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Universal Leasing Corporation Limited
Annual Report 1999
CONTENTS
Company Information
Notice of Meeting
Director's Report
Auditors' Report to the Members
Balance Sheet
Profit and Loss Account
Statement of Changes in Financial Position
Notes to the Financial Statements
Pattern of Shareholding
COMPANY INFORMATION
BOARD OF DIRECTORS
S. M. Shabbir Shah Chief Executive
Iftikhar Rizvi Director
Sarfaraz A. Shaikh Director (Nominee Allied Bank of Pakistan Ltd.)
Amir Saeed Director
Kamran Khawaja Director
Majid Ali Khan Director
Nusrat Ali Director
CREDIT COMMITTEE
S. M. Shabbir Shah Chief Executive
Moeen Asif Khawaja Vice President
Amir Saeed Director
COMPANY SECRETARY
S. M. Shabbir Shah
AUDITORS
Khalid Majid Husain Rahman
Chartered Accountants
Rahim Iqbal Rafiq & Co.
Chartered Accountants
LEGAL ADVISORS
M/s. Panni & Rizvi
Advocates & Corporate Counselors
REGISTERED OFFICE
2nd Floor, Hajvari Center,
Defence Main Boulevard,
Lahore, Cantt.
Lahore Tel #: 6673097
KARACHI OFFICE
6th Floor, Lakson Square, Building No. 3,
Sarwar Shaheed Road,
Karachi.
Telephone No. 5687860, 5687016, 5687026, 5657056
SHARE TRANSFER OFFICE
M/s. Uni Associates (Pvt) Ltd.
6th Floor, Lakson Square Building No. 3,
Sarwar Shaheed Road,
Karachi.
NOTICE OF MEETING
Notice is hereby given that the Seventh Annual General Meeting of the Universal Leasing Corporation
Limited will be held on Monday February 14, 2000 at 11.00 a.m. at 6th Floor, Lakson Square Building
# 3, Sarwar Shaheed Road, Karachi to transact the following business.
Ordinary Business:
1. To confirm the minutes of the Last Annual General meeting of the Company held on December
18, 1998.
2. To receive, consider and adopt the audited accounts for the year ended June 30, 1999 and the
reports of the Directors and the Auditors thereon.
3. To appoint auditors and fix their remuneration.
Special Business
4. To consider, ratify and approve the remuneration of full time working Director and Chief Executive.
A statement under Section 160 of the Companies Ordinance, 1984 pertaining to the special
business is annexed to this notice.
To transact any other business as may be placed before the Meeting with the permission of the
Chair.
By Order of the Board
S. M. Shabbir Shah
January 24, 2000 Chief Executive
NOTES:
1. The Share transfer Books of the Company shall remain Closed from February 14, 2000 to February
21, 2000 (both days inclusive).
2. A member entitled to attend, speak and vote at these meeting may appoint a proxy to attend,
speak and vote on his/her behalf. A proxy need not to be member.
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 attorney or other authority, in order to be
valid must be deposited at 6th Floor, Lakson Square Building # 3, Sarwar Shaheed Road, Karachi,
not less than 48 hours before the time of the respective meeting.
4. Member are requested to notify change in their address, if any.
STATEMENT UNDER SECTION 160(1) OF THE COMPANIES ORDINANCE, 1984 AGENDA # 4
Approval of remuneration of the Chief Executive and whole time working Director of the Company.
The Member's approval is sought for the payment of remuneration and provision of certain facilities
to the Chief Executive and one whole time working Director as per recommendations of the Chief Executive
and one whole time working Director as per recommendations of the Board of Directors of the Company.
For this purpose it is proposed that the following resolution be passed as an Ordinary Resolution:
"Resolved that the Chief Executive and whole time working Director shall be paid w.e.f. January 2000
the gross remuneration per month as follows alongwith other benefits as per their service contracts"
1. Mr. S. M. Shabbir Shah Chief Executive Rs. 85,000/-
2. Mr. Amir Saeed Director Rs. 25,000/-
DIRECTOR'S REPORT
The Board of Directors is pleased to present the audited accounts along with the annual report
for the year ended June 30, 1999.
CONSTITUTION OF THE BOARD
Constitution of the Board has changed during the year, Mr. Ammanullah Khan, Mr. Iqbal
Kasbati, Mr. Hameed Khan had resigned and Mr. Amir Saeed, Mr. Iftikhar Hussain Rizvi
and Mr. Khawaja Mohammad Kamran respectively are appointed in their places. Further,
MS Allied Bank of Pakistan have also changed their nominee Director i.e. Mr. Safaraz A.
Sheikh in place of Mr. Rasheed M. Choudhry. The Board places on record the appreciation
for services rendered by the out going directors and welcomes the appointment of the new
directors.
REVIEW OF OPERATIONS
This has been another difficult year due to depressing political and economic conditions of
the country. Small and medium sized leasing companies find it increasingly difficult to operate
due to double impact of potential lease losses and increased borrowing rates prevailing in the
market.
