| First Leasing Corporation Ltd |
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| (Annual
report 1996) |
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| CONTENTS |
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| Company
Information |
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2 |
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| Board
of Directors |
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3 |
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| Notice
of Meeting |
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5 |
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| Directors'
Report and Operational Review |
7 |
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| Auditors'
Report to the Members |
13 |
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| Balance
Sheet |
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14 |
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| Profit
and Loss Account |
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15 |
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| Cash
Flow Statement |
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16 |
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| Notes
to the Accounts |
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17 |
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| Pattern
of Shareholding |
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37 |
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| Categories
of Shareholders |
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38 |
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| COMPANY
INFORMATION |
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| Board
of Directors |
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| Mr.
Khurshid Hadi |
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Chairman & Chief
Executive |
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| Mr.
Shahid Shaikh |
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| Mr.
Jahangir Siddiqui |
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| Mr.
S. Masoud Ali Naqvi |
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| Mr.
Rashid Zahir |
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(Nominee Director |
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|
Saudi Pak Industrial
& Agricultural |
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|
Investment Co. (Pvt)
Limited) |
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| Mr.
Abdullah Rafi |
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(Nominee Director |
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Muslim Commercial Bank
Limited) |
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| Mr.
Abid Aziz |
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(Nominee Director |
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Pak Libya Holding Company |
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(Pvt) Limited) |
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| M
r. A. K. M. Sayeed |
(Nominee Director |
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National Investment
Trust) |
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| MANAGEMENT
COMMITTEE |
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| Mr.
Khurshid Hadi |
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| Mr.
Shahid Shaikh |
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| Mr.
Masoud Ali Naqvi |
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| Mr.
Rashid Zahir |
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| Mr.
Abdullah Rafi |
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| Mr.
Abid Aziz |
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| EXECUTIVE
COMMITTEE |
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| Mr.
Khurshid Hadi - FCA |
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Chief Executive Officer |
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| Mr.
Shahid Shaikh - FCA |
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Director |
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| Mr.
Arshad Nawab |
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Executive Director-
Karachi CSG |
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| Mr.
Shoaib Qureshi |
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Executive Director -
Lahore CSG |
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| Mr.
Zahid Ali H. Jamall - ACA |
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Executive Director
Finance |
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| Mrs.
Hina Usmani - ACA |
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Manager Corporate Finance |
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| COMPANY
SECRETARY |
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| Mr.
Zahid Ali H. Jamall - ACA |
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| AUDITORS |
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| Ford,
Rhodes, Robson, Morrow |
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| Chartered
Accountants |
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| LEGAL
ADVISORS |
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| Orr
Dignam & Co. Advocates |
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| REGISTRARS
AND SHARE TRANSFER OFFICE |
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| THK
Associates (Pvt) Limited |
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| Ground
Floor, Shaikh Sultan Trust Building No. 2 |
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| Beaumont
Road, Karachi. Tel. No. 5688808, 5685805 |
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| REGISTERED
AND HEAD OFFICE |
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| 5th
Floor, Block C, Finance & Trade Centre |
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| Shahrah-e-Faisal,
Karachi-74400. |
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| Tel.
No. 5661843 - 46 Fax No 5685329 |
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| BRANCH
OFFICES |
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| 5th
Floor, Davis Hytes |
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| Davis
Road, Lahore. |
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| House
No. 44 Street No. 6 |
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| Defence
Officer Colony, Peshawar. |
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| BANKERS: |
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| Allied
Bank of Pakistan Limited |
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| Bank
of America |
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| Bank
of Indosuez |
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| Faysal
Investment Bank Limited |
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| Habib
Bank Limited |
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| Muslim
Commercial Bank Limited |
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| National
Bank of Pakistan |
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| Standard
Chartered Bank |
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| The
Bank of Khyber |
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| The
Hong Kong and Shanghai Banking Corporation Limited |
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| NOTICE
OF MEETING |
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| Notice
is hereby given that the Fourth Annual General Meeting of First |
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| Leasing
Corporation Limited will be held at FTC Auditorium, Finance & |
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| Trade
Centre, Shahrah-e-Faisal, Karachi on Wednesday September 18, |
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| 1996
at 12 Noon to transact the following business: |
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| Ordinary
Business |
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| 1.
