chief Executive Officer Mr. Jehangir Shah (Managing Director)
Company Secretary Mr. Rizwan Akhtar
Auditors M/s Ebrahim & Company
Chartered Accountants
2nd Floor, Block "C"
Lakson Square Building
Sarwar Shaheed Road, Karachi.
Registrars & Share Transfer Office M/s Softlink (Pvt.) Limited
Wings Arcade, 1-K (Commercial)
Model Town, Lahore.
Tel. # 5839180-2 Fax # 5837061
Legal Advisor Chaudhry Fazal-i-Husain
M/s Mohsin Tayebally & Co., Advocates
M/s Rizvi, Isa & Co., Advocates
Main Bankers Allied Bank of Pakistan
Askari Commercial Bank Limited
First Women Bank Limited
Gulf Commercial Bank Limited
Muslim Commercial Bank Limited
National Bank of Pakistan
Platinum Commercial Bank Limited
Prime Commercial Bank Limited
Registered Office 10-1 l/B, 3rd Floor, LDA Flats
Lawrence Road, Lahore.
Telephone # 6311604-5
Fax # 6370017
Email # calcorp@nexlinx.net.pk
Branch Office 43/10/G, Block-VI
Dr. Mehmood Hussain Road,
PECHS, Karachi.
Telephone # 4544115-6
Fax # 4523822
Email # calcorp@cyber.net.pk
NOTICE OF 7TH ANNUAL GENERAL MEETING
Notice is hereby given that the seventh (7th) Annual General Meeting of the Shareholders of
CAPITAL ASSETS LEASING CORPORATION LIMITED will be held at the Registered Office
of the Company located at 10-1 l/B, 3rd Floor, LDA Flats, Lawrence Road, Lahore on Thursday,
30th December 1999 at 10:30 a.m. to transact the following business:
1. To confirm the minutes of second Extra Ordinary General Meeting held on June
21, 1999.
2. To receive, consider and adopt the Audited Accounts of Company for the year
ended June 30, 1999 together with the Directors' and Auditors' Reports thereon.
3. To approve, as recommended by the Directors in their meeting held on Friday,
Dec. 03, 1999 the payment of Cash Dividend ~ 5% i.e. 0.50 paisa per share for
the year ended June 30, 1999.
4. To appoint Auditors of the Company and to fix their remuneration. The present
Auditors M/s Ebrahim & Co. Chartered Accountants, retire and being eligible
offer themselves for reappointment.
Special Business
5. To approve the remuneration of Chief Executive.
6. To transact any other business with the permission of the Chair.
BY ORDER OF THE BOARD
Lahore (Rizwan Akhtar)
December 08, 1999 Company Secretary
Notes:
1. The Share Transfer Books of the Company will remain closed from 24th December,
1999 to 30th December, 1999 (both days inclusive).
2. A member eligible to attend and vote at this Meeting is entitled to appoint another
member as his/her proxy to attend and vote instead of him/her. A proxy must be a
member of the company. Proxies in order to be effective, must be received at the
Registered Office of the Company not less than 48 hours before the time of Meeting.
3. Any individual/beneficial owner of Central Depository Company (CDC), entitled to vote
at this meeting must bring his/her National Identity. Card to prove his/her identity. 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
4. A Statement under Section 160 of Companies Ordinance 1984 pertaining to the Special
Business is being sent to shareholders alongwith this notice.
5. Members are requested to notify the changes of address, if any, to the Company's Share
Registrars M/s. Softlink (Pvt.) Ltd. immediately.
DIRECTORS' REPORT
The Board of Directors is pleased to place before you the 7th Annual Report together with the
Audited Accounts of the company for the year ended June 30, 1999.
Financial Results: Notes (Rs. in 000)
Gross revenues 31,511
Total expenses 22,112
------------------
Operating profit for the year 9,399
Provisions
for potential losses (Lease) (0,986)
for potential losses (Morabaha/Short-term) 3,272
for taxation (including Deferred Taxation) 3,695
5,981
------------------
Profit after taxation 3,418
Unappropriated profits brought forward 22,747
------------------
Profit available for appropriation 26,165
Appropriations
Proposed cash dividend @ 05% 3,312
Transfer to statutory reserves @ 20% 683
3,995
------------------
Unappropriated profit carried forward 22,170
------------------
Cash Dividend:
The directors are pleased to recommend a cash dividend @ 5% to the share holders for the year
ended June 30, 1999.
Review of Operations:
During the year under review your company's balance sheet has grown to Rs.213.725 million.
Quality leases continued to be disbursed. 136 fresh lease contracts were signed, and gross
disbursements totaled Rs.75.594 million. The average net yield of the lease portfolio as on June
30th, 1999, was 25.83% per annum. The company also extended short term financing facilities
through ensuring that minimum 70% of its funds are deployed in leasing business, as per
regulatory requirements. Income from leasing operations contributed the largest revenue,
Rs. 25.652 million.
Net Income before provisions for the period under review is Rs. 9,399,406. Your Directors
considered it prudent to create a provision of Rs.3.272 million for potential losses. Provisioning
has been made in accordance with the Prudential regulations of the State Bank of Pakistan.
However in the opinion of the Management & the Board, the Morabaha & Short term financing
amounts outstanding are recoverable. Hence this provisioning should in no manner be construed
to mean that the company's Portfolio is affected.
