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Crescent Leasing Corporation Limited

(Report and Accounts for the eighteen months

ended June 30, 1996)

CONTENTS

COMPANY INFORMATION

BOARD OF DIRECTORS

Mr. Aftab Ahmed Khan

Chairman

Mr. Abdul Jabbar Kasim

Chief Executive

Mr. A.K.M. Sayeed

Mr. Altaf M. Saleem

Mr. Manzurul Haque

Mr. Nessar Ahmed

Mr. Rashid Ahmed

Mr. Stephen Potter

CORPORATE SECRETARY

Mr. Rashid Sadiq

Mr. Zaheer A. Sheikh

AUDITORS

Khalid Majid Husain Rahman & Co.

Chartered Accountants

LEGAL ADVISORS

Cornelius Lane & Mufti

Advocates & Solicitors

REGISTERED AND SHARE TRANSFER OFFICE

83-Babar Block, New Garden Town, Lahore.

Tel: 042-5881974-75

Fax: 042-5839631

HEAD OFFICE

B-801 & 802, 8th Floor Lakson Square, Bldg.# 3, Sarwar Shaheed Road, Karachi.

Tel: 021-5661938-48-58 Fax: 021-5661988

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the 9th Annual General Meeting of the shareholders of CRESCENT

LEASING CORPORATION LIMITED will be held on Monday, October 21, ;1996 at 1500 hours

at Registered Office, 83-Babar Block, New Garden Town, Lahore to transact the following busi

ness:

ORDINARY BUSINESS:

1. To confirm the Minutes of the 8th Annual General Meeting held on May 30, 1995.

2. To receive, consider and adopt the audited accounts of the company for the eighteen

months period ended June 30, 1996 together with Directors and Auditors Reports

thereon.

3. To approve payment of cash dividend. The Directors have recommended the payment of

Cash Dividend @ 15% i.e. Rs. 1.50 per share for the period ended June 30, 1996.

4. To appoint Auditors (for the year ending June 30, 1997) and fix their remuneration. The

present Auditors M/S Khalid Majid Husain Rahman, Chartered Accountants, retire and

being eligible, offer themselves for re-appointment.

SPECIAL BUSINESS:

5. To consider and if approved pass special resolution for increase in authorised capital of the

company from Rs. 200 million to Rs. 300 million.

6. To consider and if approved pass the following resolution as special resolution under

section 208 of the Companies Ordinance, 1984.

Resolved:

That the company be and is hereby authorised to invest in fully paid up ordinary shares at

par value of Rs. 10/- each of the following associated undertaking and its disposal at such

time(s) as deemed appropriate:

International Housing Finance Limited

Rs. 3.125 million

Trust Investment Bank Limited

Rs. 1.000 million

Resolved Further:

That the Chief Executive of the Company be and is hereby authorised to take or cause to be

taken any and all actions necessary to purchase the shares and to dispose of the same as

deemed appropriate.

Statement under section 160(1)(b)

of the Companies Ordinance, 1984

This statement sets out the material facts concerning the special business to be transacted at

the 9th Annual General Meeting of the Company to be held on October 21, 1996.

INCREASE IN AUTHORISED CAPITAL:

The present paid-up capital of the company is Rs. 150 million as against authorised capital of

Rs. 200 million. In order to meet the future growth in the company s capital, it is appropriate to

increase the authorised capital of the company to Rs. 300 million. Accordingly the Memorandum

& Articles of Association are sought to be amended to reflect the increase in the amount of

authorised capital appearing therein. The Directors of the company are not interested in this

business. The following resolution is proposed to be passed as Special Resolution:

Resolved:

That the authorised capital of the company be increased from Rs. 200,000,000 (Rupees

two hundred million) to Rs. 300,000,000 (Rupees three hundred million) by creation of

10,000,000 (Ten million) additional ordinary shares of Rs. 10/- each ranking in dividend

and in all other respects pari passu with the existing 20,000,000 (twenty million) ordinary

shares of Rs. 10/- each in the capital of the company and the capital clauses of the

Memorandum and Articles of Association be and are hereby altered accordingly to read as

under:

Clause V of Memorandum of Association:

The Authorised Capital of the company is Rs. 300,000,000 (Rupees three hundred million)

divided into 30,000,000 (thirty million) ordinary shares of Rs. 10/- each.

