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First Leasing Corporation Limited
Annual Report 1999
CONTENTS
Company Information
Notice of Meeting
Directors' Report
Auditors' Report
Balance Sheet
Profit and Loss Account
Cash Flow Statement
Notes to the Accounts
Pattern of Shareholding
Categories of Shareholders
COMPANY INFORMATION
BOARD OF DIRECTORS
Mr. Khurshid Hadi Chairman/Chief Executive
Mr. Arshad Nawab Director
Mr. Shoaib Qureshi Director
Mr. Zaigham Mehmood Rizvi (Nominee - Pak Libya Holding Company (Pvt) Ltd.)
Mr. Ramadan A. Haggiagi (Nominee - Pak Libya Holding Company (Pvt) Ltd.)
Mr. Nasim Beg (Nominee - National Investment Trust)
Mr. K. M. M. Shah (Nominee - National Investment Trust)
COMPANY SECRETARY
Mr. Zahid Ali H. Jamall
REGISTERED AND HEAD OFFICE
5th Floor, Block C, Finance & Trade Centre,
Shahrah-e-Faisal, Karachi-74400
Te1:5661843 Fax:5685329
BRANCH OFFICES
5th Floor, Davis Hytes, Davis Road, Lahore
1st Floor, State Life Building, Peshawar
AUDITORS
Ford, Rhodes, Robson, Morrow
Chartered Accountants
LEGAL ADVISORS
Orr Digham & Co. Advocates
REGISTRAR AND SHARE TRANSFER OFFICE
THK Associates (Pvt) Limited,
Ground Floor, Shaikh Sultan Trust Building No.2,
Beaumont Road, Karachi
Te1: 5688808, 5685805
BANKERS
Allied Bank of Pakistan Limited Bank of America
Credit Agricole Indosuez Emirates Bank International
Habib Bank Limited Muslim Commercial Bank Limited
National Bank of Pakistan Standard Chartered Bank
The Bank of Khyber The Hong Kong and Shanghai Banking Corporation Ltd.
NOTICE OF MEETING
Notice is hereby given that the Seventh Annual General Meeting of First Leasing Corporation
Limited will be held at FTC Conference Room, Finance & Trade Centre, Shahrah-e-Faisal, Karachi
on Wednesday 22nd December, 1999 at 8.00 a.m. to transact the following business:
Ordinary Business
1. To confirm the minutes of the Extra Ordinary General Meeting held on July 23, 1999.
2. To receive, consider and adopt the audited accounts together with the Directors' and Auditors'
Report thereon for the year ended June 30, 1999.
3. To appoint Auditors for the year 1999-2000. The present Auditors, Messrs, Ford, Rhodes,
Robson, Morrow, Chartered Accountants retire and being eligible have offered themselves
for reappointment.
4. Any other business with the permission of the Chair.
By Order of the Board
Zahid Ali H. Jamall
Karachi: 30th November, 1999 Company Secretary
Notes:
1. The share transfer books of the company will remain closed from December 13, 1999 to
December 22, 1999 (both days inclusive)
2. A member entitled to attend, speak and vote at the meeting is entitled to appoint a proxy
to attend, speak and vote for him/her.
3. An instrument of proxy and the power of Attorney or other authority (if any) under which
it is signed or a notarially certified copy of such power of authority, in order to be valid,
must be deposited at the registered office of the company not less than 48 hours before
the time of the meeting.
4. Members are requested to notify any change in their address immediately.
DIRECTORS' REPORT
BUSINESS ENVIRONMENT
A combination of persistent recession that has militated against industrial investment and persistent
fiscal deficit that maintain pressure on interest rates, has made this a very difficult year for smaller
financial institutions. The new governments sensitivity to these issues is manifest in its repeated
promise of lower rates. Nevertheless benefits of a rational, coherent economic policy can only filter
through in due course. Ineffective economic management of the past has been the major
contribution to prevailing business difficulties and as reported last year, perils for the financial
services industry loomed large.
The leasing industry is at the end of the lending food-chain and no amount of innovation or effort
in these past years has permitted alternatives to the commercial banks as a source of funds.
Consequently when those same financial institutions enter the leasing business, the ramifications
for the leasing industry will be a deterioration portfolio quality and uncompetitive pricing. The slim
intermediation margins and growing recovery problems compound to make the environment an
extremely difficult one in which to operate.
On the brighter side, the current recovery climate that has the full force of political support has
helped in cleaning up slow-moving lease rentals and most lessors have reported an improvement
in client behaviour other than the terminally ill cases. However the period under review was affected
by political events and besides a contraction in leasing demands, we suffered losses on account
of forex premiums and penal interest on overdue installments.
There can be no guarantee of business recovery but rational, realistic policies focused on the
resolution of economic problems, can certainly offer a promise of a more stable environment in
which to conduct business.
REVIEW OF OPERATIONS
The financial year has been a disappointing one for your company due to the high cost of funds,
a problematic slow-down in recoveries and large-scale repossession of assets into our own books.
Several steps have been taken to restructure the company, inter-alia.
Renegotiation in borrowing agreements that include better pricing and longer tenures.
Currently we have replaced Rs. 250 million of short-term borrowing and are negotiating for
another Rs. 200 million in long-term funds.
More effective recovery procedures whereby nearly all the portfolio is active and current.
A major revision in leasing activity, away from large ticket industrial assets towards smaller
ticket leases for assets with proven resale value.
Introduction of corporate consumer finance products with better returns and greater security.
Continued development of the operating lease division.
OPERATING RESULTS OF THE COMPANY
The accompanying charts reflect our diversified lease portfolio over various industry segments and
the assets are mix.
First Leasing earned a pre-tax profit of Rs. 5.86 million and the recommended appropriation thereof
is a follows:
1999 1998
(Rupees in million)
Income from finance lease operations 160.78 153.86
Profit from operating leases 661 3.50
Corporate finance & treasury operations 11.62 23.48
Capital gains 3.79 4.14
------------------ ------------------
182.80 184.98
Operating cost 176.94 153.28
------------------ ------------------
Operating profit 5.86 31.70
Provision for taxation 1.96 3.69
------------------ ------------------
Profit after taxation 3.90 28.01
------------------ ------------------
Unappropriated profit brought forward 2.94 7.81
684 35.82
APPROPRIATIONS
Special reserve 0.78 5.60
Dividend Nil (1998: 10 %) -- 27.27
------------------ ------------------
0.78 32.87
------------------ ------------------
Unappropriated profit carried forward 6.06 2.95
========== ==========
The historical trend in respect of growth and profitability is set out below:
12 months to 18 months to 12 months to 12 months to 12 months to
31st December 30th June 30th June 30th June 30th June
1994 1996 1997 1998 1999
Net investment in leases 532.30 85,565 90,865 862.12 861.18
Income from finance lease operations 8,380 20,880 180.26 153.86 160.78
Operating profit 34.40 45.39 46.24 31.70 5.86
DIVIDENDS
No dividend has been declared by the Board for the year ended 30th June 1999. This is the first
year that First Leasing Corporation has passed over the payment of a dividend. The Board assures
its shareholders that as has been the practice in all past years, the policy of providing an economic
return on investment of our shareholders will be paramount in our efforts.
STRATEGIC INVESTMENT
In view of the assumption of management of Bankers Equity Limited by the State Bank of Pakistan,
no progress has been made on the sale of our investment to the major shareholders. Management
is now in active discussion with government and the State Bank on the future course to be adopted.