Financial Results:
(Loss)/profit after taxation (9,047,150)
Unappropriated profit brought forward 4,106,392
------------------
(4,940,758)
Appropriations:
Transfer from/(to)
General reserve - reserve for 8,000,000
contingencies
Statutory reserve
Capital reserve - reserve for
deferred taxation (2,280,000)
------------------
5,720,000
------------------
Unappropriated profit carried forward 779,242
==========
Earnings per share:
Basic (0.82)
Investment in lease remained low due to the fact that quality customers are limited which
is again due to slump in the economy which is not very conducive for the promotion of
industrialization. However drastic measures are being taken by the present government to
revive economy. Measurements such as cut in the borrowing rates; promoting competent and
honest people removal of corruption; formulation and implementation of correct policies will
have positive bearing in the economy and in restoring the shattered investor confidence.
The Company has followed a prudent policy and has provided for the potential lease
The loss occurred during the year is due to income reversal of Rs. 8 million and provision
for potential lease losses amounting to Rs. 1.4 million thus aggregating to total provision of
Rs. 9.4 million. The major part of income reversal and provision made during the year is due
to the lease facility extended to MS Pakland Cement limited, MS Delta Rice (Pvt) Limited
and Mehran Paper Mills (Pvt) Limited.
The auditors of the company have qualified the opinion with respect to recoverability of certain
Musharika transactions. These Musharikas were granted to place the surplus funds of the
company which were lying idle. In the absence of bonafide customers the management of the
company suggested these funds be placed into the ventures that have lucrative returns as
well as the security of the money financed. As part of normal credit risk there is some element
of doubtfulness in the recovery of certain Musharika transactions. However, management is
making rigorous efforts to ensure the recovery from these doubtful Musharikas. The management
is aware that the company's principle line of business is leasing, considering the fact it is
decided that the Musharika facilities shall be withdrawn and funds be placed in leasing
operations. The above decision will certainly help the management to focus itself on the principle
line of business.
FUTURE OUTLOOK
Your company now wears a totally new look the new logo will Insha-Allah be the echelon
of success in near future. With this renewed commitment we intend to follow aggressive drive
to augment its lease portfolio thus switching form the conservative strategy followed in last
couple of years. Major target area will be small ticket leasing which will include consumer
leasing and leasing of motor vehicles. However, the management before the grant of the facility
will carry out tough evaluation of the client in order to avoid potential lease losses. For this
purpose the Company has already become active in the money market and is in the process
of negotiating loans on short and long term basis.
AUDITORS
The present auditors M/S Khalid Majid Husain Rahman Chartered Accountants and M/S Rahim
Iqbal Rafiq and Company Chartered Accountants retire and offer themselves for reappointment.
YEAR 2000 COMPLIANCE
The Company has successfully complied with the year 2000 issue in respect of millennium
bug.
ACKNOWLEDGEMENTS
The Board on behalf of the company wish to express gratitude to the banks, State Bank of
Pakistan and Securities and Exchange Commission of Pakistan for their guidance and support.
The Board of Directors wish to place on record its appreciation for the hard work and team
effort of the staff of the company.
PATTERN OF SHARE HOLDING
The pattern of share holdings as at June 30, 1999 is annexed to this report.
On Behalf of the Board
S. M. SHABBIR SHAH
January 22, 2000 Chief Executive
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance shoot of Universal Leasing Corporation Limited, as
at June 30, 1999 and the related profit and loss account and the statement of changes in
financial position together with the notes forming part thereof, for the year then ended and
we state that we have obtained all the information and explanations which to the beat of
our knowledge and belief were necessary for the purposes of our audit and after due verification
thereof, we report that;
(1) Shortfall, if any, that may arise in the recovery of some unsecured short term musharika
investments (refer note no. 13) as a result of these being doubtful has not been provided
for in the accounts as the final outcome thereof cannot presently be determined.
(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 further
in accordance with accounting policies consistently applied;
(ii) the expenditure incurred during the year was for the purpose of Company's business; and
(iii) the business conducted, investments made and expenditure incurred during the
year were in accordance with the objects of the Company;
(c) Except for the effect of the matter stated in para (1) above, in our opinion, and to the
best of our information and according to the explanations given to us, the balance sheet.
profit and loss account and the statement of changes in financial position together with
the notes forming part thereof, give the information required by the Companies Ordinance,
1984 in the manner so required and respectively give a true and fair view of the state
of the Company's affairs at June 30, 1999 and of the loss and the changes in financial
position for the year then ended; and
(d) in our opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance,
1980.
