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DAWOOD LEASING COMPANY
LIMITED |
|
|
|
Annual Report |
|
|
|
June 1996 |
|
|
|
| CONTENTS |
|
|
| Corporate
Information |
|
3 |
|
| Notice
of Meeting |
|
4 |
|
| Directors'
Report |
|
5 |
|
| Auditors'
Report |
|
9 |
|
| Balance
Sheet |
|
10 |
|
| Profit
& Loss Account |
|
12 |
|
| Statement
of Changes in Financial Position |
13 |
|
| Notes
to the Accounts |
|
14 |
|
| Pattern
of Share Holding |
|
22 |
|
|
| CORPORATE
INFORMATION |
|
|
| Board
of Directors |
|
| Mr.
Rafique Dawood |
|
Chairman & Chief
Executive |
|
| Mr.
Mehboob G. Rawjee |
|
|
| Mr.
Ayaz Dawood |
|
|
| Mr.
Asadullah Khawaja |
|
(Nominee of ICP) |
|
| Mr.
A.K.M. Sayeed |
|
(Nominee of NIT) |
|
| Mr.
Bashir A. Sheikh |
|
(Nominee of Al Faysal
Inv. Bank) |
|
| Mr.
S. Gulrez Yazdani |
|
(Nominee of SLIC) |
|
|
| Company
Secretary |
|
| Mr.
Salman Rasheed |
|
|
| Auditors |
|
|
| M.
Yousuf Adil & Co., |
|
| Chartered
Accountants |
|
|
| Legal
Advisors |
|
| Sattar
& Sattar Associates |
|
| Mohsin
Tayebaly & Co. |
|
|
| Bankers |
|
| ANZ
Grindlays Bank plc. |
|
| Askari
Commercial Bank Ltd. |
|
| Faysal
Bank Ltd. |
|
| Habib
Bank Ltd. |
|
| Muslim
Commercial Bank Ltd. |
|
| Oman
International Bank S.A.O.G. |
|
| Societe
Generale, The French & International Bank |
|
|
| Registered
Office |
|
| and
Head Office |
|
| 5-B,
Lakson Square Building # 1, |
|
| Sarwar
Shaheed Road, Karachi - 74200 |
|
| Tel:
(021) 568 7778-9 |
|
| Fax:
(021) 568 5830 |
|
|
|
| Branch
Office |
|
| 2nd
floor, Gulberg Heights, 6-H, Gulberg, Lahore |
|
| Tel:
(042) 571 1308 |
|
| Fax:
(042) 571 0296 |
|
|
|
|
|
| Share
Department |
|
| 513,
Clifton Centre, Khayaban-e-Roomi, |
|
| Clifton
Karachi-75600. |
|
|
| NOTICE
OF SECOND ANNUAL GENERAL MEETING |
|
| Notice
is hereby given that the Second Annual General Meeting of the Company will be
held in the Auditorium |
|
| of
the Institute of Chartered Accountants of Pakistan, G-31, Block 8, Clifton,
Karachi on November 14, 1996 at |
|
| 1130
hours to transact the following business: |
|
|
| 1.
To receive, consider and adopt the Audited Accounts of the Company for the
year ended June 30, 1996 |
|
| together
with Directors' and Auditors' Reports thereon. |
|
|
| 2.
To approve payment of Cash Dividend to the Shareholders @ Rs. 1.25 per share
of Rs. 10/= each for |
|
| the
year ended June 30, 1996 as recommended by the Board of Directors. |
|
|
| 3.
To appoint Auditors to hold office till the conclusion of the Third Annual
General Meeting and to fix |
|
| their
remuneration. The retiring Auditors Messrs M. Yousuf Adil & Company,
Chartered Accountants, |
|
| being
eligible, offer themselves for re-appointment. |
|
|
| 4.
Any other business with the permission of the chair. |
|
|
| By
order of the Board |
|
|
|
| Notes |
|
| 1.
The Register of members of the Company will remain closed from November 5,
1996 to |
|
| November
14, 1996 (both days inclusive). |
|
|
| 2.