The year under review has been one of continued slowdown in economic & business activities in
the country. Despite tills the company continued expanding its base with emphasis on quality.
Your Directors are pleased to advise that strict standards for evaluating proposals continue to be
adhered to, and only those institutions or individuals are considered for facilities whose track
record of repayments is proven good.
The pace of recoveries have been accelerated. We are pleased to inform you that the results of
these efforts has had a tremendous effect on improving the overall recovery position. This
obviously resulted in improving your company's cash flows as well as keeping the need for
provisioning to a minimum.
Fresh lease disbursements were mainly for vehicle leasing, both commercial and private.
Basically business activities having slowed down resulted in fewer requests for machinery &
equipment leasing, thus shifting the maximum exposure to the transport sector. The assets mix is
as follows.
Your company continued its support to the social sectors--education, health, food. The
education sector is the largest beneficiary percentage wise, in our lease portfolio. Tourism and
information technology sectors are areas where we have also made inroads successfully.
Y2K Compliance:
Your company is Y2K compliant, and this has been certified by our IT consultants.
Resource Mobilization:
Resources were raised through receipts of lease rentals, payments received towards reduction of
short-term borrowings, and with the cooperation of our creditor financial institutions. New
avenues continue to be tapped for obtaining funding to maintain the tempo of sustained growth.
Future Outlook:
We are encouraged by the fact that inspite of the economic scenario during the year under review
your company saw continued activity & progress. Although business revival will take some time
your Directors are hopeful of the future.
With the advantage of leasing becoming recognized & therefore becoming a preferred mode for
acquisition & financing of assets, it is felt that demand for this form of financing will continue,
obviously resulting in further growth of the sector, of which CALCORP is steadily becoming an
active participant.
The Directors & the company's management are fully aware & conscious of their
responsibilities, and are focused on balance sheet growth, increased profitability & share holders
interest, and have every intention of continuing to seek quality business.
The issue of increase in paid-up capital to Rs. 200 million by leasing companies as required by
the Securities & Exchange Commission of Pakistan is being persued by your company. Under the
present circumstances there is no option but to approach the SECP through the Leasing
Association of Pakistan with a request to extend the period for complying with this requirement.
Board of Directors:
Elections of the Board of Directors were held in June 1999 & we are pleased to inform you that
all the retiring Directors who had offered themselves for re-election were re-elected without
contest. Mr. Salman Qureshi was unanimously elected as Chairman of the Board of Directors.
Auditors:
The company's Auditors, M/s Ebrahim & Company, Chartered accounts, retire & being eligible
offer themselves for re-appointment.
Acknowledgments:
We take this opportunity to thank our valued clients, shareholders, creditor financial institutions,
the Securities & Exchange Commission of Pakistan, State Bank of Pakistan, Leasing Association
of Pakistan & all three Stock Exchanges of Pakistan, for their continued support and guidance.
The Board expresses its appreciation & thanks to the management & staff of the company for
their commitment and dedicated hard work without which these results would not have been
possible.
Pattern of Share holding:
Pattern of Share holding as on June 30th 1999 is annexed to this report.
on behalf of the Board
Jehangir Shah Salman Qureshi
Managing Director/CEO Chairman
Lahore
December 03, 1999
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet of CAPITAL ASSETS LEASING CORPORATION
LIMITED as at June 30, 1999 and the related profit and loss account and statement of changes in
financial position together with the notes forming part thereof, for the year then ended and we
state that we have obtained all the information & explanations which to the best of our
knowledge and belief were necessary for the purposes of our audit, and after due verification
thereof, 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 accounts 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 and the statement of changes in financial
position together with the notes forming part thereof, give the information required by
the Companies Ordinance, 1984 in the manner so required and respectively give a true
and fair view of the state of the Company's affairs as at June 30, 1999 and of the profit
and changes in financial position for the year then ended; and
d) in our opinion no zakat was deductible at source under the Zakat and Ushr Ordinance,
1980.
Karachi Ebrahim & Company
December 03, 1999 Chartered Accountants
BALANCE SHEET AS AT JUNE 30, 1999
1999 1998
SHARE CAPITAL AND RESERVES Notes Rupees Rupees
Authorized Capital
10,000,000 ordinary shares of
Rs. 10 each 100,000,000 100,000,000
========== ==========
Issued subscribed and paid-up capital
6,623,950 ordinary shares
of Rs. 10 each fully paid in cash 66,239,500 66,239,500
Reserves 3 7,612,407 6,928,786
Unappropriated profit 22,169,693 22,747,182
------------------ ------------------
96,021,600 95,915,468
LIABILITIES AGAINST ASSETS
SUBJECT TO FINANCE LEASE 4 659,831 282,725
DEFERRED LIABILITIES 5 3,197,170 224,004
LONG TERM DEPOSITS 6 25,252,421 24,988,455
CURRENT LIABILITIES
Current portion of long term liabilities 19,219,928 12,923,429
Short term loans-and running finances 7 58,367,704 47,491,034
Creditors, accrued and other liabilities 8 5,721,938 7,394,484
Provision for taxation 1,430,351 992,176
Dividend 9 3,854,481 1,172,596
------------------ ------------------
88,594,402 69,973,719
CONTINGENCIES AND COMMITMENTS 10
------------------ ------------------
213,725,424 191,384,371
========== ==========
TANGIBLE FIXED ASSETS 11 4,090,303 3,499,870
INVESTMENT IN LEASE AND HIRE
PURCHASE FINANCES 12 95,407,662 85,936,768
LONG TERM INVESTMENTS 13 250,000 250,000
LONG TERM DEPOSITS 14 514,590 271,180
DEFERRED COST 15 122,122 271,773
CURRENT ASSETS
Current portion of long term investment
in lease and hire purchase finances 71,156,037 58,789,517
Morabaha and short term finances 16 20401060 21,387,370
Advances, prepayments and other
receivables 17 5,048,111 4,324,691
Cash bank balances 18 16,735,539 16,658,202
------------------ ------------------
113,340,747 101,159,780
------------------ ------------------
213,725,424 191,384,371
========== ==========
NOTE: The annexed notes form an integral part of these accounts.