ELECTION OF DIRECTORS
In terms of section 178 (1) of the Companies Ordinance 1984, the following were elected Directors
at the election held on 23rd December, 1998:
1. Mr. Khurshid Hadi
2. Mr. Zaigham M. Rizvi
3. Mr. Ramadan A. Haggiagi
4. Mr. Nasim Beg
5. Mr. K.M.M. Shah
6. Mr. Arshad Nawab
7. Mr. Shoaib Qureshi
INFORMATION TECHNOLOGY
The company has taken measures to ensure that its computer applications, system and hardware
are Year 2000 Compliant.
ACKNOWLEDGMENT
The Board of Directors wish to place on record their sincere appreciation of the devoted services
of our staff and to reemphasize our commitment to the development of their professional careers
and to their well-being. The Board also acknowledges the support of all our institutional lenders.
For and on behalf of the Board
Khurshid Hadi
Karachi: 30th November, 1999 Chairman/Chief Executive
FORD RHODES, ROBSON, MORROW
Chartered Accountants
Finlay House,  Telephone H.O: (92-211) 241 5582
I.I. Chundrigar Road, Branch: (92-21) 240 1081
P.O. Box 4719, Telefax: (92-21) 241 9592
Karachi 74000, E Mail: frrm@cyber.net.pk.
Pakistan.
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet of FIRST LEASING CORPORATION LIMITED
as at June 30, 1999 and the related profit and loss account and cash flow statement,
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 and, after due verification thereof, 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 and the cash flow statement,
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 of the cash flows for the year then ended;
d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 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 matters referred to in note 7.1.
Pending the outcome of the matters referred to therein, no provision has been made
for the diminution in value of investment in Bankers Equity Limited as the
management believes that no permanent diminution in value has occurred.
Karachi -
November 30, 1999 Chartered Accountants
(MEMBER FIRM OF ERNST & YOUNG INTERNATIONAL)
BALANCE SHEET AS AT JUNE 30, 1999
1999 1998
Note Rupees Rupees
FIXED ASSETS - Tangible 3 115,377,300 104,601,958
INVESTMENT IN LEASES
Installment contracts receivable 993,062,668 973,624,824
Residual value of leased assets 100,650,532 118,927,069
------------------ ------------------
1,093,713,200 1,092,551,893
Less: Unearned income (232,532,097) (230,435,623)
------------------ ------------------
Net investment in leases 861,181,103 862,116,270
Less: Current portion of net investment in leases (320,796,338) (391,906,203)
------------------ ------------------
540,384,765 470,210,067
LONG-TERM FINANCE 4 -- 5,893,330
------------------ ------------------
540,384,765 476,103,397
Less: Provision for lease losses and doubtful receivables 5 (36,381,575) (30,223,833)
------------------ ------------------
504,003,190 445,879,564
LONG-TERM ADVANCES 6 5,660,660 5,115,169
LONG-TERM INVESTMENTS 7 96,929,094 74,879,094
LONG-TERM DEPOSIT AND DEFERRED COSTS 8 1,448,469 2,010,695
CURRENT ASSETS
Current portion of net investment in leases 320,796,338 391,906,203
Current maturity of long-term finance 4 10,350,967 7,045,379
Current maturity of long-term advances 480,155 287,543
Short-term and morabaha finances 9 58,320,729 53,479,025
Advances, deposits, prepayments and
other receivables 10 101,188,226 62,317,624
Investment in marketable securities 11 31,314,456 23,423,000
Cash and bank balances 12 17,189,891 19,345,626
------------------ ------------------
539,640,762 557,804,400
------------------ ------------------
1,263,059,475 1,190,290,880
========== ==========
SHARE CAPITAL AND RESERVES
Authorised 50,000,000 ordinary shares of Rs.10 each 500,000,000 500,000,000
========== ==========
Issued, subscribed and paid-up capital 13 272,782,340 272,782,340
Reserves 14 51,689,719 47,793,303
------------------ ------------------
Shareholders' equity 324,472,059 320,575,643
LONG-TERM FINANCES UNDER
MUSHARIKA ARRANGEMENTS 15 105,945,655 97,995,801
LONG-TERM FINANCES 16 149,223,514 170,527,457
OBLIGATIONS UNDER FINANCE LEASE 17 6,267,061 11,963,892
LONG-TERM DEPOSITS AND LIABILITIES 18 119,810,508 162,119,995
CURRENT LIABILITIES
Current maturity of long-term liabilities 19 155,004,022 174,429,597
Other current liabilities 20 402,336,656 225,400,261
Proposed dividend -- 27,278,234
------------------ ------------------
557,340,678 427,108,092
COMMITMENTS 21 ------------------ ------------------
1,263,059,475 1,190,290,880
========== ==========
The annexed notes form an integral part of these accounts. The auditors' report is annexed hereto.
Khurshid Hadi Zaigham Mehmood Rizvi
Chairman/Chief Executive Director
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED JUNE 30, 1999
1999 1998
Note Rupees Rupees
INCOME
Income from finance lease operations 22 160,778,505 153,864,305
Profit from operating leases 23 6,611,985 3,502,973
Corporate finance and treasury operations 24 11,622,877 23,482,449
Gain on marketable securities 3,788,357 4,142,492
[including loss of Rs.250,000
(1998 Rs. Nil) on long term investments]
------------------ ------------------
182,801,724 184,992,219
EXPENDITURE
Financial and bank charges 25 131,396,128 114,587,370
Selling, general and administrative expenses 26 31,452,029 31,509,734
Provision for diminution in value of investments
- short term 4,706,352 3,156,147
- long term 450,000 --
Provision for lease losses and doubtful receivables 8,745,484 4,027,481
Write off of net investment in lease finance 188,763 --
------------------ ------------------
176,938,756 153,280,732
------------------ ------------------
OPERATING PROFIT 5,862,968 31,711,487
PROVISION FOR TAXATION
- current year 1,746,878 3,696,839
- prior years 219,674 --
------------------ ------------------
1,966,552 3,696,839
------------------ ------------------
PROFIT AFTER TAXATION 3,896,416 28,014,648
UNAPPROPRIATED PROFIT BROUGHT FORWARD 2,943,763 7,810,279
------------------ ------------------
6,840,179 35,824,927
APPROPRIATIONS:
Transfer to special reserve 779,283 5,602,930
Proposed dividend: Nil (1998: 10%) -- 27,278,234
------------------ ------------------
779,283 32,881,164
------------------ ------------------
UNAPPROPRIATED PROFIT CARRIED FORWARD 6,060,896 2,943,763
========== ==========
Basic earnings per share 29 0.14 1.03
The annexed notes form an integral part of these accounts
Khurshid Hadi Zaigham Mehmood Rizvi
Chairman/Chief Executive Director
CASH FLOW STATEMENT
FOR THE YEAR ENDED JUNE 30, 1999
1999 1998
Rupees Rupees
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year before taxation 5,862,968 31,711,488
Adjustments for:
Depreciation on fixed assets 15,213,350 11,441,352
Amortization of deferred costs 859,956 253,483
Provision for lease losses and doubtful receivables 8,745,484 4,027,481
Provision for diminution in value of investments
- short term 4,706,352 3,156,147
- long term 450,000 --
(Gain) on sale of marketable securities (4,038,357) (4,142,792)
Loss on sale of long term investments 250,000 --
(Profit) on sale of fixed assets (585,901) (105,716)
Finance/mark-up expenses 130,606,887 114,041,378
Investment income (10,325,064) (21,383,611)
------------------ ------------------
145,882,707 107,287,722
------------------ ------------------
Operating profit before working capital changes 151,745,675 138,999,210
(Increase)/Decrease in current assets
Short-term finances and morabaha finances (4,841,703) 2,906,575
Investment in marketable securities (8,559,451) (5,833,442)
Advances, deposits, prepayments and other receivables (42,928,368) (26,270,509)
------------------ ------------------
(56,329,522) (29,197,376)
Increase/(Decrease) in current liabilities
Certificates of investment (22,010,000) 4,525,000
Short-term finances 181,306,791 (18,680,000)
Finance under mark-up arrangements 17,571,707 19,547,887
Accrued and other liabilities 4,456,567 12,177,427
------------------ ------------------
181,325,065 17,570,314
Cash generated from operations
Income taxes paid (3,066,488) (3,980,468)
Finance/mark-up paid (133,235,261) (114,361,482)
Investment income received 14,382,830 29,114,806
------------------ ------------------
(121,918,919) (89,227,144)
------------------ ------------------
Net cash generated from operating activities 154,822,299 38,145,004
CASH FLOWS FROM INVESTING ACTIVITIES
Long-term investments 2,250,000 (14,911,139)
Capital expenditure (28,361,236) (86,367,373)
Long-term deposits and deferred costs (297,730) (548,000)
Net investment in lease finance (net of repayments) 935,167 46,537,403
Advance against shares (24,999,990) --
Purchases of long-term investment (10) --
Sale of fixed assets 2,958,453 2,211,695
Long-term advances (disbursements) (1,194,887) --
Recovery of loan to directors 456,784 273,549
------------------ ------------------
