| Network Leasing Corporation Limited |
|
|
|
|
|
|
|
| Annual
Report 2000 |
|
|
|
| CONTENTS |
|
|
| Management |
|
|
| Directors'
Report |
|
| Operational
Review |
|
| Auditors'
Report |
|
| Financial
Statements |
|
| Pattern
of Shareholding |
|
| Company
Information |
|
| Notice
of the Annual General Meeting |
|
|
|
| MANAGEMENT |
|
|
| Board
of Directors |
|
| Mr.
Mohammed Elias |
|
| Ms.
Musaret Siddiqi |
|
| Mr.
Zaigham M. Rizvi |
|
| Mr.
Hanif A. Sattar |
|
| Mr.
Emile HJ Groot |
|
| Dr.
Mahfooz All |
|
| Mr.
Abdul Qayyum Bux |
|
| Mr.
Yusuf A. Sattar |
|
| Mr.
Asif Siddiqi |
|
|
| Executive
Management |
|
| Mr.
Asif Siddiqi FCA |
|
Managing Director &
CEO |
|
| Mr.
Yusuf A.'Sattar FCMA |
|
Executive Director-
Finance |
|
| Ms.
Musaret Siddiqi FCA |
|
Executive Director-
Operations |
|
|
|
| DIRECTORS'
REPORT |
|
| TOTHE
SHAREHOLDERS |
|
|
| Your
directors have pleasure in presenting to the shareholders the results and the
Annual Report for |
|
| the
year ended June 30, 2000. |
|
|
| Financials |
|
| The
operating profit for the year ended June 30, 2000 was Rs. 10,083,420. The
profit after tax for the |
|
| year
was Rs. 7,652,925 while the after tax profit for the year ended June 30, 1999
was Rs. 2,624,783. |
|
|
| Deferred
tax, which was previously explained only by way of a note in the accounts by
all leasing |
|
| companies,
has actually been provided for in this year's accounts, under the direction
from the |
|
| Securities
& Exchange Commission of Pakistan, as a result of the requirement of
IAS-12. |
|
|
| With
regard to the company's profitability, your directors are confident that with
the expected stablisation |
|
| of
the economic conditions, the profitability of your company will improve
further during the financial |
|
| year
ending June 2001. |
|
|
| The
profit is proposed to be appropriated as under: |
|
|
|
2000 |
1999 |
|
|
Rupees |
Rupees |
|
|
| Operating
profit |
|
10,083,420 |
8,170,354 |
|
| Taxation: |
|
|
|
| Current |
|
(2,430,495) |
(589,552) |
|
| Prior |
|
-- |
(4,956,019 |
|
|
---------- |
---------- |
|
| Profit
after tax |
|
7,652,925 |
2,624,783 |
|
| Unappropriated
profit brought forward |
|
3,668,073 |
4,439,634 |
|
|
---------- |
---------- |
|
|
11,320,998 |
7,064,417 |
|
|
|
|
| Appropriations: |
|
|
|
| Transfer
to special reserve |
|
(1,5301585) |
(524,957 |
|
| Capital
reserve for deferred taxation |
|
(1,039,565) |
(2,871,387 |
|
| Proposed
dividend |
|
(7,500,000) |
-- |
|
|
---------- |
---------- |
|
| Unappropriated
profit carried forward |
|
1,250,848 |
3,668,073 |
|
|
========== |
========== |
|
|
| Directors |
|
| Ms.
Samina H. Khan retired on August 1,2000 after completing the three years
tenure and Mr. Zaigham |
|
| M.
Rizvi was elected from that date. The Board wishes to thank Ms. Samina H.
Khan for her valuable |
|
| services
and welcomes Mr. Zaigham M. Rizvi as a Board member. |
|
|
| Year
2000 computer compliance |
|
| The
managment had thoroughly re-examined all the systems, software, and hardware.
They have |
|
| successfully
crossed the year 2000 baseline. |
|
|
| Auditors |
|
| The
retiring auditors Messrs Ford Rhodes Robson Morrow, Chartered Accountants,
being eligible, |
|
| offer
themselves for re-appointment. |
|
|
| Shareholding
pattern |
|
| A
statement reflecting the pattern of shareholding is attached to the Annual
Report. |
|
|
| Acknowledgment |
|
| The
directors wish to place on record their appreciation for the hard work put in
and the dedication |
|
| displayed
by the staff and the management in performance of their duties. |
|
|
| On
behalf of the Board |
|
|
| Mohammed
Elias |
|
| Chairman |
|
|
| Karachi. |
|
| November
16, 2000 |
|
|
|
| OPERATIONAL
REVIEW |
|
|
| Overview |
|
| On
30th June 2000, the company completed its fifth year of full operations. With
everyone's |
|
| support
and undertstanding, we have managed to make steady progress. |
|
|
| Network
Leasing was formed to provide lease financing and developmental support
services to |
|
| micro
and small enterprises and cottage industries as its main business. |
|
|
| These
enterprises form a vital part of the country's economy. They produce goods
and services |
|
| for
the vast majority of the people and at the same time provide employment
opportunities in |
|
| urban
as well as in rural areas. |
|
|
| The
progress during the period under review was better than the previous year.