Jehangir Shah Nisar A. Memon
Managing Director/CEO Director
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED JUNE 30, 1999
1999 1998
Notes Rupees Rupees
Income from leasing operations 19 25,651,892 22,399,699
Other income 20 5,859,068 4,425,498
------------------ ------------------
31,510,960 26,825,197
Administrative and operating expenses 21 13,108,210 9,931,545
Financial charges 22 9,003,344 4,617,532
------------------ ------------------
22,111,554 14,549,077
------------------ ------------------
Operating profit before provisions 9,399,406 12,276,120
Provision/(reversal of provision) for losses:
For lease transactions (986,300) 247,500
For morabaha and short term finances 3,272,500 502,500
------------------ ------------------
2,286,200 750,000
------------------ ------------------
Operating profit for the year 7,113,206 11,526,120
Provision for taxation: 23
Current year 402,000 355,000
Prior year 234,099 --
Deferred 3,059,000 --
------------------ ------------------
3,695,099 355,000
------------------ ------------------
Net profit after taxation 3,418,107 11,171,120
Unappropriated profit brought forward 22,747,182 13,810,286
------------------ ------------------
Profit available for appropriation 26,165,289 24,981,406
Appropriations:
Proposed dividend @ 5% (1998: Nil) 3,311,975 --
Transfer to reserves 683,621 2,234,224
------------------ ------------------
3,995,596 2,234,224
------------------ ------------------
Unappropriated profit carried forward 22,169,693 22,747,182
========== ==========
Earnings per share 24 Rs. 0.52 Rs. 1.69
Note: The annexed notes form an integral part of these accounts.
Jehangir Shah Nisar A. Memon
Managing Director/CEO Director
STATEMENT OF CHANGES IN FINANCIAL POSITION
(CASH FLOW STATEMENT) FOR THE YEAR ENDED JUNE 30, 1999
1999 1998
Rupees Rupees
CASH FLOW FROM OPERATING ACTIVITIES
Profit before taxation 7,113,206 11,526,120
Adjustments for non cash charges/(credit) & other items
Gratuity .... -- 162,604
Depreciation 1,396,649 1,157,789
(Gain) on disposal of fixed assets (378,034) (64,288)
Amortization of deferred cost 149,651 584,587
Financial charges 9,003,344 4,617,532
Provision for losses 2,286,200 750,000
------------------ ------------------
19,571,016 18,734,344
(Increase) in current assets
Advances, prepayments and other receivables (397,200) (2,069,348)
(Decrease)/increase in current liabilities
Creators, accrued and other liabilities (3,721,249) 4,801,065
------------------ ------------------
Cash generated from operations 15,452,567 21,466,061
Financial charges paid (6,954,641) (4,669,571)
Tax paid (524,144) (765,342)
Gratuity paid (85,834) --
Net investment in lease and hire purchase finances (20,856,114) (32,778,660)
Morabaha and short term finances (2,286,190) (4,164,870)
Lease security deposits 6,238,786 13,758,055
------------------ ------------------
Net Cash from operating activities (9,015,570) (7,154,327)
STATEMENT OF CHANGES IN FINANCIAL POSITION
(CASH FLOW STATEMENT) FOR THE YEAR ENDED JUNE 30, 1999
1,999 1998
Rupees Rupees
CASH FLOW FROM INVESTING ACTIVITIES
Addition to fixed assets (963,478) (801,113)
Proceeds from sale of fixed assets 384,530 140,000
Long term investments -- (50,000)
Long term deposits (243,410) (167,180)
------------------ ------------------
Net cash from investing activities (822,358) (878,293)
CASH FLOW FROM FINANCING ACTIVITIES
Repayment of liabilities against assets subject to
finance lease (331,315) (104,189)
Dividend and Zakat paid (630,090) (3,795,367)
Short term loans and running finances 10,876,670 27,386,917
------------------ ------------------
Net cash from financing activities 9,915,265 23,487,361
------------------ ------------------
Net increase in cash and cash equivalents 77,337 15,454,741
Cash and cash equivalents at the beginning of the year 16,658,202 1,203,461
------------------ ------------------
Cash and cash equivalents at the end of the year 16,735,539 16,658,202
========== ==========
Jehangir Shah Nisar A. Memon
Managing Director/CEO Director
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED JUNE 30,1999.
