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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
------------------ ------------------
Cash and bank balances at the end of the year 32,920,059 18,563,910
========== ==========
Basheer A. Chowdry C. Ahsanul Haq M.H.S Kazmi
Chief Executive Chairman Director
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED JUNE 30, 1999
1. LEGAL STATUS AND NATURE OF BUSINESS
Al-Zamin Leasing Modaraba has been formed under the Modaraba Companies
and Modaraba (Floatation and Control) Ordinance, 1980 and the Rules framed
thereunder and is managed by Al-Zamin Modaraba Management (Private)
Limited, a Company incorporated in Pakistan under the Companies Ordinance,
1984 and registered with the Registrar of Modaraba Companies and Modarabas
under the Modaraba Companies and Modaraba (Floatation and Control)
Ordinance, 1980.
The Modaraba is listed on Karachi, Lahore and Islamabad Stock Exchanges.
The Modaraba started its operation as a specific purpose Modaraba with
leasing as its main business. With the approval of the Corporate Law Authority,
the Modaraba was converted into Multi-purpose Modaraba in 1995 thereby
allowing to undertake various business transactions under the Islamic Modes
of Financing.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Accounting convention
These accounts have been prepared under the 'historical cost convention'.
2.2 Staff retirement benefits
Modaraba operates a contributory provident fund scheme for it's
employees eligible under the scheme. Equal monthly contributions
are made by the Modaraba and the employees in accordance with the
rules.
2.3 Taxation
Current
Provision for current taxation is based on taxable income at current
tax rates after taking into account tax exemption, rebates and tax
credits available, if any.
Deferred
Deferred tax is accounted for by using the liability method on all major
timing differences excluding tax effect on those timing differences
which are not likely to reverse in the foreseeable future. As a measure
of prudence, deferred tax debits are not accounted for.
2.4 Fixed assets and depreciation
Fixed assets are stated at cost less accumulated depreciation.
Depreciation is charged to income applying the straight line method.
Depreciation on additions/disposals during the year is charged
proportionately for the period of use.
Gain or loss on disposal of assets is accounted for in the year in which
it arises.
2.5 Investments
a) Long term investment in quoted shares are stated at cost. Provision
is made for the decline, other than temporary in the value of
investment.
b) Short term investment in quoted shares are stated at lower of
cost and market value determined on an aggregate portfolio
basis.
2.6 Provision for Doubtful Debts
Provision for doubtful debts on potential lease losses is made at the
year end after review of outstanding lease portfolio on the basis of
State Bank of Pakistan Prudential Regulations as applies to Modaraba.
2.7 Deferred cost
Deferred cost is written off over a maximum period of five years from
the year of deferment.
2.8 Lease accounting
The Modaraba provides assets on leasing arrangements to its clients
under lease agreements as approved by the Religious Board. These
leases are recorded in the books of accounts as finance lease in line
with International Accounting Standard 17.
2.9 Revenue recognition
a) For leasing transactions, the unearned finance income is deferred
and amortized to income over the term of lease applying the
annuity method to produce a constant rate of return on the net
investment in leases. Unrealized lease income on potential lease
losses is excluded from the income from leasing operations in
accordance with the requirement of State Bank of Pakistan
Prudential Regulations as applies to Modaraba.
b) Profit from Morabaha transactions is recognised on pro-rata accrual
basis, calculated on number of days funds were utilised.
c) Profit on Musharaka investments and finance is accounted for on
the basis of the projected rate of profit. The effect of adjustments,
if any, between actual rate and projected rate of profit is accounted
for at the time of determination of the actual rate. Unrealized
Musharaka income is excluded from profit on Musharaka in
accordance with the requirement of SBP Prudential Regulations.
d) Profit on short term placements, term deposits and investments
is recognised on accrual basis.
e) Capital gain/(loss) on sale of investments is accounted for in the
year in which it arises.
f) Dividend income from shares is recognized at the time of closure
of the shares transfer books of the company declaring the dividend
and is shown net of Zakat.
g) Income from fee and commission is recognised as and when it
3. ISSUED, SUBSCRIBED AND PAID UP CAPITAL
Fully paid Modaraba Certificates of Rs. 10 each.
