| Atlas
Leasing Limited |
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| Annual Report 1999 |
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| Contents |
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| Notice of Meeting |
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| Corporate Data |
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| Directors' Report |
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| Chairman's Review |
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| Pattern of Shareholding |
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| Decade at a glance |
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| Graphic Presentation |
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| Auditors' Report |
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| Balance Sheet |
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| Profit and Loss Account |
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| Cash Flow Statement |
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| Notes to the Accounts |
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| Atlas Group Companies |
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| NOTICE OF MEETING |
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| Notice
is hereby given that the Twelfth Annual General Meeting of the members of
ATLAS LEASE |
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| LIMITED
will be held on Wednesday, December 22, 1999 at 10.30 a.m. at Registered
Office of the |
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| Company
at Federation House, Sharae Firdousi, Clifton, Karachi to transact the
following business: |
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| ORDINARY BUSINESS : |
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| 1.
To confirm the Minutes of the Eleventh Annual General Meeting held on
December 14, 1998. |
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| 2.
To receive, consider and adopt the Audited Accounts of the Company for the
year ended June |
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| 30,
1999 together with the Directors' and Auditors' Report thereon. |
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| 3.
To appoint Auditors and fix their remuneration for the year ending June 30,
2000. The present |
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| Auditors
M/s. Ford, Rhodes, Robson, Morrow, Chartered Accountants, retire and being
eligi- |
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| ble, offer themselves for
reappointment. |
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| SPECIAL BUSINESS: |
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| 4.
To approve the issue of Bonus Shares @ 15% for the year ended June 30, 1999
as recom- |
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| mended
by the Board of Directors and in this regard to pass with or without
modifications the |
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| relative Ordinary Resolution. |
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| 5.
To approve the issue of Right Shares @ 50% at par as recommended by the Board
of Direc- |
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| tors
and in this regard to pass with or without modifications the relative Special
Resolution. |
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| 6.
To approve the remuneration of the Chief Executive of the Company as
recommended by the |
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| Board of Directors. |
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| OTHER BUSINESS: |
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| 7.
To transact any other business as may be placed before the meeting with the
permission of the |
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| Chair. |
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| A
statement under section 160 (1) (b) of the Companies Ordinance, 1984
pertaining to the Special |
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| Business
referred to above is annexed to this Notice of Meeting. |
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|
By Order of the Board |
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|
MUHAMMAD RAFIQUE UMER |
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| Karachi: November 12, 1999 |
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|
Company Secretary |
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| NOTES : |
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| i)
The Register of Members of the Company will remain closed from 11/12/1999 to |
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| 17/12/1999
(both days inclusive). Transfers received in order at the Registered Office
of the |
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| Company
at the close of business on December 10, 1999 will be treated in time for the
pur- |
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| pose of entitlement of Bonus
and Right shares. |
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|
|
| ii)
A member entitled to attend and vote at this meeting may appoint another
member as his / her |
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| proxy
to attend and vote on his / her behalf. The instrument appointing a Proxy and
the power |
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| of
attorney or other authority under which it is signed or a notarially
certified copy of the power |
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| of
attorney must be received at the Registered Office of the Company duly
stamped, signed |
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| and
witnessed not later than 48 hours before the meeting. |
|
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| iii)
Shareholders whose shares are deposited with Central Depository System (CDS)
are re- |
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| quested
to bring their National Identity Card (NIC) alongwith their Account Number in
CDS for |
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| verification. |
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| iv)
Members are requested to notify any change in their addresses immediately. |
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| CORPORATE DATA |
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| BOARD OF DIRECTORS : |
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|
LEGAL ADVISORS : |
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| CHAIRMAN |
|
Mohsin Tayebaly & Co. |
|
| Mr. Yusuf H. Shirazi |
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|
BANKS & LENDING
INSTITUTIONS: |
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| CHIEF EXECUTIVE |
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| Mr. Khaleeq-ur-Rahman Khan |
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|
BANKS: |
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|
ABN AMRO Bank |
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| MEMBERS |
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|
Allied Bank of Pakistan
Limited |
|
| Dr. Amjad Waheed |
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|
Askari Commercial Bank
Limited |
|
| Mr. Masanori Okuda |
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|