Net cash (used in) investing activities (48,253,449) (52,803,865)
CASH FLOWS FROM FINANCING ACTIVITIES
Issue/(repayments) of Certificates of investment (41,355,000) 57,525,000
Long-term loans 30,000,000 85,000,000
Repayment of long-term loans (92,178,493) (83,6847494)
Dividend paid (27,938,602) (42,440,027)
Long-term finance -- (5,826,101)
Long-term advances and deposits (22,736,967) 5,259,448
Musharika finance 45,484,477 (60,903,796
------------------ ------------------
Net cash (used in) financing activities (108,724,585) (45,069,970)
------------------ ------------------
Net (decrease) in cash and bank balances (2,155,735) (59,728,831)
Cash and bank balances at the beginning of the year 19,345,626 79,074,458
------------------ ------------------
Cash and bank balances at the end of the year 17,189,891 19,345,627
========== ==========
Khurshid Hadi Zaigham Mehmood Rizvi
Chairman/Chief Executive Director
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED JUNE 30, 1999
1. THE COMPANY AND ITS OPERATIONS
The company was incorporated in Pakistan on August 31, 1991. The company is listed on
the Karachi and Lahore Stock Exchanges and is principally engaged in leasing of assets
and providing corporate finance services.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Accounting convention
These accounts have been prepared under the historical cost convention.
2.2 Revenue recognition
Lease income
Finance lease
The company follows the financing method in accounting for recognition of lease
income. To more accurately match income and expenditure, a portion of unearned
lease income approximating the costs incurred in writing the lease, including a general
provision for potential lease losses, is taken to "income from leasing" at the time of
execution of the lease. The remainder of unearned lease income is taken to income
over the term of the lease, so as to produce a systematic return on net investment
in leases. Income pertaining to the periods falling between rentals due and the period
end is recognized on an accrual basis.
Operating Lease
Rental income is recognized on an accrual basis over the lease period.
Corporate finance and treasury operations.
Commitment fee and other commissions are taken to income when realized. Return
on term deposits and fees for corporate finance services are recognized on an accrual
basis.
2.3 Provision for potential lease losses and doubtful receivables
Provision for lease, losses and doubtful receivables is maintained at a level which is
adequate to provide for any foreseen and unforeseen doubtful receivables.
2.4 Tangible fixed assets and depreciation
Owned
These are stated at cost less accumulated depreciation. Depreciation is charged to
income applying the straight line method, whereby the cost of an assets is written off
over its estimated useful life. In respect of additions during the year, depreciation is
charged for the full year, however, no depreciation is charged in the year of disposal.
Leased out assets repossessed are accounted for at lower of original cost, fair value
or present carrying amount.
Depreciation is charged on assets acquired for operating leases from the date of
acquisition on a straight line basis.
Maintenance and normal repairs are charged to income as and when incurred. Major
renewals and improvements are capitalised.
Profit/loss on disposal of fixed assets is included in the profit and loss account of current
year.
Leased
Assets acquired through lease finance are included as tangible fixed assets. The
outstanding lease obligation less finance charges allocated to future periods are shown
as a liability. The financial charge is calculated at the mark-up rate implicit in the lease.
Depreciation is charged over the useful life of the assets or lease term whichever is
shorter. However, if there is reasonable certainty that the ownership of the assets would
transfer to the company at the end of the lease term, the asset is depreciated over
its useful life.
2.5 Deferred costs.
Deferred costs are amortized over a period of five years commencing from the year
such costs are incurred.
2.6 Investments
Long-term investments
These are stated at cost. Provision is made for any diminution in value, if considered
permanent.
Short-term investments
These are stated at lower of cost or market value on a portfolio basis.
2.7 Taxation
Current
Income for the purpose of computing current taxation is determined under the provisions
of the tax law whereby lease income received or receivable are deemed to be income.
Provision for taxation is thus based on income determined in accordance with the
requirements of the tax law.
Deferred
The company accounts for deferred taxation using the liability method on all major
temporary differences and is dealt with as stated in note 27 of the accounts.
2.8 Foreign currency translation
Assets and liabilities in foreign currencies are translated into rupees at the rates of
exchange prevailing at the balance sheet date except for instances where forward
exchange risk cover has been taken. Such amounts are stated at the contracted rate.
Exchange gains and losses are included in current income.
2.9 Employees' retirement benefits
The company operates a contributory Provident Fund for all its permanent employees
and contributions are made monthly in accordance with the fund rules.
3. FIXED ASSETS-Tangible
COST DEPRECIATION
Written
Additions Disposals Accumulated Accumulated Down Value
As at during the during the As at as at Charge for On as at as at Depreciation
July 1, 1998 year year June 30, 1999 July 1, 1998 the year disposal June 30, 1999 June 30, 1999 Rate
Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees %
OWNED
Office building 1,403,300 -- -- 1,403,300 308,737 70,165 -- 378,902 1,024,398 5
Leasehold improvements 2,253,987 25,000 -- 2,278,987 1,276,601 228,420 -- 1,505,021 773,966 15
Furniture and fixtures 1,844,631 134,700 27,350 1,951,981 1,485,807 173,334 27,350 1,631,791 320,190 20
Office equipment 1,714,969 106,850 19,500 1,802,319 1,120,915 239,016 7,800 1,352,131 450,188 20
Computer equipment 2,132,358 285,850 36,200 2,382,008 1,495,057 442,463 27,150 1,910,370 471,638 25
Air conditioners and
household equipment 2,354,770 350,493 562,053 2,143,210 1,297,415 473,865 319,676 1,451,604 691,606 25
Motor vehicles 12,905,732 878,827 3,839,328 9,945,231 8,061,722 1,666,465 2,334,528 7,393,659 2,551,572 25
Plant and machinery
(for lease and re-sale)  10,332,000 -- -- 10,332,000 3,130,976 1,033,200 -- 4,164,176 6,167,824 10
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
34,941,747 1,781,720 4,484,431 32,239,036 18,177,230 4,326,928 2,716,504 19,787,654 12,451,382
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
LEASED
Motor vehicles 772,000 880,000 -- 1,652,000 193,000 413,000 -- 606,000 1,046,000 25
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
35,713,747 2,661,720 4,484,431 33,891,036 18,370,230 4,739,928 2,716,504 20,393,654 13,497,382
========== ========== ========== ========== ========== ========== ========== ========== ==========
FOR OPERATING LEASE
OWNED
Plant and machinery 75,328,331 25,699,516 -- 101,027,847 5,804,265 8,537,195 -- 14,341,460 86,686,387 10
Office equipment 350,000 -- -- 350,000 11,667 35,000 -- 46,667 303,333 10
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
75,678,331 25,699,516 -- 101,377,847 5,815,932 8,572,195 -- 14,388,127 86,989,720
========== ========== ========== ========== ========== ========== ========== ========== ==========
LEASED
Plant and Machinery 19,415,348 -- 691,000 18,724,348 2,019,298 1,901,227 86,375 3,834,150 14,890,198 10
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
95,093,679 25,699,516 691,000 120,102,195 7,835,230 10,473,422 86,375 18,222,277 101,879,918
========== ========== ========== ========== ========== ========== ========== ========== ==========
130,807,426 28,361,236 5,175,431 153,993,231 26,205,460 15,213,350 2,802,879 38,615,931 115,377,300
========== ========== ========== ========== ========== ========== ========== ========== ==========
1998 47,554,133 86,367,373 3,114,080 130,807,426 15,772,217 11,441,352 1,008,101 26,205,468 104,601,958
========== ========== ========== ========== ========== ========== ========== ========== ==========
3.1 Disposal of Assets
Accumulated Book Sale Mode of
Description Cost depreciation value proceeds Profit disposal Sold/transferred to
Rupees Rupees Rupees Rupees Rupees
Computer equipment 36,200 27,150 9,050 9,050 -- Negotiation Employee
Motor Vehicle 300,158 225,118 75,040 75,040 -- As per service rules Employee
Motor Vehicle 715,000 715,000 -- 89,375 89,375 As per service rules Employee
Motor vehicle 2,694,170 1,347,085 1,347,085 1,700,000 352,915 Negotiation Siddiqsons Industries (Pvt) Ltd.