A member entitled to attend and vote at a General Meeting is entitled to
appoint a proxy to attend and |
|
| vote
instead of him/her. No person other than a member shall act as a proxy. |
|
|
| 3.
An instrument appointing a proxy and the power-of-attorney or other authority
(if any) under which it is |
|
| signed
or a naturally certified copy of the power or authority, in order to be
valid, must be deposited at |
|
| the
Registered Office of the Company, at the latest by 1130 hours on November 12,
1996 and must be |
|
| duly
stamped, signed and witnessed. |
|
|
| 4.
The Shareholders are requested to notify any changes in their address
immediately. |
|
|
| DIRECTORS
REPORT |
|
| We
are pleased to present your Company's Second Annual Report for the year ended
June 30, 1996. Dawood |
|
| Leasing
commenced business operations on January 1, 1995 and this is our first report
depicting a full year of |
|
| operation. |
|
|
| Operating
Results |
|
|
July 1, 1995 |
|
January 1, 1995 |
|
|
|
|
to |
|
to |
|
|
|
June 30, 1996 |
|
June 30, 1995 |
|
|
|
Rupees |
|
Rupees |
|
| Income |
|
|
| Lease
Income |
|
84,664,664 |
|
21,190,592 |
|
| Non
Lease Income |
|
4,452,231 |
|
6,811,018 |
|
|
----------- |
|
----------- |
|
|
|
|
89,116,895 |
|
28,001,610 |
|
|
|
|
=========== |
|
=========== |
|
|
|
|
|
|
| Profit
Before Taxation |
|
|
46,210,588 |
|
18,087,384 |
|
| Provision
for Taxation |
|
|
1,273,702 |
|
170,000 |
|
|
|
|
----------- |
|
----------- |
|
| Profit
after Taxation |
|
|
44,936,886 |
|
17,917,384 |
|
| Unappropriated
Profit Brought Forward |
4,333,907 |
|
-- |
|
|
|
|
----------- |
|
----------- |
|
| Profit
Available for Appropriation |
|
49,270,793 |
|
17,917,384 |
|
|
|
|
|
|
| Appropriations |
|
|
|
|
| Transfer
to Statutory Reserve |
|
8,987,377 |
|
3,583,477 |
|
| Transfer
to General Reserve |
|
7,500,000 |
|
10,000,000 |
|
| Proposed
Cash Dividend |
|
|
31,250,000 |
|
-- |
|
|
|
|
----------- |
|
----------- |
|
|
|
|
47,737,377 |
|
13,583,477 |
|
|
|
|
----------- |
|
----------- |
|
| Unappropriated
Profit Carried Forward |
1,533,416 |
|
4,333,907 |
|
|
|
|
=========== |
|
=========== |
|
|
| Earnings
per Share |
|
|
1.80 |
|
1.43 |
|
|
|
|
|
(Annualized) |
|
|
|
|
| Proposed
Cash Dividend |
|
|
1.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Review
of Operations |
|
| The
lease income of your Company has increased from Rs. 21.19 million to Rs.
84.66 million during the year. |
|
| New
leases worth Rs. 282.8 million have been written, taking the total leases
written since the start of business |
|
| operations
to Rs. 575.6 million. We are pleased to report that all lease rentals due for
the year have been |
|
| received. |
|
|
| Dawood
Leasing has followed a conservative policy for writing leases. We have
continued to maintain a fairly |
|
| diversified
lease portfolio with exposure to any sector not exceeding 16%. Last year, our
maximum exposure |
|
| was
27% to the cement sector. That has now been reduced to 15%. This year, power
generation is at the top of |
|
| the
list with an exposure of 16% |
|
|
| Due
to our conservative accounting approach, we had written-off the entire
deferred expenditure of Rs. 2.3 million |
|
| in
the last period accounts. This year, a general provision of Rs. 5.0 million
has been made to build-up a reserve |
|
| for
potential lease losses. The total of mandatory statutory reserve, general
reserve and allowance for potential |
|
| lease
losses is now 6.8% of net investment in lease finance. |
|
|
| During
the year, Dawood Leasing has been successful in arranging for various lease
syndications worth over |
|
| Rs.