Faysal Bank Limited |
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| Mr. Muhammad Shafi |
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|
Habib Bank AG Zurich |
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| Mr. Sanaullah Qureshi |
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|
Habib Bank Limited |
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| Mr. Saquib H. Shirazi |
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|
Muslim Commercial Bank
Limited |
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| Mr. Talat Mahmood |
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The Bank of
Tokyo-Mitsubishi, Limited |
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| Mr. Toshiki Miyazaki |
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|
The Hongkong and Shanghai |
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|
Banking Corporation
Limited |
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| COMPANY SECRETARY |
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|
| Mr. Muhammad Rafique Umer |
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|
LENDING INSTITUTIONS : |
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|
Al-Faysal Investment Bank
Limited |
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| GROUP EXECUTIVE COMMITTEE: |
|
Asian Development Bank
(ADB) |
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| CHAIRMAN |
|
Commonwealth Development
Corporation (CDC) |
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| Mr. Yusuf H. Shirazi |
|
German Investment and
Development Co.(DEG) |
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|
International Finance
Corporation (IFC) |
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| MEMBERS |
|
Netherlands Development
Finance Co. (FMO) |
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| Mr. Jawaid Iqbal Ahmed |
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|
Pakistan Kuwait
Investment Co., (Pvt.) Limited |
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| Mr. Frahim Ali Khan |
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| Mr. Iftikhar H. Shirazi |
|
REGISTERED OFFICE &
HEAD OFFICE · |
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| Mr. Aamir H. Shirazi |
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|
Federation House, Sharae
Firdousi, |
|
| Mr. Saquib H. Shirazi |
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|
Clifton, Karachi - 75600 |
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|
Tel · (92-21) 5866817 -
20, 5866919 - 20 |
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| SECRETARY |
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|
Fax : (92-21) 5870543 |
|
| Mr. Amjad Hussain |
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|
E-mail:
all@atlasgrouppk.com |
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| GROUP PERSONNEL COMMITTEE: |
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|
BRANCH OFFICES : |
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| CHAIRMAN |
|
|
LAHORE OFFICE : |
|
| Mr. Yusuf H. Shirazi |
|
1st Floor, Emirates Bank
Building, |
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|
14- Egerton Road, Lahore |
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| GROUP AUDIT COMMITTEE : |
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Tel: (92-42) 6366170 -
74,6364941, |
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|
6305439, 6305449 |
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| CHAIRMAN |
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Fax: (92-42) 6365058 |
|
| Mr. Sanaullah Qureshi |
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|
ISLAMABAD OFFICE:· |
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| AUDITORS: |
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2nd Floor, Saudi Pak
Tower, |
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| Ford, Rhodes, Robson, Morrow |
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|
Blue Area, Islamabad |
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| Chartered Accountants |
|
Tel: (92-51) 824906,
824909 |
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Fax: (92-51) 821377 |
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| DIRECTORS' REPORT |
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| The
Directors have pleasure in submitting Annual Report of the Company together
with the |
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| Audited
Accounts and the Auditors' Report thereon for the year ended June 30, 1999. |
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| Financial Results: |
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1999 |
1998 |
|
|
|
Rupees |
Rupees |
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|
| Net profit for the year after
charging all |
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| expenses and doubtful debts |
|
25,311,230 |
19,712,909 |
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| Previous profit brought
forward |
|
205,691 |
4,213,954 |
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|
--------------------- |
--------------------- |
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| Profit available for
appropriation |
|
25,516,921 |
23,926,863 |
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| Appropriations: |
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| Transfer to statutory reserve |
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|
5,062,246 |
3,942,582 |
|
|
| Transfer from general reserve
for deferred taxation |
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(14,740,000) |
-- |
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| Transfer to capital reserve
for deferred taxation |
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|
24,440,000 |
-- |
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| Transfer to reserve for issue
of bonus shares |
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|
9,956,914 |
-- |
|
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| Transfer to general reserve |
|
|
-- |
4,000,000 |
|
|
| Cash dividend |
|
|
-- |
15,778,590 |
|
|
|
--------------------- |
--------------------- |
|
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|
24,719,160 |
23,721,172 |
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|
|
--------------------- |
--------------------- |
|
| Unappropriated profit carried
forward |
|
797,761 |
205,691 |
|
|
============ |
============ |
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| Dividend: |
|
| The
Directors are pleased to recommend a stock dividend / issuance of bonus
shares in proportion |
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| of
three (3) shares for every twenty (20) shares held, i.e. 15% out of current
year's profit and |
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| premium on shares account. |
|
|
| Chairman's Review: |
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| The
accompanying Chairman's Review deals with the performance of the Company
during the |
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| year
and future outlook. The Directors of the Company endorse the contents of the
review. |
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|
| Pattern of Shareholding: |
|
| The