Khalid Majid Husain Rahman Rahim Iqbal Rafiq and Company
Chartered Accountants Chartered Accountants
Karachi: January 22, 2000
BALANCE SHEET AS AT JUNE 30, 1999
Note 1999 1998
Rupees Rupees
SHARE CAPITAL AND RESERVES
Authorised capital
20,000,000 ordinary shares of Rs.10 each 200,000,000 200,000,000
========== ==========
Issued, subscribed and paid-up capital
11,000,000 ordinary shares of Rs.10 each
fully paid in cash 110,000,000 110,000,000
Reserves 3 8,056,600 13,776,600
Unappropriated profit 779,242 4,106,392
------------------ ------------------
118,835,842 127,882,992
OBLIGATIONS UNDER FINANCE LEASES 4 -- 222,884
DEFERRED LIABILITY 559,536 649,774
LONG TERM DEPOSITS 5 2,758,673 10,348,087
CURRENT LIABILITIES
Current portion of obligations
under finance leases 28,953 444,873
Current maturity of long term deposits 8,267,429 4,726,735
Short term running finance 6 17,252,749 18,543,806
Accrued and other liabilities 7 912,884 1,421,783
Provision for taxation 51,339 631,487
Unclaimed dividend 2,600 2,600
------------------ ------------------
26,515,954 25,771,284
COMMITMENTS 8
------------------ ------------------
148,670,005 164,875,021
========== ==========
TANGIBLE FIXED ASSETS 9 12,798,875 15,038,466
NET INVESTMENTS IN LEASES
Minimum lease rentals receivable 71,540,130 92,807,192
Add: Residual value 12,632,195 16,660,567
------------------ ------------------
Gross investment in leases 84,172,325 109,467,759
Less: Unearned finance income (8,420,613) (13,940,375)
------------------ ------------------
Net investment in lease finance 75,751,712 95,527,384
Less: Allowance for potential lease losses (12,339,719) (2,907,765)
------------------ ------------------
63,411,993 92,619,619
Less: Current portion of net investment in leases (55,714,441) (27,206,839)
------------------ ------------------
7,697,552 65,412,780
LONG TERM INVESTMENTS 10 1,392,400 1,401,900
LONG TERM DEPOSITS, PREPAYMENTS
AND DEFERRED COSTS 11 270,000 1,052,595
CURRENT ASSETS
Current portion of net investment in leases 55,714,441 27,206,839
Short term investments 12 857,722 756,740
Short term musharika investments 13 43,256,358 13,347,449
Advances, deposits, prepayments and
other receivables 14 26,535,916 38,206,238
Cash and bank balances 15 146,741 2,422,011
------------------ ------------------
126,511,178 81,939,277
------------------ ------------------
148,670,005 164,875,021
========== ==========
The annexed notes form an integral part of these financial statements.
M. Shabbir Shah Amir Saeed
Chief Executive Director
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED JUNE 30, 1999
Note 1999 1998
Rupees Rupees
Income from lease operations 16 5,472,668 16,855,573
Other income 17 9,850,183 6,962,229
------------------ ------------------
15,322,851 23,817,802
------------------ ------------------
Administrative and operating expenses 18 10,827,240 11,802,881
Financial charges 19 3,734,878 3,635,450
Provision for potential lease losses 9,431,954 2,654,866
------------------ ------------------
23,994,072 18,093,197
------------------ ------------------
(Loss)/Profit before taxation (8,671,221) 5,724,605
Provision for taxation 375,929 1,210,894
------------------ ------------------
(Loss)/Profit after taxation (9,047,150) 4,513,711
Unappropriated profit brought forward 4,106,392 495,423
------------------ ------------------
(4,940,758) 5,009,134
Appropriations:
Transfer from/(to):
General reserve-reserve for contingencies 8,000,000 --
Statutory reserve -- 902,742
Capital reserve - reserve for deferred taxation (2,280,000) --
------------------ ------------------
5,720,000 902,742
------------------ ------------------
Unappropriated profit carried forward 779,242 4,106,392
========== ==========
Earning per share: 22
- Basic (0.82) 0.41
- Diluted N/A N/A
The annexed notes form an integral part of these financial statements.
S. M. Shabbir Shah Amir Saeed
Chief Executive Director
STATEMENT OF CHANGES IN FINANCIAL POSITION
(CASH FLOW STATEMENT) FOR THE YEAR ENDED JUNE 30, 1999
1999 1998
Rupees Rupees
GASH FLOWS FROM OPERATING ACTIVITIES
Operating (1oss)/profit before taxation (8,671,221) 5,724,605
Adjustments for non cash items:
Amortization of deferred cost 891,227 891,227
Depreciation 1,742,611 1,901,696
Gain on sale of investments (15,000) (285,550)
Financial charges 8,734,878 36,357,450
Reversal/Provision for diminution in value of investments (91,482) 768,190
Provision for gratuity 380,507 300,387
Provision for potential lease losses 9,431,954 2,654,866
Gain on sale of fixed asset (3,800) --
Dividend income (88,442) (35,599)
------------------ ------------------
Operating profit before working capital changes 7,811,282 15,555,272
Decrease in not investment in leases 19,775,672 12,200,896
(Increase(/decrease in short term musharika investment (29,908,909) 34,567,839
(Decrease)/Increase in long term deposits (4,048,720) 56,868
(Decrease)/Increase in accrued liabilities excluding accrued
financial charges (469,118) 316,932
Decrease/(Increase) in advances, deposits,
prepayments and other receivable 11,670,322 (17,307,285)
------------------ ------------------
(2,980,753) (1,275,750)
------------------ ------------------
Cash generated from operations 4,330,479 14,279,022
Decrease/(increase) in long term deposits and prepayments (78,629) 5,490
Income tax paid (956,077) (193,067)
Gratuity paid (470,745) --
------------------ ------------------
Net cash generated from operating activities 2,825,028 14,091,945
CASH FLOWS FROM INVESTING ACTIVITIES
Dividend received 88,442 56,104
Purchase of fixed assets (117,200) (1,821,130)
Sale proceed from fixed assets 800,920 --
Short term investments 15,000 (55,351)
------------------ ------------------
Net cash generated / (used) in investing activities 287,162 (1,320,877)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from lease obligations 817,060 882,000
Dividend paid -- (10,997,400)
Repayment of finance lease liabilities (68S,804) (481,866)
Financial charges paid (3,774,659) (3,156,107)
------------------ ------------------
Net cash used in financing activities (4,096,403) (14,253,373)
------------------ ------------------
Net decrease in cash and cash equivalents (984,213) (1,481,805)
Add: Cash and cash equivalents as at July 1, 1998 (16,121,795) (14,689,990)
------------------ ------------------
Cash and cash equivalents as at June 30, 1999 (Note 23) (17,106,008) (16,121,795)
========== ==========
S. M. Shabbir Shah Amir Saeed
Chief Executive Director
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1999
1. LEGAL STATUS AND NATURE OF BUSINESS
The Universal Leasing Corporation Limited was incorporated in Pakistan on July 29,
1993 as a public limited company under the Companies Ordinance, 1984. The principal
activity of the Company is leasing of assets. The Company's shares were floated for public
subscription on February 6, 1995, while it commenced its business from April 24, 1995.
