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Al-Zamin Leasing Modaraba (Management) Private Limited
Annual Report 1999
CORPORATE INFORMATION
BOARD Of DIRECTORS
Mr. C. Ahsanul Haq - Chairman
Mr. Basheer A. Chowdry - Chief Executive
Mr. S.M. Farooq
Mr. Ansar Husain
Mr. Manzoor Hussain Shah Kazmi
Brig. (Retd) Luqman Mahmood
Dr. Hasan Abbas Zaheer
Syed Ghazanfar Ali [Nominee of Pak Libya Holding Co. (Pvt) Ltd.]
COMPANY SECRETARY
Mr. M. Moizul Haque
AUDITORS OF THE MODARABA
M. Yousuf Adil Saleem & Company, Chartered Accountants
AUDITORS OF THE MODARABA COMPANY
Jalis Ahmed & Company, Chartered Accountants
BANKERS
Allied Bank of Pakistan Limited
Askari Commercial Bank Limited
First Women Bank Limited
Gulf Commercial Bank Limited
Habib Bank Limited
National Bank of Pakistan
National Development Finance Corporation
Pakistan Industrial Credit & Investment Corporation
Soneri Bank Limited
LEGAL ADVISORS
Sharif & Company, Advocates
Mansoor Ahmed Khan & Company, Advocates
MODARABA COMPANY
Al-Zamin Modaraba Management (Private) Limited
REGISTERED OFFICE & SHARES DEPARTMENT
104-106, Kassam Court,
BC-9, Block 5, Clifton,
Karachi-75600
Tel: 587 6651, 587 6652, 571725,
       587 3373, 586 7102, 574474.
Fax: 587 0408
E-mail: alzamin@zoooom.net
LAHORE OFFICE
Suit No. F-05, 1st Floor, Rehman Business Centre,
32 B-III, Gulberg III, Lahore
Tel: 571 5583, 571 5584
Fax: 571 5585
CONTENTS
Directors' Report
Asset and Sector-wise Analysis of Leases
Auditors' Report
Balance Sheet
Profit and Loss Account
Statement of Changes in Financial Position
Notes to the Accounts
Pattern of Certificate Holding
DIRECTORS' REPORT
FOR THE YEAR 1998-99
The Board of Directors of Al-Zamin Modaraba Management (Private) Limited takes
pleasure in presenting the Seventh Annual Report of Al-Zamin Leasing Modaraba,
together with audited Accounts for the year ended 30th June 1999.
OPERATING RESULTS
The Modaraba achieved an unprecedented growth of 41.25% in the Balance Sheet
footings during the year inspite of difficult market conditions. Consequently, total
assets of the Modaraba increased from Rs 289.2 million to Rs 408.5 million, with a
growth of 37.75% in net investment in leases from Rs 218.5 million to Rs 301
million.
This growth was made possible due to availability of further resources and credit
lines which clearly indicates a continued confidence of the financial institutions in
the quality and strength of your Modaraba. While the short-term and term finances
from the financial institutions and Musharaka investors increased from an overall
figure of Rs 91.8 million to Rs 174.9 million, the investments in lease finances
increased by over Rs 82 million and Musharaka finance investment by Rs 21
million. Along with a healthy and balanced growth achieved on both sides of the
balance sheet, your Modaraba maintains enough liquidity to continue its planned
expansion. The Board is happy to report that further credit lines have also been
approved by financial institutions for your Modaraba, the utilization of which will
achieve further enhancement in its size and profitability.
While the capital market of the country is expanding through the introduction of
TFCs and other debt-instruments of the financial and corporate sector, the need to
evolve and introduce a suitable debt-instrument complying fully with the requirements
of Sharia is being felt by the Modaraba sector as well. Careful research and
development work is being carried by those who are genuinely interested in promoting
the Islamic mode of financing and it is hoped that some tangible results may be
achieved in this regard before long.