The economic |
|
| situation
is expected to imporve and we hope to expand our outreach further during the
current |
|
| year. |
|
|
| Leasing
Operations |
|
| Our
clients include cottage industrial units, primary and secondary schools in
low income areas, |
|
| small
hospitals and clinics, service and repair workshops, small stores, upcoming
professionals |
|
| such
as doctors, lawyers and engineers, small fishermen, small farmers and dairy
farmers in |
|
| the
rural areas. |
|
|
| Health
and education have been identified as the two key areas which not only effect
the present |
|
| but
coming generations as well. Consequently, considerable efforts are directed
towards these |
|
| sectors
in all low income areas. Women and children are the main beneficiaries in
these sectors. |
|
| As
mentioned earlier, our portfolio includes primary schools, high schools,
technical training |
|
| institutes,
clinics, maternity homes and small hospitals. |
|
|
| The
separate Women Division established in the previous years is now functioning
reasonably |
|
| satisfactorily. |
|
|
| Our
endeavor during the period has been to reach the women at the grass root
level. We have |
|
| succeeded
to a certain extent by extending our outreach to the main cities and
surrounding |
|
| villages,
but this process will take time since we accord high priority to the clients'
income |
|
| generating
capabilities in order to make the operation sustainable. |
|
|
| Geographical
Coverage |
|
| During
the period under review, regular visits were made by our senior executives as
well as the |
|
| programme
officers to the villages and semi-urban areas in Sindh, Punjab and NWFR |
|
|
| The
Lahore office has now been functioning for over 3 years and the client base
there is |
|
| expanding.
The Peshawar office is presently in the process of being re-inforced and
activated |
|
| further
as we are endeavoring to increase the operations in the NWFR |
|
|
| Since
we started our operations from Karachi, a large number of our clients are
urban based. |
|
| The
cottage and small industries are in the sub-urban areas and agriculture and
fisheries based |
|
| clients
are rural. As we expand our outreach to more agricultural based activities,
the proportion |
|
| of
the rural clients will increase. |
|
|
| Institutional
Development |
|
| The
internal systems and controls for monitoring the clients were further
strengthened during the |
|
| period.
Since the number of clients had increased, a number of tasks that were
previously done |
|
| manually,
had to be computerised. Special emphasis was laid on the recovery systems and
client |
|
| monitoring.
Due to increa~e in the number of client=, the number of late payer3 and
problem ca3e3 |
|
| naturally
increased. In order to cope with that, additional staff was hired and
trained. |
|
|
| Support
and Training to the Clients |
|
| Assisting
the client in preparing the financial statements is now standardized. |
|
|
| Our
staff prepare the client's financial statements for the last 3 years, with
the help of the |
|
| information
and figures provided by the clients. This procedure is followed in each and
every |
|
| case
where the clients cannot prepare the statements themselves. In cases where
the clients |
|
| have
a little knowledge but have not prepared the accounts, our staff help them
prepare the |
|
| statements. |
|
|
| Recoveries |
|
| The
rental recovery continues to be satisfactory. The overdue rental position of
over 3 months |
|
| on
30 June 2000 was 2.24% of the total portfolio. |
|
|
| Most
of the over dues are with prior arrangement, and are recoverable eventually.