It is listed on the Karachi Stock Exchange and is classified as a Non-Banking Financial
Institution (NBFI) by the State Bank of Pakistan.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Accounting convention
These financial statements have been prepared under the historical cost convention.
2.2 Fixed assets and depreciation
Owned:
Fixed assets are stated at cost less depreciation to date. Depreciation is charged
to income by applying straight-line method over the useful life of the assets. Full
year's depreciation is charged on acquisitions during the year.
Normal repairs and maintenance are charged to income as and when incurred. Major
renewals and improvements are capitalized.
Gains and losses on disposal of fixed assets, if any, are included in income currently.
Leased:
Assets acquired under finance leases are stated at the fair value or, if lower, at present
value of minimum lease payments. Leased assets are depreciated over their useful
life by applying straight-line method.
The outstanding obligations under finance leases less finance charges allocated to
future periods is shown as liability. The finance charges are calculated at the rate
implicit in the lease and are charged to profit and loss account.
2.3 Deferred costs and amortization
Deferred costs are amortized systematically over the period of five years commencing
from the year of incurrence.
2.4 Investments
Long term investments are carried at cost. Provision is made for diminution other
than temporary in their values, if any.
Short term investments are carried at the lower of cost and market value, determined
on an aggregate portfolio basis. The Charges or credits, if any, arising from adjustments
in carrying amounts are taken to the profit and loss account.
Gains and losses on disposal of investments, if any, are recognized in income currently.
2.5 Taxation
Current:
Provision for taxation is made at the prevailing rates of taxation after taking into
account tax credits available, if any.
Deferred:
Deferred taxation is accounted for using the liability method on all major timing
differences excluding tax effects on those timing differences which are not likely to
reverse in the foreseeable future.
2.6 Revenue recognition
Income from lease operations:
The Company follows the "financing method" for recognition of lease income. Ac-
cordingly, at the commencement of lease, the total unearned lease finance income
consists of the excess of aggregate lease rental receivables plus any residual value
over the cost of the leased assets. This finance income is allocated over the lease
term on a pattern reflecting a constant periodic return on the Company's net investment
outstanding in respect of the lease.
Front-end fee, commitment fee and other commissions are taken to income when
realized.
Profit on Musharika investments:
Expected profit on Musharika investments is recognized on pro-rata accrual basis.
Dividend income:
Dividend income is recognized when the right to receive the dividend is established.
2.7 Staff retirement benefits
The Company operates an un-funded gratuity scheme for all of its permanent employees.
Provision for gratutity is made on one month gross salary for those employees who
have completed three years of service.
2.8 Allowance for potential lease losses
The allowance for potential lease losses is maintained at a level, which, in the judgment
of the management, is adequate to provide for potential losses on lease portfolio that
can be reasonably anticipated.
2.9 Earnings per share
Basic earnings per share is calculated by dividing profit after tax by the weighted
average number of outstanding shares during the year.
3. CHANGES IN EQUITY
Reserves
Share Capital Unappropriated
Capital Statutory Contingency deferred Total profit Total
taxation
As at July 1, 1997 110,000,000 4,873,858 8,000,000 -- 12,873,858 495,423 123,369,281
Profit during the year -- -- -- -- -- 4,513,711 4,513,711
Inter transfer -- 902,742 -- -- 902,742 (902,742) --
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
As at July 1, 1998 110,000,000 5,776,600 8,000,000 -- 13,776,600 4,106,392 127,882,992
Loss during the year -- -- -- -- -- (9,047,150) (9,047,150)
Inter transfer -- -- (8,000,000) 2,280,000 (5,720,000) 5,720,000 --
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
As at June 30, 1999 110,000,000 5,776,600 -- 2,280,000 8,056,600 779,242 118,835,842
========== ========== ========== ========== ========== ========== ==========
3.1 Statutory reserve represents the reserve created under the provisions of the State
Bank of Pakistan's Rules for Non Banking Financial Institutions.