Utilization of fresh credit lines naturally resulted in the increase of financial charges
to Rs 24.2 million which, inter-alia, generated enhanced earnings in the leasing
and Musharaka transactions. In view of the current problems being faced by the
commercial and industrial sectors, delays and defaults are being experienced by
the leasing sector in lease rental recovery. Consequently, the entire sector is faced
with the problem of provisioning for the overdues and potential losses. Your
Modaraba also made sufficient provisions in accordance with prudential guidelines
in order to strengthen the balance sheet. The Board had approved setting up of a
Contingency Reserve last year as a matter of prudence in view of the current
economic climate to which further allocations have been made this year as well.
Specific guidelines have been provided by the Securities & Exchange Commission
for dealing with the deferred taxation and your Modaraba has made requisite
provisioning to comply with the regulations.
After making a transfer to Special Reserve under the statutory requirements, and
accounting for the provisioning made, it is proposed to pay a cash dividend of
12.5% to the certificate holders of the Modaraba and to carry an unappropriated
profit of Rs. 2.36 million to the next year.
The operating results for the year reflect adequately the diligent and consistent
efforts of your Management to maintain a constant growth of Modaraba inspite of
the visible decline in the fresh investments and reduced output of the manufacturing
sector of the country. Various steps taken in creating suitable reserves and provisions
conform to the professional prudence, for building enough cushion in the balance
sheet to take care of any effect of the declining economy on the future results of
your Modaraba. The proposed distribution to the Certificate-holders re-affirms the
policy of the Modaraba to share its gains with the investors and should be maintained
in the future as well.
FUTURE PROSPECTS
Our economy is still going through an unprecedented period of uncertainties.
Inspite of concerted efforts being made by the government, no significant improvement
has been seen in the balance of payment, industrial output and GDP growth. The
steps to revive the economy would, hopefully, produce positive results in due
course but it will take some time for the economy to feel any real impact thereof.
Consequently, instances of delays and defaults by the clients are increasing in the
financial sector and leasing sector in not immune to the situation.
While your Modaraba has mobilised arrangements for substantial resources, it is
getting difficult to find good lessees for the expansion of the leasing portfolio at the
rates which could sustain a sound profit stream. Those players in the market who
have access to cheaper funds are taking away the quality business. Consequently,
medium sized lessors have to make exceptional efforts to capture a due portion of
good leasing business at acceptable rates of return. Nevertheless, your Board has
decided to exercise extreme caution in handling fresh business to ensure that the
overall quality of the portfolio is not reduced by the pressures to maintain the
business growth. A fine balance of energetic efforts and professional prudence is
needed to be maintained of which your Management is fully aware of and capable to
achieve. Extra efforts are being made to minimise the effect of the overdue rentals
on your profit stream while pursuing the default cases vigorously.
YEAR 2000 PROBLEM
The Board is happy to report that your Modaraba has successfully handled Y2K
problem and is now fully complaint having a properly tested software.
CREDIT RATING
The credit rating awarded by the DCR-VIS Credit Rating Company Limited during
the previous year was re-confirmed for the year under review as well. Your Modaraba
enjoys a respectable medium to long term entity rating of Triple B Minus which
reflects "adequate credit quality with reasonably sufficient prudence factors.. Short
term entity rating of D-3 indicates satisfactory liquidity and other prudence factors,
qualifying the Modaraba for the investment grade.
ACKNOWLEDGMENTS
The Directors are pleased to put on record their appreciation of the devoted efforts
made by the staff for the successful operation of the Modaraba and valuable
guidance provided by the Registrar Modaraba and Securities & Exchange Commission
of Pakistan.
For and on behalf of the Board of Directors
Karachi: Basheer A. Chowdry
30th October, 1999 Chief Executive
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet 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 to the accounts for the year ended June 30, 1999 of Al-Zamin
Leasing Modaraba, which are Modaraba Company's (Al-Zamin Modaraba Management
(Private Limited) representation and we state that we have obtained all the information
and, explanation which we required and after due verification thereof, we report that:
a. in our opinion, proper books of account have been kept by the Modaraba Company
in respect of Al-Zamin Leasing Modaraba as required by the Modaraba Companies
and Modaraba (Floatation and Control) Ordinance, 1980 and Modaraba Companies
and Modaraba Rules, 1981.