To receive, consider and adopt the audited accounts together with the |
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| Directors'
and Auditors' Report for the period ended June 30, 1996. |
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| 2.
To appoint Auditors and fix their remuneration. The present Auditors, |
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| Messrs.
Ford, Rhodes, Robson, Morrow, Chartered Accountants retire |
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| and
being eligible have offered themselves for reappointment. |
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| Special
Business |
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| 3.
To approve the remuneration of the Chief Executive and a working |
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| director
of the company. |
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| 4.
Any other business with the permission of the Chair. |
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| Karachi:
August 27, 1996 By order of the Board |
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| Zahid
Ali H. Jamall |
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| Company
Secretary |
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| Notes: |
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| 1.
The share transfer books of the company will remain closed from |
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| September
16, 1996 to September 25, 1996 (both days inclusive). |
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| 2.
A member entitled to attend, speak and vote at the meeting is |
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| entitled
to appoint a proxy to attend, speak and vote for him/her. |
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| 3.
An instrument of proxy and the power of Attorney or other authority |
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| (if
any) under which it is signed or a notaraly certified copy of such |
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| power
of authority, in order to be valid, must be deposited at the |
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| registered
office of the company not less than 48 hours before the |
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| time
of the meeting. |
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| 4.
Members are requested to notify any change in their address |
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| immediately. |
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| STATEMENT
UNDER SECTION 160(1) OF THE COMPANIES |
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| ORDINANCE,
1984 |
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| 1.
Approval is being sought to fix the remuneration of the Chief Executive |
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| of
the Company and a working director. |
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| This
statement under Section 160 of the Companies Ordinance, |
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| 1984
is annexed to the Notice of the Annual General Meeting of |
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| First
Leasing Corporation Limited to be held on September 18, 1996 |
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| and
sets out material facts concerning the special business to be |
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| transacted
at the meeting. |
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| The
shareholders' approval will be sought for the payment of |
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| remuneration
and the provision of certain facilities to the |
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| Chief
Executive and a working director as recommended by the |
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| Board
of Directors of the Company. For this purpose, it is proposed |
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| that
the following resolutions be passed as ordinary resolutions, |
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| namely: |
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| "RESOLVED
THAT the Chief Executive of the Company be and is |
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| hereby
authorised to draw as remuneration gross aggregate monthly |
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| sum
not exceeding Rs. 150,000 (Rupees one hundred and fifty |
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| thousand
only) as determined by the Board of Directors. |
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| The
Chief Executive will also be provided perquisites, with annual |
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| bonus,
provident fund and leave as per company rules and |
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| regulations
in force from time to time during his term of office that |
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| commences
from the date of his appointment. |
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| "FURTHER
RESOLVED THAT the Working Director of the Company be |
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| and
is hereby authorised to draw as remuneration gross aggregate |
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| monthly
sum not exceeding Rs. 150,000 (Rupees one hundred and |
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| fifty
thousand only) as determined by the Board of Directors. The |
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| Working
Director will also be provided perquisites, with annual bonus, |
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| provident
fund and leave as per company rules and regulations in |
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| force
from time to time during his term of office." |
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| DIRECTORS'
REPORT AND OPERATIONAL REVIEW |
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| This
report of your Board covers the |
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| operations
of the company for an |
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| eighteen
month period ended 30th June |
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| 1996
pursuant to an abrupt change in the |
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| tax
regulations announced with the |
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| Finance
Bill 1995. The period under |
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| review
has been challenging for our |
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| operations
but our investment in quality |
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| management
and prudent operating |
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| procedures
has been a bulwark against |
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| the
difficult economic conditions. |
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| REVIEW |
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| Over
this period the financial sector has laboured amidst persistent |
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| stagflation,
an inelastic tax base, leading to an escalating burden on the |
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| formal
sector tax-payer. This situation has been compounded by |
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| sporadic
changes in regulations affecting financial sector operations |
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| that
are often ill - conceived and that ignore their long-term ramifications |
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| on
the sector, especially in its ability to support trade and industrial |
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| development. |
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| A
consistent comm~tment to an economic policy which principally relies |
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| on
the private sector is also deemed to require a period of adjustment |
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| before
the full benefits materialize. This is however a specious argument |
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| in
a situation where there is minimal response from risk capital either in |
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| the
form of domestic savings or direct foreign investment. With the |
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| obvious
exception of the energy sector where uncertainty is all but |
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| eliminated,
risk capital continues to be shy with gross domestic |
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| investment
declining from an average of 5.9% in the 80's to 4.7% last |
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| year.