1999 1998
Rupees Rupees
4. OBLIGATION UNDER FINANCE LEASES
Balance of obligations under finance leases 667,757 767,623
Add: Acquisition net of repayments / adjustment (638,804) (99,866)
------------------ ------------------
28,953 667,757
Less: Current portion shown under
current liabilities (28,953) (444,873)
------------------ ------------------
-- 222,884
========== ==========
The obligation under finance lease is reported at minimum lease payment, discounted
by using rate of 20.35%. The future payments due are follows:
1999 1998
Rupees Rupees
June 30, 1999 -- 540,529
June 30, 2000 29,795 188,495
June 30, 2001 -- 64,650
------------------ ------------------
29,795 793,674
Less: Finance charges allocated to future period (842) (125,917)
------------------ ------------------
28,953 667,757
========== ==========
5. LONG TERM DEPOSITS
Security deposits 11,026,102 15,074,822
Less: Current maturity shown
under current liabilities (8,267,429) (4,726,735)
------------------ ------------------
2,758,673 10,348,087
========== ==========
These represent interest free lease key money received against lease contracts and are
repayable/adjustable at the expiry/termination of the respective leases.
6. SHORT TERM RUNNING FINANCE - Secured
Short term running finance facilities available at the balance sheet date from commercial
banks under mark-up arrangements were Rupees 17.818 million (1998: Rupees 20 million).
The rates of mark-up applicable to these facilities range from Rupees 0.50 to Rupees
0.55 (1998 Rupees 0.55 to Rupees 0.60) per Rupees 1,000 per day payable quarterly. These
facilities are secured by charge on the leased assets and related rentals receivable.
7. ACCRUED AND OTHER LIABILITIES
1999 1998
Rupees Rupees
Mark-up on short term running finance 439,562 479,343
Auditors' remuneration 245,750 525,750
Advance against lease 7,900 87,900
Tax deducted from payments to
suppliers and others 2,604 27,431
Others 137,068 301,359
------------------ ------------------
912,884 1,421,783
========== ==========
8. COMMITMENTS
For acquiring 4.59% share
in First Women Bank Limited 25,704,000 25,704,000
For lease disbursements -- 5,900,000
9. FIXED ASSETS
COST DEPRECIATION
As at Additions Transfers Disposals As at As at For the Transfers As at Written Depreciation
July 1, during during June 30, July 1, year/ June 30, down rate %
1998 the year the year 1999 1998 (disposals) 1999 value per annum
RUPEES
Owned:
Office premises 9,844,000 -- -- -- 9,844,000 1,476,600 492,200 -- 1,968,800 7,875,200 5
Furniture & fixtures 7,101,647 -- -- -- 7,101,647 2,327,405 710,165 -- 3,037,570 4,064,077 10
Office Equipment 565,835 117,200 -- -- 683,035 358,403 136,607 -- 495,010 188,025 20
Motor Vehicles 1,453,555 -- 712,800 (516,300) 1,650,055 549,113 330,011 343,080 1,003,024 647,031 20
(219,180)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
18,965,037 117,200 712,800 (516,300) 19,278,737 4,711,521 1,668,983 343,080 6,504,404 12,774,333
(219,180)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Leased:
Motor Vehicles 1,109,125 -- (712,800) (396,325) -- 422,345 (79,265) (343,080) -- -- 20
Office Equipment 245,425 -- -- -- 245,425 147,255 73,628 -- 220,883 24,542 30
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
1,354,550 -- (712,800) (396,325) 245,425 569,600 73,628 (343,080) 220,883 24,542
(79,265)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
1999 20,319,587 117,200 -- (912,625) 19,524,162 5,281,121 1,742,611 -- 6,725,287 12,798,875
(298,445)
========== ========== ========== ========== ========== ========== ========== ========== ========== ==========
1998 18,998,457 1,321,130 -- -- 20,319,587 3,379,425 1,901,696 -- 5,281,121 15,038,466
========== ========== ========== ========== ========== ========== ========== ========== ========== ==========
9.1 Disposal of fixed assets
Accumulated Written Sales Gain/ Mode Particulars
Particulars Cost depreciation down proceeds (loss) of purchaser
value
Rupees
Motor Vehicles - Owned 226,500 45,300 181,200 185,000 3,800 Negotiation Nauman
Motor Vehicles - Owned 289,800 173,880 115,920 115,920 -- Negotiation Saif Khan
(J. S. Knitting (Pvt) Ltd)
Motor Vehicles - Leased 398,325 79,285 317,080 317,080 -- Insurance Receivable from Security
claim Leasing Corporation Limited
------------------ ------------------ ------------------ ------------------ ------------------
912,625 298.45 614,180 817,980 3,800
========== ========== ========== ========== ==========
10. LONG TERM INVESTMENTS - Listed securities
No. of certificates/ 1999 1998
shares Rupees Rupees
1999 1998
Mutual Funds
49,630 49,630 Confidence Mutual Fund Limited 496,300 496,300
10,000 10,000 23rd ICP Mutual Fund 81,300 81,300
10,000 10,000 25th ICP Mutual Fund 102,800 102,800
Leasing Companies
National Development Leasing
Corporation Limited
24,675 24,675 (Ordinary shares Of Rupees 5 each) 396,175 396,175
Synthetic & Rayon
20,000 20,000 Pakistan Synthetic Limited 468,425 468,425
------------------ ------------------
1,545,000 1,545,000
Less: Provision for diminution
in the value of investments (152,600) (143,100)
------------------ ------------------
1,392,400 1,401,900
========== ==========
10.1 Unless stated otherwise, investments represent certificates/ordinary shares of Rupees
10 each fully paid in cash.