1. NATURE AND STATUS OF BUSINESS
The company was incorporated on April 01, 1992 in Pakistan as a public limited
company and its shares are quoted on all Stock Exchanges in Pakistan. The principal
activity of the Company is to carry on leasing business.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Accounting convention
These accounts have been prepared under the historical cost convention without
any adjustments for the effect of inflation or current values.
2.2 Staff retirement benefits
The Company operates a funded contributory provident fund scheme covering
all regular employees. Equal monthly contributions are made by the Company
and employees to the fund.
Provision for gratuity represents the amounts due to staff upto the date of
introduction of provident fund scheme.
2.3 Revenue recognition
Lease income is recognized using the "Finance Method". Under this method the
unearned finance income represented by the excess of the aggregate of lease
rentals and the estimated residual value over the cost of leased assets is allocated
to income on a systematic basis over the period of the lease term.
Profit on morabaha and short term finances is recognized on a prorata basis
taking into account the relevant buy-back date.
Front end fee, project examination fee and other commissions are recognized as
income on receipt.
2.4 Taxation
Provision for current taxation is the higher of the amount computed on taxable
income at the current tax rates after taking into account tax rebates and minimum
tax computed at the prescribed rate on turnover.
The Company accounts for deferred taxation using the liability method on all
significant timing differences excluding those that are not likely to reverse in
foreseeable future as stated more fully in Note: 23.2
2.5 Tangible fixed assets.
These are stated at cost less accumulated depreciation. Depreciation is charged
to income applying the straight-line method whereby the cost of an asset is
written off over its estimated useful life at the rates given in relevant note.
Full year's depreciation is charged on additions while no depreciation is charged
on disposal during the year.
Minor repair and maintenance are charged to revenue. Major repairs, renewals
and improvements are capitalized.
Gains and losses on disposal of fixed assets are charged to income.
2.6 Accounting for leases
The Company accounts for assets operated under financial lease by recording the
assets and related liability.
The amounts are determined on the basis of discounted value of total minimum
lease payments and residual value of the assets at the end of the lease period to
be paid by the Company.
Financial charges are allocated to accounting periods in a manner so as to
provide constant periodic rate of charge on the outstanding liability.
Depreciation is charged at rates specified in the related note to write off the
assets over its estimated useful life. In view of certainty of the ownership of the
assets at the end of the lease.
2.7 Provision for potential losses
Provision for potential losses against lease, morabaha and short term financing
represents provision which in the opinion of the management, is required to
cover potential losses that can be reasonably anticipated. The allowance is
increased by provisions charged to income and is decreased by charge-offs and
net. of recoveries.
2.8 Investments
Long term investments are stated at cost. Provision is made for diminution in the
value of investments if considered permanent.
2.9 Deferred costs
These costs are amortized over a period of five years commencing from the year
in which they are incurred.
1999 1998
Rupees Rupees
3. RESERVE
Opening balance 6,928,786 4,694,562
Transfer from profit and loss account 683,621 2,234,224
------------------ ------------------
7,612,407 6,928,786
========== ==========
This reserve represents the amounts set aside out of after tax profits in accordance with
State Bank of Pakistan NBFI Circular No.1 dated December 05, 1991. Under this
Circular 20% of the after tax profits are to be credited to reserves till such time that such
reserves equal the paid up capital.
1999 1998
Rupees Rupees
4. LIABILITIES AGAINST ASSETS
SUBJECT TO FINANCE LEASE
Present value of minimum lease rental payments 1,094,448 395,663
Less: Current portion shown under
current liabilities 434,617 112,938
------------------ ------------------
659,831 282,725
========== ==========
The above liabilities represent the unpaid balance of the total of minimum lease
payments and the residual value payable at the end of lease discounted at 20.63 to 21.62
percent per annum.
Remaining aggregate rentals of Rs. 1.176 million inclusive of mark-up are payable in 35
equal monthly installments latest by May 2002.
Future lease payments are as follows:
Financial year
1999- 2000 595,620
2000- 2001 514,055
2001 - 2002 65,883
------------------
1,175,558
Less: Financial charges allocated to future period 81,110
------------------
1,094,448
==========
At the end of the lease period the ownership of assets shall be transferred to the
Company on payment of residual value.
The cost of operating and maintaining the leased assets is borne by the Company.
The above liability is secured against demand promissory note.
1999 1998
Rupees Rupees
5. DEFERRED LIABILITIES
Provision for gratuity 138,170 224,004
Deferred taxation (Note: 23.2) 3,059,000 --
------------------ ------------------
3,197,170 224,004
========== ==========
6. LONG TERM DEPOSITS
Lease security deposits 44,037,732 37,798,946
Less: Current portion shown under
current liabilities 18,785,311 12,810,491
------------------ ------------------
25,252,421 24,988,455
========== ==========
These represent interest free security deposits received from lessees under lease
contracts and are adjustable at the expiry of the respective lease period on settlement of
accounts and transfer of assets.