1999 1998 1999 1998
Certificates Certificates Rupees Rupees
10,000,000 10,000,000 Fully paid in cash 100,000,000 100,000,000
2,650,000 2,650,000 Issued as fully paid
bonus certificates  26,500,000 26,500,000
------------------ ------------------ ------------------ ------------------
12,650,000 12,650,000 126,500,000 126,500,000
========== ========== ========== ==========
4. RESERVES AND UNAPPROPRIATED PROFIT
4.1 Capital Reserve
Special Reserve
Opening balance         13,659,449 10,658,628
Transferred during the year  2,170,112 3,000,821
Balance at the end of the year   15,829,561 13,659,449
Contingency Reserve
Opening balance            6,000,000 --
Transferred from general reserve   -- 5,000,000
Transferred during the year        1,000,000 1,000,000
Balance at the end of the year   7,000,000 6,000,000
Deferred Tax Reserve (Note No. 22)
Transferred during the year        1,400,000 --
4,2 General Reserve
General Reserve
Opening balance  -- 5,000,000
Transferred to contingency reserve -- (5,000,000)
------------------ ------------------
-- --
4.3 Unappropriated profit  2,360,479 11,892,530
------------------ ------------------
26,590,040 31,551,979
========== ==========
Special reserve represents appropriation @ 20% of profit after tax as per the
rules of State Bank of Pakistan for non-banking financial institutions.
Contingency reserve has been created as a matter of prudence specifically to
provide for possible losses on lease receivables. In view of the prevailing
economic climate, the directors consider this reserve not available for distribution
at present.
1999 1998
5. LONG TERM MORAHABA FINANCES Rupees Rupees
Finance from financial institutions
Opening balance   48,462,645 37,001,241
Obtained during the year        45,000,000 30,000,000
------------------ ------------------
93,462,645 67,001,241
Paid during the year (31,953,560) (18,538,596)
------------------ ------------------
61,509,085 48,462,645
Payable within one year
shown under current liabilities (35,893,718) (20,971,033)
------------------ ------------------
25,615,367 27,491,612
========== ==========
Amount        90,000,000 70,000,000
Marked-up Price      116,212,068 99,712,939
Rate of profit  18.25%/21.50% 20% / 21.50%
5.1 The finances are payable in quarterly and half yearly installments and are
secured against hypothecation of specific leased out assets and charge on
receivables.
1999 1998
6. LONG TERM SECURITY DEPOSITS Rupees Rupees
ON LEASE CONTRACTS
Customer's security deposits 53,987,379 30,876,789
Payable within one year shown
under current liabilities (10,811,099) (5,340,489)
------------------ ------------------
43,176,280 25,536,300
========== ==========
7. SHORT TERM FINANCES
Musharaka finance (7.1)
Financial institutions  63,000,000 --
Leasing companies        12,798,776 11,569,589
Investment company  -- 4,000,000
Individuals  19,710,000 7,635,000
Morabaha finance (7.2)
Banking companies   17,884,473 20,094,741
------------------ ------------------
113,393,249 43,299,330
========== ==========
7.1 These finances have been obtained for a period of 90 days to 365 days at a
profit rate ranging from 16.25% to 20.50% (1998 - 18% to 21%) per annum.
These are secured by way of demand promissory notes and/or pledge of
marketable securities.
7.2 The Modaraba has financing facilities from Scheduled Commercial Banks
and are secured against pledge of marketable securities and/or hypothecation
of leased assets and receivables. The aggregate sale price of Morabaha
financing is Rs. 28 million with a repurchase price of Rs. 34.372 million.
1999 1998
Rupees Rupees
8. ACCRUED AND OTHER LIABILITIES
Profit payable on secured Musharaka finances  4,941,484 1,473,534
Accrued expenses   636,475 681,804
Lease termination                            720,780 --
Withholding tax                 1,948 --
------------------ ------------------
6,300,687 2,155,338
========== ==========
9. DIVIDEND
Proposed 15,812,500 --
Unclaimed 795,055 829,764
------------------ ------------------
16,607,555 829,764
========== ==========
10. FIXED ASSETS - TANGIBLE
Particulars Cost as at Additions/ Cost as at Accumulated Depreciation Accumulated Book Rate
July 01, (deletion) June 30, depreciation for the year/ depreciation Value at %
1998 during the 1999 at July 01, (on deletions) at June 30, June 30,
year 1998 1999 1999
Office equipment 1,733,125 302,700 2,026,425 441,464 187,886 626,452 1,399,973 10
(9,400) (2,898)
Furniture and fixtures 1,419,987 284,765 1,704,752 238,851 169,077 407,928 1,296,824 10
Vehicles 4,673,437 1,247,850 5,680,925 1,853,723 1,040,709 2,706,148 2,974,777 20
(240,362)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
1999 Rupees 7,826,549 1,835,315 9,412,102 2,534,038 1,397,672 3,740,528 5,671,574
(249,762) (191,182)
========== ========== ========== ========== ========== ========== ==========
1998 Rupees 6,881,807 1,322,742 7,826,549 1,429,525 1,173,813 2,534,038 5,292,511
(378,000) (69,300)
========== ========== ========== ========== ========== ========== ==========
10.1 Disposal of Fixed Assets
Particulars Cost Accumulated Book Sale Particulars of
depreciation Value Proceed purchaser
Motor vehicle  240,362 188,284 52,078 106,250 Mr. Akif Tufail
House No. 5/A, Hussain Street,
Muslim Town, Lahore
Equipment     9,400 2,898 6,502 1,500 World Net
Shop No. 13, D-33, Block-N,
------------------ ------------------ ------------------ ------------------ North Nazimabad, Karachi.