There were |
|
| some
willful default cases. These lessees have been take to the banking court. We
are reasonably |
|
| hopeful
that in the end the amounts will be recovered. In other cases the assets were |
|
| repossessed. |
|
|
| Resource
Mobilisation |
|
| During
the year we mobilized Rs. 125 million from various financial institutions. |
|
|
| Credit
Rating |
|
| Pakistan
Credit Rating Agency (PACRA) who are the affiliates of Fitch Inc., New York,
rated |
|
| Network
Leasing Corporation Limited and assigned A-3, short term and BBB long term
for its |
|
| entity
rating. These ratings are investment grade and denote a low expectation of
credit risk |
|
| and
adequate capacity to service financial obligations on a timely basis. |
|
|
| Acknowledgement |
|
| We
are grateful to FMO, SDC (the Government of Switzerland), the World Bank
Group, the |
|
| Asian
Development Bank and the Ministry of Finance, the Government of Pakistan for
the |
|
| confidence
they reposed in us. |
|
|
| We
owe special gratitude to our shareholders and the clients for their kindness
and support. |
|
|
| We
take this opportunity to thank the Securities & Exchange Commission of
Pakistan for their |
|
| continued
support and understanding. Our thanks also to the State Bank of Pakistan for
their |
|
| valuable
advice and guidance. |
|
|
| Musaret
Siddiqi (Ms.) |
|
| Executive
Director- Operations |
|
|
| Karachi |
|
| November
17, 2000 |
|
|
|
| AUDITORS'
REPORTTOTHE MEMBERS |
|
|
| We
have audited the annexed balance sheet of NETWORK LEASING CORPORATION LIMITED |
|
| as
at June 30, 2000 and the related profit and loss account, cash flow statement
and statement |
|
| of
changes in equity together with the notes forming part thereof, for the year
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. |
|
|
| It
is the responsibility of the company's management to establish and maintain a
system of |
|
| internal
control, and prepare and present the above said statements in conformity with
the |
|
| approved
accounting standards and the requirements of the Companies Ordinance, 1984.
Our |
|
| responsibility
is to express an opinion on these statements based on our audit. |
|
|
| We
conducted our audit in accordance with the auditing standards as applicable
in Paksitan. |
|
| These
standards require that we plan and perform the audit to obtain reasonable
assurance |
|
| about
whether the above said statements are free of any material misstatement. An
audit includes |
|
| examining,
on a test basis, evidence supporting the amounts and disclosures in the above
said |
|
| statements.
An audit also includes assessing the accounting policies and significant
estimates |
|
| made
by management, as well as, evaluating the overall presentation of the above
said |
|
| statements.
We believe that our audit provides a reasonable basis for our opinion and,
after due |
|
| verification,
we report that - |
|
|
| (a)
in our opinion, proper books of accounts 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 year was for the purpose of the company's |
|
| business;
and |
|
|
| (iii)
the business conducted, investments made and the expenditure incurred during |
|
| the
year 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, cash flow statement and
statement of |
|
| changes
in equity together with the notes forming part thereof conform with approved |
|
| accounting
standards as applicable in Pakistan, and, 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, 2000 and of
the profit, |
|
| its
cash flows and changes in equity for the year then ended; and |
|
|
| (d)
in our opinion no Zakat was deducted
at source under the Zakat and
Ushr Ordinance. |
|
| 1980. |
|
|
| Karachi |
|
Ford, Rhodes, Robson, Morrow |
|
| November
15, 2000 |
|
Chartered Accountants |
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 2000 |
