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National Development Leasing Corporation Limited
Annual Report 1999
Contents
Company Information
Notice of Meeting
Ten Years at a Glance
Directors' Report
Auditors' Report
Balance Sheet
Profit and Loss Account
Statement of Changes in Financial Position
Notes to the Accounts
Pattern of Shareholding
Company Information
Board of Directors Mr. Mohammad Naseem Chairman
Mr. Mohammad Salim Director
Mr. S. M. Saleem Director
Mr. Mohammad Sharif Director
Mr. Zahid Haleem Sheikh Director
Mr. Farrukh Hussain Sheikh Director
Ms. Naheed Hyder Director
Mr. Mubashir A. Akhtar Managing Director & Chief Executive
Company Secretary Mr. Abdul Ghafoor Ateeq
Auditors Ford, Rhodes, Robson, Morrow
Chartered Accountants
Legal Advisors Orr. Dignam & Company, Advocates
Liaquat Merchant Associates
Sajjad Law Associates
Consultants M. Yousuf Adil Saleem & Co.
Chartered Accountants
Share Registrar THK Associates (Pvt) Limited,
Ground Floor, Sheikh Sultan Trust Building No.2,
Beaumont Road,
Karachi-75530
Bankers Allied Bank of Pakistan Limited
American Express Bank Limited
Askari Commercial Bank Limited
Bank of Punjab
Citibank, N.A.
Deutsche Bank A.G.
Faysal Bank Limited
First International Investment Bank Limited
Habib Bank Limited
Mashreq Bank psc.
Muslim Commercial Bank Limited
National Bank of Pakistan
National Development Finance Corporation
Platinum Commercial Bank Limited
Prime Commercial Bank Limited
Standard Chartered Bank
Correspondent Banks Chase Manhattan Bank
Deutsche Bank A.G.
Head Office and
Registered Office
Karachi NIC Building, 10th Floor
Abbasi Shaheed Road
Tel: 5660671-78 Fax: 5680454
E-mail: ndlckar@cyberaccess.com.pk
Branches
KARACHI CLIFTON BC-1, Block-5,
Kehkashan Scheme # 5, Main Clifton Road
Tel: 5875666-777 Fax: 5875888
Contact: Mr. Ahmed Noor
LAHORE 7/4, E-3, Main Boulevard,
Gulberg III
Tel: 5754111,5754122 Fax: 5754166
Contact: Mr. Tahir Rizwan
LAHORE CANTT Unit No. 3, Cantonment Commercial Complex,
Abid Majeed Road,
Tel: 6652317-8 Fax: 6652310
Contact: Mr. Shahzad Afzal
FAISALABAD Tile Mall Regency Shopping Arcade,
Ground Floor.
Tel: 617946-47 Fax: 612890
Contact: Mr. Salim-ul-Haque
ISLAMABAD State Life Building, Ground Floor
Jinnah Avenue, Phase II,
Blue Area.
Tel: 277362-64 Fax: 277365
Contact: Mr. Fuad Rasul
Notice of Annual General Meeting
Notice is hereby given that the Fifteenth Annual General Meeting of National Development Leasing
Corporation Limited will be held at FTC Auditorium, Finance and Trade Centre, Sharea Faisal, Karachi on
Tuesday, November 23, 1999 at 9:30 a.m. to transact the following business:
1. To confirm the Minutes of the Fourteenth Annual General Meeting held on December 15, 1998.
2. To receive, consider and adopt the Audited Accounts of the Corporation for the year ended June 30,
1999 together with Directors' and Auditors' Report thereon.
3. To approve 15% cash dividend as recommended by the Directors.
4. To appoint Auditors and fix their remuneration. The present Auditors, Messrs. Ford, Rhodes, Robson,
Morrow, Chartered Accountants, retire and being eligible, offer themselves for re-appointment.
5. To transact any other business with the permission of the Chair.
By Order of the Board
Abdul Ghafoor Ateeq
Karachi: October 19, 1999 Company Secretary
Notes:
a. An instrument of proxy duly stamped, signed and witnessed and the power of attorney or other
authority (if any) under which it is signed or a notarially certified copy of such power or authority,
in order to be valid, must be deposited at the registered office of the Corporation at least 48 hours
before the time of the meeting.
b. Members are requested to immediately inform of any change in their addresses.
Ten Years at a Glance
Rupees in Million
Year 18 months
Ended June 30 June 30 June 30 June 30 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31
1999 1998 1997 1996 1994 1993 1992 1991 1990 1989
FINANCIAL POSITION
Authorised Capital 500 500 500 500 500 500 500 500 100 100
Paid-up Capital 377 377 359 359 259 207 159 88 68 68
Reserves 856 823 828 780 687 620 595 479 378 158
Shareholders Equity 1,233 1,200 1,187 1,139 946 827 754 567 446 226
Long Term Loans '-Foreign 791 802 910 690 821 569 651 469 506 212
-Local 723 502 367 304 154 220 247 223 507 501
Certificates of Investment 715 1,090 1,576 1,755 881 671 964 1,008 2,977 1,622
Net Investment in Lease Finance 3,782 3,650 3,767 3,971 2,739 2,344 2,044 1,789 1,709 1,214
Total Assets 4,805 4,924 5,312 5272 3,644 2,878 3,071 2,666 5,061 3,011
OPERATING POSITION
Lease Income 572 614 625 807 398 299 255 243 193 120
Total Revenue 698 739 785 1,115 540 425 393 507 571 329
Total Expenditure 534 543 599 755 317 250 237 361 395 216
Operating Profit 164 196 186 360 223 175 156 146 176 113
Profit Before Taxation 120 78 130 266 187 165 149 146 176 113
Profit After Taxation 90 50 102 211 157 125 111 146 234 75
DISTRIBUTION
Cash Dividend 15.00% 10.00% 15.00% 30.00% 15.00% 25.00% 20.00% 20.00% 20.00% 12.00%
Stock Dividend -- -- 0 -- 25.00% 25.00% 30.00% -- 30.00% --
RIGHT ISSUE -- -- -- -- 10.00% -- -- 30.00% 50.00% --
RATIOS
Current Ratio 1.08 1.01 1.00 0.81 1.17 1.25 1.52 1.19 0.97 0.96
Debt/Equity 1.27 1.28 1.38 1.25 1.42 1.34 1.76 1.69 4.00 5.54
Book Value Per Share (in Rupees) 16.34 15.90 16.52 15.85 18.29 20.00 23.71 32.12 24.06 12.18
Note: Prior years' figures have been rearranged, wherever necessary, for the purpose of comparison.
Directors' Report to the Shareholders
The Director are pleased to present the financial results of the Company for the year ended June 30, 1999.
Board of Directors
The composition of the Board of Directors has changed since the last Annual General Meeting due to
acceptance of resignation of Mr. Shahid Hassan. The Directors place on record their appreciation of the
services rendered by the outgoing Director. The Directors welcome Ms. Naheed Hyder as Director of the
Company and look forward to her valuable contribution.
Financials
Your Directors are pleased to report an after tax profit of Rs. 90.048 million for the year ended June 30, 1999
and propose that profit be appropriated as follows:
(Rupees in 000's)
June 30 June 30
1999 1998
Profit before taxation 120,048 78,027
Taxation 30,000 28,000
------------------ ------------------
Net Profit after taxation 90,048 50,027
Unappropriated profit brought forward 1,139 1,353
------------------ ------------------
Profit available for appropriation 91,187 51,380
APPROPRIATIONS
Proposed Dividend 15 % (1998: 10%) 56,610 37,740
Transfer to General Reserve 29,000 10,000
Transfer to Special Reserve 4,502 2,501
Transfer from General Reserve for deferred taxation (68,410) --
Transferred to Capital Reserve for deferred taxation 68,410 --
------------------ ------------------
90,112 50,241
------------------ ------------------
Unappropriated profit carried forward 1,075 1,139
========== ==========
The Economy
The economy has shown a net GDP growth rate of 3.1 percent as against the revised GDP growth rate of 4.3
percent last year and targeted growth rate of 6 percent. The growth in respect of agriculture, manufacturing
and services sectors have shown decline as compared to budgeted targets set for fiscal 1998-99. A praise
worthy feature of 1998-99, is a noticeable slowdown in the rate of inflation which declined to about 6
percent. The Government after several meetings and hectic negotiations was successful in reaching an
agreement with IMF to reactivate its stalled aid program, which was followed by restoration of financial
support by the World Bank and the Asian Development Bank. The Paris club rescheduled external debt to
the extent of US $ 3.3 billion for a period upto December 2000. The economy appears to have survived
through the crisis and has been able to secure fiscal space to move forward under the mid-term policy
framework.