Article 4 Of Articles of Association:

The authorised capital of the company is Rs. 300,000,000 (Rupees three hundred million)

divided into 30,000,000 (thirty million) ordinary shares of Rs. 10/- each.

Resolved Further:

That corporate secretary of the company be and is hereby authorised to do all necessary

arrangements including signing of all documents in this regard to alter the capital clauses

of the Memorandum and Articles of Association.

INVESTMENT IN ASSOCIATED UNDERTAKINGS:

International Housing Finance Limited (IHFL) is a housing finance company sponsored by

International Finance Corporation (IFC), Commonwealth Development Corporation (CDC) and

Crescent Investment Bank Limited (Cres Bank). The primary object of the company is to provide

housing finance facilities to individuals and corporate clients. The company has issued right

shares @ 100% which brings the total paid-up capital of IHFL to Rs. 125 million. Crescent

Leasing Corporation Limited (CLC) has agreed to subscribe to 312,500 shares at par

amounting to Rs. 3.125 million. The authorised capital of IHFL is Rs. 150 million.

The final structure of paid up capital is as under:

No. of shares

Rupees

Ownership

of Rs. 10/- each.

Percentage

CDC

3,750,000

37,500,000

30.0%

IFC

2,500,000

25,000,000

20.0%

CRES BANK

3,750,000

37,500,000

30.0%

PICIC

1,875,000

18,750,000

15.0%

PILCORP

312,500

3,125,000

2.5%

CLC

312,500

3,125,000

2.5%

---------

12,500,000

125,000,000

100%

=========

Trust Investment Bank Limited (TIBL) is an investment bank with authorised and paid-up

capital of Rs. 200 million and Rs. 100 million respectively. TIBL has been recently listed on the

stock exchanges. Although the public offer was under-subscribed, the bank offers good invest

ment opportunity and has potential for growth. CLC has agreed to take up shares worth Rs.

1.00 million out of public offer at par value of Rs. 10/- each.

The following are material facts about the proposed investment:

1. Name of investee

International Housing

Trust Investment

company or asso-

Finance Limited

Bank Limited

ciated undertaking.

2. Nature,

Investment in shares

amount and

Rs. 3,125,000

Rs. 1,000,000

extent of

(Rupees Three Million One

(Rupees One Million only)

investment.

Hundred Twenty Five

Thousand only)

3. Price at which

At par value

shares would

i.e. Rs. 10/-

i.e. Rs.10/

be purchased.

per share.

4. Source of funds

Internal

from where shares

generation.

would be purchased.

5. Period for which

As deemed

investment would

appropriate

be made.

6. Purpose of

To earn dividend

investment:

& capital gain.

7. Benefits likely

The company will

to accrue to the

earn dividend and

company and the

capital gain to

shareholders from

increase its profits

the proposed investment.

The proposed investment in associated undertakings will be beneficial for CLC. It is, therefore,

recommended that the shareholders may pass the proposed resolution as special resolution

under section 208 of the Companies Ordinance, 1984. Mr. Altaf M. Saleem and Mr. Nessar

Ahmed are Directors of IHFL. Mr. Altaf M. Saleem is Chairman of TIBL. The other Directors of

the company have no interest in the above investments.

Copies of the Memorandum and Articles of Association of IHFL and TlBL are kept at the

Registered Office of the Company which can be inspected from 10.00 a.m. to 11.30 a.m. on all

working days upto October 14, 1996.

BOOK CLOSURE:

The share transfer books of the company will remain closed from October 16, 1996, to October

22, 1996, (both days inclusive). Transfer received in order at the Registered Office by the close

of business hours on October 15, 1996 will be treated in time for the entitlement of cash

dividend.

BY ORDER OF THE BOARD

Zaheer A. Shaikh

Dated: September 15, 1996

Corporate Secretary

NOTE:

1. A member eligible to attend and vote at this Meeting may appoint another member as

his/her proxy to attend and vote instead of him/her.

2. The instrument appointing a proxy and the power of attorney or other authority under which

it is signed or a notarially certified copy of the power of attorney must be deposited at the

registered office of the company at least 48 hours before the meeting. A form of proxy is

enclosed.