|
|
|
Note |
2000 |
1999 |
|
|
|
Rupees |
Rupees |
|
| ASSETS |
|
| NON-CURRENT
ASSETS |
|
| Tangible
fixed assets |
|
3 |
14,102,467 |
15,658,677 |
|
|
| Minimum
lease payments receivable |
|
394,922,565 |
283,957,492 |
|
| Residual
value of leased assets |
|
52,498,565 |
42,653,695 |
|
|
----------- |
----------- |
|
| Installment
contract receivable |
|
447,421,130 |
326,611,187 |
|
| Unearned
finance income |
|
(90,805,679 |
(67,644,273 |
|
|
----------- |
----------- |
|
| Net
investment in leases |
|
356,615,451 |
258,966,914 |
|
| Current
maturity of net investment in leases |
|
(136,610,961 |
(109,003,217 |
|
| Provision
for potential lease losses |
|
5 |
(2,336,964 |
(2,330,702 |
|
|
|
----------- |
----------- |
|
|
|
217,667,526 |
147,632,995 |
|
|
|
|
|
| Long
term deposits |
|
6 |
440,505 |
457,505 |
|
| Certificate
of investment |
|
7 |
6,685,000 |
6,685,000 |
|
| Deferred
costs |
|
8 |
8,999,857 |
9,770,504 |
|
|
|
----------- |
----------- |
|
| TOTAL
NON-CURRENT ASSETS |
|
247,895,355 |
180,204,681 |
|
|
|
|
| CURRENT
ASSETS |
|
|
|
| Current
maturity of net investment in leases |
|
136,610,961 |
109,003,217 |
|
| Short
term investments |
|
9 |
700,000 |
700,000 |
|
| Advances,
deposits, prepayments and |
|
|
|
| other
receivables |
|
10 |
25,070,903 |
19,429,087 |
|
| Cash
and bank balances |
|
11 |
86,181,852 |
29,040,794 |
|
|
|
----------- |
----------- |
|
| TOTAL
CURRENT ASSETS |
|
248,563,716 |
158,173,098 |
|
|
----------- |
----------- |
|
| TOTAL
ASSETS |
|
496,459,071 |
338,377,779 |
|
|
========== |
========== |
|
| EQUITY
AND LIABILITIES |
|
| SHARE
CAPITAL AND RESERVES |
|
| Authorised
capital |
|
| 20,000,000
ordinary shares of Rs. 10/- each |
|
200,000,000 |
200,000,000 |
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up capital |
|
12 |
100,000,000 |
100,000,000 |
|
| Reserves |
|
13 |
13,335,626 |
13,182,701 |
|
|
|
----------- |
----------- |
|
|
|
113,335,626 |
113,182,701 |
|
| NON-CURRENT
LIABILITIES |
|
|
|
| Long
term loans and finances |
|
14 |
164,627,748 |
151,254,900 |
|
| Long
term deposits |
|
15 |
39,084,465 |
30,335,814 |
|
|
----------- |
----------- |
|
| TOTAL
NON-CURRENT LIABILITIES |
|
203,712,213 |
181,590,714 |
|
| CURRENT
LIABILITIES |
|
| Current
maturity of long term liabilities |
|
16 |
38,157,384 |
30,033,781 |
|
| Short
term loans and finances |
|
17 |
75,000,000 |
-- |
|
| Musharika
arrangements |
|
18 |
10,000,000 |
3,333,334 |
|
| Morabaha
arrangements |
|
19 |
10,000,000 |
-- |
|
| Short
term running finances |
|
20 |
22,332,730 |
-- |
|
| Creditors,
accrued and other liabilities |
|
21 |
16,256,558 |
10,067,594 |
|
| Unclaimed
dividend |
|
164,560 |
169,655 |
|
| Proposed
dividend |
|
7,500,000 |
-- |
|
|
----------- |
----------- |
|
| TOTAL
CURRENT LIABILITIES |
|
179,411,232 |
43,604,364 |
|
| CONTINGENCIES
AND COMMITMENTS |
22 |
-- |
-- |
|
|
----------- |
----------- |
|
| TOTAL
EQUITY AND LIABILITIES |
|
496,459,071 |
338,377,779 |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Mohammed Elias |
|
Asif Siddiqi |
|
|
Chairman / Director |
|
Chief Executive |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 2000 |
|
|
|
|
Note |
2000 |
1999 |
|
|
|
Rupees |
Rupees |
|
|
| INCOME |
|
| Income
from leasing operations |
|
59,929,541 |
45,256,658 |
|
| Other
Income |
|
23 |
8,630,050 |
1,992,882 |
|
|
|
----------- |
----------- |
|
|
68,559,591 |
47,249,540 |
|
|
| EXPENDITURE |
|
| Direct
cost of leases |
|
4,478,460 |
3,244,718 |
|
| .Administrativeand
operating expenses |
|
24 |
16,426,140 |
11,970,154 |
|
| Financial
charges |
|
25 |
35,724,720 |
21,180,965 |
|
| Amortization
of deferred costs |
|
|
770,647 |
1,837,360 |
|
| Provision
and write offs on lease portfolio |
26 |
1,076,204 |
845,989 |
|
|
|
----------- |
----------- |
|
|
|
58,476,171 |
39,079,186 |