The Government has done well to raise the development expenditure for fiscal year 1999-2000 to Rs. 116.3
billion which is 26.2 percent higher than the revised Rs.92.1 billion of the previous fiscal year. Debt servicing
which consumes 65 percent of the total revenue, has not been allowed to hit the growth of the economy.
Foreign exchange crisis had a direct as well as indirect bearing on the economy. Home remittances have
declined after freezing of the private foreign currency accounts and a steep fall was witnessed in net foreign
private investment. Local investment during the last few years has been abysmal with only balancing;
modernization and replacement taking place, in the already established industrial sector signaling sharp
contraction of investment in the country. There is a need to take a wide ranging and difficult economic
policy decisions to build a durable basis for growth and financial stability. While we expect growth to pick
up in fiscal 1999-2000 to over 4 percent, higher long-term growth will come only from successful economic
restructuring.
Leasing sector in Pakistan which portrayed rapid growth, in the past, both in the number of companies and
quantum of business is now faced with some formidable challenges. This sector witnessed growth of 20
percent, on an average, is now finding it difficult to maintain sustained growth rate due to difficult economic
conditions. Banks and DFIs are providing long-term funds and have entered leasing business. These institutions
have resources and access to low cost deposits and pose a major threat to leasing companies. Though
commercial banks have provided funds to leasing companies, the risk of mismatch, availability of funds at
economical rates and lack of demand have forced companies to adopt conservative lending policies. Despite
this, I am pleased to report that your Company was able to generate quality business in the current financial
year. Your Corporation continued to emphasis on its core activity i.e. leasing which despite the backdrop of
economic recession produced commendable results.
Overview of Operations
Your Corporation achieved strong results for the year under review. Profit before taxation was Rs. 120 million
as compared to 78 million in the previous year. Total income earned in fiscal 1999 dropped from Rs.739
million to Rs.698 million depicting a fall of 5.9 percent. The reduction in lease revenue is mainly on account of
decline in disbursements in the previous years. Cost of borrowing decreased to Rs.447 million from Rs.458
million in the previous year, due to availability of comparatively cheaper funds and downward revision of
borrowing rates coupled with efficient handling of short term borrowings. The Company was successful in
arresting the inflationary impact by controlling operating expenses which increased marginally from 85 to 87
million. The Company has been able to stem the rising trend of infection and as a result of focused recovery 
efforts, there are visible signs of improvement in recovery position. The Company has made a provision
of Rs.29 million against potential lease losses as against 111 million provided in the previous year. Provision for
diminution in value of investments increased to Rs. 16 million from Rs.7 million in the previous year, in view
of provision made during the year for long term equity investments. We expect future provision for diminution
in value of investments to be minimal. The investments made by your Company are diversified in key economic sectors.
Funding
Your Company was able to generate long-term funds in line with its objective of reducing mismatch of
funds. The funds were invested principally in leasing business. Local financial institutions once again
demonstrated their confidence by extending credit lines and enhancing credit facilities. The Company
continued to maintain excellent relations with multilateral agencies and the closing date of an undrawn loan
amount of US $ 5 million was extended by one year as cost of foreign exchange cover for the entire period
of loan remained uncertain. We propose to raise long-term funds during 1999-2000 from the issue of Term
Finance Certificates. The issue will help expand year Corporation's core leasing business and tap a new
funding base.
Equity Investment
The stock market began to show signs of recovery from the effects of economic sanctions on the basis of
loan rescheduling and IMF support. The KSE - 100 index, reflecting improving fundamentals, reached a
high of 1428, in May 1999, but later bottomed out, at around 1054 on June 30, 1999. Management has not
ventured into new buying activities and has marked the prices of trading portfolio to market values. During
the year under review, a provision of Rs. 18 million was made for diminution in value of long term investments
in compliance with Technical Release 23.
Regulatory Environment
Securities and Exchange Commission of Pakistan (SECP) has replaced the Corporate Law Authority. The
Commission will monitor and regulate capital markets in the country, administer the Companies Ordinance
and regulate leasing companies and modarabas. The creation of SECP is viewed as a major step towards the
complete deregulation and the creation of independent regulatory bodies in the country.
Year 2000 compliance
The Y2K compliance program is progressing well. We have installed new hardware and software applications
that are Y2K compliant. Though no one can predict with absolute certainty what may happen as a result of
the millennium bug, we are confident that our preparations will enable our computer system to meet our
needs.
Credit Rating
The Pakistan Credit Rating Agency has updated the Company's credit rating for the year to June 30, 1999. I
am pleased to report that your Company has maintained the entity rating of A (Single A) for long term and
A1 (A One) for short term despite difficult economic conditions. These ratings are applicable to the unsecured
creditors of the Company. The rating for secured Term Finance Certificates has also been maintained at A+
(A Plus).
Year Long Term Short Term TFC
1999 A A 1 A+
1998 A A 1 A+
1997 A A1 --
Future Outlook
We are committed to further development of the leasing business by concentrating on intensifying our core
activities, which will Insha Allah result in consistent and profitable growth. We will continue in our quest to
maintain high quality portfolio with prudent diversification of risks. We shall, create an environment conducive
to professional growth and development of the employees, retain and attract superior managerial talents and
apply proficient technological and organization support system.
Mission Statement
As mankind enter into a new millennium it faces greater challenges and new millennium promises, to be full
of hope. We at National Leasing are prepared to meet these challenges by adopting a proactive and dynamic
approach. We are confident and look forward to meeting these challenges posed and opportunities offered
by the new millennium. Our objective is to strengthen various aspects of Corporate Governance, lead the
industry standards for adhering to business practices and compliance of regulatory requirements and improve
our corporate image as largest leasing company.
Auditors
The retiring auditors Messrs. Ford, Rhodes, Robson, Morrow, Chartered Accountants, being eligible, offer
themselves for reappointment.
Acknowledgment
We offer our sincere thanks to our valued clients, bankers, shareholders and sponsors for the trust and
confidence they have placed in the Corporation.
We extend our appreciation to the Board of Directors, State Bank of Pakistan, Securities and Exchange
Commission of Pakistan and Multilateral Agencies for their continued support and guidance. We equally
appreciate the hard work and commitment demonstrated by our team members in contributing towards
achieving the objectives of the Company.
Shareholding Pattern
A statement reflecting the pattern of shareholding is attached to the Annual Report.
On behalf of the Board
Mubashir A. Akhtar
Karachi: September 13, 1999. Managing Director and Chief Executive
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet of NATIONAL DEVELOPMENT LEASING
CORPORATION LIMITED as at June 30, 1999 and the related profit and loss account and
statement of changes in financial position (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 statement of changes in
financial position (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 the changes in financial position for the year
then ended; and
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.