It appears that despite the elimination of all licensing requirements, |
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| and
liberalization of trade and reduction of import tariffs, despite |
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| continued
subsidized credit, and despite freedom from the monolithic |
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| state
financial sector, the rewards of liberalization still remain ethereal. |
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| To
some extent Pakistan has been a victim of the worldwide drift away |
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| from
emerging markets and this is dramatically demonstrated in the free |
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| fall
of our stock markets - the index has declined to 1450 today from a |
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| high
of 2611 in 1994. International disinterest in our market also affects |
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| the
equity and bond issues but the decline in domestic industrial |
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| investment
can only be attributed to an implacable lack of confidence in |
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| market
and price stability. Nothing explains the prevalent pricing of |
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| shares
at staggering discounts nor at PE ratios far below those in any |
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| other
Asian market. |
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| For
the Non-Bank Financial Institutions (NBFls) the problems of |
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| economically
priced finance and prompt debt recovery continue to |
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| persist.
Government's appetite continues to crowd out the private sector |
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| creating
price volatility mainly in an upwards direction. The most |
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| assiduous
or the most imaginative of financial brains cannot engineer a |
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| lease
product that is priced below borrowing cost plus operating |
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| margins
and still make a profit. Current rupee costs range between 19 |
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| 20%
whereas even subsidized foreign currency borrowings after |
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| exchange
risk premium and guarantee commission also cost 19-20%. It |
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| is
not surprising that only those leasing companies can operate |
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| profitably
that had harnessed low-cost multi-lateral funding prior to the |
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| State
Bank's withdrawal of subsidized exchange risk premium. |
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| A
concern comparable to the mobilization of economically priced funds |
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| is
the prompt recovery of lease rentals or other debt. The problem of |
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| default
is wide-spread in the financial sector and despite the fashioning |
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| of
regulations that attempt to combat growing overdue debt, no solution |
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| is
plausible without the clear, unambiguous commitment of both political |
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| and
judicial leadership. It is impossible to over emphasize the need for |
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| the
collective wisdom of the Government of Pakistan, State Bank of |
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| Pakistan
and the relevant courts to be brought to bear on the problem in |
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| a
rational and effective manner. |
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| OPERATING
RESULTS OF THE COMPANY |
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| The
company recorded significant growth in the volume of business and |
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| as
is evident from the accompanying charts, diversified its lease |
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| portfolio
over various industry segments for a broader risk profile. |
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| REVIEW
OF OPERATIONS |
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| Our
strength was again demonstrated in 1995-1996 by the ability to |
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| meet
growth targets and to maintain the desired asset mix. |
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| The
company's cash flow situation remained satisfactory throughout the |
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| year
as local banks increased their support to the company during this |
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| period.
This was very useful in the absence of long term funds from |
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| multilateral
agencies. The company also raised funds from COls. most |
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| Of
which were short term and the company's dependence on this source |
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| of
funds has been very limited. |
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| Similar
to most other institutions in the financial sector the company |
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| made
a significant provision for diminution in the value of its stock |
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| portfolio
which diluted earnings per share for the current reporting |
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| period.