7. SHORT TERM LOANS AND RUNNING FINANCES
Short term loans
Secured
Financial institution
Morabaha financing (Note: 7.1) 3,000,000 --
Unsecured
Financial institutions (Note: 7.2) 11,200,000 5,000,000
------------------ ------------------
14,200,000 5,000,000
Short term running finances
Secured
Banking companies
Under mark-up agreements (Note: 7.3) 44,167,704 42,491,034
------------------ ------------------
58,367,704 47,491,034
========== ==========
7.1 This facility for short-term finance is secured by first pari passu charge on leased assets
and receivables of the Company and carries markup at 21% per annum. The balance is
repayable by June 10, 2000.
7.2 These facilities are short-term borrowings from financial institutions and carry mark-up
at rates ranging from 17% to 20% per annum. These borrowing comprising of three
different facilities are repayable on various dates by September 1999.
7.3 Under these agreements the Company can avail Rs. 43.954 million (1998: Rs. 42.50
million) from commercial banks. Under these arrangements goods owned by the
Company are sold to the banks and are deemed to be immediately repurchased by the
Company at a price paid by the bank plus mark-up computed at rates ranging from 50
paisas to 54 paisas per Rs. 1,000 per diem or part thereof on the price outstanding. The
aggregate facility for short-term finances is secured by first pari passu charge on
Company's leased assets, fixed assets and receivables. These facilities are
renewable/repayable on various dates by May 2000.
1999 1998
Rupees Rupees
8. CREDITORS, ACCRUED AND
OTHER LIABILITIES
Creditors 11,870 186,806
Accrued expenses 488,149 443,699
Advance rental from lessees 1,227,208 4,662,098
Mark-up accrued on secured short term loans
and running finances 3,628,949 1,768,869
Mark-up accrued on unsecured loan 206,192 30,120
Mark-up on assets subject to finance lease 12,551 --
Others 147,019 302,892
------------------ ------------------
5,721,938 7,394,484
========== ==========
9. DIVIDEND
Proposed dividend 05% (1998: Nil) 3,311,975 --
Unclaimed dividend 542,506 1,172,596
------------------ ------------------
3,854,481 1,172,596
========== ==========
10. CONTINGENCIES AND COMMITMENTS
10.1 Contingencies
The income tax assessments for the assessment years 1993-94 and 1996-97 have been
completed determining tax liability amounting to Rs.4.136 million, which the Company
is disputing in appeals before Income Tax Authorities. In the event of adverse decision in
the appeals, the company would be faced with a liability amounting to Rs.3.961 million
and a corresponding charge against profit amounting to Rs.3.886 million.
10.2 Commitments
There were no capital commitments as at the balance sheet date.
11. TANGIBLE FIXED ASSETS
COST RATE DEPRECIATION Written down
value
PARTICULARS As at Additions Disposal/ As at % As at Disposal/ For the As at as at
01-07-98 During Adjustments 30-06-99 01-07-98 Adjustments year 30-06-99 30-06-99
the year
Owned
Furniture and fixture 907,121 41,084 (5,300) 942,905 10 316,468 (2,915) 94,291 407,844 535,061
Air conditioner and refrigerators 399,231 27,800 (15,000) 412,031 15 190,325 (12,000) 61,805 240,130 171,901
Electric fitting and installation 35,790 1,800 (5,550) 32,040 15 21,815 (4,440) 4,806 22,181 9,859
Office machines and equipment 1,411,077 271,960 -- 1,683,037 15 770,122 -- 252,456 1,022,578 660,459
Vehicles 3,981,486 620,834 (776,750) 3,825,570 20 2,322,210 (776,749) 720,831 2,266,292 1,559,278
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
6,734,705 963,478 (802,600) 6,895,583 -- 3,620,940 (796,104) 1,134,189 3,959,025 2,936,558
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Leased
Office equipment 60,500 725,000 -- 785,500 20 12,100 -- 157,100 216,695 568,805
Vehicles 397,300 305,100 -- 702,400 15 59,595 -- 105,360 117,460 584,940
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
457,800 1,030,100 -- 1,487,900 -- 71,695 -- 262,460 334,155 1,153,745
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Total Rupees - 1999 7,192,505 1,993,578 (802,600) 8,383,483 -- 3,692,635 (796,104) 1,396,649 4,293,180 4,090,303
========== ========== ========== ========== ========== ========== ========== ========== ========== ==========
Total Rupees - 1998 6,198,448 1,698,663 (704,606) 7,192,505 -- 2,723,990 (189,144) 1,157,789 3,692,635 3,499,870
========== ========== ========== ========== ========== ========== ========== ========== ========== ==========
11.1 The following assets were deleted the year
PARTICULARS COST ACCUMULATED WRITTEN SALES MODE OF PARTICULARS OF
DEPRECIATION DOWN VALUE PROCEEDS DISPOSAL PURCHASERS
Vehicle 776,750 776,749 1 370,000 Negotiation Mr. Abdul Hayee Khan, Lahore
Furniture and fixture 5,300 2,915 2,385 2,900 Negotiation Mr. Abdul Waseh, Lahore.
Electric fitting and installation 5,550 4,440 1,110 1,210 Negotiation Mr. Zareef Khan, Lahore
Air conditions and refrigerators 15,000 12,000 3,000 10,420 Insurance claim Commercial Union Inc., Lahore.