Karachi- Chartered Accountants
September 13, 1999
Balance Sheet as at June 30, 1999
(Rupees in 000's)
Note June 30 June 30
1999 1998
CAPITAL AND RESERVES
Authorised Capital
100,000,000 Ordinary Shares of Rs 5 each 500,000 500,000
========== ==========
Issued, Subscribed and Paid-up Capital 3 377,400 377,400
Reserves 4 855,989 822,551
------------------ ------------------
Shareholders' Equity 1,233,389 1,199,951
DEFERRED LIABILITIES
Gratuity 5,319 4,294
LONG TERM FINANCE AND LIABILITIES
Long Term Finances 5 1,146,803 1,004,046
Certificates of Investment 6 174,918 105,807
Deposits on Lease Contracts 7 242,526 421,876
------------------ ------------------
1,564,247 1,531,729
CURRENT LIABILITIES
Short Term Finances 8 479,200 446,977
Current Maturity
Long Term Finances 5 366,779 300,487
Certificates of Investment 6 540,089 984,569
Deposits on Lease Contracts 7 293,308 133,727
Obligation under Finance Lease -- 1,551
Accrued Expenses and Other Liabilities 9 265,970 277,959
Taxation -- 4,719
Proposed Dividend 56,610 37,740
------------------ ------------------
2,001,956 2,187,729
CONTINGENCIES AND COMMITMENTS 11
------------------ ------------------
4,804,911 4,923,703
========== ==========
TANGIBLE FIXED ASSETS 12 60,585 59,074
LONG TERM ADVANCES 13 16,141 18,937
LONG TERM DEPOSITS 14 359,555 414,000
LONG TERM INVESTMENTS 15 14,381 36,970
NET INVESTMENT IN LEASE FINANCE 16 2,183,442 2,155,543
LONG TERM PREPAYMENTS AND
DEFERRED COST 17 6,882 9,474
CURRENT ASSETS
Short Term Finances 18 21,014 59,351
Current Maturity
Long Term Deposits 14 102,730 121,900
Net Investment in Lease Finance 16 1,599,326 1,494,774
Short Term Investments 19 125,915 163,930
Income Accrued or Due 29,905 39,831
Advances, Deposits, Prepayments and
Other Receivables 20 177,205 276,646
Taxation 3,394 --
Cash and Bank Balances 21 104,436 73,273
------------------ ------------------
2,163,925 2,229,705
------------------ ------------------
4,804,911 4,923,703
========== ==========
The annexed notes form an integral part of these accounts.
The auditors' report is annexed hereto.
Mohammad Naseem Mubashir A. Akhtar
Chairman Managing Director & Chief Executive
Profit and Loss Account for the year ended June 30, 1999
(Rupees in 000's)
Note June 30 June 30
1999 1998
1NCOME
Lease Income 571,802 614,192
Income from Investments / Finances 22 100,138 102,877
Other Income 23 26,055 22,367
------------------ ------------------
697,995 739,436
EXPENDITURE
Financial charges / return on borrowings 24 302,064 234,640
Return on Certificates of Investment 144,566 223,467
Administrative and Operating Expenses 25 86,949 85,304
------------------ ------------------
533,579 543,411
OPERATING PROFIT BEFORE PROVISIONS 164,416 196,025
PROVISIONS - Doubtful Debts 28,640 110,755
- Investments 15,728 7,243
------------------ ------------------
44,368 117,998
------------------ ------------------
PROFIT BEFORE TAXATION 120,048 78,027
PROVISION FOR TAXATION 10 30,000 28,000
------------------ ------------------
NET PROFIT AFTER TAXATION 90,048 50,027
UNAPPROPRIATED PROFIT BROUGHT FORWARD 1,139 1,353
------------------ ------------------
PROFIT AVAILABLE FOR APPROPRIATIONS 91,187 51,380
APPROPRIATIONS
Proposed Dividend 15% (1998: 10%) 56,610 37,740
Transfer to General Reserve 29,000 10,000
Transfer to Special Reserve 4,502 2,501
Transfer from General Reserve for deferred taxation (.68,410) --
Transfer to Capital Reserve for deferred taxation 68,410 --
------------------ ------------------
90,112 50,241
------------------ ------------------
UNAPPROPRIATED PROFIT CARRIED FORWARD 1,075 1,139
========== ==========
Basic earning per share of Rs.5 each 31 1.19 0.66
========== ==========
The annexed notes form an integral part of these accounts.
Mohammad Naseem Mubashir A. Akhtar
Chairman Managing Director & Chief Executive
Statement of Changes in Financial Position (Cash Flow Statement)
for the year ended June 30, 1999
(Rupees in 000's)
Note June 30 June 30
1999 1998
CASH FLOW FROM OPERATING ACTIVITIES
Cash generated from operations 30 838,489 1,094,404
Mark-up on borrowings/Certificates of Investment paid (459,995) (396,354)
Income tax paid (38,113) (24,185)
Gratuity paid (1,110) (1,396)
------------------ ------------------
Net cash generated from Operating activities 339,271 672,469
CASH FLOW FROM INVESTING ACTIVITIES
Long term deposits 73,615 (200,418)
Long term investments 4,996 4,495
Fixed capital expenditure ( 11,778) (10,350)
Sales proceeds of fixed assets 1,864 2,581
Investment income received 4,701 5,427
Investment in lease finance (net) (159,705) 16,518
Long term advances (net) 1,835 (9,312)
------------------ ------------------
Net cash utilised in investing activities (84,472) (191,059)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from long term finances 209,049 26,891
Certificates of investment (375,369) (486,035)
Deposits from lessees (19,769) 23.63
Obligation under finance lease (1,551 ) (1,027)
Prepayments and deferred cost 1,628 734
Dividend paid (37,624) (53,699)
------------------ ------------------
Net cash utilised in financing activities (223,636) (489,503)
------------------ ------------------
Net increase/(decrease) in cash 31,163 (8,093)
Cash and Bank Balances at the beginning
of the year 73,273 81,366
------------------ ------------------
Cash and Bank Balances at the end of the year 104,436 73,273
========== ==========
Mohammad Naseem Mubashir A. Akhtar
Chairman Managing Director & Chief Executive
Notes to the Accounts for the year ended June 30, 1999
1. THE CORPORATION AND ITS ACTIVITIES
National Development Leasing Corporation Limited is a public limited company incorporated
in Pakistan and is listed on all of the three stock exchanges of the country. The principal business
activity of the Corporation is to provide lease financing and related services, which is conducted
through branches in all the major cities of Pakistan. It has also been declared a Development
Finance Institution (DFI) by the Government of Pakistan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Accounting convention
These financial statements have been prepared under the historical cost convention.
2.2 Taxation
The charge for current taxation for the year, is based on taxable income at the current rates
of taxation which is computed as if all leases are operating leases, after taking into account
allowances for the year available for depreciation in respect of fixed assets under lease
finance.
The tax effect for deferred taxation is calculated using the liability method on all major
timing differences and is being dealt with as stated in note 10.2 to the accounts.
2.3 Staff retirement benefits
The Corporation operates an unfunded gratuity scheme which covers all employees. During
the year the Corporation has changed minimum qualifying service period for the entitlement
of gratuity from one year to three years. However, obligations under the scheme are provided
annually.
In addition, the Company operates recognized provident fund scheme for all its permanent
employees, for which equal monthly contributions are made both by the Company and by
the employees to the fund at the rate of 10% of basic pay.
2.4 Tangible fixed assets and depreciation
Fixed assets are stated at cost less accumulated depreciation.
Depreciation is charged to income applying the straight line method over the estimated
useful lives at the rates given in Note 12 to the accounts. In respect of additions and deletions
of assets during the year, depreciation is charged from the month of acquisition and upto
the month preceding the deletion and/or upto the month of deletion if sold after 15th day of
the month respectively.
Gains and losses on disposal of fixed assets, if any, are included in income currently.
Normal repairs and maintenance are charged to income as and when incurred.
2.5 Foreign currency translation
Assets and liabilities in foreign currencies are recorded at the exchange rates applicable on
the transaction date (except where forward exchange contracts have been entered into,
such amounts are stated at the contracted rates) and are translated into rupees at the exchange
rates prevailing on the balance sheet date.
Gains and losses on translation are taken to income currently.
2.6 Government securities - repurchase transactions
The Corporation also enters into transactions of repurchase or resale of registered
Government Securities at contracted rates for specified time periods. These are recorded
as follows:
(a) in the case of sale under repurchase obligations, the securities are deleted from the
books at cost and the charges arising from the differential in sale and repurchase
values are accrued on a pro-rata basis and recorded under income from Government
Securities. Upon repurchase, the securities are reinstated at their respective original
cost;
(b) in the case of purchase under resale obligations, the securities are booked at the
contracted purchase price and the differential of the contracted purchase and resale
prices is amortised over the period of the contract and recorded under income from
Government Securities.