Motor vehicle 70,700 17,675 53,025 65,000 11,975 Insurance claim EFU General Insurance Co. Ltd.
Motor vehicle 59,300 29,650 29,650 50,000 20,350 Insurance claim EFU General Insurance Co. Ltd.
AC and household equipment 64,100 48,075 16,025 16,025 -- As per service rules Employee
AC and household equipment 80,700 80,700 -- 20,175 20,175 As per service rules Employee
AC and household equipment 346,350 173,175 173,175 230,900 57,725 As per service rules Employee
AC and household equipment 70,903 17,726 53,177 70,903 17,726 As per service rules Employee
Furniture & Fixture 16,900 16,900 -- 4,225 4,225 Negotiation Employee
Furniture & Fixture 10,450 10,450 -- 3,135 3,135 Negotiation Employee
Office equipment 19,500 7,800 11,700 14,625 2,925 Negotiation Employee
Generator 691,000 86,375 604,625 610,000 5,375 Negotiation Allied Engineering (Pvt.) Ltd,
------------------ ------------------ ------------------ ------------------ ------------------
5,175,431 2,802,879 2,372,552 2,958,453 585,901
========== ========== ========== ========== ==========
1998 3,114,080 1,008,101 2,105,979 2,211,695 105,716
========== ========== ========== ========== ==========
1999 1998
Rupees Rupees
4. LONG-TERM FINANCE-Considered good 12,938,709 12,938,709
Less: Current maturity shown under current assets (12,938,709) (7,045,379)
------------------ ------------------
-- 5,893,330
========== ==========
The finance is secured by a pari-passu equitable mortgage of immovable property and pledge
of directors, shares of the borrowing company (Cosmopolitan Development Corporation) and
the personal guarantees of the directors. The loan carries a mark-up at the rate of Re. 0.495
per Rs. 1000 per day.
The finance is considered good, as a compromise decree has been passed by the banking
tribunal. The finance is now recoverable in 10 equal quarterly installments which became due
from March 18, 1998. As a result and in accordance with the decree, mark-up accrued of
Rs.5,826,101 has been capitalised in the above. The above is shown net of provision of
Rs.2,587,742 under current assets.
5. PROVISION FOR LEASE LOSSES AND
DOUBTFUL RECEIVABLES 36,381,575 30,223,833
========== ==========
A general provision for doubtful receivables has been made and in the opinion of the
management no specific provision is required. However, to comply with State Bank of
Pakistan's regulations governing Non Banking Financial Institutions, an amount of Rs. 36.38
million (1998 Rs. 30.22 million) has been allocated towards provision required for prudential
regulations on various receivables.
1999 1998
Note Rupees Rupees
6. LONG-TERM ADVANCES - Considered good 6,140,815 5,402,712
Less Current maturity shown under current assets (480,155) (287,543)
------------------ ------------------
5,660,660 5,115,169
========== ==========
The loans under the scheme have been provided to the chief executive and a director of
the company to facilitate the construction of their houses. The loans are repayable in equal
monthly installments over a period of 6 to 15 years which commenced from January 31, 1997
and July, 1, 1998 respectively alongwith 5% service charges per annum on the monthly
outstanding balances. One of the advances is secured by deposit of the title deeds of the
properties. Maximum amount due at the end of any month during the year was Rs.6,560,399
(1998 Rs. 5,653,983).
7. LONG-TERM INVESTMENTS
Quoted:
First Capital Securities Limited
470,250 (1998: 418,000) ordinary shares
of Rs. 10 each 5,401,085 5,401,085
Network Leasing Corporation Limited
(an associated undertaking)
(1998:250,000 ordinary shares of Rs. 10 each) -- 2,500,000
First Capital Mutual Fund
(an associated undertaking)
150,000 ordinary shares of Rs. 10 each 1,500,000 1,500,000
Bankers Equity Limited
2,702,700 ordinary shares of Rs. 10 each 7.1 50,566,870 50,566,870
ICP S.E.M.F.
692,000 ordinary share of Rs. 10 each 14,911,139 14,911,139
------------------ ------------------
72,379,094 74,879,094
Unquoted
Maghreb Development Corporation (Pvt.) Ltd.
(an associated .undertaking)
1 ordinary share of Rs. 10 each (1998: Nil) 7.2 10 --
Advance against share capital 24,999,990 --
------------------ ------------------
25,000,000 --
------------------ ------------------
97,379,094 74,879,094
Provision for diminution in value of investments (450,000) --
------------------ ------------------
96,929,094 74,879,094
========== ==========
Aggregate market value of quoted long-term investments as on June 30, 1999 was
Rs. 23,448,323 (1998: Rs. 19,745,380), of which Rs. 11,081,070 (1998: Rs. 9,189,180)
relates to Bankers Equity Limited. The break up value of investment in the unquoted
share is Rs. 10 (1998: Rs. Nil).
7.1 Due to various reasons, the State Bank of Pakistan has taken administrative control of
Bankers Equity Limited. It is not known at this point of time the action that will be taken in
resolving the issues involved and the resulting impact it may cause on the carrying value
of these investments. The company is however confident that the above would not result
in permanent diminution in the value of these investments.
7.2 The investment in share capital represents a sponsor share, giving the company 25% equity
in the share capital of the investee.
1999 1998
Note Rupees Rupees
8. LONG-TERM DEPOSIT AND DEFERRED COSTS
Long-term deposit 845,730 548,000
Deferred costs 8.1 602,739 1,462,695
------------------ ------------------
1,448,469 2,010,695
========== ==========
8.1 Deferred costs
Registration fees 1,045,710 1,045,710
Formation expenses 88,133 88,133
Underwriting commission 260,000 260,000
Brokerage 223,324 223,324
Share issue expenses 3,026,965 3,026,965
Pre-operating expenses 224,239 224,239
Commitment fee on long-term loans 1,914,777 1,914,777
------------------ ------------------
6,783,148 6,783,148
Less: Amortization to date (6,180,409) (5,320,453)
------------------ ------------------
602,739 1,462,695
========== ==========
The above costs have been carried forward as they confer benefit to future periods.