1.0 billion. Thus, we have not only serviced our valued clients but also
shared the risk and rewards with |
|
| other
leasing companies. We strongly believe that leasing companies are
complementary to each other. Lease |
|
| syndication
not only provides the benefit of multiple risk evaluation criterion but also
of risk sharing. |
|
|
| Your
Company's target market has been towards infrastructure and related projects,
small business as well as |
|
| consumer
lease financing. We have also embarked upon leasing to the health sector and
technical training |
|
| institutions. |
|
|
| As
reported earlier, your Company had entered the consumer finance business by
providing lease facilities to |
|
| Diners
Club card holders. This scheme has been well received by the card holders and
over 600 leases worth a |
|
| total
of Rs. 21.7 million have been written so far. It is anticipated that, by June
1997, over 1,000 card leases will |
| be
written. |
|
|
| We
are pleased to report, that despite bearish stock market conditions, an
amount of Rs. 2.2 million was |
|
| contributed
by capital gains. |
|
|
| Future
Business Prospects |
|
| In
Pakistan, leasing still has a vast potential for growth, as less than 10% of
the capital investment in the country |
| is
being financed through leasing. Nevertheless, in the presence of sluggish
economic growth and a growing |
|
| number
of leasing companies, it is prudent to have a long-term view and strive for
sustainable and steady |
|
| growth. |
|
|
| With
this perspective, your Company plans to maintain a well diversified portfolio
of leases. Our objective is to |
|
| create
the right mix between big-ticket leasing, small enterprise leasing and
consumer lease financing. Your |
|
| Company
plans to continue to serve viable, environment friendly and
socio-economically beneficial entities. |
|
|
| The
1996-97 budget has levied Central Excise Duty @ 1/12 of 1% per month on the
lease financing. This levy is |
|
| a
pass through cost and will make the lease finance expensive. This incremental
cost, together with other taxes |
|
| levied
on the corporate sector, may further hamper the pace of industrial growth in
the country. The management |
|
| is
fully aware of the challenging domestic environment in which it has to
operate. |
|
|
| As
a resource mobilisation measure, your Company is in the process of
negotiating a number of additional credit |
|
| lines
from both local and multilateral institutions. We are also in the process of
preparing a comprehensive |
|
| scheme
to launch Certificates of Investment (COIs). With the introduction of COIs,
we hope to enhance our |
|
| competitive
position in the leasing industry. |
|
|
| You
would be pleased to know, that on the initiative of your Company, Pakistan
Credit Rating Agency |
|
| (PACRA)
has already started evaluating Dawood Leasing. We are confident that this
credit rating, once done, |
|
| will
add to the stockholders' faith in the Company. |
|
|
| Pattern
of Share Holding |
|
| The
pattern of Share-holding appears on page 22. |
|
|
|
| Auditors |
|
| The
retiring auditors, Messrs M. Yousuf Adil & Company, Chartered
Accountants, being eligible, offer |
|
| themselves
for re-appointment. |
|
|
|
| Acknowledgment |
|
| We
wish to record our appreciation for the continued support and confidence of
our esteemed clients and |
|
| shareholders,
especially the small investors, We value the support and guidance provided by
the Ministry of |
|
| Finance,
the State Bank of Pakistan and the Corporate Law Authority. We are grateful
to our lease syndicate |
|
| partners