3. Shareholders are requested to immediately notify the change in address, if any.

DIRECTORS' REPORT

Your Directors have pleasure in presenting the Audited Accounts for the period January 1995 to June 1996,

covering a period of 18 months. Pursuant to the Finance Act 1995, your company changed its account

ing year from calendar to fiscal; to comply with the requirement.

The financial results of the Company for the period under review are summarized as follows:

For eighteen months

For the year

ended June '96

ended Dec. '94

Rs. ('000)

Revenue

80,862

24,131

Expenditure

36,540

14,172

--------

Profit before taxation

44,322

9,959

Provision for taxation

653

406

--------

Profit after taxation

43,669

9,553

Unappropriated profit brought forward

8,345

3,457

--------

Profit available for appropriation

52,014

13,010

Appropriations

Transfer to reserve under NBFI regulations

8,734

1,911

Transfer to general reserve

4,835

2,755

Proposed Dividend @ 15%

22,500

--------

36,069

4,666

--------

Unappropriated profit carried forward

15,945

8,345

========

OPERATING RESULTS

By the grace of Almighty Allah, your company has shown substantial improvement in operating results

during the period under review. All the figures show an upward trend. Net Investment in Lease Financing

which was Rs. 137 million at the end of December 1994, stands at Rs. 379 million as on June 30, 1996.

On an yearly basis it is an increase of around 117%. During the preceding six months it went up by 50%.

Lease finance income shows an increase of Rs. 40 million during the eighteen months. Total income

went by 237% from Rs. 24 million to Rs. 81 million. The Company Net Profit was Rs. 43.67 million up

by 4.57 times from a figure of Rs. 9.55 million, on a comparative basis.

Long-term funds available through Commonwealth Development Corporation have been successfully

utilized. The remaining draw-down will be in October 1996. The funds from second right issue were

available for utilization in May 1995. The adjusted earning per share works to Rs. 3.38 per share.

Lease disbursement and commitments during the review period were to the tune of Rs. 370 million.

The company continuing with its strategy of prudent and judicious selection of sectors and clients has

developed a qualify portfolio. The emphasis is to support areas which have growth potential and in the

process select best users of lease financing. Judged from this view-point Lease Portfolio by Type of

Asset depict around 65% in Plant & Machinery followed by 22% in vehicles (including commercial).

REVIEW OF OPERATIONS

The government over the last couple of years has had moderate success in bringing down the budget

deficit. Despite this the economy is experiencing a high current account deficit, approaching six percent

of GDP, a sluggish growth in manufacturing sector and a double digit inflation fuelled by cost - push

factors giving rise to high cost of imported inputs.

Economic numbers are not very encouraging and would therefore leave scar on the recovery

process. Macroeconomic fundamentals will have to be substantially improved in order to keep the tempo

of industrialization and direct foreign investment up. In the emerging business scenario the function of

financial intermediation is demanding. The lessors will have to concentrate not only on business

expansion but focus to manage financial risk.

Our strategy aims at providing services and products with long-term view in perspective. This requires a

close understanding of client's business, his performance and growth perspective. In the circumstances,

we aim to augment our role in the credit delivery, tapping new areas with improved efficacy to achieve the

objective of quality services to the clients.

Resource mobilization is the mainstay of leasing companies to maintain a sustainable growth rate. Local

funds are not only expensive but also come with a tinge of short-term characteristics.

According to the State Bank Governor the financial intermediation cost of public sectors banks was

in the band of 7 to 8 percent, whereas it should be in the range of 2 to 3 percent. Obviously leasing

companies borrowing from such sources, working on limited margins, have not much to influence.

Long-term funds, due various factors, now come expensive. One of the anxieties of lessors is

arrangement of matching funds.

The state of affairs of commercial banks and DFls will provide opportunities to leasing companies

to play significant role in the capital formation of the economy. However, in the coming years, leasing

companies will have to be innovative both in the matter of soliciting business and mobilization of

resources. Leasing Companies for a variety of factors need to join hands, to complement each other in

situation of sectoral and client exposure and in the process giving credence that the leasing companies

now possess strength to arrange large ticket leasing to off-set domination of DFls and commercial

banks. Creslease has participated in syndicated lease financing with the objective of manifesting its

transaction capability. We have during this endeavour developed strength and have focused on "market

need" approach in the matter of seeking quality clients.