1999 Rupees   249,762 191,182 58,580 107,750
========== ========== ========== ==========
1998 Rupees 378,000 69,300 308,700 325,000
========== ========== ========== ==========
11. LONG TERM INVESTMENTS
Name of the Company No. of shares Market 1999 1998
/certificates value Rupees Rupees
Maple Leaf Cement Factory Limited  38,250 109,013 2,089,800 2,089,800
Pakistan Telecommunication
Corporation Limited         20,000 397,000 1,011,100 1,011,100
Dhan Fibres Limited   20,000 92,000 234,750 234,750
Indus Motors Limited     5,000 62,500 123,300 123,300
ICP 21st Mutual Fund       5,000 7,500 111,025 111,025
KESC Limited        2,200 18,920 105,980 105,980
ICP 19th Mutual Fund         2,500 25,125 77,900 77,900
Hub Power Company Limited        5,000 70,500 69,700 69,700
Askari Commercial Bank Limited    2,656 32,005 65,320 65,320
Kashmir Polytex Limited 5,000 5,000 61,575 61,575
Nishat Chunian Limited  1,500 12,525 54,240 54,240
Agri Autos Limited (Face value Rs. 5)  2,000 5,900 43,135 43,135
Reliance Spinning Mills Limited  1,500 12,750 41,445 41,445
Fauji Cement Limited  100 295 1,000 1,000
------------------ ------------------ ------------------
851,033 4,090,270 4,090,270
Less: Provision for diminution in value
Opening balance                              3,360,974 --
Provision / (Reversal) during the year  (121,736) 3,360,974
------------------ ------------------
(3,239,238) (3,360,974)
------------------ ------------------
851,032 729,296
========== ==========
11.1 The face value of above fully paid shares / certificates unless otherwise
mentioned is Rs. 10 each.
1999 1998
Rupees Rupees
12. NET INVESTMENT IN LEASE FINANCE
Minimum lease payments receivable (12.1) 326,287,974 248,076,497
Residual value of leased assets 58,734,378 34,560,788
------------------ ------------------
Lease contracts receivable      385,022,352 282,637,285
Less:
Unearned lease income 78,096,794 62,748,007
Provision for potential lease losses 5,946,396 1,347,213
------------------ ------------------
(84,043,190) (64,095,220)
------------------ ------------------
Net investment 300,979,162 218,542,065
========== ==========
12.1 Minimum lease rentals receivable
Due within one year   152,275,089 109,731,717
Due after one year but not
later than 5 years   174,012,885 138,344,780
------------------ ------------------
326,287,974 248,076,497
========== ==========
The amounts are generally secured against leased assets, personal guarantees
and promissory notes by the lessees.
The income of Rs. 9,371,916/- (1998 - Rs 3,769,106/-) has been transferred
to suspense account and deducted from income on lease operations. Till
last year, the unrealized income was shown together with provision in profit
and loss account and reduced separately under allowances for potential
lease losses.
1999 1998
Rupees Rupees
13. MUSHARAKA FINANCE
Secured      61,261,944 39,991,096
========== ==========
It represents investments under Musharaka basis for working capital. Bank Guarantee
and Shares are kept as security. Expected rate of profit ranges between 19% to 24%
(1998-21% to 24%) per annum.