10.2 The aggregate market value of the investments as on June 30, 1999 amounted
to Rupees 837,712 (1998: Rupees 425,812).
11. LONG TERM DEPOSITS AND DEFERRED COSTS
1999 1998
Rupees Rupees
Deposits:
Lahore office 30,000 50,000
Lease key money -- 121,371
Central Depository Commission 200,000 --
Others 40,000 20,000
------------------ ------------------
270,000 191,371
Deferred costs (Note 11.1) -- 891,227
------------------ ------------------
270,000 1,082,598
========== ==========
11.1 Deferred costs
Preliminary expenses 1,396,646 1,396,646
Shares floatation expenses including
Commission and brokerage 791,591 791,591
Unallocated revenue expenditure 2,057,030 2,057,030
Others 210,868 210,868
------------------ ------------------
4,456,135 4,456,135
Less: Amortization to date (4,456,135) (3,564,908)
------------------ ------------------
-- 891,227
========== ==========
12. SHORT TERM INVESTMENTS - Listed securities
No. of certificates/ 1999 1998
shares Rupees Rupees
1998 1999
Mutual Fund Companies
1,000 1,000 21st ICP Mutual Fund 8,230 8,230
Leasing Companies
3,000 3,000 Paramount Leasing Corporation Ltd 28,890 28,890
Textile Spinning
2,000 2,000 Ahmed Hassan Textile Mills Limited 18,260 18,260
5,000 5,000 Idrees Textile Mills Limited 33,150 33,150
Sugar & Allied Industries
5,000 5,000 Haseeb Waqas Sugar Mills Limited 89,650 39,650
Chemical and Pharmaceutical
25,000 25,000 FFC Jordan Fertilizer Limited 486,650 486,650
Fuel and Energy
23,000 23,000 Sui Southern Gas Limited 564,000 564,000
Auto & Allied Engineering
Agri Autos Industries Limited
10,500 10,500 (Ordinary shares of Rupees 5 each) 51,240 51,240
4,862 4,862 General Rubber & Tyre Corporation Ltd 198,910 198,910
8,000 8,000 Indus Motors Corporation Limited 161,600 161,600
------------------ ------------------
1,590,580 1,590,580
Less: Provision for diminution in
the value of investments (732,858) (833,840)
-- --
------------------ ------------------
857,722 756,740
========== ==========
12.1 Unless stated otherwise, investments represent certificates/ordinary shares of Rupees
10 each fully paid in cash.
12.2 The aggregate market value of the investments as on dune 30, 1999 amounted
to Rupees 857,722 (1998: Rupees 756,740).
13. SHORT TERM MUSHARIKA INVESTMENTS - Unsecured
These represent investments made on musharika basis, whereby the Company is to
participate in the profit and loss in agreed proportions. The expected profit on such
investments is 22% per annum.
14. ADVANCES, DEPOSITS, PREPAYMENTS
AND OTHER RECEIVABLES
1999 1998
Rupees Rupees
Advances:
For purchase of software 144,000 144,000
To staff '- considered good (Note 14.1) 399,273 161,750
Against legal charges 100,000 --
Against lease to be underwritten -- 18,100,000
Deposit with the Privatization Commission
(Note 14.2) 10,000,000 10,000,000
Lease key money 12,271 --
Prepayments 125,058 257,892
Musharika profit receivable - considered good 7,784,099 2,208,677
Receivable from Binham group 5,232,704 3,360,472
Mark-up against leased assets 781,074 2,928,895
Other receivables 1,957,437 1,044,552
------------------ ------------------
26,535,916 38,206,238
========== ==========
14.1 Maximum amount due from the executives at the end of any month during the
year amounted to Rupees 354,023 (1998: Rupees 140,000).
14.2 This represents amount deposited with the Privatization Commission, Government
of Pakistan, on behalf of a consortium for acquisition of 51% shares of First Women
Bank Limited. The Company has 9% share in the consortium.