FUTURE OUTLOOK

Our strategy in the coming years is to further enhance and deepen our understanding of target market,

simultaneously to participate in syndication where the risk and reward are compatible to the objective of

Creslease. Furthermore we are closely looking at some innovation of lease products whereby the

vendors would be attracted to offer products through "a lease package", to bring depth to the lease

market.

We have set a target for the coming year that will enable us to penetrate the market and maintain the

growth tempo. Simultaneously we have arrangement in place for funds to meet our targets.

The renewed strategy and corporate commitment has given Creslease a stature in the market. The

company is now poised to attain new heights and will be looked favourably by investors, lenders and

analyst. Our long-term aim is to improve shareholders value. The directors recommend a cash

dividend of Rs. 1.50 per share for the period ended June 30, 1996.

ACKNOWLEDGMENT

The Board acknowledges the support of the bankers, lending institutions and Commonwealth

Development Corporation, particularly, for the support to enable Creslease to attain new heights. The

board wishes to record its appreciation of the company personnel for hard work, team effort and

achievements.

AUDITORS

The auditors, Khalid Majid Husain Rahman, Chartered Accountants retire and being eligible, offer

themselves for re-appointment.

PATTERN OF SHAREHOLDING

The pattern of shareholding as on June 30, 1996, is annexed to this report.

AUDITORS REPORT TO THE MEMBERS

We have audited the annexed balance sheet of Crescent Leasing Corporation Limited as at June

30th, 1996, and the related profit and loss account and statement of changes in financial

position, together with the notes forming part thereof, for the eighteen months then ended and

we state that we have obtained all the information and explanations which to the best of our

knowledge and belief were necessary for the purposes of our audit and, after due verification there

of, we report that:

(a) in our opinion, proper books of account have been kept by the company as required by the

Companies Ordinance, 1984;

(b) in our opinion:

(i) the balance sheet and profit and loss account together with the notes therein have been

drawn up in conformity with the Companies Ordinance, 1984, and are in agreement

with the books of account and are further in accordance with accounting policies con

sistently applied;

(ii) the expenditure incurred during the period was for the purpose of the company s

business; and

(iii) the business conducted, investments made and the expenditure incurred during the

period were in accordance with the objects of the company;

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 as at June 30th, 1996 and of the profit and the

changes in financial position for the period then ended; and

(d) in our opinion no zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.

KARACHI: September, 12, 1996

Khalid Majid Husain Rahman

Chartered Accountants

BALANCE SHEET AS AT JUNE 30, 1996

June

December

1996

1994

Note

Rupees

SHARE CAPITAL AND RESERVES

Authorised Capital

20,000,000 ordinary shares of Rs. 10/- each

200,000,000

===========

Issued, subscribed and paid-up capital

150,000,000

75,000,000

Capital reserve

Premium on issue of right shares

56,250,000

Revenue reserves

35,045,985

13,876,948

----------

241,295,985

88,876,948

LONG-TERM FINANCES

290,453,563

2,983,813

LIABILITIES AGAINST ASSETS SUBJECT

TO FINANCE LEASE

559,640

LONG-TERM DEPOSITS

33,175,109

13,924,411

CURRENT LIABILITIES

Current maturity of long-term liabilities 8

33,866,868

12,153,745

Short-term finance

3,700,094

35,000,000

Creditors, accrued and other liabilities 10

13,418,789

1,859,123

Proposed dividend

22,500,000

----------

COMMITMENTS

----------

638,970,048

154,798,040

===========

The annexed notes form an integral part of these financial statements.

TANGIBLE FIXED ASSETS

Operating assets

16,659,487

2,568,304

Assets subject to Finance lease

995,435

----------

17,654,922

2,568,304

NET INVESTMENT IN LEASES

272,037,673

97,557,002

LONG-TERM DEPOSITS AND DEFERRED COST

168,214,578

1,053,538

LONG-TERM LOAN

499,994

164,103

CURRENT ASSETS

Current maturity of net investment in leases 14.1

107,074,759

4O,132,946

Investments

40,935,000

8,925,037

Advances, deposits, prepayments

and other receivables

32,281,658

2,952,464

Cash and bank balances

271,464

1,444,646

----------

180,562,881

53,455,093

----------

638,970,048

154,798,040

===========