pattern of shareholding of the Company is annexed. |
|
|
| Auditors: |
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| The
present Auditors Messrs Ford, Rhodes, Robson, Morrow, Chartered Accountants,
retire and |
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| being eligible, offer
themselves for reappointment. |
|
|
| for and on behalf of |
|
| BOARD OF DIRECTORS |
|
|
| SANAULLAH QURESHI |
|
KHALEEQ-UR-RAHMAN KHAN |
YUSUF H. SHIRAZI |
|
| Director |
|
Chief Executive |
|
Chairman |
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|
| Karachi: November 12, 1999 |
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|
| CHAIRMAN'S REVIEW |
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| I am pleased to present the
Twelfth Annual Report |
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| of your Company for the year
ended June 30, |
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| 1999. |
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| THE ECONOMY |
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| The adverse backlash of the
nuclear explosions |
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| of last year was quite marked
as the economy |
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| witnessed a continuous slump
during the year |
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| under review. The first half
was completely |
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| dominated by the effects of
the sanctions imposed |
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| by the world financial and
other institutions with |
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| respect to
inflow of foreign loans and aid packages. |
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| The foreign currency reserves
hit rock bottom |
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| as the country slipped into a
worst ever economic |
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| crisis with almost no
investment taking place |
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| in the country. The economy
was also affected |
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| by the slow down of the
global economic activity |
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| particularly in South East
Asia. |
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| During the second half of the
year under review, |
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| things however began to look
better with the |
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| easing of sanctions and the
successful negotiation |
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| of the Government with the
foreign donors and |
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| lending agencies which
resulted in rescheduling |
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| of existing debts and the
resumption of fresh |
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| funds inflow. The Government
also embarked |
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| on the path of adjustment and
reforms and a |
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| series of wide ranging
measures were taken; |
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| these included rolling back
of several measures |
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| taken after the economic
sanctions. However, |
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| before the economy could
actually get back on |
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| the track to recovery, the
momentum was hampered |
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| by the worsening of the
Indo-Pak relationship |
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| due to the Kargil conflict. |
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| The GDP registered a meager
growth of 3.1% |
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| during the year as against
4.3% of last year. |
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| Exports were 11.7% lower than
last year. Value |
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|
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| addition in the manufacturing
sector was also |
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|
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| below expectations at 4.7%
during the year as |
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|
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| against an impressive 7.9%
last year. The economic |
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|
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| sanctions, discouragement of
imports, uncertain |
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| economic environment and
lower demand for |
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| exports due to global
economic recession adversely |
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|
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| affected the growth in this
sector. The agricultural |
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| sector also suffered a set
back due to unfavorable |
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| weather conditions. It
registered a paltry growth |
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|
| of 0.35% as against 3.8% of
the previous year. |
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|
| National savings declined to
11.1% of GNP as |
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| compared with 14.2% last
year. Only the service |
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| sector showed improvement: it
recorded a growth |
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|
| of 4.1% compared to a growth
of 3.2% during |
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| the previous year. Net
foreign private investment |
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| inflows stood at US$ 300.7 m
during July-March, |
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| 1998-99 as against US$ 639.9
m in the comparable |
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| period last year, a sizeable decline
indeed. |
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| MONETARY DEVELOPMENTS |
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| At the beginning of the year,
the State Bank |
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| of Pakistan introduced a dual
exchange rate |
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| in an attempt to stabilize
the exchange rate. |
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| The aim was to preserve
foreign exchange reserves |
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| as well as to force the
liquidation of frozen foreign |
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| currency accounts. During the
second half of |
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| the year, the government,
however, announced |
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| unification of rates for both
foreign currency |
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| deposits and trade finance.