14. SHORT TERM INVESTMENTS
Name of the Company No. of shares Market 1999 1998
/certificates value
Financial Link Modaraba  11,800 7,080 118,000 118,000
Cherat Cement Limited   2,500 32,500 111,650 111,650
Adamjee Insurance Company Limited 1,663 82,479 99,400 99,400
Indus Motors Limited    2,000 25,000 92,820 92,820
Bank Al-Habib Limited     2,590 63,828 70,200 70,200
Sui Northern Gas Company Limited 1,600 13,280 55,244 55,244
Ghandara Leasing Company Limited 1,000 4,500 54,740 54,740
ICP SEMF     1,500 15,825 49,075 49,075
Pakistan International Airlines
Corporation  2,200 28,380 42,768 42,768
Saif Textile Mills Limited       1,210 8,470 38,660 38,660
KASB Premier Fund Limited     5,000 12,500 36,450 36,450
Bolan Casting Limited 1,000 18,000 35,160 35,160
Engro Chemicals (Pakistan) Limited   287 25,422 27,505 27,505
D.G. Khan Cement Company Limited  470 1,998 27,216 27,216
Union Bank Limited      726 6,534 26,801 26,801
Kohinoor Power Company Limited  600 1,950 21,120 21,120
Bank Al-Habib Limited  400 7,200 20,601 20,601
Agri Auto Industries Limited 1,000 2,950 18,090 18,090
Lever Brothers Pakistan Limited
(Face Value Rs. 50)  24 18,240 17,923 17,923
ICP 12th Mutual Fund 500 5,500 15,564 15,564
First Mehran Modaraba 1,200 3,000 15,336 15,336
Pakistan State Oil Limited 314 34,780 15,264 15,264
Sakrand Sugar Mills Limited     1,300 13,000 13,094 13,094
First Ibrahim Modaraba      1,100 4,565 11,844 11,844
Adamjee Insurance Company Limited  180 6,993 11,764 11,764
Pak Suzuki Motor Company Limited  200 5,000 11,700 11,700
Maqbool Textile Mills Limited  1,000 4,250 11,340 11,340
Elite Capital Modaraba 1,000 850 11,687 11,687
ICP 6th Mutual Fund 500 5,975 10,624 10,624
Singer Pakistan Limited     125 6,600 10,589 10,589
Ciba Geigy (Pakistan) Limited  100 3,600 8,465 8,465
Ravi Textile Mills Limited 1,000 1,000 8,340 8,340
Dewan Salman Fibre Limited        209 5,256 7,224 7,224
Pakistan Industrial Credit and
Investment Corporation Limited   198 1,416 6,859 6,859
Fauji Fertilizer Company Limited 100 4,110 5,209 5,209
Zahur Textile Mills Limited 380 646 4,828 4,828
Trust Modaraba 182 590 1,859 1,859
First Hajveri Modaraba           100 450 984 984
------------------ ------------------ ------------------
483,717 1,145,997 1,145,997
Less: Provision for diminution in value
Opening balance  723,496 65,110
Provision/(Reversal) during the year (61,216) 658,386
------------------ ------------------
(662,280) (723,496)
------------------ ------------------
483,717 422,501
========== ==========
14.1 The face value of above fully paid shares/certificates
unless otherwise mentioned is Rs. 10 each.
1999 1998
Rupees Rupees
15. ADVANCES, DEPOSITS AND PREPAYMENTS
Advance income tax       112,748 1,356,350
Short term deposits        340,900 40,900
Short term prepayments 789,537 560,532
Other    205,377 194,983
------------------ ------------------
1,448,562 2,152,765
========== ==========
16. OTHER RECEIVABLES
Considered Good
Accrued profit    2,989,997 2,588,699
Receivable from Management Company    1,108,686 266,895
Other 776,676 628,241
------------------ ------------------
4,875,359 3,483,835
========== ==========
17. CASH AND BANK BALANCES
Cash in hand  52,095 45,752
Cash with banks
In PLS accounts 32,745,075 18,476,482
In current accounts 122,889 41,676
------------------ ------------------
32,867,964 18,518,158
------------------ ------------------
32,920,059 18,563,910
========== ==========
18. OTHER INCOME
Dividend income          86,716 120,697
Profit on disposal of fixed assets   49,170 16,300
Miscellaneous  98,789 108,562
------------------ ------------------
234,675 245,559
========== ==========
19. OPERATING EXPENSES
Salaries and benefits (19.1) 6,950,445 5,979,356
Rent, rates and taxes  987,282 726,589
Telecommunication   794,350 807,149
Printing and stationery   383,348 466,005
Fees and subscription     289,560 357,831
Electricity and gas  425,491 404,031
Insurance       777,488 869,420
Legal and professional     267,927 442,188
Postage  118,382 189,326
Repairs and maintenance      499,731 726,670
Vehicles running and maintenance     812,051 585,021
Travelling and conveyance 153,011 149,340
Advertisement       83,380 146,960
Auditors' remuneration (19.2)  43,000 37,500
Newspapers and periodicals 61,508 60,187
Entertainment    68,582 86,585
Depreciation  1,397,672 1,173,813
Donation (19.3)         4,000 10,000
Other     109,274 57,508
------------------ ------------------
14,226,482 13,275,479
========== ==========
19.1 These are in respect of officers and
employees of the Modaraba.