We expect some recovery from this source during the |
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| forthcoming
year and hope to balance out the decline in the EPS. The |
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| state
of the Stock Market also precluded the floatation of a Convertible |
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| TFC
for which permission had been obtained in the previous year. |
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| OPERATING
RESULTS |
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| First
Leasing-earned a pre-tax profit of Rs. 45.39 million and the |
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| recommended
appropriation thereof is as follows: |
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|
Rupees in million |
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|
6/30/1996 |
1994 |
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|
|
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|
| Income
from Leasing, |
|
208.8 |
83.84 |
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|
| Income/(Loss)from
operating leases |
(.45) |
- |
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|
| Corporate
finance & treasury operations |
7.88 |
7.12 |
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|
| Capital
gains |
|
2.76 |
3.20 |
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|
-------- |
-------- |
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|
218.99 |
94.16 |
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|
| Operating
cost |
|
173.60 |
59.75 |
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|
-------- |
-------- |
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| Operating
profit |
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|
45.39 |
34.41 |
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| Provision
for taxation |
|
5.28 |
O.11 |
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|
-------- |
-------- |
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|
40.11 |
34.30 |
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| Transfer
from reserve for contingencies |
- |
4.60 |
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| Unappropriated
profit brought forward |
13.91 |
7.87 |
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|
-------- |
-------- |
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|
54.02 |
46.77 |
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| APPROPRIATIONS |
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| Special
reserve |
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|
8.02 |
6.86 |
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| Dividends
- 20% |
|
28.43 |
26.00 |
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|
-------- |
-------- |
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|
56.43 |
32.86 |
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|
-------- |
-------- |
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|
| Unappropriated
profit carried forward. |
17.57 |
13.91 |
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|
========= |
========= |
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| The
following table demonstrates the company's policy to continue core |
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| leasing
business, balancing its growth against prudent lending policies |
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| and
profitability. Corporate finance and treasury functions and the |
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| equipment
rental business will continue to supplement this income. |
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|
12 months 12 months 12
months 18 months |
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|
to 31st to 31st
to 31st to 30th |
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|
December December
December June |
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|
1992 1993 1994 1996 |
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|
Rupees in million |
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| Net
Investment in Leases 178.1 286.3
532.3 855.65 |
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| Income
from Leasing 16.1 43.8
83.8 208.79 |
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| Operating
Profit 18.4 30.4
34.4 45.39 |
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| FUTURE
BUSINESS PROSPECTS |
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| Rs.
118.5 million has been raised from the issue of right shares; in |
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| today's
depressed conditions, we see this as another confirmation of the |
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| trust
reposed in us by our shareholders and confidence that this |
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| company
would be able to generate growth and profitability to meet the |
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| shareholders'
expectations. |
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| The
subscription of the rights issue will permit further growth and has |
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| strengthened
equity base to facilitate further borrowings. The enhanced |
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| equity
will permit us to aggressively market and invigorate our resource |
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| mobilization
efforts. In the long-term scenario we expect that the capital |
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| markets
could be tapped as a potential source of resource mobilization. |
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| A
decision has been made to sell all non strategic equity investments |
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| and
retain only the investment in Bankers Equity Limited. This latter |
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| investment
has been made as a strategic alliance with a larger and |
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| diversified
financial institution that will allow us more effective transaction |
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| capabilities. |
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| As
submitted in our last report the Equipment Rental Division was set up |
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| during
this period involving construction and road building machinery. |
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| An
increase in investment in equipment is proposed for this division and |
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| we
expect to be the leading player in this business segment in the |
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| future. |
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|
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| ASIAN
LEASING ASSOCIATION |
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| Your
Chairman was elected for a second term as the President of |
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| Asialease
at the 15th General Assembly held in Bangkok last April and |
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| will
hold that office till the 16th General Assembly next year. |
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|
|
| CHIEF
EXECUTIVE OFFICER |
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| With
the full-time secondment of your Chairman to Bankers Equity |
|
| Limited,
your Board recommended the promotion of the Deputy |
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| Managing
Director Mr. Shahid Shaikh, FCA to the post of Chief |
|
| Executive.
Mr. Shaikh has been with the company for the past three |
|
| years
after several years as a partner of KPMG Taseer Hadi Khalid & |
|
| Co.