This was handled |
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| through a newly introduced
inter bank rate |
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| mechanism. |
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| During the .first half of the
year, the State Bank |
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| of Pakistan also placed a
moratorium on the |
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| repayment of foreign loans by
the private sector. |
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| This caused a serious
situation which was later |
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| alleviated when permission
for remittances was |
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| re-allowed in December 1998
at the inter bank |
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| rate. |
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| During most of the year, the
stock market remained |
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| under pressure with the index
starting at 863.17 |
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| points on July 1,1998, and
touching the lowest |
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|
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| mark of 765 points later in
the same month. |
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| The index reached a high of
1416 points in May |
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| 1999 and came back to 1054
points at the end |
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| of June 1999. |
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|
| WORLD REGULATORY
ORGANIZATIONS |
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| The business activity is
directly related to the |
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|
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| national business
environment. Leasing plays |
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| a critical role in the
financial sector of the economy |
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|
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| particularly. Being a
signatory to the World Trade |
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| Organization (WTO), Pakistan,
in this respect, |
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| is obliged to make certain
changes in the laws |
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| relating to Trade Policy,
custom valuation and |
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| other trade related matters
which are affecting |
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| ' country's local trade,
finance and industry. These |
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| changes basically aim at
further liberalization |
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| of trade and are to be
implemented from this |
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| year. These will have a great
bearing on the |
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| leasing business too. The
Ministry of Commerce, |
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| Government of Pakistan, is of
the view that a |
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| major change is expected in
the concessionary |
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| regime replacing it with the
tariff incentives driven |
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| regime which may affect local
trade and industry |
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| as it is and, as such, the
leasing industry also |
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| as it is!: |
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|
| (It so happens when friends
turn unfriendly!) |
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| Yae Kahan
Kee Dosti Hay Kaa Banay Hayan Dost Nasa |
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|
| This agreement was signed by
the Ministry of |
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| Commerce on behalf of the
Government of |
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| Pakistan. Obviously, neither
any debate was |
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| carried out, nor any
consultation made which |
|
| is the norm in such major
decisions. In most |
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| countries of the world,
private sector is associated |
|
| with such decision making of
great importance. |
|
| No such due diligence was
made at any quarters. |
|
| The private sector did not
even know that such |
|
| an agreement was signed-in
1995 !. On the |
|
| contrary, the private sector
was, at the same |
|
| time, being encouraged to
invest and, in fact, |
|
|
|
|
| coerced with compulsory
localization programs |
|
|
| involving huge investment
having serious |
|
|
| repercussions without a
concessionary regime. |
|
|
|
|
|
| However, the Ministry of
Industries, Government |
|
|
| of Pakistan, duly supported
by an expert view |
|
|
| on WTO, believe on continuing
with the existing |
|
|
| policy. The Ministry has thus
approached the |
|
|
| WTO in this respect. The
Ministry's approach, |
|
|
| if implemented, will have a
far-reaching effect |
|
|
| on the trade and other
related industries as a |
|
|
| whole, and consequently would