and lending institutions for their support and confidence. The commitment,
dedication and hard work |
|
| demonstrated
by the management and staff members of the Company in achieving these results
are fully rec- |
|
| ognized
and acknowledged. We convey our special thanks to Sui Northern Gas Pipelines
Limited and Habib |
|
| Bank
Limited who are the largest customers of your Company. |
|
|
| We
pledge to continue to work towards social responsibility and national
development, in the best interests of |
|
| our
Shareholders. |
|
|
|
| On
behalf of the Board |
|
| Rafique
Dawood |
|
| Chairman
& Chief Executive |
|
|
|
| September
25, 1996 |
|
| Karachi. |
|
|
|
| AUDITORS
REPORT TO THE MEMBERS |
|
| We
have audited the annexed balance sheet of Dawood Leasing Company Limited as
at June 30, 1996 and the |
|
| related
profit and loss account and statement of changes in financial position,
together with the notes forming |
|
| part
thereof, for the period 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 purpose of our
audit and, after due |
|
| verification
thereof, we report that: |
|
|
| a)
in our opinion, proper books of account have been kept by 'the company as
required by the |
|
| Companies
Ordinance, 1984; |
|
|
| b)
in our opinion- |
|
|
| (i)
the balance sheet and profit and loss account together with the notes thereon
have |
|
| been
drawn up in conformity with the Companies Ordinance, 1984, and are in |
|
| agreement
with the books of account and are further in accordance with accounting |
|
| policies
consistently applied; |
|
|
| (ii)
the expenditure incurred during the 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 object of the company; |
|
|
| c)
in our opinion and to the best of our information and according to the
explanations given to us, |
|
| the
balance sheet, profit and loss account and the statement of changes in
financial position, |
|
| together
with the notes forming part thereof, give the information required by the
Companies |
|
| Ordinance,
1984 in the manner so required and respectively give a true and fair view of
the |
|
| state
of the Company's affairs as at June 30, 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. |
|
|
|
|
| M.Yousuf
Adil & Co., |
|
| Chartered
Accountants |
|
|
| BALANCE
SHEET AS AT JUNE 30, 1996 |
|
|
|
1996 |
1995 |
|
|
|
Note |
Rupees |
Rupees |
|
|
| SHARE
CAPITAL AND RESERVES |
|
| Authorized |
|
|
|
| 30,000,000
Ordinary Shares of Rs. 10/- each. |
|
300,000,000 |
300,000,000 |
|
|
|
|
=========== |
=========== |
|
| Issued,
Subscribed and Paid up |
|
| 25,000,000
Ordinary Shares of Rs. 10/- each |
|
| Fully
Paid in Cash |
|
|
|
250,000,000 |
250,000,000 |
|
| Statutory
Reserve |
|
|
3 |
12,570,854 |
3,583,477 |
|
| General
Reserve |
|
|
4 |
17,500,000 |
10,000,000 |
|
| Unappropriated
Profit |
|
|
1,533,416 |
4,333,907 |
|
|
|
|
----------------------- |
|
|
281,604,270 |
267,917,384 |
|
|
|
|
| REDEEMABLE
CAPITAL |
|
5 |
59,890,256 |
30,000,000 |
|
| LIABILITY AGAINST ASSET SUBJECT
TO |
|
|
|
| FINANCE
LEASE |
|
6 |
165,424 |
187,742 |
|
| LONG
TERM LEASE DEPOSITS |
|
7 |
40,605,063 |
27,154,120 |
|
| ALLOWANCE
FOR POTENTIAL LEASE LOSSES |
|
5,000,000 |
-- |
|
| CURRENT
LIABILITIES |
|
|
|
| Short
Term Borrowings |
|
|
8 |
42,325,635 |
10,000,000 |
|
| Current
Maturity of Redeemable Capital |
|
61,733,662 |
-- |
|
| Current
Maturity of Lease Liability |
|
95,228 |
89,878 |
|
| Accrued
and Other Liabilities |
|
9 |
15,635,987 |
4,933,328 |
|
| Proposed
Cash Dividend |
|
|
31,250,000 |
-- |
|
| Taxation |
|
|
|
1,142,790 |
170,000 |
|
|
|
|
----------------------- |
|
|
152,183,302 |