9. SHORT-TERM AND MORABAHA FINANCES - Considered good
Short-term finances 1,789,444 1,000,000
Morabaha finances 56,531,285 52,479,025
------------------ ------------------
58,320,729 53,479,025
========== ==========
Short-term and morabaha finances have been extended to clients on mark-up/profit basis from
3 months to 1 year and are secured by equitable mortgage of immovable properties, lien on stocks,
pledge of COIs, promissory notes and personal guarantees in accordance with individual agreements
with the clients. Mark-up/profit rates vary from Re. 0.52 to Re. 0.71 per Rs. 1000 per day.
Included in the above is Rs. 4,260,000 (1998: Rs.5,700,000) in respect of associated companies.
The maximum amount due at the end of any month from associated undertakings during the year
was Rs.4,260,000 (1998: Rs.5,700,000).
1999 1998
Note Rupees Rupees
10. ADVANCES, DEPOSITS, PREPAYMENTS AND
OTHER RECEIVABLES
Advances - unsecured, considered good
Advances to suppliers and contractors 10.1 23,869,959 3,254,066
Advances to employees 10.2 4,996,370 3,955,067
------------------ ------------------
28,866,329 7,209,133
Security deposits 754,487 680,767
Prepayments 3,397,075 1,018,306
------------------ ------------------
4,151,562 1,699,073
Mark-up receivable
- Financial institutions 2,045,339 1,051,321
- Others 9,020,649 14,072,433
------------------ ------------------
11,065,988 15,123,754
Other charges recoverable from lessees 13,728,210 11,244,057
Operating lease rentals receivable 8,220,712 1,952,839
Other assets 10.3 20,000,000 20,000,000
Other receivables 10.4 15,155,425 5,088,768
------------------ ------------------
101,188,226 62,317,624
========== ==========
10.1 This includes amount paid against equipment for operating lease amounting to
Rs.18,668,175 (1998: Rs. Nil).
10.2 The maximum amount due at the end of any month during the year was Rs.6,394,944
(1998: Rs.5,179,250).
10.3 This represents leased assets repossessed, stated at original cost.
10.4 The above includes Rs.1,001,000 (1998: Rs. Nil) due from an associated company with
respect to inter-company expenses. The maximum amount due at the end of any
month was Rs. 1,001,000 (1998: Rs. Nil).
11. INVESTMENTS IN MARKETABLE SECURITIES
1999 1998
No. of No. of
ordinary ordinary
shares of Cost shares of cost
Description Rs.10 each Rupees Rs. 10 each Rupees
Adamjee Insurance Co. Ltd. 5,500 323,100 27,500 1,504,425
AI-Meezan Mutual Fund Ltd. 250,000 2,500,000 250,000 2,500,000
Biofo Industries Ltd. 200,000 905,620 -- --
Dhan Fibre Ltd. 100,000 457,500 -- --
EFU General Insurance Co. Ltd. 12,000 757,350 12,000 757,350
Engro Chemical Ltd. -- -- 25,000 1,791,820
F F C Jordan -- -- 125,000 1,817,975
Fauji Fertilizer Ltd. 75,000 4,217,250 -- --
First Capital Mutual Fund 76,000 760,000 76,000 760,000
Hub Power Company Ltd. 100,000 1,944,250 -- --
ICI Pakistan Ltd. 50,000 731,140 150,000 1,900,850
ICP SEMF 585,500 8,596,105 -- --
Karachi Electric Supply Corporation Ltd. 428,000 6,044,259 50,000 555,471
P I C I C 25,000 270,750 -- --
Packages Ltd. 250 9,924 -- --
Pakistan International Air Lines Ltd. 85,000 1,402,796 -- --
Pakistan State Oil -- -- 10,000 1,152,100
Pakistan Telecommunication Corp. Ltd. -- -- 215,000 4,215,125
Shell Pakistan Ltd. 15,000 2,893,322 -- --
Southern Electric Power Ltd. -- -- 75,000 386,125
Sui Nothern Gas Pipe Lines Ltd. 28,750 286,143 150,000 1,685,425
Sui Southern Gas Pipe Lines Ltd. -- -- 100,000 1,017,300
Tri Pack Films Ltd. 50,000 542,265 -- --
------------------ ------------------
32,641,774 20,043,966
Government securities (note 11.1) 7,600,000 7,600,000
------------------ ------------------
40,241,774 27,643,966
Provision for diminution in value of investment (8,927,318) (4,220,966)
------------------ ------------------
Aggregate market value at June 30. 31,314,456 23,423,000
========== ==========
11.1 These represent investment in government securities as required under the relevant
provision of the State Bank of Pakistan's Rules for Non-Banking Financial Institutions to
maintain liquidity against certain liabilities.
1999 1998
Rupees Rupees
12. CASH AND BANK BALANCES
Balance with banks on current accounts 1,544,663 972,518
Term deposit (note 12.1) 15,517,364 18,282,162
------------------ ------------------
17,062,027 19,254,680
Cash in hand 127,864 90,946
------------------ ------------------
17,189,891 19,345,626
========== ==========
12.1 Included in the above is Rs. 6.28 million (1998 Rs.15.00 million) held with an investment
bank.
Furthermore Rs.1.10 million (1998: Rs. 1.00 million) has been deposited with State Bank
of Pakistan as required under the relevant provision of the SBP's Rules for Non-Banking
Financial Institutions to maintain liquidity against certain liabilities
1999 1998
Note Rupees Rupees
13. ISSUED, SUBSCRIBED AND PAID-UP
SHARE CAPITAL
Fully paid-up ordinary shares of Rs. 10 each
Issued for cash
1998 1999
Number Number
of shares of shares
27,278,234 27,278,234 272,782,340 272,782,340
========== ==========
14. RESERVES
Capital Reserve
Share premium 6,274,730 6,274,730
Special reserve 14.1 39,354,093 38,574,810
------------------ ------------------
45,628,823 44,849,540
Revenue Reserve
Unappropriated profit 6,060,896 2,943,763
------------------ ------------------
51,689,719 47,793,303
========== ==========
14.1 Opening balance 38,574,810 32,971,880
Add: Transferred from profit and loss account 779,283 5,602,930
------------------ ------------------
39,354,093 38,574,810
========== ==========
The above represents 20% of after tax profit as required under the relevant provision of the
State Bank of Pakistan's rules for Non-Banking Financial Institutions,
15. LONG-TERM FINANCES UNDER
MUSHARIKA ARRANGEMENTS
Musharika finances 170,105,655 124,621,178
Less: Current maturity shown under current liabilities (64,160,000) (26,625,377)
------------------ ------------------
105,945,655 97,995,801
========== ==========
Musharika finances include Rs,130.10 million (1998: Rs. 84.62 million) which are unsecured, The
balance of Rs.40 million is secured by hypothecation of company's assets, The mushariks earned
an average rate of 18.08% per annum (1998: 18.92%) on these musharika arrangements. The
terms of repayment of principal and profit range from monthly to end of term basis.