1999 1998
Rupees Rupees
15. CASH AND BANK BALANCES
Cash in hand 23,055 84,838
Cash at banks:
On current accounts with:
- State Bank of Pakistan 65,000 65,000
- Commercial banks 58,574 2,272,061
On PLS savings account:
- On deposit account 112 11.20
------------------ ------------------
146,741 2,422,011
========== ==========
16. INCOME FROM LEASE OPERATIONS
Income on lease contracts 5,470,368 16,787,484
Front end and documentation fee 2,300 68,089
------------------ ------------------
5,472,668 16,855,573
========== ==========
17. OTHER INCOME
Profit on musharika investments 6,875,422 2,252,780
Mark-up income 2,631,294 3,991,764
Profit/return on deposits with banks 16,516 156,763
Gain on sale of investments 15,000 286,050
Gain on lease termination 65,776 228,464
Dividend income 88,422 35,599
Late payment charges 58,000 --
Reversal of diminution in value of investments 91,482 --
Gain on disposal of fixed assets 3,800 --
Others 4,471 10,809
------------------ ------------------
9,850,183 6,962,229
========== ==========
18. ADMINISTRATIVE AND
OPERATING EXPENSES
Salaries, allowances and staff benefits 2,130,081 1,420,320
Remuneration of chief executive, directors and
other executives (Note 21) 2,133,404 2,521,211
Rent expenses 354,000 608,133
Traveling and conveyance 509,940 267,306
Vehicle running expenses 382,385 391,118
Electricity and gas charges 281,300 324,093
Telephone and telex 287,179 185,497
Insurance 288,462 267,235
Fees, subscriptions and periodicals 111,131 141,255
Printing and stationery 74,589 80,000
Legal and professional charges 268,063 360,217
Auditors' remuneration (Note 18.1) 220,000 465,000
Repairs and maintenance 194,480 150,588
Entertainment expenses 120,911 134,385
Depreciation 1,742,611 1,901,696
Share registrar services 240,080 240,000
Amortization of deferred costs 891,227 891,227
Advertisement 15,360 55,130
Property tax 40,012 36,655
Donations (Note 18.2) 12,000 12,000
Provision for diminution in value of investments -- 768,190
Zakat 1,968 --
Gratuity 380,507 300,387
Miscellaneous 147,550 281,238
------------------ ------------------
10,827,240 11,802,881
========== ==========
18.1 Auditors' remuneration
Khalid Majid Rahim Iqbal 1999 1998
Hussain Rafiq & Co. Rupees Rupees
Rahman
Audit fee 42,500 42,500 85,000 85,000
Fee for taxation services -- -- -- 360,000
Accountancy services 40,000 -- 40,000 --
Fee for special audit - 98 30,000 -- 30,000 --
Fee for special audit - 99 35,000 -- 35,000 --
Out-of-pocket expenses:
- Statutory 10,000 10,000 20,000 --
- Special 12,000 -- 12,000 20,000
------------------ ------------------ ------------------ ------------------
169,500 52,500 222,000 465,000
========== ========== ========== ==========
18.2 Donations
Donations do not include any amount paid to any person or organization in which
the chief executive, directors or their spouses have any interest.
19. FINANCIAL CHARGES
1999 1998
Rupees Rupees
Finance charges under lease obligations 80,957 169,898
Mark-up on short-term running finance 3,641,199 3,434,364
Bank charges 12,722 24,032
Lease processing fee -- 5,820
Central excise duty -- 1,836
------------------ ------------------
3,734,878 3,635,450
========== ==========
20. PROVISION FOR TAXATION
Current
- For the year 87,964 1,175,932
- For prior year 287,965 34,962
------------------ ------------------
375,929 1,210,894
========== ==========
21. REMUNERATION OF CHIEF EXECUTIVE, DIRECTOR AND
OTHER EXECUTIVES
1999 1998
Chief Director Executives Chief Director Executives
Executive Executive
Rupees Rupees
Managerial remuneration 522,000 192,000 608,000 660,000 312,000 492,000
Housing and utility 294,720 108,000 342,000 432,536 206,610 338,218
Expenses reimbursed 15,917 5,246 45,521 23,078 11,777 44,992
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
832,637 305,246 995,521 1,115,614 530,387 875,210
========== ========== ========== ========== ========== ==========
1 1 4 1 1 3
21.1 The chief executive, director and other executives are provided with free use of
company maintained cars. In addition, the chief executive is also entitled to
reimbursement of salaries of house keeping staff and use of mobile telephone.
1999 1998
Rupees Rupees
22. EARNINGS PER SHARE
- Basic
Numerator:
(Loss)/profit after tax (Rupees) (9,047,150) 4,513,711
Denominator:
Weighted average number of shares
Outstanding during the year 11,000,000 11,000,000
Basic earnings per share (Rupees per share) (0.82) 0.41
- Diluted
Diluted earnings per share is not applicable as the corporation has not issued any
instrument that would have an impact on earning per share when exercised.
1999 1998
Rupees Rupees
23. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise
of the following items:
Cash and bank balances 146,741 2,422,011
Short-term running finance (17,252,749) (18,543,806)
------------------ ------------------
(17,106,008) (16,121,795)
========== ==========
24. DEFERRED TAXATION:
Deferred taxation arising due to timing differences between accounting and income tax
revenue computed under liability method is estimated at Rs. 9.71 million (1998: Rs. 11.88
million).
The liability for deferred taxation is not likely to reverse in the foreseeable future. However,
in accordance with the circular no. 16 dated September 09, 1999 issued by the Securities
and Exchange Commission of Pakistan, an amount of Rs. 2.28 million has been transferred
to Capital Reserve under "Reserve for deferred taxation"
Unprovided liability for deferred taxation is Rs. 7.43 million.
25. CREDIT RISK AND CONCENTRATION OF CREDIT RISK
Credit risk is the risk that one party 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 counter parties and continuously assessing the credit worthiness of counter
parties.
Corporation follows two sets of guidelines, internally, it has its own operating policy
duly approved by the board of directors whereas externally it adheres to the rules and
regulations issued by State Bank of Pakistan and Securities and Exchange Commission
of Pakistan.
Concentration of credit risk arise when number of counter parties 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
conditions.
Maximum credit risk in respect of Net Investment in Finance Lease is to the extent
of the amount provided as allowance for potential lease losses.