15,193,206 |
|
| CONTINGENCY
AND COMMITMENT |
|
10 |
|
|
|
----------------------- |
|
|
539,448,315 |
340,452,452 |
|
|
======================= |
|
|
| The
annexed notes from 1 to 21 form an integral part of these accounts. |
|
|
|
| OPERATING
ASSETS |
|
11 |
11,221,240 |
12,441,246 |
|
|
| NET
INVESTMENT IN LEASE FINANCE |
|
| Minimum
Lease Payments Receivable |
|
655,910,575 |
348,480,877 |
|
| Residual
Value of Lease Assets |
|
51,324,880 |
27,023,921 |
|
|
|
|
|
----------------------- |
|
|
|
|
|
707,235,455 |
375,504,798 |
|
| Unearned
Income |
|
|
(196,659,686) |
(122,129,781) |
|
|
|
|
|
----------------------- |
|
| Net
Investment in Lease Finance |
|
510,575,769 |
253,375,017 |
|
| Current
Portion of Net Investment in Lease Finance |
(121,544,593) |
(27,794,042) |
|
|
|
|
|
----------------------- |
|
|
|
389,031,176 |
225,580,975 |
|
| CURRENT
ASSETS |
|
|
|
| Current
Portion of Net Investment in Lease Finance |
121,544,593 |
27,794,042 |
|
| Short
Term Investments |
|
12 |
7,188,400 |
30,647,860 |
|
| Advances
Against Lease Commitment |
|
|
3,750,000 |
37,000,000 |
|
| Advances,
Deposits and Prepayments |
|
13 |
1,438,887 |
550,483 |
|
| Other
Receivables |
|
14 |
1,237,871 |
795,558 |
|
| Cash
and Bank Balances |
|
15 |
4,036,148 |
5,642,288 |
|
|
|
|
----------------------- |
|
|
|
|
|
|
|
|
139,195,899 |
102,430,231 |
|
|
----------------------- |
|
|
|
539,448,315 |
340,452,452 |
|
|
========================= |
|
|
| Rafique
Dawood |
|
|
| Chairman
& Chief Executive |
|
|
|
|
| S.
Gulrez Yazdani |
|
| Director |
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30,1996 |
|
|
|
|
|
Six Months |
|
|
|
|
ended June 30, |
|
|
|
Note |
1996 |
1995 |
|
|
|
|
Rupees |
Rupees |
|
| Income |
|
|
|
| Lease
Income |
|
|
84,664,664 |
21,190,592 |
|
| Return
on Deposits and Investments |
16 |
2,164,772 |
4,148,662 |
|
| Gain
on Sale of Investments |
|
2,227,421 |
2,662,356 |
|
| Other
Income |
|
|
60,038 |
- |
|
|
|
|
|
------------------------ |
|
|
|
89,116,895 |
28,001,610 |
|
| Expenditure |
|
|
|
|
|
|
| Administration and Operating Expenses |
17 |
|
|
14,448,630 |
6,517,877 |
|
| Financial Charges |
18 |
|
|
23,457,677 |
1,055,701 |
|
| Allowance
for Potential Lease Losses |
5,000,000 |
- |
|
|
|
------------------------ |
|
|
|
42,906,307 |
7,573,578 |
|
|
|
|
|
|
|
------------------------ |
|
| Operating
profit |
|
|
46,210,588 |
20,428,032 |
|
|
|
|
|
|
|
| Incorporation,
Listing and Other - Net |
- |
2,340,648 |
|
|
|
------------ |
------------ |
|
| Profit
Before Taxation |
|
|
46,210,588 |
18,087,384 |
|
| Provision
for Taxation |
|
|
|
|
|
|
| Current
Year |
|
|
546,042 |
170,000 |
|
| Prior Year |
|
|
727,660 |
- |
|
|
|
|
|
|
1,273,702 |
170,000 |
|
|
|
|
| Profit
After Taxation |
|
|
44,936,886 |
17,917,384 |
|
| Unappropriated
Profit Brought Forward |
4,333,907 |
-- |
|
|
|
------------ |
------------ |
|
| Profit
Available for Appropriation |
|
49,270,793 |
17,917,384 |
|
|
|
|
|
| Appropriations |
|
|
|
| Transferred
to Statutory Reserve |
|
8,987,377 |
3,583,477 |
|
| Transferred
to General Reserve |
|
7,500,000 |
10,000,000 |
|
| Proposed
Cash Dividend |
|
|
31,250,000 |
-- |
|
|
|
------------ |
------------ |
|
|
|
47,737,377 |
13,583,477 |
|
|
|
|
|
|
|
------------ |
------------ |
|
| Unappropriated
Profit Carried Forward |
1,533,416 |
4,333,907 |
|
|
|
======================== |
|
|
| The
annexed notes from 1 to 21 form an integral part of these accounts |
|
|
| STATEMENT
OF CHANGES IN FINANCIAL POSITION |
|
| FOR
THE YEAR ENDED JUNE 30, 1996 |
|
|
|
|
|
1996 |
1995 |
|
|
|
Rupees |
Rupees |
|
| A.