1999 1998
Note Rupees Rupees
16. LONG-TERM FINANCES-Secured
Foreign currency loan
International Finance Corporation 16.1 69,376,500 84,793,500
Less: Exchange difference not yet due (536,850) (656,150)1
------------------ ------------------
68,839,650 84,137,350
Local currency finances
From banking companies
Finance A 16.2 20,000,000 20,000,000
From financial Institutions
Finance B -- 11,271,436
Finance C -- 4,151,524
Finance D 16.3 25,000,000 25,000,000
Finance E -- 7,027,163
Finance F -- 25,000,000
Finance G 16.4 10,000,000 20,000,000
Finance H 16.5 11,453,343 17,410,460
Finance I 16.6 18,193,114 25,000,000
Finance K 16.7 13,333,334 20,000,000
Finance L 16.8 50,000,000 20,000,000
------------------ ------------------
147,979,791 194,860,583
------------------ ------------------
216,819,441 278,997,933
Less: Current maturity shown under current liabilities (67,595,927) (108,470,476)
------------------ ------------------
149,223,514 170,527,457
========== ==========
16.1 IFG Loan
The International Finance Corporation (IFC) has extended a loan for financing of lease
operations which is repayable in sixteen semi-annual equal installments which commenced
from June 15, 1996. The loan carries interest at the rate of 8.5% payable semi-annually
secured by hypothecation of leased assets and related lease receivables, ranking pari-passu
with the charges created or which may be created in favour of other lenders. The loan is
registered under the exchange risk coverage scheme of the State Bank of Pakistan in case
the company fails to pay any amount on the due date, it shall be liable to pay liquidated
damages at the rate of 2% per annum over and above the interest rate.
16.2 Finance A
This has been obtained from a banking institution at a mark-up rate of 19% per annum,
payable quarterly. The loan is repayable in lump-sum on August 1, 1999 and is secured by
hypothecation of leased assets.
16.3 Finance D
This has been obtained from a financial institution at a mark-up rate ranging from 18% to
20.5% per annum. The loan is repayable in lump-sum on August 26, 2000 and secured by
hypothecation of leased assets.
16.4 Finance G
This has been obtained from a financial institution at a mark-up rate of 20.5% per annum,
payable quarterly. The loan is repayable in four equal quarterly installments which commenced
from February 28, 1999 and is secured by hypothecation of leased assets.
16.5 Finance H
This has been obtained from a financial institution on a sale and repurchase agreement for
financing the leasing operations of the company and is secured by hypothecation of leased
assets.
The sale price was Rs. 20,000,000 with a purchase price of Rs.27,078,100 and is repayable
in twelve equal quarterly installments which commenced from March 29, 1998.
16.6 Finance I
This has been obtained from a financial institution on a sale and repurchase agreement for
financing the leasing operations of the company and is secured by hypothecation of leased
assets.
The sale price was Rs. 25,000,000 with a purchase price of Rs. 33,384,624 and is repayable
in twelve equal quarterly installments which commenced from September 01, 1998.
16.7 Finance K
This has been obtained from a financial institution on a sale and repurchase agreement for
financing the leasing operations of the company and is secured by hypothecation of leased
assets.
The sale price was Rs. 20,000,000 with a purchase price of Rs. 26,430,229 and is repayable
in six semi-annual installments which commenced from September 23, 1998.
16.8 Finance L
This represents three tranches of Rs. 30,000,000, Rs. 10,000,000 and Rs. 10,000,000
obtained from a financial institution. Mark-up ranging from 18% to 19% is payable quarterly
and the principal is payable on April 21, 2001, April 28, 2001 and June 18, 2001 respectively.
The finance is secured by hypothecation of leased assets.
1998 1999
Note Rupees Rupees
17. OBLIGATIONS UNDER FINANCE LEASE
Liabilities against lease finance 17.1 12,354,377 16,814,807
Less: Current maturity shown under current liabilities (6,087,316) (4,850,915)
------------------ ------------------
6,267,061 11,963,892
========== ==========
1999 1998
Note Rupees Rupees
17.1 Year to June 30, 1999 -- 7,801,944
Year to June 30, 2000 7,940,403 7,914,699
Year to June 30, 2001 4,007,668 3,981,964
Year to June 30, 2002 2,339,988 2,258,634
------------------ ------------------
14,288,059 21,957,241
Less: Finance charges allocated to future periods (1,933,682) (5,142,434)
------------------ ------------------
12,354,377 16,814,807
========== ==========
These obligations represent acquisition of equipment under finance lease facility. The average rate
of return used as the discounting factor is 21.58% per annum. The lease rentals are payable in
monthly installments.
At the end of the lease the ownership of the asset shall be transferred to the company on payment
of residual value amounting to Rs.1,267,867 (1998: 1,009,367).
18. LONG-TERM DEPOSITS AND LIABILITIES
Deposits
Deposits on leases 93,171,287 111,447,824
Less: Current maturity shown under current liabilities (17,160,779) (34,482,829)
------------------ ------------------
76,010,508 76,964,995
Certificates of investment 18.1 43,800,000 85,155,000
------------------ ------------------
119,810,508 162,119,995
========== ==========
18.1 The company has a scheme of registered Certificates of Investment (COIs) for resource
mobilisation as per permission from the Securities and Exchange Commission of Pakistan.
These certificates are issued under profit and loss sharing basis at rates of profit ranging
from 17.55% to 19.20% per annum. The COIs are for terms of 2 years to 5 years.
19. CURRENT MATURITY OF LONG-TERM LIABILITIES
Current maturity of long-term finances under
musharika arrangements 64,160,000 26,625,377
Current maturity of long-term finances 67,595,927 108,470,476
Current maturity of obligations under finance lease 6,087,316 4,850,915
Current maturity of long-term deposits 17,160,779 34,482,829
------------------ ------------------
155,004,022 174,429,597
========== ==========
1999 1998
Note Rupees Rupees
20. OTHER CURRENT LIABILITIES
Short-term finances from
-banks and financial institutions 20.1 226,665,133 45,358,341
Running finance under mark-up arrangement 20.2 52,108,784 34,537,077
Certificates of investment 20.3 70,095,000 92,105,000
Creditors, accrued 'and other liabilities 20.4 50,747,668 48,919,475
Unclaimed dividend 1,604,609 2,264,977
Provision for taxation 1,115,462 2,215,391
------------------ ------------------
402,336,656 225,400,261
========== ==========
20.1 Short-term finances from banks and financial institutions
Represents short-term finances utilised against aggregate facilities of Rs. 226.66 million
(1998: Rs. 45.35 million). These finances carry mark-up at rates ranging from 15.50% to
19.60%. Included in these are unsecured finances of Rs. 190.01 million (1998: Rs. 30
million).
1999 1998
(Rupees in million)
Security for the balance of the finances is as follows:
Hypothecation of asset leased out -- 10.00
Pledge of marketable securities 36.65 --
Cash collateral - included in bank
balances in deposit accounts -- 6.28
20.2 Running finance under mark-up arrangement
Represents running finance against aggregate facilities of Rs. 75 million (1998:85 million)
from a commercial bank. The average rate of mark-up is STFB + 400 Basis Points Standard,
flooring at 17% per annum. These arrangements are secured by hypothecation of leased
assets.
20.3 Certificates of investment
The company has a scheme of registered Certificates of Investments (COIs) for resource
mobilisation as per permission from the Securities and Exchange Commission of Pakistan.
These certificates are issued under profit and loss sharing basis at rates of profit ranging
from 13.00% to 19.50% per annum. The COIs are for terms of 3 months to 1 year.
1999 1998
Note Rupees Rupees
20.4 Creditors, accrued and other liabilities
Creditors 20.4.1 22,674,511 13,087,702
Accrued expenses 649,533 423,760
Other payables 4,046,142 4,572,971
Advances from customers against
pending lease executions 364,090 482,311
Tax deducted at source 176,850 73,020
Mark-up payable
Financial institutions - secured 12,743,484 13,345,210
- unsecured 5,703,815 6,486,815
Exchange risk fee payable to SBP 174,410 232,079
Others - secured -- 1,102,647
- unsecured 2,666,836 2,750,168
------------------ ------------------
21,288,545 23,916,919
Advance rentals 1,547,996 6,362,792
------------------ ------------------
50,747,668 48,919,475
========== ==========
20.4.1 This includes an amount of Rs. 12.51 million (1998: Rs. 12.58 million) payable to
a supplier for acquisition of assets to be given on operating leases.