2.7 Deferred cost
Long term prepayments and front end fee are amortised over the period during which the
benefits accrue in the underlying transactions.
2.8 Investments
Long term
These are stated at cost. However, cost is reduced to recognize any decline thereof, other
than temporary.
Short term
These are stated at lower of cost and market value on a portfolio basis.
Notes to the Accounts
2.9 Revenue recognition
The financing method is used in accounting for income on direct finance leases. Under
this method the unearned income - i.e. the excess of aggregate lease rentals and the esti-
mated residual value over the net investment (cost of leased asset) - is deferred and then
amortised to income over the term of the lease, applying the annuity method to produce a
constant rate of return on the net investment in lease.
Return earned on term finance certificates and finance on mark-up/buy-back agreement
basis is recognized on a time proportion basis taking account of, where applicable, the
relevant buy-back dates and prices, or where a specific schedule of recoveries is pre-
scribed in the agreement, the respective dates when return is required to be paid to the
Corporation.
Income on Government Securities is recognised by pro-rata accruals of the differential in 
cost and maturity values and/or the coupon rate applicable.
Fees for project examination, commitment fee and other commission, etc., are recognised
as income when realised.
Dividend income is recognised on receipt basis.
2.10 Provision for doubtful debts
The Corporation maintains provision for doubtful debts at a level that can be reasonably
anticipated keeping in view the nature of its overall business activities and considers this
to be adequate to meet potential losses.
(Rupees in 000's)
June 30 June 30
1999 1998
3. ISSUED, SUBSCRIBED AND PAID-UP CAPITAL
33,395,943 (1998: 33,395,943) ordinary shares
of Rs. 5 each fully paid in cash 166,979 166,979
42,084,057 (1998: 42,084,057) ordinary shares
of Rs. 5 each issued as bonus shares 210,421 210,421
------------------ ------------------
377,400 377,400
========== ==========
(Rupees in 000's)
Note June 30 June 30
1999 1998
4. RESERVES
Capital Reserves
- Reserve for contingencies 4.1 44,241 44,241
- Special reserves (Reserve Fund) 4.2
Balance at the beginning of the year 37,837 35,336
Transfer from profit and loss account 4,502 2,501
------------------ ------------------
Balance at the end of the year 42,339 37,837
- Premium on issue of shares 90,334 90,334
- Deferred taxation 4.3
Transfer from Profit and loss account 68,410 --
- Reserve for issue of bonus shares
Balance at the beginning of the year -- 17,976
Transfer to share capital -- 17,976
------------------ ------------------
Balance at the end of the year -- --
------------------ ------------------
245,324 172,412
Revenue Reserves
General Reserves
Balance at the beginning of the year 649,000 639,000
Transfer from profit and loss account 29,000 10,000
Transfer to Profit and Loss Account for deferred taxation (68,410) --
------------------ ------------------
Balance at the end of the year 609,590 649,000
Unappropriated profit 1,075 1,139
------------------ ------------------
855,989 822,551
========== ==========
4.1 The reserve for contingencies is a specific purpose reserve created to provide for possible losses on
lease receivables which the directors consider, at present, not available for dividend distribution.
4.2 The special reserve represents profit set aside as required under the State Bank of Pakistan rules for
Non-Banking Financial Institutions.
4.3 The deferred taxation reserve has been created in compliance with Circular 16 of 1999 of the
Securities and Exchange Commission of Pakistan issued on September 09, 1999.
(Rupees in 000's)
Note June 30 June 30
1999 1998
5. LONG TERM FINANCES
5.1 Refinance Credits from State Bank of
Pakistan - unsecured 5.1.1
· Fourth PLS finance of Rs. 150 million 3,456 3,695
· Sixth PLS finance of Rs. 113.690 million -- 299
· Seventh PLS finance of Rs. 68.666 million 2,297 2,485
------------------ ------------------
5,753 6,479
Less: Current maturities 5,753 6,479
------------------ ------------------
-- --
========== ==========
5.2 Loans from Asian Development Bank
- secured 5.2.1
· Fourth loan of Rs. 251.516 million 20,960 62,879
· Fifth loan of Rs. 407.028 million 467,100 464,600
------------------ ------------------
488,060 527,479
Less: Current maturities 124,760 88,379
------------------ ------------------
363,300 439,100
========== ==========
5.3 Loan from The Export- Import Bank
of Korea - secured 5.3.1
· Credit facility of Rs. 119.122 million 109,195 --
Less: Current maturity 9,927 --
------------------ ------------------
99,268 --
========== ==========
5.4 Loans from International Finance Corporation
- secured 5.4.1
· Loan 'A' of Rs. 382.242 million 193,510 236,513
· Loan 'B' of Rs. 113.175 million -- 38,330
------------------ ------------------
193,510 274,843
Less: Current maturities 43,002 81,333
------------------ ------------------
150,508 193,510
========== ==========
(Rupees in 000's)
Note June 30 June 30
1999 1998
5.5 Loans from Muslim Commercial
Bank Limited - secured 5.5.1
· Credit line of Rs 24.803 million 22,323 --
· Credit line of Rs 29.364 million 29,364 --
------------------ ------------------
51,687 --
Less: Current maturities 7,864 --
------------------ ------------------
43,823 --
========== ==========
5.6 Loans from First International Investment 5.6.1
Bank Limited - secured
· Credit facility of Rs. 113 million -- 56,488
· Credit facility of Rs. 200.6 million 180,540 200,600
------------------ ------------------
180,540 257,088
Less: Current maturities 40,120 76,548
------------------ ------------------
140,420 180,540
========== ==========
5.7 Loans from Askari Commercial Bank Limited 5.7.1
· Credit facility of Rs. 14.5 million - unsecured -- 14,500
· Credit facility of Rs. 15.072 million - secured 10,088 14,163
· Credit facility of Rs. 20 million - secured 8,333 18,333
------------------ ------------------
18,421 46,996
Less: Current maturities 13,216 28,575
------------------ ------------------
5,205 18,421
========== ==========
5.8 Loan from Pakistan Kuwait Investment 5.8.1
Company (Private) Limited - secured
· Credit facility of Rs. 191.648 million 172,475 191,648
Less: Current maturity 38,336 19,173
------------------ ------------------
134,139 172,475
========== ==========
5.9 Loans from Habib Bank Limited - secured 5.9.1
· Credit facility of Rs. 75 million 62,500 --
· Credit facility of Rs. 131.285 million 122,677 --
------------------ ------------------
185,177 --
Less: Current maturities 63,259 --
------------------ ------------------
121,918 --
========== ==========
(Rupees in 000's)
Note June 30 June 30
1999 1998
5.10 Loans from Prime Commercial Bank
Limited - secured 5.10.1
· Credit facility of Rs 24.386 million 24,386 --
· Credit facility of Rs 35.614 million 34,378 --
------------------ ------------------
58,764 --
Less: Current maturities 20,542 --
------------------ ------------------
38,222 --
========== ==========
5.11 Loan from Gulf Commercial Bank
Limited - unsecured 5.11.1 50,000 --
========== ==========
Long term portion 1,146,803 1,004,046
========== ==========
Current maturities 366,779 300,487
========== ==========
5.1.1 Refinance Credits from State Bank of Pakistan - unsecured
The refinance credits are allocated for the financing of domestic sales of locally manufactured
machinery (LMM). The credits are repayable in seventeen equal half- yearly installments
commencing four years after the date of first withdrawal. However, the excess of the outstanding
finance from the State Bank of Pakistan under the credit lines over the outstanding finance extended
by the Corporation under the related credit lines must be repaid immediately.
Under the terms of the agreements, the State Bank of Pakistan will share in the over-all profit
(before tax) of the Corporation, subject to a maximum of 1% in respect of the fourth line and 4% in
respect of the seventh lines of the amount of refinance availed.