|
|
|
----------- |
----------- |
|
| Operating
profit for the year |
|
10,083,420 |
8,170,354 |
|
|
| Taxation |
|
27 |
|
| Current |
|
2,430,495 |
589,552 |
|
| Prior |
|
-- |
4,956,019 |
|
|
----------- |
----------- |
|
|
2,430,495 |
5,545,571 |
|
|
----------- |
----------- |
|
| Profit
for the year |
|
7,652,925 |
2,624,783 |
|
| Unappropriated
profit brought forward |
|
3,668,073 |
4,439,634 |
|
|
----------- |
----------- |
|
| Profit
available for appropriation |
|
11,320,998 |
7,064,417 |
|
| Appropriations |
|
|
| Transfer
to special reserve |
|
13.1 |
1,530,585 |
524,957 |
|
| Transfer
to capital reserve for deferred taxation |
13.2 |
1,039,565 |
2,871,387 |
|
| Proposed
dividend - Re. 0.75 (7.5%) per share |
|
|
| (1999:
Rs. Nil) |
|
|
7,500,000 |
-- |
|
|
|
----------- |
----------- |
|
|
|
10,070,150 |
3,396,344 |
|
|
|
----------- |
----------- |
|
| Unappropriated
profit carried forward |
|
|
1,250,848 |
3,668,073 |
|
|
|
|
========== |
========== |
|
| Basic
earnings per share |
|
28 |
0.77 |
0.26 |
|
|
|
========== |
========== |
|
| Diluted
earnings per share |
|
28 |
0.70 |
0.24 |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Mohammed Elias |
|
Asif Siddiqi |
|
|
Chairman / Director |
|
Chief Executive |
|
|
|
| STATEMENT
OF CHANGES IN EQUITY |
|
| FORTHEYEAR
ENDED JUNE 30, 2000 |
|
|
|
Capital reserves Revenue
reserve |
|
| Issued,
subscribed |
|
Deferred |
Unappropriated |
Total |
|
|
and paid-up |
reserve |
taxation |
profit |
|
|
capital |
|
reserve |
|
|
Rupees |
Rupees |
Rupees |
Rupees |
|
|
| Balance
as at July 1, 1998 |
|
100,000,000 |
6,118,284 |
-- |
4,439,634 |
110,557,918 |
|
|
|
|
| Profit
after taxation |
|
-- |
-- |
-- |
|
2,624,783 |
|
| Transfer
to special reserve |
|
-- |
524,957 |
-- |
|
-- |
|
|
| Transfer
to deferred taxation reserve |
-- |
-- |
2,871,387 |
|
-- |
|
|
|
|
|
| Balance
as at June 30, 1999 |
|
100,000,000 |
6,643,241 |
2,871,387 |
3,668,073 |
113,182,701 |
|
| Profit
after taxation |
|
-- |
-- |
-- |
7,652,925 |
7,652,925 |
|
| Transfer
to special reserve |
|
-- |
1,530,585 |
-- |
(1,530,585) |
-- |
|
| Transfer
to deferred taxation reserve |
-- |
-- |
1,039,565 |
(1,039,565) |
-- |
|
| Proposed
dividend |
|
-- |
-- |
-- |
(7,500,000) |
(7,500,000) |
|
| Balance
as at June 30, 2000 |
|
100,000,000 |
8,173,826 |
3,910,952 |
1,250,848 |
113,335,626 |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
| Mohammed Elias |
Asif Siddiqi |
|
| Chairman / Director |
Chief Executive |
|
|
| 10 |
|
|
| N ~T~ |
|
|
| CASH
FLOW STATEMENT |
|
| FORTHEYEAR
ENDED JUNE 30, 2000 |
|
|
|
Note |
2 0 0 0 |
|
1 9 9 9 |
|
|
Rupees |
|
Rupees |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
| Cash generated from operations |
29 |
44,366,767 |
|
22,416,340 |
|
| Income
tax paid |
(7,094,348) |
|
(3,184,818)1 |
|
| Interest/mark-up
paid |
(30,003,003) |
|
(17,852,727 )J |
|
| Interest/mark-up
received |
5,291,164 |
|
2,182,453 |
|
| Long
term deposits |
|
92,000 |
(224,015)~ |
|
|
(31,714,187) |
|
(19,079,107) |
|
| Net
cash generated from operating .activities |
12,652,580 |
|
3,337,233 |
|
| CASH
FLOW FROM INVESTING ACTIVITIES |
|
|
|
Purchase of fixed assets |
(1,040,958) |
|
(1,691,931) |
|
|
Sale proceed of fixed assets |
170,000 |
|
219,280 |
|
|
Gain on sale of shares |
782,570 |
|
-- |
|
|
Purchase of certificate
of investments |
-- |
(6,685,000 |
|
|
Net investment in leases - net of
repayments |
(97,648,537 |
|
(70,734,659 |
|
|
Net cash used in investing
activities |
(97,736,925 |
|
(78,892,310 |
|
| CASH
FLOW FROM FINANCING ACTIVITIES |
|
|
| Long
term loans and finances obtained |
45,649,869 |
103,162,862 |
|
| Long
term loans and finances repaid |
(26,360,730 |
(19,281,990 |
|
| Short
term loans and finances obtained |
75,000,000 |
|
-- |
|
| Mushadka
arrangement obtained |
10,000,000 |
5,000,000 |