21. COMMITMENTS
Commitments for lease finance 70,640,000 87,339,000
Letter of comfort against Letter of Credit -- 7,543,119
------------------ ------------------
70,640,000 94,882,119
========== ==========
22. INCOME FROM FINANCE LEASE OPERATIONS
Lease income 160,778,505 153,864,305
========== ==========
The above includes all income arising on account of finance lease operations.
23. PROFIT FROM OPERATING LEASES
Rentals 32,066,324 16,799,226
Depreciation 10,473,423 5,959,567
Maintenance expenses 14,231,870 6,969,852
Other expenses 749,046 366,834
------------------ ------------------
25,454,339 13,296,253
------------------ ------------------
6,611,985 3,502,973
========== ==========
1999 1998
Rupees Rupees
24. CORPORATE FINANCE AND TREASURY OPERATIONS
Financial services fee -- 342,500
Arrangement fee 100,000 22,500
Dividend income 2,900,519 6,700,400
Return on term deposits 1,466,137 6,373,963
Return on government securities 1,143,434 993,780
Return on long-term finances -- 2,086,818
Return on short-term morabaha finances
[net after charging financial costs of
Rs. 7,300,000 (1998: Rs.7,505,000)] 4,811,783 4,114,600
Gain on disposal of fixed assets 585,901 105,716
Exchange gain 3,191 1,114,049
Miscellaneous income 611,912 1,628,123
------------------ ------------------
11,622,877 23,482,449
========== ==========
25. FINANCIAL AND BANK CHARGES
Profit on musharika finances 13,422,706 220,301
Mark-up on long-term finances 33,941,512 34,656,123
Exchange risk fee 5,340,622 6,375,833
Mark-up on certificates of investment 31,394,910 28,070,946
Finance charges on leased assets 2,988,788 2,351,390
Finance charges - bills discounted -- 83,109
Mark-up on short-term finances
- Banks and financial institutions 35,525,361 17,597,642
- Others -- 250,499
Mark-up on running finance [net of Rs. 859,144
recovered (1998: Rs.714,640] 7,992,988 2,625,670
Bank charges and commissions 358,417 354,514
Amortization of deferred costs 430,824 191,478
------------------ ------------------
131,396,128 114,587,370
========== ==========
26. SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Directors fee 26.1 6,500 1,000
Salaries and allowances 26.2 12,730,073 13,693,595
Staff welfare and training 1,568,674 1,848,917
Office rent 1,955,751 1,452,369
Travelling 969,345 913,875
Vehicle up- keep and running 1,546,295 1,940,552
Legal and professional charges 968,522 524,240
Insurance 143,832 47,205
Telephone and fax 1,956,180 1,541,493
Postage and courier 168,813 189,139
Electricity, water and gas 756,726 733,260
Subscription 409,236 302,782
Auditors' remuneration 26.3 186,556 120,000
Shares registrar services 454,925 381,779
Advertisement 120,065 150,858
Printing and stationery 468,884 684,883
Depreciation 4,739,924 5,294,597
Amortization of deferred costs 429,132 62,005
Office repairs and maintenance 920,730 756,724
Donations 26.4 142,700 94,000
Professional tax 157,092 130,000
General expenses 615,999 646,461
Zakat 36,075 --
------------------ ------------------
31,452,029 31,509,734
========== ==========
26.1 Fees totalling Rs. 6,500 (1998: Rs. 1,000) have been paid to directors for attending board
meetings during the year.
26.2 Remuneration of Chief Executive, Directors and Executives
1999 1998
Chief Chief
Executive Directors Executives Total Executive Directors Executives Total
Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees
Managerial remuneration 1,161,600 630,600 2,689,920 4,482,120 1,330,362 1,329,520 3,137,281 5,797,163
Housing and utilities 638,400 346,800 1,430,640 2,415,840 497,050 730,898 1,516,346 2,744,294
Medical and other expenses 682,625 241,704 152,638 1,076,967 857,163 403,407 233,327 1,493,897
Provident fund 116,160 63,070 268,992 448,222 90,380 132,952 280,964 504,296
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
2,598,785 1,282,174 4,542,190 8,423,149 2,774,955 2,596,777 5,167,918 10,539,650
========== ========== ========== ========== ========== ========== ========== ==========
Number of persons 1 2 15 18 1 2 15 18
In addition the Chief Executive, two directors and certain executives are also provided with free
use of company cars and perquisites in accordance with the terms of their employment. All
executives are provided with medical insurance cover.
1999 1998
Rupees Rupees
26.3 Auditors' remuneration
Statutory audit 125,000 100,000
Advisory services 50,000 --
Out-of-pocket expenses 11,556 20,000
------------------ ------------------
186,556 120,000
========== ==========
26.4 Donations
Recipients of donation do not include any donee in whom any director or his spouse had
an interest.
27. DEFERRED TAXATION
Deferred taxation arising due to timing differences computed under the liability method is estimated
at Rs. 113.209 million (1998:Rs.105.052 million) of which Rs. 8.157 million is in respect of the current 
year. However, due to unabsorbed tax depreciation carried forward as per tax returns of Rs.344.315
million resulting in a deferred tax debit of Rs.114.614 million, no provision for deferred tax liability
is required in the accounts.
28. TRANSACTIONS WITH ASSOCIATED UNDERTAKINGS
Receipts
Lease rentals received 17,693,227 8,739,964
Security deposits on operating leases 997,725 135,150
Profit received on short-term finances -- 1,300,170
Net funds received from trading activities -- 5,818,325
Dividend income -- 4,344,050
Morabaha finance -- 9,200,000
Musharika finances 59,500,000 --
Sale of long-term investments 2,250,000 --
Payments
Profit paid on Certificates of investment -- 75,000
Mark-up paid on managed fund -- 5,498,822
Leases disbursed -- 8,500,000
Morabaha finance 4,000,000 2,741,123
Musharika finance 9,700,000 --
Mark-up paid on musharika finance 1,095,685 --
Advance against share capital 24,999,990 --
Long-term investment 10 --
Inter-company expenses 1,001,000 --
The transactions with the associated undertakings are in the normal course of business at
contracted rates and terms determined in accordance with market rates.
1999 1998
Rupees Rupees
29. BASIC EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit for the year by number of shares
outstanding during the year as follows:
Profit after tax for the year 3,896,416 28,014,649
========== ==========
Weighted average number of shares outstanding
during the year 27,278,234 27,278,234
========== ==========
Basic earnings per share 0.14 1.03
========== ==========
29.1 No figure for diluted earnings per share has been presented as the Company has not issued
any instruments which would have an impact on earnings per share when exercised.
30. CREDIT RISK AND CONCENTRATIONS OF CREDIT RISK
Credit risk is the risk, which arises with the possibility that one party to a financial instrument will
fail to discharge an obligation and cause the other party to incur a financial loss. The company
attempts to control credit risk by monitoring credit exposures by undertaking transactions with a
large number of counterparties in various industries and by continuously assessing the credit
worthiness of counterparties.
Concentration of credit risk arises when a number of counterparties have similar type of business
activities. As a result any change in economic, political or other conditions would effect their ability
to meet contractual obligations in a similar manner.
The company manages these risks by ensuring that adequately secured exposures are made to
creditworthy parties. Furthermore exposures to various industrial sectors are kept within prescribed
limits.