5.2.1 Loans from Asian Development Bank (ADB) - secured
 - Fourth loan - US$ 10 million equivalent to Pak Rupees 251.516 million
The return on these funds is payable at 9.4% per annum directly to ADB. In addition, an exchange
risk fee at 6.07% per annum based on the Pak Rupee equivalent of the amount withdrawn and
outstanding is payable to the Government of Pakistan.
The loan is secured by hypothecation of specific leased assets and related receivables. The loan
is repayable in twelve semi-annual installments which commenced from January 15, 1994.
- Fifth loan - US$ 10 million equivalent to Pak Rupees 407.028 million
Interest on this loan is payable at 2.25% per annum above LIBOR.
The loan is secured by hypothecation of specific leased assets and related receivables. The loan
is repayable in ten semi-annual installments which commenced from March 25, 1999.
5.3.1 Loan from The Export - Import Bank of Korea - secured
- Loan of KW3, 459.180 million equivalent to Pak Rupees 119.122 million
The Corporation has entered into a subsidiary loan agreement with Government of Pakistan to
participate into the Economic Development Corporation Fund of the Export - Import Bank of
Korea for Industrial Equipment Leasing. The loan is carrying return at the rate of 11% per
annum.
The loan is repayable in twenty four equal half-yearly installments commenced from November
20, 1998.
5.4.1 Loan from International Finance Corporation (IFC) - secured
- Loan 'A' US$ 12.5 million equivalent to Pak Rupees 382.242 million
This represents borrowing for the structuring of lease financing, mainly for industrial plant
and equipment. The return on these funds is payable at 8.5% per annum directly to IFC. In
addition, an exchange risk fee at 6.66% per annum based on Pak Rupee equivalent of the
amount withdrawn and outstanding is payable to the Government of Pakistan.
The loan is secured by hypothecation of specific leased assets and related receivables. The
loan is repayable in sixteen semi-annual equal installments which commenced from June 15,
1996.
5.5.1 Loans from Muslim Commercial Bank Limited - secured
- Credit facility of Rs. 24.803 million
This facility is repayable in twenty quarterly installments commenced from November 05,
1998 and carrying mark-up at the rate of 18% per annum payable on quarterly basis. The
facility is secured by first charge over leased assets and related receivables.
- Credit facility of Rs. 29.364 million
This facility is repayable in twenty quarterly installments which will commence from September
19, 1999 and carrying mark-up at the rate of 18% per annum payable on quarterly basis. The
facility is secured by first charge over leased assets and related receivables.
5.6.1 Loan from First International Investment Bank Limited - secured
- Credit facility of Rs. 200.6 million
This represents loan against the security of long term U.S. dollar deposits. This loan is repayable
in ten equal installments. The first installment commenced from March 15, 1999. The remaining
installments are repayable on half-yearly basis which are linked to the maturity of the long
term deposits. The return is payable at the rate ranging from 14.275% to 14.90% per annum on
quarterly basis.
5.7.1 Loans from Askari Commercial Bank Limited - secured
- Credit line of Rs. 15.072 million
This facility is repayable in twelve quarterly installments which commenced from June 9,
1998 and carrying mark-up at the rate of 18.50% per annum payable on quarterly basis. This
facility is secured by first hypothecation charge over specific leased assets and related
receivables.
-Credit line of Rs. 20 million
The facility is repayable in twenty four equal installments which commenced from May 2, 1998
and carrying mark-up at the rate of 17.50% per annum payable on quarterly basis. The facility
is secured by first hypothecation charge over specific leased assets and related receivable.
5.8.1 Loan from Pakistan Kuwait Investment Company (Private) Limited - secured
This represents credit facility of Rs.191.648 million against the security of long term U.S.
dollar deposits. This loan is repayable in twenty four installments. The first installment
commenced from March 15, 1999. The remaining installments, are repayable on half yearly
basis which are linked to the maturity of the long term deposits, while mark-up is payable at
the rate ranging from 13.79% to 15.07% per annum.
5.9.1 Loans from Habib Bank Limited - secured
- Credit facility of Rs. 75 million
This facility is repayable in six biannual installments commenced from June 10, 1999 and
carrying mark-up at the rate of 17.50% per annum payable on biannual basis. The facility is
secured by first charge over specific leased assets and related receivables.
- Credit facility of Rs. 131.285 million - secured
This facility is repayable in twelve quarterly installments which commenced from June 20,
1999 and carrying mark-up at the rate of 18.50% per annum payable on quarterly basis. This
facility is secured by first charge over specific leased assets and related receivables.
5.10.1 Loans from Prime Commercial Bank Limited - secured
- Credit facility of Rs. 24.386 million
This facility is repayable in eight quarterly installments commencing from August 23, 1999 and
carrying mark-up at the rate of 17% per annum payable on quarterly basis. The facility is secured
by first charge over specific leased assets and related receivables.
- Credit facility of Rs. 35.614 million - secured
This facility is repayable in thirty six monthly installments commenced from June 9, 1999 and
carrying mark-up at the rate of 17% per annum payable on monthly basis. The facility is secured
by first charge over specific leased assets and related receivables.
5.11.1 Loan from Gulf Commercial Bank Limited - unsecured
This represents a Rs.50 million facility carrying mark-up at the rate of l 6.50% per annum. The
facility is repayable on July 04, 2000 in lump sum together with the mark-up thereon.
6. CERTIFICATES OF INVESTMENT
This represents Certificates of Investment issued by the Corporation in local and foreign currencies.
These are for terms of three months to five years.
Maturities falling within the next twelve months are included under current maturities.
7. DEPOSITS ON LEASE CONTRACTS
These represent security deposits received against lease contracts.
(Rupees in 000's)
Note June 30 June 30
1999 1998
8. SHORT TERM FINANCES
Morabaha finance - secured 8.1 50,000 --
Musharika finance - secured -- 100,000
Term finance
Bank-secured 8.2 25,000 28,010
Financial institutions-unsecured 8.3 204,000 205,000
Others-unsecured 8.4 169,000 19,000
------------------ ------------------
398,000 252,010
Running finance - secured 8.5 31,200 94,967
------------------ ------------------
479,200 446,977
========== ==========
8.1 This represents morabaha finance of Rs.50 million secured against specific leased assets and
related receivables. The finance is repayable in lump sum together with mark-up at the rate of
17.25% per annum.
8.2 This represents facility from a scheduled bank amounting to Rs.25 million (1998: Rs. 168 million)
and is secured by hypothecation of specific leased assets and related receivables. Mark-up is payable
at the rate of 17% per annum.
8.3 These represents facilities from different financial institutions. Mark-up is payable at rates ranging
from 10.50% to 17.25% per annum.
8.4 This represents facilities from different non-financial institutions. Mark-up is payable at rates ranging
from 12.30% to 17% per annum.
8.5 These represent facilities from scheduled banks amounting to Rs.65 million (1998: Rs. 145 million)
and carry mark-up ranging from 0.4658 to 0.4795 paisas per rupees 1,000 per day on a daily product
basis. These arrangements are secured by hypothecation of leased assets and related receivables.
(Rupees in 000's)
June 30 June 30
1999 1998
9. ACCRUED EXPENSES AND
OTHER LIABILITIES
These comprise:
Financial charges on long term finances - secured 151,426 171,818
- unsecured 642 416
Financial charges on short term finances - secured 7,721 8,312
- unsecured 6,247 997
Return on certificates of investment 50,911 50,357
Advance rentals 738 4,375
Due to lessees 30,224 10,003
Advance against certificates of investment -- 188
Accrued liabilities 4,228 5,727
Other liabilities [ includes unclaimed dividend 13,833 25,766
Rs.0.780 million (1998:Rs.0.664 million)] ------------------ ------------------
265,970 277,959
========== ==========
10. TAXATION
10.1 Current
Income-tax assessments of the Corporation have been completed for and upto the assessment
year 1998-99 (accounting year 1998). The Corporation has filed appeals in respect of various
assessment years at appropriate appellate forums against certain add-backs to income and is of
the opinion that these appeals will be successful.