Details of the industry sector analysis of lease portfolio is given below:-
Sector Exposure Percentage
Cement 36,067,186 46.77
Food and allied 10,716,938 13.90
Paper boards 6,595,081 8.55
Energy fuel 5,569,396 7.22
Service sector 4,968,964 6.44
Textiles 4,169,860 5.40
Individuals 3,277,856 4.25
Sugar 2,192,248 2.84
Consumer Goods 1,569,770 2.04
Others 1,993,776 2.59
------------------ ------------------
77,121,075 100.00
========== ==========
In addition the company has invested certain fund in listed securities and musharika
as mentioned in notes 10, 12 and 13.
26. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Fair value is the amount for which an asset could be exchanged or a liability settled,
between knowledgeable willing parties in an arms length transaction. The Corporation
prepares its financial statements under the historical cost convention, however, the
estimated fair value of financial instruments are not significantly different from their
book values except for long term investments.
27. INTEREST / MARKUP RATE RISK MANAGEMENT:
(a) The Corporation manages this risk by matching the repricing of assets and liabilities.
The Corporation's interest / markup rate sensitivity position, based on the earlier
of contractual repricing or maturity dates, is as follows:
INTEREST/MARK-UP RATE SENSITIVITY NOT EXPOSED
TO INTEREST/
LESS THAN ONE MONTH OVER ONE MARK-UP TOTAL
ONE MONTH TO ONE YEAR RATE RISK
YEAR
FINANCIAL ASSETS:
Net investment in finance leases 32,792,121 12,121,003 19,498,869 -- 63,411,993
Long term investments -- -- -- 1,392,400 1,392,400
Long term deposits -- -- -- 270,000 270,000
Short term investments -- -- -- 857,722 857,722
Short term musharika investments -- 43,256,358 -- -- 43,256,358
Advances deposits & other receivables -- 4,434,215 -- 22,115,788 26,449,058
Cash and bank balances -- -- -- 146,741 146,741
------------------ ------------------ ------------------ ------------------ ------------------
32,792,121 59,811,576 18,498,869 24,782,651 135,784,272
========== ========== ========== ========== ==========
FINANCIAL LIABILITIES:
Obligations under finance leases -- 28,953 -- -- 28,953
Deferred liability -- -- -- 559,536 559,536
Long term deposits -- -- -- 11,028,102 11,026,102
Short term running finance 17,252,749 -- -- -- 17,252,749
Accrued and other liabilities -- -- -- 872,884 872,884
Unclaimed dividend -- -- -- 2,600 2,600
------------------ ------------------ ------------------ ------------------ ------------------
17,252,749 28,953 -- 12,461,122 29,742,824
------------------ ------------------ ------------------ ------------------ ------------------
On - balance sheet gap (a) 15,539,372 59,782,623 18,498,869 12,321,529 106,041,448
========== ========== ========== ========== ==========
Cummulative Interest rate sensitivity gap
1999 Rupees 29,253,454 59,782,623 18,498,869
========== ========== ==========
(b) The effective interest/mark-up rate for financial assets and liabilities are as follows:
Percentage
FINANCIAL ASSETS
Net investment in finance leases 21.99
Short term musharika investments 22.00
Advances, deposits and other receivables
receivable 23.00
FINANCIAL LIABILITIES
Obligation under finance lease 20.35
Short term running finance 19.16
28. NUMBER OF EMPLOYEES
Number of employees at the year end is 42 (1998: 80).
29. CORRESPONDING FIGURES
The corresponding figures have been re-arranged wherever necessary for the purpose
of comparison.
S. M. Shabbir Shah Amir Saeed
Chief Executive Director
PATTERN OF SHAREHOLDING AS AT JUNE 30, 1998
NO. OF SHAREHOLDING
SHARE TOTAL
S.No. HOLDER FROM TO SHARES HELD
1. 37 101 500 18,400
2. 3 501 1,000 3,000
3. 10 1,001 5,000 40,500
4. 24 5,001 10,000 208,500
5. 26 10,001 15,000 373,000
6. 27 15,001 20,000 532,500
7. 31 20,001 25,000 773,000
8. 16 25,001 30,000 477,000
9. 7 30,001 35,000 245,000
10. 10 45,001 50,000 500,000
11. 1 95,001 100,000 100,000
12. 1 115,001 120,000 120,000
13. 1 245,001 250,000 250,000
14. 1 295,001 300,000 300,000
15. 1 495,001 500,000 500,000
16. 1 510,001 515,000 512,400
17. 1 520,001 525,000 520,100
18. 1 690,001 695,000 692,800
19. 1 710,001 715,000 712,800
20. 1 910,001 915,000 912,800
21. 1 1,285,001 1,290,000 1,288,300
22. 1 1,915,001 1,920,000 1,919,900
------------------ ------------------
203 11,000,000
========== ==========
NOTE: The slabs not applicable have not been shown.
CATEGORIES OF SHAREHOLDERS
Categories of Shareholders Number Shares Held Percentage
INDIVIDUAL 194 3,690,900 33.554
JOINT STOCK COMPANIES 2 2,432,300 22.112
MODARABA COMPANIES 3 1,925,700 17.506
INVESTMENT COMPANIES 4 2,951,100 26.828
------------------ ------------------ ------------------
203 11,000,000 100.000
========== ========== ==========
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