------------------ ------------------ ------------------ ------------------
Total Rupees 802,600 796,104 6,496 384,530
========== ========== ========== ==========
1999 1998
Rupees Rupees
12. INVESTMENT IN LEASE AND HIRE
PURCHASE FINANCES
Minimum lease and hire purchase rentals
receivable 159,388,383 143,436,940
Add: Residual value 44,037,732 37,798,946
------------------ ------------------
Gross investment in lease and hire
purchase finances (Note: 12.1) 203,426,115 181,235,886
Less: Unearned finance income 34,276,216 32,942,101
------------------ ------------------
Net investment in lease and hire
purchase finances 169,149,899 148,293,785
Less: Current portion of
net investment (Note: 12.2) 71,156,037 58,789,517
Provision for lease losses 2,586,200 3,572,500
------------------ ------------------
73,742,237 62,362,017
------------------ ------------------
95,407,662 85,931,768
========== ==========
12.1 This includes balance due from an Associated Company amounting to Rs.2.048 million
(1998: Nil). Maximum amount due from Associated Company at the end of any month
during the year was Rs. 2.048 million (1998: Nil).
12.2 This represents the principal portion of lease rentals amounting to Rs.83.034 million
(1998: Rs.76.329 million) receivable within next twelve months.
1999 1998
Rupees Rupees
13. LONG TERM INVESTMENTS - AT COST
Federal Investment Bonds (Note: 13.1) 200,000 200,000
Shares in listed company
5,000 ordinary shares of Commercial
Union Life Assurance Company
(Pakistan) Ltd. (Note: 13.2) 50,000 50,000
------------------ ------------------
250,000 250,000
========== ==========
13.1 Federal Investment Bonds have been issued by Government of Pakistan and carry profit
at the rate of 15% per annum.
13.2 The market value of these shares as at the balance sheet date was Rs.38,750
(1998: Rs.42,500). No provision for decline in market value of these shares has been
made, as in the opinion of the Directors, this decline is temporary.
1999 1998
Rupees Rupees
14. LONG TERM DEPOSITS
Security deposits 514,590 271,180
========== ==========
1999 1998
Rupees Rupees
15. DEFERRED COSTS
Preliminary expenses -- 24,373
Floatation expenses -- 329,674
Pre-operating expenses 271,773 502,313
------------------ ------------------
271,773 856,360
Less: Amortized during the year 149,651 584,587
------------------ ------------------
122,122 271,773
========== ==========
1999 1998
Rupees Rupees
16. MORABAHA AND SHORT TERM FINANCES
Morabaha finances (Note: 16.1) 3,000,000 3,000,000
Short term finances (Note: 16.2) 23,351,060 21,064,870
------------------ ------------------
26,351,060 24,064,870
Less: Provision for doubtful receivables 5,950,000 2,677,500
------------------ ------------------
20,401,060 21,387,370
========== ==========
16.1 These represent amounts receivable against morabaha transactions i.e. sale of goods on a
deferred payment basis at specified profit margin. These are secured by equitable
mortgage of property. The rate of profit applicable range from 26 to 28 percent per
annum.
16.2 These finances are secured by equitable mortgage of property and charge on machinery
and carry mark up at rates ranging from 22 to 30 percent per annum. These include
balance due from an Associated Company amounting to Rs.0.939 million (1998:Nil).
Maximum amount due from Associated Company at the end of any month during the
year was Rs.0.939 million (1998 Nil).
1999 1998
Rupees Rupees
17. ADVANCES, PREPAYMENTS AND
OTHER RECEIVABLES
Advances (Unsecured - considered good)
Against salary 118,020 50,000
Against expenses
Staff 20,000 21,545
Rent 135,000 --
Others 98,846 90,708
------------------ ------------------
253,846 112,253
Against purchase of leased assets 352,695 2,162,854
Income tax 1,509,466 1,183,246
------------------ ------------------
2,234,027 3,508,353
Prepayments 195,484 121,744
Accrued return on bank deposits and short
term finance 1,258,928 418,472
Other receivables (Considered good)
Associated Company (Note: 17. l) 58,957 --
Executive (Note: 17.2) 138,645 --
Others 1,162,070 276,122
------------------ ------------------
1,359,672 276,122
------------------ ------------------
5,048,111 4,324,691
========== ==========
17.1 The maximum amount due from an Associated Company at the end of any month during
the year was Rs.0.059 million (1998:Nil).
17.2 The maximum amount due from Executive at the end of any month during he year was
Rs.0.139 million (1998:Nil)
1999 1998
Rupees  Rupees
18. CASH AND BANK BALANCES
Cash in Hand 1,224,818 172,849
Cash in Banks 
- in current accounts               3,301,644 1,224,580
- in deposit accounts (Note: 18.1) 12,209,077 15,260,773
------------------ ------------------
15,510,721 16,485,353
------------------ ------------------
16,735,539 16,658,202
========== ==========
18.1 These include Rs. 20,000 (1998: Rs. 20,000) with State Bank of Pakistan as required
under the rules of business for Non Banking Financial Institutions.