b. in our opinion, the balance sheet and profit and loss account have been drawn up
in conformity with the Modaraba Companies and Modaraba (Floatation and Control)
Ordinance, 1980, and Modaraba Companies and Modaraba Rules, 1981, and are
further in accordance with accounting policies consistently applied.
c. in our opinion and to the best of our information and according to the explanations
given to us;
i) the balance sheet and the related profit and loss account and statement of
changes in financial position (cash flow statement), which are in agreement
with the books of account, exhibit respectively a true and fair view of the
state of the Modaraba's affairs as at June 30, 1999 and the profit and the
changes in the financial position for the year ended on that date;
ii) in our opinion, no Zakat was deductible at source under the Zakat and
Ushr Ordinance, 1980.
iii) the business conducted, investments made and the expenditure incurred
by the Modaraba are in accordance with objects, terms and conditions of
the Modaraba.
Karachi:  M. Yousuf Adil Saleem & Co.
Date: 30th October 1999 Chartered Accountants
BALANCE SHEET
AS AT JUNE 30, 1999
1999 1998
Note Rupees Rupees
CAPITAL AND RESERVES
Certificate Capital
Authorised
20,000,000 Modaraba
Certificates of Rs. 10 each  200,000,000 200,000,000
========== ==========
Issued, subscribed and paid up 3 126,500,000 126,500,000
Reserves and unappropriated profit 4 26,590,040 31,551,979
------------------ ------------------
153,090,040 158,051,979
LONG TERM FINANCES 5 25,615,367 27,491,612
LONG TERM SECURITY DEPOSITS
ON LEASE CONTRACTS  6 43,176,280 25,536,300
DEFERRED TAXATION  1,000,000 1,000,000
CURRENT LIABILITIES
Current portion of long term finances 35,893,718 20,971,033
Current portion of long term security
deposits on lease contracts 10,811,099 5,340,489
Short term finances  7 113,393,249 43,299,330
Advance lease rent/security deposits 2,603,414 1,670,427
Accrued and other liabilities  8 6,300,687 2,155,338
Taxation -- 2,831,707
Dividend 9 16,607,555 829,764
------------------ ------------------
185,609,722 77,098,088
------------------ ------------------
408,491,409 289,177,979
========== ==========
FIXED ASSETS - TANGIBLE   10 5,671,574 5,292,511
LONG TERM INVESTMENTS   11 851,032 729,296
NET INVESTMENT IN LEASE
FINANCE
Net Investment 12 300,979,162 218,542,065
Current portion (118,475,648) (91,769,515)
------------------ ------------------
182,503,514 126,772,550
CURRENT ASSETS
Current portion of net Investment
in lease finance        118,475,648 917,695,151
Musharaka finance       13 61,261,944 39,991,096
Short term Investments     14 483,717 422,501
Advances, deposits and
prepayments  15 1,445,562 2,152,765
Other receivables  16 4,875,359 3,483,835
Cash and bank balances    17 32,920,059 18,563,910
------------------ ------------------
219,465,289 156,383,622
------------------ ------------------
408,491,409 289,177,979
========== ==========
The annexed notes from 1 to 27 form 
an integral. part of these accounts.