CASH FLOW FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
| Profit
after Taxation |
|
44,936,886 |
17,917,384 |
|
|
|
|
|
| Adjustment
to Determine Net Cash Flows |
|
|
| Depreciation |
|
2,021,468 |
1,947,642 |
|
| Gain
on Sale of Investment |
|
(2,227,421 ) |
(2,662,356) |
|
| Financial
Charges |
|
23,457,677 |
1,055,701 |
|
| Gain
on Sale of Assets |
|
(60,038) |
-- |
|
| Allowance
for Potential Lease Losses |
5,000,000 |
-- |
|
|
|
----------- |
----------- |
|
| Operating
Profit Before Working Capital Changes |
73,128,572 |
18,258,371 |
|
| Working
Capital Changes |
|
|
|
| Advances,
Deposits and Prepayments |
|
(888,404) |
(550,483) |
|
| Other
Receivables |
|
(442,313) |
(795,558) |
|
| Accrued
and Other Liabilities |
|
3,525,230 |
3,901,342 |
|
| Taxation |
|
972,790 |
170,000 |
|
|
|
----------- |
----------- |
|
|
|
3,167,303 |
2,725,301 |
|
|
|
|
|
|
|
----------- |
----------- |
|
|
|
76,295,875 |
20,983,672 |
|
|
|
|
|
| Less:
Financial Charges Paid |
|
(16,280,248) |
(23,715) |
|
|
|
----------- |
----------- |
|
| Net
Cash Provided by Operating Activities |
60,015,627 |
20,959,957 |
|
|
|
|
|
|
|
|
|
| B.
CASH FLOW FROM FINANCING ACTIVITIES |
|
|
| Issue
of Share Capital |
|
-- |
250,000,000 |
|
| Redeemable
Capital Obtained |
|
105,000,000 |
30,000,000 |
|
| Lease
Finance Obtained |
|
349,000 |
343,500 |
|
| Redemption
of Redeemable Capital |
|
(13,376,082) |
|
|
| Repayment
of Lease Liability |
|
(365,968) |
(65,880) |
|
| Long
Term Lease Deposits |
|
13,450,943 |
27,154,120 |
|
| Short
Term Borrowings |
|
32,325,635 |
10,000,000 |
|
|
|
----------- |
----------- |
|
| Net
Cash Provided by Financing Activities |
137,383,528 |
317,431,740 |
|
|
| C.
CASH FLOW USED IN INVESTING ACTIVITIES |
|
| Investment
in Leases (Net) |
|
(257,200,752) |
(253,375,017) |
|
| Capital
Expenditure |
|
|
(1,076,262) |
(15,388,888) |
|
| Proceeds
from Sale of Fixed Assets |
|
334,838 |
1,000,000 |
|
| Investment
in Marketable Securities |
|
(15,348,500) |
(60,418,604) |
|
| Sale
Proceeds of Marketable Securities |
41,035,381 |
32,433,100 |
|
| Advance
Against Lease Commitment |
|
33,250,000 |
(37,000,000) |
|
|
|
|
----------- |
----------- |
|
| Net
Cash Used in Investing Activities |
(199,005,295) |
(332,749,409) |
|
|
|
|
| Net (decrease)/increase in
cash and cash |
----------- |
----------- |
|
| equivalent
(A + B + c) |
|
|
(1,606,140) |
5,642,288 |
|
| Cash and cash equivalent
at the beginning |
|
|