19. INCOME FROM LEASING OPERATIONS
Income on lease contracts 23,871,835 18,925,317
Income from hire purchase contracts 817,879 2,296,946
Front-end fee 589,646 645,133
Documentation charges 245,590 313,913
Late payment and other charges 126,942 218,390
------------------ ------------------
25,651,892 22,399,699
========== ==========
20. OTHER INCOME
Profit on Morabaha and short term
finances 2,475,282 3,956,868
Return on bank deposits 679,747 373,316
Gain on sale of fixed assets 378,034 64,288
Gain on purchases and sale of shares 2,137,045 --
Dividend income 145,000 --
Profit on FIB's investment 30,000 30,000
Miscellaneous 13,960 1,026
------------------ ------------------
5,859,068 4,425,498
========== ==========
21. ADMINISTRATIVE AND OPERATING EXPENSES
Salaries, allowances and benefits(Note: 21.1) 5,259,689 3,402,295
Traveling and conveyance charges 406,527 791,561
Training and seminars 9,023 11,100
Rent, rates and taxes 5551240 865,550
Electricity, gas and water 588,900 197,751
Repairs and maintenance 247,230 249,113
Printing and stationery 315,449 269,952
Telephone and postage expenses 1,653,005 568,430
Advertising expenses 110,093 31,320
Legal and professional charges 707,077 568,137
Vehicle running expenses 682,086 484,755
Insurance expenses 309,161 264,036
Entertainment expenses 154,736 93,545
Amortization of deferred costs 149,651 584,587
Donation (Note: 21.2) 2,020 --
Auditors' remuneration
Audit fee 40,000 40,000
Out of pocket expenses 20,809 43,693
Special audit fee 20,000 20,000
Tax and advisory services 175,000 7,500
------------------ ------------------
255,809 111,193
Sundry expenses 305,865 280,431
Depreciation 1,396,649 1,157,789
------------------ ------------------
13,108,210 99,317,545
========== ==========
21.1 This amount includes Rs.140,206 (1998: Rs.162.604) in respect of staff retirement
benefits.
21.2 No Director and his spouse has any interest in the donee.
22. FINANCIAL CHARGES
Mark-up/interest on:
Unsecured short term loans 497,116 540,309
Secured short term loans and running
Finances 8,160,789 3,974,683
Liabilities for finance lease 197,729 34,056
Bank charges 147,710 67,343
Zakat -- 1,141
------------------ ------------------
9,003,344 4,617,532
  ========== ==========
23. PROVISION FOR TAXATION
23.1 Current Tax
The provision for current taxation represents the minimum tax under the income Tax
Ordinance, 1979 after considering unabsorbed depreciation and tax losses.
23.2 Deferred Tax
Deferred tax arising due to timing differences computed under the liability method is
estimated at Rs.11.570 million (1998:Rs.10.639 million). As per revised International
Accounting Standard (IAS) 12 "Accounting for taxes on income" full liability against
deferred tax should be provided in the year to which it relates. The Securities and
Exchange Commission of Pakistan vide Circular No.16 dated September 9,1999 has
directed that in order to achieve compliance with the revised IAS 12, all leasing
companies, during each of the five financial years beginning July 01,1998 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 un-provided deferred tax liability as at the
beginning of the financial year ending June 30,1999. Consequently the Company has
made full provision for deferred tax liability for the year amounting to Rs.0.931 million
and one fifth of the un-provided liability as at July 01,1998 amounting to Rs.2.128
million.
1999 1998
Rupees Rupees
24. EARNING PER SHARE
Net profit for the year 3,418,107 11,171,120
========== ==========
Number of shares
Average issued ordinary shares 6,623,950 6,623,950
------------------ ------------------
Earning per share Rs. 0.52 Rs. 1.69
========== ==========
1999
25. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES
The aggregate amounts charged in the accounts for remuneration, including certain
benefits to the Chairman, Chief Executive, Directors and Executives of the Company
were as follows:
CHIEF EXECUTIVE DIRECTORS EXECUTIVES
1999 1998 1999 1998 1999 1998
Rupees Rupees Rupees Rupees Rupees Rupees
Meeting fees -- -- -- 4,500 -- --
Managerial Remuneration 984,402 463,065 4,000 -- 920,053 1,280,696
Bonus 100,000 -- -- -- -- --
Utilities 32,100 15,967 -- -- 30,680 43,905
Leave encashment 50,000 -- -- -- 58,334 152,479
Provident Fund Contribution 53,502 -- -- -- -- --
Reimbursable expenses 53,576 74,340 -- -- 54,336 52,986
Contract for legal services -- -- 332,600 240,000 -- --
Contract with Advisor to the
Board of Directors -- -- -- -- 1,423,375 --
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Total 1,273,580 553,372 336,600 244,500 2,486,778 1,530,066
========== ========== ========== ========== ========== ==========
Number of persons 1 1 4 4 5 7
========== ========== ========== ========== ========== ==========
The Chairman, Chief Executive, Advisor to the Board and certain Executives are provided with
free use of c6mpany maintained car and other benefits as per Company policy.