Number of employees at year end 22 21
19.2 Auditors' remuneration
Audit fee   40,000 35,000
Out of pocket expenses    3,000 2,500
------------------ ------------------
43,000 37,500
========== ==========
19.3 No director and his spouse had any
interest in the donees fund.
20. FINANCIAL CHARGES
Profit on long term finance 11,835,303 6,294,695
Profit on short term finance   12,019,275 7,241,778
Front end fee and bank charges 418,488 416,573
------------------ ------------------
24,273,066 13,953,046
========== ==========
21. REMUNERATION OF CHIEF EXECUTIVE AND EXECUTIVES
The following emoluments were paid by the Modaraba to other Executives and
Officers:
1999 1998
Rupees Rupees
Basic salary 2,935,783 2,781,297
House rent allowance  1,267,622 1,250,568
Utility allowance  223,515 207,242
Leave encashment 149,982 160,424
Bonus 171,650 173,600
------------------ ------------------
4,748,552 4,573,131
========== ==========
Number of persons    14 13
The Chief Executive and Executives were provided with free use of company cars.
22. TAXATION
There is no tax on the Modaraba under clause 102E of Second Schedule of
Income Tax Ordinance, 1979 for the assessment year 1999-2000, if 90% of the
profits are distributed as a cash dividend to the certificate holders.
The liability for deferred tax works out to Rs. 6.7 million (1998 - 6.9 million).
Proportionate provision after reducing existing provision has been taken to capital
reserve as required by Circular No. 16 dated September 09, 1999 of the Securities
and Exchange Commission of Pakistan.
23. CREDIT RISK AND CONCENTRATIONS OF CREDIT RISK
The Modaraba attempts to control credit risk by monitoring credit exposures,
limiting transactions with specific counterparties, and continuously assessing the
credit worthiness of counterparties.
Al-Zamin Leasing Modaraba follows two sets of guidelines. Internally, it has its
own operating policy duly approved by the Board of Directors of the Modaraba
Management Company whereas, externally it adheres to the regulations issued
by the State Bank of Pakistan. The operating policy defines the extent of exposure
with reference to a particular sector or group of leases.
Detail of the industry sector analysis of lease portfolio is given below:
1999 1999
Rupees Percentage
Textile and cotton      75,453,509 25.07
Chemicals and pharmaceutical     32,050,023 10.65
Engineering   25,236,325 8.38
Cement   22,123,358 7.35
Energy, oil and gas          16,397,290 5.45
Sugar 15,345,813 5.10
Health care   9,352,796 3.11
Banks and DFI's   8,779,156 2.92
Transport  8,328,846 2.77
Construction 6,594,611 2.19
Food and beverages   3,319,627 1.10
Paper and board       2,756,892 0.92
Leather and footwear                780,001 0.26
Hotels     581,951 0.19
Glass and ceramics 564,467 0.18
Others        73,314,497 24.36
------------------ ------------------
300,979,162 100.00
========== ==========
In addition, the Modaraba has placed certain funds under Musharaka
arrangements with various companies and individuals.
Fair value of financial instruments
The carrying value of all the financial instruments reflected in the financial statements
approximates their fair values after making provisions as referred in Note No. 11,
12, 13 and 14.
24. PROFIT/MARKUP RATE RISK MANAGEMENT
The Modaraba manages this risk by matching the repricing of assets and liabilities.