Basheer A. Chowdry C. Ahsanul Haq M.H.S Kazmi
Chief Executive Chairman Director
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED JUNE 30, 1999
1999 1998
Note Rupees Rupees
REVENUE
Income from leasing operations  44,832,817 42,365,678
Profit on Musharaka transactions 9,705,744 7,473,280
Profit on investment in securities -- 175,015
Profit on PLS deposit accounts      726,345 566,666
Other income   18 234,675 245,559
------------------ ------------------
55,499,581 50,826,198
OPERATING AND FINANCIAL COSTS
Operating expenses 19 14,226,482 13,275,479
Financial charges       20 24,273,066 13,953,046
------------------ ------------------
(38,499,548) (27,228,525)
------------------ ------------------
17,000,033 23,597,673
OTHER CHARGES
(Reversal)/Provision for diminution
in value of investments (182,952) 4,019,360
Allowance for potential lease losses 4,599,183 24,438
Balances written off  382,496 --
------------------ ------------------
(4,798,727) (4,043,798)
------------------ ------------------
Profit before taxation 12,201,306 19,553,875
Modaraba Company's Management Fee (1,109,210) (1,777,625)
------------------ ------------------
Profit for the year  11,092,096 17,776,250
Taxation
Current   -- 2,000,000
Prior year 241,535 272,144
Deferred   -- 500,000
------------------ ------------------
(241,535) (2,772,144)
------------------ ------------------
Profit after taxation 10,850,561 15,004,106
Unappropriated profit brought forward 11,892,530 889,245
------------------ ------------------
Profit available for appropriation 22,743,091 15,893,351
APPROPRIATIONS
Dividend @ Re. 1.25 per Certificate (1998-Nil) 158,125,000 --
Transferred to special reserve 2,170,112 3,000,821
Transferred to contingency reserve 1,000,000 1,000,000
Transferred to reserve for deferred taxation 1,400,000 --
------------------ ------------------
(20,382,612) (4,000,821)
------------------ ------------------
Unappropriated profit carried forward 2,360,479 11,892,530
========== ==========
Earning per Certificate 26 0.86 1.19
The annexed notes from 1 to 27 form
an integral part of these accounts.
Basheer A. Chowdry C. Ahsanul Haq M.H.S Kazmi
Chief Executive Chairman Director
STATEMENT OF CHANGES IN FINANCIAL POSITION
(CASH FLOW STATEMENT) FOR THE YEAR ENDED JUNE 30, 1999
1999 1998
Rupees Rupees
A. CASH FLOW FROM OPERATING ACTIVITIES
Profit after taxation 10,850,561 15,004,106
Adjustments
Financial charges           24,273,066 13,953,046
Depreciation   1,397,672 1,173,813
Provision for diminution
in value of investments (182,952) 4,019,360
Provision for deferred tax -- 500,000
Allowance for potential lease losses     4,599,183 24,438
Gain on sale of fixed assets (49,170) (16,300)
Gain on sale of investments -- (175,015)
------------------ ------------------
Operating profit before working capital changes  40,888,360 34,483,448
(Increase)/decrease in current assets
Advances, deposits and prepayments 704,203 (795,616)
Other receivables (1,391,524) (1,446,496)
------------------ ------------------
(687,321) (2,242,112)
Increase/(decrease) in current liabilities
Advance lease rent/security deposits 932,987 69,006
Accrued and other liabilities 677,399 (415,756)
Taxation (2,831,707) 1,264,480
------------------ ------------------
(1,221,321) 917,730
------------------ ------------------
Cash generated from operations 38,979,718 33,159,066
Financial charges paid  (20,805,116) (13,999,076)
------------------ ------------------
Net cash from operating activities 18,174,602 19,159,990
========== ==========
1999 1998
Rupees Rupees
B. CASH FLOW FROM INVESTING ACTIVITIES
Fixed capital expenditure (1,835,315) (1,322,742)
Investment in listed securities -- (516,750)
Net investment in leased assets (87,036,280) (5,301,621)
Proceeds from sale of investments -- 1,351,640
Musharaka financing (21,270,848) (4,250,014)
Proceeds from disposal of fixed assets 107,750 325,000
------------------ ------------------
Net cash used in investing activities (110,034,693) (9,714,487)
------------------ ------------------
C. CASH FLOW FROM FINANCING ACTIVITIES
Long term Musharaka finance obtained 45,000,000 30,000,000
Security deposits on lease contracts 23,110,590 2,251,659
Increase in short term Musharaka finance 70,093,919 9,147,136
Repayment of long term Musharaka finance (31,953,560) (18,538,596)
Dividend (34,709) (21,040,885)
------------------ ------------------
Net cash from financing activities 106,216,240 1,819,314
------------------ ------------------
Net increase in cash and cash equivalents 14,356,149 11,264,817
Cash and bank balances at the beginning of the year 18,563,910 7,299,093<