26. CHANGES IN EQUITY
SHARE UNAPPRO-
CAPITAL RESERVES PRIATED TOTAL
PROFIT
RUPEES
Balance as at June 30, 1997    66,239,500 4,694,562 13,810,286 84,744,348
Net profit for the year ended June 30, 1998 -- -- 11,171,120 11,171,120
Transfer to reserves  -- 2,234,224 (2,234,224) --
------------------ ------------------ ------------------ ------------------
Balance as at June 30, 1998 66,239,500 6,928,786 22,747,182 95,915,468
Net profit for the year ended June 30, 1999 -- -- 3,418,107 3,418,107
Proposed dividend -- -- (3,311,975) (3,311,975)
Transfer to reserves -- 683,621 (683,621) --
------------------ ------------------ ------------------ ------------------
Balance as at June 30, 1999 66,239,500 7,612,407 22,169,693 96,021,600
========== ========== ========== ==========
27. TRANSACTIONS WITH ASSOCIATED COMPANY
The Company completed following transactions during the year with an associated
Company in the normal course of business:
1999 1998
Rupees: Rupees
Leases finance provided 2,148,850 --
Lease rentals received 126,835 --
Interest on lease finance 38,605 --
Short term finance provided 939,000 --
Interest on Short term Finance 24,851 --
Recoverable expenses incurred 58,957 --
28. INTEREST RATE RISK
Interest rate risk and sensitivity of the Company's financial assets and financial liabilities
as at June 30, 1999 can be evaluated from the following:
(RUPEES)
Non interest/
Within More than markup Total
one year one year bearing
FINANCIAL ASSETS
Net investment in lease and hire purchase
finances 71,156,037 95,407,662 -- 166,563,699
Long term investments -- 200,000 50,000 250,000
Long term deposits -- -- 514,590 514,590
Morabaha and short term finances 20,401,060 -- -- 20,401,060
Advances, deposits and other receivables -- -- 3,343,161 3,343,161
Cash and bank balances 12,204,723 -- 4,530,816 16,735,539
------------------ ------------------ ------------------ ------------------
103,761,820 95,607,662 8,438,567 207,808,049
========== ========== ========== ==========
FINANCIAL LIABILITIES
Liability against leased assets           434,617 659,831 -- 1,094,448
Long term deposits -- -- 44,037,732 44,037,732
Short term loans/running finances 58,367,704 -- 58,367,704
Creditors, accrued & other liabilities -- -- 5,721,938 5,721,938
Dividend -- -- 3,854,481 3,854,481
------------------ ------------------ ------------------ ------------------
58,802,321 659,831 53,614,151 113,076,303
------------------ ------------------ ------------------ ------------------
Net financial assets / (liabilities) 44,959,499 94,947,831 (45,175,584) 94,731,746
========== ========== ========== ==========
29. CREDIT RISK
The Company's credit risk exposure is not significantly different from that reflected in
the financial statements. The Management monitors and limits Company's exposure to
credit risk through monitoring of clients, credit exposure, review and conservative
estimates of provisions for potential lease losses and doubtful receivables and through
the prudent use of collateral for large amounts of credit. The Management is of the view
that it is not exposed to significant concentration of credit risk as its financial assets are
adequately diversified in different avenues.
30. FAIR VALUE OF THE FINANCIAL INSTRUMENTS.
The carrying value of financial assets and financial liabilities approximates their fair
values as reflected in the financial statements except those stated as listed securities as
referred in Note: 13.
31. NUMBER OF EMPLOYEES
Total number of employees at the year-end was 20 (1998-23).
32. FINANCIAL RELIEF AND PROVISION
AGAINST NON-PERFORMING ADVANCES.
As no relief was given or loan written off during the year under review, the information
for statements. required to be filed under section 33A of the Banking Companies
Ordinance, 1962 is "Nil"
33. GENERAL
i) Figures have been rounded off to the nearest rupee.
ii) Corresponding figures have been re-arranged wherever necessary for the purpose of
comparison.
Jehangir Shah Nisar A. Memon
Managing Director/CEO Director
PATTERN OF HOLDING OF SHARES
HELD BY THE SHAREHOLDERS AS AT 30TH JUNE 1999
No. of Shareholding Total
share holders From To shares held
39 1 100 3700
512 101 500 241200
146 501 1000 134650
148 1001 5000 345600
21 5001 10000 162500
9 10001 15000 114800
2 15001 20000 34500
7 20001 25000 161250
2 25001 30000 57500
1 30001 35000 31500
1 35001 40000 40000
1 45001 50000 50000
1 50001 55000 54500
1 55001 60000 59000
2 95001 100000 200000
1 115001 120000 116600
1 145001 150000 150000
1 160001 165000 164600
1 165001 170000 168300
1 200001 205000 203800
1 250001 255000 254400
1 265001 270000 269300
1 270001 275000 271500
2 370001 375000 750000
2 385001 390000 771700
1 450001 455000 455000
1 495001 500000 499500
1 855001 860000 858550
------------------ ------------------
908 6623950
========== ==========
Categories of Shareholders Number Share Held Percentage
(%)
1. Individuals 891 3221950 48.641
2. Investment Companies 4 86400 1.304
3. Insurance Companies 3 205050 3.096
4. Joint Stock Companies 2 858650 12.963
5. Financial Institution 5 1280900 19.337
6. Modaraba Companies -- -- --
7. Leasing Companies -- -- --
8. Others 3 971000 14.659
------------------ ------------------ ------------------
TOTAL 908 6623950 100.000
========== ========== ==========
OTHERS
Associations -- -- --
Abandoned Property -- -- --
Government Authority -- -- --
Modarabas Management -- -- --
Non-Residents -- -- --
Foreign Companies 2 954500 14.410
Trust 1 16500 0.249
------------------ ------------------ ------------------
TOTAL 3 971000 14.659
========== ========== ==========
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