The Modaraba's markup rate sensitivity position, based on the earlier of contractual
repricing or maturity dates, is as follows:
FINANCIAL ASSETS Less than One month Over Not exposed to Total
one month to one year one year profit rate/
markup risk
Long term investment -- -- -- 851,032 851,032
Net investment in lease finance 137,496 110,705,566 190,136,100 -- 300,979,162
Musharaka finance 21,781,615 39,480,329 -- -- 61,261,944
Short term investment -- -- -- 483,717 483,717
Advances, deposits & prepayments -- -- -- 1,448,562 1,448,562
Other receivables -- -- -- 4,875,359 4,875,359
Cash and bank balances 25,338,128 7,459,042 -- 122,889 32,920,059
------------------ ------------------ ------------------ ------------------ ------------------
Rupees 47,257,239 157,644,937 190,136,100 7,781,559 402,819,835
========== ========== ========== ========== ==========
FINANCIAL LIABILITIES Less than One month Over Not exposed to Total
one month to one year one year profit rate/
markup risk
Long term finances 4,353,208 31,540,510 25,615,367 -- 61,509,085
Lease key money -- -- -- 53,987,379 53,987,379
Short term finances 21,100,000 92,293,249 -- -- 113,393,249
Advance lease rent/security deposits -- -- -- 2,603,414 2,603,414
Accrued and other liabilities -- -- -- 6,300,687 6,300,687
------------------ ------------------ ------------------ ------------------ ------------------
Rupees 25,453,208 123,833,759 25,615,367 62,891,480 237,793,814
========== ========== ========== ========== ==========
The effective markup rate for each of the monetary financial instrument is as follows:
Financial assets Effective profit rate%
Net investment in lease finance 23.34
Musharaka finance 19-24
Cash and bank balances 11
Financial Liabilities
Long term finance 18.25 - 21.50
Short term finance 16.25 - 20.50
25. OWNER'S EQUITY
Movements owner's equity during the year are identified and adequately disclosed
in the financial statements.
26. EARNING PER CERTIFICATE
There is no dilutive effect on the basic earning per certificate of the Modaraba,
which is based on:--
1999 1998
Rupees Rupees
Profit after taxation 10,850,561 15,004,106
Weighted average number of ordinary certificates 12,650,000 12,650,000
Earning per Certificate 0.86 1.19
27. FIGURES
These have been bounded off to the nearest Rupee.
Corresponding figures have been rearranged and regrouped wherever necessary
for the purpose of comparison.
Basheer A. Chowdry C. Ahsanul Haq M.H.S Kazmi
Chief Executive Chairman Director
PATTERN OF CERTIFICATE HOLDING AS AT JUNE 30, 1999
Number of Certificate holding Total
Certificate Certificates
holders From To Held
2,173 1 -- 100 113,031
772 101 -- 500 165,233
2,636 501 -- 1,000 1,687,058
665 1,001 -- 5,000 1,373,476
125 5,001 -- 10,000 871,302
45 10,001 -- 15,000 525,391
8 15,001 -- 20,000 140,995
8 20,001 -- 25,000 177,011
5 25,001 -- 30,000 134,832
4 30,001 -- 35,000 129,767
3 35,001 -- 40,000 108,914
2 40,001 -- 45,000 87,790
1 45,001 -- 50,000 47,150
2 60,001 -- 65,000 126,500
1 90,001 -- 95,000 94,875
1 110,001 -- 115,000 112,430
1 125,001 -- 130,000 127,500
1 175,001 -- 180,000 178,885
1 230,001 -- 235,000 234,000
1 315,001 -- 320,000 316,250
1 490,001 -- 495,000 493,621
1 515,001 -- 520,000 515,235
1 620,001 -- 625,000 624,722
1 2,005,001 -- 2,010,000 2,008,855
1 2,255,001 -- 2,260,000 2,255,177
------------------ ------------------
6,460 12,650,000
========== ==========
CATEGORIES OF CERTIFICATE HOLDING AS AT JUNE 30, 1999
Categories of Number Certificates Percentage
Certificate holders Certificate Held
holders
1. INDIVIDUALS 6422 5,730,783 45.30
2. INVESTMENT COMPANIES 7 1,023,610 8.09
3. INSURANCE COMPANIES 5 214,582 1.70
4. JOINT STOCK COMPANIES 9 176,654 1.40
5. FINANCIAL INSTITUTIONS 10 3,223,766 25.48
6. MODARABA COMPANY 1 2,008,855 15.88
7. MODARABAS 3 194,500 1.54
8. OTHERS (TO BE SPECIFIED) 3 77,250 0.61
------------------ ------------------ ------------------
6,460 12,650,000 100.00
========== ========== ==========
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