Details of the industry sector analysis of lease portfolio is given below:
June 30, 1999 %
Industry Sector (Rupees)
Cement 168,130,579 19.53
Services 93,380,431 10.85
Textile Weaving and Knitting 91,186,245 10.60
Chemicals, Fertilizers and Pharma 80,801,297 9.38
Steel, Engineering and Automobile 75,424,615 8.76
Energy, Oil and Gas 51,134,787 5.94
Transport and Communication 47,189,927 5.48
Food, Tobacco and Beverages 41,185,784 4.78
Hotels 31,296,876 3.63
Electrical and Electronic Goods 29,788,113 3.46
Textile Spinning 24,397,183 2.83
Sugar and Allied 18,907,834 2.20
Paper and Board 18,579,457 2.16
Synthetic and Rayon 17,088,712 1.98
Health Care 9,341,761 1.08
Financial Institutions 9,245,637 1.07
Construction 8,207,056 0.95
Dairy and Poultry 6,663,478 0.77
Leather Footwear and Tanneries 1,043,994 0.12
Glass and Ceramics 635,456 0.07
Miscellaneous 37,551,881 4.36
------------------ ------------------
861,181,103 100.00
========== ==========
31. NET FOREIGN CURRENCY EXPOSURE
For foreign currency borrowings, appropriate forward exchange cover has been obtained directly
from State Bank of Pakistan to hedge against foreign exchange fluctuation risk.
32. MARK-UP RATE RISK
Mark-up rate risk (MRR) arises from the possibility that changes in MRR will affect the value of
financial instruments. A company is exposed to MRR as a result of mismatches or gaps in the
amounts of assets and liabilities and off balance sheet instruments that mature or reprice in a given
period. The risk is managed by matching the repricing of assets and liabilities.
The company's MRR sensitivity position based on the earlier of contractual repricing or maturity
date, is a follows:
More than one
Less than year and less More than Not exposed More than
one year than five years five years to MRR Total five years
Rupees Rupees Rupees Rupees Rupees Rupees
Assets
Fixed Assets -- -- -- 115,377,300 115,377,300
Net investment in leases 303,635,559 428,493,397 -- 100,650,532 832,779,488
Long-term finance 10,350,967 -- -- -- 10,350,967
Long-term advances 480,155 2,219,514 3,441,146 -- 6,140,815
Long-term investments -- -- -- 96,929,094 96,929,094
Long-term deposits -- -- -- 845,730 845,730
Long-term deferred costs -- -- -- 602,739 602,739
Shod-term and morabaha finances 58,320,729 -- -- -- 58,320,729
Advances -- -- -- 28,866,329 28,866,329
Deposits -- -- -- 754,487 754,487
Prepayments -- -- -- 3,397,075 3,397,075
Other receivables -- -- -- 60,190,375 60,190,375
Investment in marketable securities 7,600,000 -- -- 23,714,456 31,314,456
Cash and bank balances 15,517,364 -- -- 1,672,527 17,189,891
------------------ ------------------ ------------------ ------------------ ------------------
A 395,904,774 430,712,911 3,441,146 433,000,644 1,263,059,475
========== ========== ========== ========== ==========
Equity and Liabilities
Share capital and reserves -- -- -- 324,472,059 324,472,059
Long-term finances under
musharika arrangements 64,160,000 105,945,655 -- -- 170,105,655
Long-term finances 67,595,927 149,223,514 -- -- 216,819,441
Obligations under finance lease 6,007,316 6,267,061 -- -- 12,354,377
Long-terms deposits -- -- -- 93,171,287 93,171,287
Certificates of investment 70,095,000 43,800,000 -- -- 113,895,000
Other current liabilities 278,773,917 -- -- 53,467,739 332,241,656
------------------ ------------------ ------------------ ------------------ ------------------
B 486,712,160 305,236,230 -- 471,111,085 1,263,059,475
========== ========== ========== ========== ==========
MRR sensitivity gap (A-B) (90,807,386) 125,476,681 3,441,146 (38,110,441) --
Cumulative MRR sensitivity gap (90,807,386) 34,669,295 38,110,441 -- --
a) The total MRR sensitivity gap represents the net amounts of on-balance sheet items.
b) The effective MRR for each of the monetary financial instrument is as follows:
1999
Effective
MRR
%
Assets
Net investment in leases 22.88
Long-term finance 18.07
Long-term advances 5.00
Short-term and morabaha finances 19.78
Investment in marketable securities 15.00
Cash and bank balances 18.00
Equity and Liabilities
Long-term finances under musharika arrangements 18.08
Long-term finances. 17.43
Obligations under finance lease 21.58
Certificates of investment 18.68
Other current liabilities 18.28
33. FAIR VALUE OF FINANCIAL INSTRUMENT
The table below sets out the estimated fair values of balances sheet financial instruments with
their respective book values as of June 30, 1999. The fair value is the amount for which an asset
could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's
length transaction. Consequently differences can arise between book value and the fair value
estimates.
Book value Fair value Book value over
Fair value
Rupees Rupees Rupees
Long term investments - quoted
Equity investments 71,929,094 23,448,323 48,480,771
========== ========== ==========
The fair value of long term equity investments is based on quoted market prices.
No change has been made in the classification of equity investment between long and short-
term during the current accounting period. Management intends to hold these investments for a
long-term period and considers the decline in market value temporary. Therefore no additional
provision is considered necessary.
The estimated fair value of all other balances sheet financial instruments are not significantly
different from their book values.
34. GENERAL
34.1 Figures have been rounded off to the nearest rupee.
34.2 Previous year's figures have been rearranged wherever necessary for the purpose of
comparison.
Khurshid Hadi Zaigham Mehmood Rizvi
Chairman/Chief Executive Director
PATTERN OF SHAREHOLDING
No. of Having Shares Shares Percentage
Shareholders From To Held
102 1 100 10200 .0373
1320 101 500 632600 2.3190
381 501 1000 372500 1.3655
263 1001 5000 711700 2.6090
53 5001 10000 434600 1.5932
15 10001 15000 194300 .7122
5 15001 20000 90200 .3306
3 20001 25000 66700 .2445
2 25001 30000 56800 .2082
2 30001 35000 69000 .2529
2 35001 40000 79800 .2925
2 45001 50000 93900 .3442
1 50001 55000 51300 .1880
2 55001 60000 117900 .4322
1 75001 80000 75500 .2767
2 95001 100000 200000 .7331
1 105001 110000 110000 .4032
2 110001 115000 228400 .8372
1 125001 130000 127000 .4655
1 150001 155000 151100 .5539
1 165001 170000 166700 .6111
2 190001 195000 385400 1.4128
1 195001 200000 198500 .7276
1 210001 215000 215000 .7881
1 395001 400000 400000 1.4663
1 1000001 1005000 1004000 3.6805
1 3405001 3410000 3409500 12.4989
1 4860001 4865000 4864134 17.8315
1 6325001 6330000 6326500 23.1924
1 6430001 6435000 6435000 23.5902
------------------ ------------------ ------------------
2172 27278234 100.0000
========== ========== ==========
CATEGORIES OF SHAREHOLDERS
SHARE SHARES-
PARTICULARS HOLDERS HOLDING PERCENTAGE
INDIVIDUALS 2120 4,272,100 15.6617
INVESTMENT COMPANIES 4 95,500 .3500
INSURANCE COMPANIES 3 133,000 .4875
JOINT STOCK COMPANIES 16 454,100 1.6646
FINANCIAL INSTITUTIONS 18 21,999,034 80.6468
MODARABA COMPANIES 6 100,500 .3684
FOREIGN COMPANIES 1 4,000 .0146
NON-RESIDENT (U.S. $) 1 215,000 .7881
NON-RESIDENT (PAK Rs.) 3 5,000 .0183
------------------ ------------------ ------------------
COMPANY TOTAL 2,172 27,278,234 100.000
========== ========== ==========
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