10.2 Deferred
Accumulated deferred taxation arising out of timing differences between book and income tax
revenues or charges is estimated at Rs. 259.319 million (1998: Rs. 267.049 million). The
Corporation has appropriated Rs.68.410 million in the current financial year (being 1/5th of the
opening balance of deferred tax liability plus a further sum of Rs. 15 million) to achieve compliance
with Circular 16 of 1999 issued by Securities and Exchange Commission of Pakistan. Timing
differences amounting to Rs. 190.909 million, therefore remain unappropriated.
(Rupees in 000's)
June 30 June 30
1999 1998
11. CONTINGENCIES AND COMMITMENTS
11.1 Contingencies
Guarantees issued 1,219 6,280
========== ==========
11.2 Commitments
a) Letters of credit 12,239 20,598
b) Government securities repurchase commitments 250,000 275,000
========== ==========
12. TANGIBLE FIXED ASSETS
Rupees in 000's
COST DEPRECIATION
Book
At the At the value
Note beginning of Additions/ end of the Rate per At the end For the On at the end
the year (disposals) Adjustments year annum of the year Year disposals Adjustments of the year
%
Owned
Land and buildings 12.1 48,344 22 -- 48,366 10 8,990 1,810 -- -- 39,376
--
Equipment 18,633 3,267 3,454 24,299 20 16,867 3,097 707 2,072 7,432
(1,055)
Furniture and Fixtures 7,354 247 -- 7,367 10 4,473 649 99 -- 2,894
(234)
Vehicles 20,076 8,242 -- 21,488 25 10,605 4,050 6,658 -- 10,883
(6,830)
Leasehold improvements 2,198 -- -- 2,198 33 2,198 7 -- -- --
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
96,605 11,778 3,454 103,718 43,133 9,613 7,464 2,072 60,585
(8,119) ------------------ ------------------ ------------------ ------------------ ------------------
------------------ ------------------ ------------------ ------------------
Leased
Equipment 3,454 -- -- -- 20 -- -- -- -- --
(3,454) (2,072)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
100,059 11,778 3,454 103,718 43,133 9,613 7,464 2,072 60,585
(8,119) (3,454) (2,072)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
June 1998 96,788 10,350 -- 100,059 40,985 8,848 (4,547) -- 59,074
(7,079)
========== ========== ========== ========== ========== ========== ========== ========== ==========
12.1 The land and buildings include (at cost) an amount of Rs.30.3 million (1998 Rs.30.3 million) for
which mutation has not yet been arranged. Efforts are in progress to obtain mutation in favour of
the Corporation.
12.2 Disposal of tangible fixed assets
(Rupees in 000's)
Accumulated Book Sale Profit/ Mode of
Particulars Cost depreciation value Proceeds (loss) Disposal Sold to/transferred to/claim from
Vehicle 698 596 102 116 14 Final settlement Mr. M.N.H. Naqvi, Employee
Vehicle 444 435 9 101 92 Final settlement Mr. M. Anser Basarai, Employee
Vehicle 187 187 -- 150 150 Tender Mr. Arshad Ali Kassim
Vehicle 110 110 -- 50 50 Negotiation Mr. Nasir Mahmood, Employee
Vehicle 110 110 -- -- -- Service Rules Mr. Iqbal Mirza. Employee
Vehicle 61 6 55 63 8 Insurance Claim M/s Adamjee Insurance Company
Vehicle 26 24 2 23 21 Tender Mr. Tanveer Alam
Vehicle 130 125 5 90 85 Negotiation Musharaf Khan Afridi, Employee
Vehicle 466 466 -- -- -- Service Rules Mr. Jamiluddin
Vehicle 680 680 -- 330 330 Tender Mr. Fazal Mehmood
Vehicle 549 549 -- 288 288 Tender M/s A.J. Kazi & Co.
Vehicle 651 651 -- -- -- Final Settlement Mr. A. G. Ateeq, Employee
Vehicle 422 422 -- 315 315 Tender Mr. Dilber Khan
Vehicle 377 377 -- -- -- Service Rules Mr. Akhtar A. Khan, Employee
Vehicle 298 298 -- 72 72 Final Settlement Mrs. Shaheena Sohail, Employee
Vehicle 291 291 -- -- -- Final Settlement Mr. Wahid Ahmed, Employee
Vehicle 617 617 -- -- -- Service Rules Mr. Akram Sheikh, Employee
Vehicle 713 713 -- -- -- Service Rules Mr. Mohammad Ameen, Employee
------------------ ------------------ ------------------ ------------------ ------------------
6,830 6,657 173 1,598 1,425
------------------ ------------------ ------------------ ------------------ ------------------
Equipment 50 33 17 6 ( 111 Negotiation Mr. Musharaf Khan Afridi, Employee
Equipment 50 33 17 6 ( 11 ) Negotiation Mr. Nasar Khan Afridi, Employee
Equipment 50 34 16 6 (10) Negotiation Mr. Masroor Hussain, Employee
Equipment 50 34 16 6 (10) Negotiation Maj. (Retd.) Muzammal Ali
Equipment 62 62 -- 1 1 Negotiation Mr. Khalid Iqbal
Equipment 180 180 -- 70 70 Trade In Shirazi Trading Company
Equipment 75 75 -- 1 1 Negotiation Mr. Khalid Iqbal
Equipment 24 12 12 3 (9) Trade In Phone Warehouse
Equipment 24 15 9 3 (6) Trade In Phone Warehouse
Equipment 42 24 18 18 -- Final Settlement Mr. Ansar Basarai, Employee
Equipment 200 104 96 8 (88) Final Settlement Mr. A.G. Ateeq, Employee
Equipment 66 38 28 20 (8) Final Settlement Mr. Shaheena Sohail, Employee
Equipment 62 21 41 41 -- Final Settlement Mr. S.M.N.H. Naqvi, Employee
Equipment 60 19 41 18 (23) Final Settlement Mr. Wahid Ahmed, Employee
Equipment 60 24 36 39 3 Final Settlement Mr. Zaeem-ud-Din, Employee
------------------ ------------------ ------------------ ------------------ ------------------
1,055 708 347 246 (101)
------------------ ------------------ ------------------ ------------------ ------------------
Furniture 14 14 -- 5 5 Negotiation Various
Furniture 58 18 40 9 (31) Final Settlement Mr. Ansar Basarai, Employee
Furniture 9 3 6 6 -- Final Settlement Mrs. Shaheena Sohail, Employee
Furniture 138 62 76 -- (76) Final Settlement Mr. S.M.N.H. Naqvi, Employee
Furniture 15 2 13 -- (13) Final Settlement Mr. Wahid Ahmed, Employee
------------------ ------------------ ------------------ ------------------ ------------------
234 99 135 20 (115)
------------------ ------------------ ------------------ ------------------ ------------------
1,289 807 482 266 (216)
------------------ ------------------ ------------------ ------------------ ------------------
8,119 7,464 655 1,864 1,209
========== ========== ========== ========== ==========
June 1998 7,079 4,547 2,532 2,581 49
========== ========== ========== ========== ==========
(Rupees in 000's)
Note June 30 June 30
1999 1998
13. LONG TERM ADVANCES - considered good
Advances to employees
Chief executive 3,142 4,355
Executives 14,231 15,257
Other employees 1,960 1,556
------------------ ------------------
19,333 21,168
Less: Installments recoverable within one year 3,192 2,231
------------------ ------------------
16,141 18,937
========== ==========
Outstanding for period:
- Exceeding three years 11,922 14,694
- Others 7,411 6,474
------------------ ------------------
19,333 21,168
========== ==========
Maximum aggregate amount outstanding during
the year in respect of chief executive and executives 19,817 19,612
========== ==========
Advances to executives represent house, personal, transport and computer loans granted in accordance
with the employees' service regulations.