Chartered Accountants. |
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| The
Chairman will continue to head the Management and Executive |
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| Committees |
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|
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| ACKNOWLEDGMENT
TO FIRST LEASING STAFF |
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| As
mentioned earlier our investment in quality management has allowed |
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| us
to continue our growth and our desire to diversify our risk portfolio. |
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| The
Board thanks the staff for their efforts and the commitment |
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| demonstrated
in effectively implementing and exerting the policies of the |
|
| company. |
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|
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| DIVIDENDS |
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| A
20% interim dividend was declared on June 12, 1996 for the period |
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| ended
June 30, 1996; no further dividend has been recommended by |
|
| the
Board. |
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|
|
| AUIDITORS |
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| The
auditors Ford, Rhodes, Robson, Morrow, Chartered Accountants |
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| retire
and being eligible offer themselves for re-appointment. |
|
|
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| Date:
August 15, 1996 |
|
Khurshid Hadi |
|
|
|
|
Chairman and Chief
Executive |
|
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
| We
have audited the annexed balance sheet of First Leasing |
|
| Corporation
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 purposes 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 objects 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 Zakat deductible at source under the Zakat and |
|
| Ushr
Ordinance, 1980 was deducted by the company and |
|
| deposited
in the Central Zakat Fund established under section 7 |
|
| of
that ordinance. |
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|
|
|
| Karachi - August 15, 1996 |
|
Ford, Rhodes, Robson,
Morrow |
|
|
|
Chartered Accountants |
|
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1996 |
|
|
|
|
|
30th June |
31st December |
|
|
|
|
|
|
|
1996 |
1994 |
|
|
|
|
|
|
Note |
Rupees |
Rupees |
|
|
|
|
|
|
| FIXED
ASSETS - tangible |
|
3 |
25,413,812 |
7,603,283 |
|
| INVESTMENT
IN LEASES |
|
| Installment
contract receivables |
|
1,052,366,053 |
661,323,348 |
|
| Less:
Unearned Income |
|
(196,715,336) |
(129,073,466) |
|
|
|
|
------------- |
------------- |
|
| Net
investment in leases |
|
855,650,722 |
532,249,882 |
|
| Less:
Current portion of net investment |
|
|
|
| in leases |
|
|
353,842,182 |
(200,191,624) |
|
|
|
|
------------- |
------------- |
|
|
|
|
|
501,808,540 |
332,058,258 |
|
|
|
|
|
| Long-term
finance |
|
|
4 |
7,112,608 |
7,112,608 |
|
|
|
|
|
------------- |
------------- |
|
|
|
|
|
508,921,148 |
339,170,866 |
|
| Less: Provision for
potential lease losses |
|
|
| and
doubtful debts |
|
|
5 |
(14,903,669) |
(8,935,294) |
|
|
|
|
|
------------- |
------------- |
|
|
|
|
494,017,479 |
3,30,235,572 |
|
|
|
|
|
|
|
| LONG-TERM
INVESTMENTS |
|
|
6 |
59,967,955 |
20,086,295 |
|
| DEFERRED
COSTS |
|
|
|
7 |
504,532,983 |
2,719,742 |
|
|
|
| CURRENT
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
| Current
portion of net investment in leases |
|
|
353,842,182 |
200,191,624 |
|
| Short-term
finance |
|
|
|
8 |
63,000,000 |
20,684,420 |
|
| Advances, deposits,
prepayments and other |
|
|
|
| receivables |
|
|
9 |
25,099,290 |
7,465,199 |
|
| Investment
in marketable and unquoted |
|
|
|
| securities |
|
|
10 |
44,227,942 |
20,171,597 |
|
| Cash
Bank balances |
|
|
11 |
18,363,569 |
13,117,809 |
|
|
|
|
|
------------- |
------------- |
|
|
|
|
|
504,532,983 |
261,630,649 |
|
|
|
|
|
------------- |
------------- |
|
|
|
|
|
1,086,012,303 |
622,275,541 |
|
|
|
|
|
=============== |
=============== |
|
|
|
| CAPITAL
AND RESERVES |
|
| Authorised |
|
|
|
|
| 50,000,000
ordinary shares of Rs. 10 each |
|
500,000,000 |
200,000,000 |
|
| (1994:
20,000,000 ordinary shares of Rs. 10 each) |
|
=============== |
=============== |
|
| Issued,
subscribed and paid-up |
|
| 15,432,067
ordinary shares of Rs. 10 each |
|
12 |
154,320,670 |
130,000,000 |
|
| (1994:
13,00O,OOO ordinary shares of Rs. 10 each) |
|
| Reserves |
|
|
|
13 |
48,348,505 |
3O,389,611 |
|
|
|
------------- |
------------- |
|
| Shareholders'
equity |
|
202,669,175 |
160,389,611 |
|
|
|
|
|
|
| FINANCE
UNDER MUSHARIK |