House loan is repayable within twenty five years of service period with the restriction of settling loan
atleast two years before retirement. Personal loan is repayable in twenty-four equal monthly install-
ments. Transport and computer loans are repayable in forty-eight equal monthly installments.
14. LONG TERM DEPOSITS
Foreign currency deposits 5.6.1 &5.8.1 462,285 535,900
Less: Current maturity 102,730 121,900
------------------ ------------------
359,555 414,000
========== ==========
14.1 Hedges of Long Term Foreign Currency Borrowings
In the absence of exchange risk cover by the State Bank of Pakistan, the Corporation has adopted an
alternative method to hedge foreign exchange risk associated with its foreign currency borrowings. This
involves purchasing foreign currency from the secondary market, placing the foreign currency on deposit
and obtaining credit facilities against these deposits in local currency on a matching basis.
Premium paid on purchases of foreign currency from the secondary market is deferred and is written off
over the loan period (note 17 to the accounts).
The details of hedge transactions are as follows:
Long term foreign currency borrowing hedged by long term deposits is as follows:
(Rupees in 000's)
Fifth' loan of Asian Development Bank Limited 467,100
(Repayment commenced from March 25, 1999) ==========
Long term deposits to hedge long term borrowings are as follows:
Deposits in foreign currency with
First International investment Bank Limited 231,143
==========
Pakistan Kuwait Investment Company (Private) Limited 231,142
==========
(Rupees in 000's)
Note June 30 June 30
1999 1998
15. LONG TERM INVESTMENTS
Listed companies- at average cost 26.2 21,974 26,970
Unlisted Company 26.3 10,000 10,000
------------------ ------------------
31,974 36,970
Less: Provision for decline in market value 17,593 --
------------------ ------------------
14,381 36,970
========== ==========
The provision for decline in value of long term quoted investments has been made to the extent of lower of
cost and market value and in case of unlisted company at the lower of cost and break-up value based on
latest available financial statement in order to comply with the requirement of Technical Release 23 issued
by the Institute of Chartered Accountants of Pakistan. However, management believes that market value of
long term quoted investments may or may not indicate the likelihood of ultimate recovery of the carrying
amount of quoted investments in view of the current market conditions.
Had the long term quoted investments been valued at break-up value instead of market value, the provision
for decline in market value would have been lower by Rs. 4.532 million. Consequently, profit before taxa-
tion would have increased by the same amount.
16. NET INVESTMENT IN LEASE FINANCE
Minimum Lease rentals receivables 4,735,860 4,440,663
Add: Residual value of leased assets 627,203 629,406
------------------ ------------------
Gross investment in lease finance 16.3 5,363,063 5,070,069
Less: Unearned income 11,362,298 1,228,717
Provision for potential lease losses 217,997 191,035
------------------ ------------------
1,580,295 1,419,752
------------------ ------------------
Net investment in lease finance 16.3 3,782,768 3,650,317
Less: Current portion of net investment 1,599,326 1,494,774
------------------ ------------------
Long term portion of net investment 2,183,442 2,155,543
========== ==========
16.1 Minimum lease rentals receivables over the twelve months amounting to Rs.1,270.401 million
(1998: Rs. 1,373.596 million).
16.2 Net investment in lease finance includes Rs. 118.633 million (1998:Rs.309.382 million) in respect
of an associated company. Maximum amount outstanding during the year was Rs. 140.597 million
(1998: Rs.310.159 million).
Gross Investment Net Investment
in Lease Finance in Lease Finance
(Rupees in 000's) (Rupees in 000's)
June 30, June30, June 30, June 30,
1999 1998 1999 1998
16.3 Less than one year 2,153,807 2,050,781 1,599,326 1,494,774
More than one year and less than five years 3,123,148 2,887,529 2,146,977 2,049,543
More than five years 86,108 131,759 36,465 106,000
------------------ ------------------ ------------------ ------------------
5,363,063 5,070,069 3,782,768 3,650,317
========== ========== ========== ==========
(Rupees in 000's)
Note June 30 June 30
1999 1998
17. LONG TERM PREPAYMENTS AND
DEFERRED COSTS
Prepayments 3,534 5,162
Deferred cost
Front end fees 4,312 5,483
Less: Amortized during the year 964 1,171
------------------ ------------------
3,348 4,312
------------------ ------------------
6,882 9,474
========== ==========
18 SHORT TERM FINANCES- Secured
Considered good
Finance under mark-up agreements
net of provision of Rs. 5.377 million (1998: Rs. 5.377 million) -- --
Finance under buy-back agreements
net of provision of Rs. 13.040 million (1998: Rs. 11.567 million) 3,292 8,235
Against foreign currency COIs -- 28,647
Against local currency COIs 15 287
Bridge finance
net of provision of Rs. 12.03 million (1998: Rs. 12.03 million) 16,470 16,470
Advance against letters of credit 1,237 5,712
------------------ ------------------
21,014 59,351
========== ==========
19. SHORT TERM INVESTMENTS
Government securities 19.1 105,000 115,000
Shares in listed companies
- Purchase under resale obligations -- 17,300
- Trading portfolio 26.4 50,545 53,125
[market value Rs. 20.915 million
(1998: Rs. 21.630 million)]
Less: Provision for decline in market value 31,495 26.83
Adjustment during the year (1,865) 4,670
------------------ ------------------
29,630 31,495
------------------ ------------------
20,915 21,630
Placements -- 10,000
------------------ ------------------
125,915 163,930
========== ==========
(Rupees in 000's)
Note June 30 June 30
1999 1998
19.1 Government Securities
Federal investment bonds - at cost including FIB's
of Rs. 150 million purchased on resale commitment
[aggregate face value Rs.355 million
( 1998:Rs.275 million)] 355,000 275,000
Sale under repurchase commitments [aggregate face
value Rs.250 million (1998:Rs.275 million)] (250,000) (275,000)
------------------ ------------------
105,000 --
NIT Units -- 115,000
------------------ ------------------
105,000 115,000
========== ==========
The management of the Corporation does not intend to hold the portfolio until maturities.
20. ADVANCES, DEPOSITS, PREPAYMENTS AND
OTHER RECEIVABLES
Current portion of advances to chief executive 1,238 1,212
Current portion of advances to executives 1,408 808
Current portion of advances to other employees 546 211
Deposits 831 764
Prepayments 4,417 16,008
Other receivables - net of provision for doubtful receivables
amounting to Rs.6.968 million (1998:Rs.2.933 million) 20.1 168,765 257,643
------------------ ------------------
177,205 276,646
========== ==========
20.1 Other receivables include Rs. 149.685 million (1998:Rs.231.831 million) in respect of amount
receivable from State Bank of Pakistan/Ministry of Finance against exchange risk fee.
21. CASH AND BANK BALANCES
In hand:
- Cash 79 3
- Cheques 49,856 29,562
With banks:
- Current accounts 28,079 24,391
- Profit & loss sharing accounts
- Financial institutions 1,519 1,223
- Scheduled banks 24,903 18,094
------------------ ------------------
26,422 19317
------------------ ------------------
104,436 73,273
========== ==========
(Rupees in 000's)
Note June 30 June 30
1999 1998
22. INCOME FROM INVESTMENTS / FINANCES
Income from government securities 24,383 28,032
Income from other investments 22.1 3,794 4,612
Income from long term finances 37,263 35,763
Income from short term finances 34,698 34,470
------------------ ------------------
100,138 102,877
========== ==========
22.1 Income from other investments
Dividend income 1,129 475
Return on Redeemable Capital Certificates/TFC 2,665 3,672
Profit on sale of investments -- 465
------------------ ------------------
3,794 4,612
========== ==========
23. OTHER INCOME
Fees, commission and exchange gain 23.1 10,839 15,550
Income from bank deposits 10,309 5,171
Profit on disposal of fixed assets 1,209 49
Others 3,698 1,597
------------------ ------------------
26,055 22,367
========== ==========
23.1 Fees, commission and exchange gain - Fees 5,482 8,725
- Commission 699 332
- Exchange gain 4,658 6,493
------------------ ------------------
10,839 15,550
========== ==========
24. FINANCIAL CHARGES / RETURN ON BORROWINGS
Long term finances - secured 191,033 166,284
- unsecured 2,903 2,843
Short term finances - secured 47,721 26,017
- unsecured 47,643 24,695
Bank charges 406 873
Commission and brokerage 1,182 785
Others 11,176 13,143
------------------ ------------------
302,064 234,640
========== ==========
(Rupees in 000's)
Note June 30 June 30
1999 1998
25. ADMINISTRATIVE AND OPERATING EXPENSES
Directors' fees 25.1 1 2
Salaries and benefits 45,697 48,442
Staff welfare and training 556 528
Rent 5,523 4,626
Insurance 4,185 4,076
Utilities 3,902 3,758
Stationery and supplies 1,135 1,441
Vehicle running expenses 3,491 2,736
Travelling 1,244 1,263
Legal and professional charges 25.3 6,400 4,096
Depreciation 9,613 8,848
Donations / Scholarships -- 66
Advertisement 292 505
Repairs and maintenance 2,098 1,617
Other expenses 2,812 3,300
------------------ ------------------
86,949 85,304
========== ==========
25.1 Directors' fee
One director (1998' two) was paid fees for attending board meetings of the Corporation.
25.2 Remuneration of Chief Executive and other executives
Rupees in 000's
Chief Executive Executives
June 30 June30 June 30 June 30
1999 1998 1999 1998
Managerial remuneration 1,750 3,483 10,404 9,634
Housing and utilities 1,000 1,860 5,762 5,905
Medical expenses 126 115 867 797
Provident fund and gratuity 326 385 1,763 1,815
------------------ ------------------ ------------------ ------------------
3,202 5,843 18,796 18,151
========== ========== ========== ==========
Number Of persons 1 1 46 43
========== ========== ========== ==========
The Chief Executive and certain Executives are also entitled to free use of Corporation maintained cars and
certain items of household, furniture and fixtures in accordance with the service rules.
    (Rupees in 000's)
June 30 June 30
1999 1998
25.3 Auditors' remuneration
Legal and professional charges include:
Annual audit fee 200 175
Other certifications 105 60
Out-of-pocket expenses 35 50
------------------ ------------------
340 285
========== ==========
26. INVESTMENT IN LISTED / UNLISTED COMPANIES MODARABA
No. of Shares Investment in Listed Companies/ Short term Long term-
Certificates Modarabas Investment Investment
held (Rupees in 000's)
June 1999 June 1998 June 1999 June 1998 June 1999 June 1998
12,273 12,273 First Habib Bank Modaraba 165 165
5 5 Mohib Textile Mills Ltd.
540 450 Sakrand Sugar Mills Ltd. 5 5
100 100 Yousaf Weaving Mills Ltd. 2 2
65,746 65,746 First Mehran Modaraba 1,043 1,043
80 80 Nishat (Chunian) Ltd. 1 1
87 87 Brother Textile Mills Ltd. 2 2
40,595 40,595 First Prudential Modaraba 442 442
3,500 3,500 L.T.V.C.M. (Face value Rs 5 per share) 27 27
902 902 Gulshan Spinning Mills Ltd. 33 33
9,697 9,697 Third Prudential Modaraba 78 78
31,398 31,398 First Fidelity Leasing Modaraba 617 617
14,200 14,200 First Crescent Modaraba 267 267
39,000 39,000 Awan Textile Mills Ltd. 390 390
8,320 8,320 Pioneer Cables Ltd.' 225 225
28,972 28,955 Sui Northern Gas Pipelines Ltd. 606 606
425 425 I.C.I. Pakistan Ltd. 10 10
13,834 13,834 Nishat Mills Ltd. 550 550
20,000 20,000 Allied Motors Ltd. 305 305
3,000 3,000 Capital Assets Leasing Ltd. 32 32
9,196 8,065 Crescent investment Bank Ltd. 517 517
7,004 7,004 Crescent Steel Ltd. 500 500
24,100 24,100 D.G. Khan Cement Ltd. 1,671 1,671
13,000 13,000 Fecto Cement Ltd. 678 678
200,000 200,000 Glamour Textile Mills Ltd. 5,016 5,016
8,376 6,980 P.I.L. Corp. Ltd. 479 479
20,775 18,589 Searle Pakistan Ltd. 1,305 1,305
1,980 1,800 Soneri Bank Ltd. -- --
333 333 Tri Star Polyestar Ltd. 6 6
-- 168 Trust Leasing Corporation Ltd. -- 8
100 100 Trust Modaraba 1 1
8,000 8,000 Gulistan Spinning Mills Ltd. 279 279
50 50 Ansari Sugar Mills Ltd. -- --
500 500 Security Investment Bank Ltd. 17 17
984 984 Union Bank Ltd. 36 36
11,200 11,200 Lucky Cement Ltd. 232 232
12,705 12,705 Asian Leasing Corporation Ltd. 417 417
6,000 6,000 Pakistan Telecommunication Company Ltd. 290 290
1,310 1,310 Karachi Electric Supply Corporation Ltd. 4 4
6,750 6,750 Maple Leaf Cement Ltd. 464 464
9,975 6,650 K.A.S.B. & Co. Ltd. 585 585
906,788 906,788 K.A.S.B. Premier Fund Ltd. 9,068 9,068
20,000 20,000 Dhan Fibres Ltd. 262 262
18,911 17,192 Sui Southern Gas Co. Ltd. 449 449
7,001 7,001 General Tyres & Rubber Co. Ltd. 240 240
100,000 100,000 D.G. Electric Ltd. 3,100 3,100
561,500 561,500 Ibrahim Fibres Ltd. 8,984 8,984
171,473 342,946 L.T.V.C.M.-RCC 11,145 13,717
(Face value Rs.65 per certificate)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
26.1 Sub Total 50,545 53,125
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
1,000,000 1,000,000 K.A.S.B. Premier Fund Ltd. (Pre IPO) 10,000 10,000
648,487 648,487 Agriautos Ltd. 4,864 4,864
200,000 200,000 Elahi Electric Ltd. 4,291 4,291
10,000 10,000 Chakwal Cement Ltd. GDR 2,819 2,819
(Face value Rs. 11.275 per share)
-- 50 Nishat Tek Ltd. - TFC -- 4,996
(Face value Rs. 100 per Certificate)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
26.2 Sub Total 21,974 26,970
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Investment in Unlisted Companies
1,000,000 1,000,000 Mac Pac Films Ltd. 1,000,000 1,000,000
(Mr. Maqbool Ellahi- Chief Executive)
26.3 Sub Total 10,000 10,000
========== ========== ========== ==========
26.4 Total Short Term Investments 50,545 53,125
========== ========== ========== ==========
26.5 Total Long Term Investments 31,974 36,970
========== ========== ========== ==========
Unless otherwise stated holding are in ordinary shares/certificates/vouchers of Rs. 10 each.
Investment with a carrying value of Rs. 0.996 million (1998: Rs. 0.996 million) are not held in the name
of the Corporation but are covered by blank transfer deeds.
27. CREDIT RISK AND CONCENTRATIONS OF CREDIT RISK
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and
cause the other party to incur a financial loss. The Corporation attempts to control credit risk by monitoring
credit exposures, limiting transactions with specific counterparties and continually assessing the credit
worthiness of counterparties.
Concentration of cedit risk arise when number of counterparties are engaged in similar business activities,
or have similar economic feature that would cause their ability to meet contractual obligation to be
similarly affected by changes in economic, political or other conditions.
Maximum Credit risk in respect of Net Investment in Finance Lease is to the extent of the amount
mentioned in note 16 to the financial statements.
Details of the sector analysis of lease portfolio is given below:
INDUSTRY SECTOR
1999
S.No. Industry Sector (Rs.'000) %
1. Auto & Allied 204,041 5.39
2. Cement 690,694 18.26
3. Chemical - Fertilizer 212,808 5.63
4. Electrical & Electronics 51,572 1.36
5. Energy, Oil & Gas 719,278 19.01