benefit the leasing |
|
|
| industry. Some countries have
recently obtained |
|
|
| such extensions and
exceptions. Whatever the |
|
|
| case, there is a need to
protect the huge investment |
|
|
| made in this behalf in the
industry, the local |
|
|
| trade and services as well as
other related |
|
|
| initiatives, in the larger
interest of the country. |
|
|
|
|
|
| It is generally felt by the
industrial and various |
|
|
| trade
bodies also that Pakistan like other developing |
|
| countries should take up such
matters that hurt |
|
|
| its industry, trade and
services at the next round |
|
|
| of WTO multilateral trade
negotiations particularly |
|
|
| as according to Andy Rowel, a
well known |
|
|
| economic writer "WTO
represents 1% of 1 (0.01%) |
|
|
| of the richest corporations
and individuals in |
|
|
|
|
| the world ....... and last
decade saw increase |
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|
|
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| of wealth 70 to 85% in the
richest 20 countries |
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|
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| as against 2% decline in the
20 poorest countries |
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|
|
|
| of the world". The World
Bank Chief, James |
|
|
|
|
| Wolfensohn, further
reinforces to say "...the |
|
|
|
|
| searing image of desperation,
hopelessness |
|
|
|
|
| and decline - of people who
once had hope, |
|
|
|
|
| but
will have it no more..." if the present globalization |
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|
|
| of economy - though IMF and
WTO imperatives |
|
|
|
|
| persists in its present form! |
|
|
|
|
|
|
| Further, The Wall Street
Journal of November |
|
|
| 12-13, 1999 in its editorial
wrote ". ...... Michel |
|
|
| Camdessus ....... has given
us all something serious |
|
|
|
|
| to talk about ...-Not least
is just what is the |
|
|
|
| proper role of the
International Monetary Fund ...... |
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|
|
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| in the past year, individuals
calling for the abolition |
|
|
|
|
|
| of the IMF have included
George Shultz, William |
|
|
|
|
|
| Simon and Walter Wriston
.......... their utter |
|
|
|
|
|
| seriousness about maintaining
a sound system |
|
|
|
|
|
| of global finance and trade
..... the truth is that |
|
|
|
|
|
| the IMF, in its current
exalted incarnation, deserves |
|
|
|
|
|
| a sober reassessment from its
primary funding |
|
|
|
|
|
| members of its ability to
perform that function ...... |
|
|
|
|
|
| The IMF also needs to get rid
of its bias toward |
|
|
|
|
|
| devaluation, which is
supposed to "revive" exports |
|
|
|
|
|
| even as the inevitable,
resulting inflation quickly |
|
|
|
|
|
| diminishes the resident
population's incomes |
|
|
|
|
|
| and assets. Impoverishing
people in this way |
|
|
|
|
|
| is morally indefensible and
politically |
|
|
|
|
|
| unsustainable ........" |
|
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|
|
|
|
|
|
|
|
|
| All this needs a thoughtful
consideration in the |
|
|
|
|
|
| interest of world economy,
itself. |
|
|
|
|
|
|
|
|
|
| THE LEASING INDUSTRY |
|
|
|
|
|
| The year under review
remained difficult for the |
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|
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| leasing industry. This was
mainly due to economic |
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|
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| slowdown and default culture.
The overall lease |
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|
|
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| disbursement in the industry
dropped by |
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|
|
|
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| approximately 2.5% to Rs. 9.9
billion from Rs. |
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|
|
|
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| 10.15 billion in 1997-98.
Your company, on the |
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|
|
|
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| other hand, improved
its market share by 0.87% |
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|
|
|
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| to hold 6.22% as its share in
the lease disbursement |
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|
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|
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| during 1998-99. |
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|
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| Regulatory issues also had a
negative impact |
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| on the depressing state of
affairs. The Central |
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|
|
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| Excise Duty (CED) levied in
June 1996 was |
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| withdrawn in June 1997, yet
the demand was |
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|
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| raised by the Excise
Department. The concerned |
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| leasing companies contested
it but ultimately |
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| had to pay. The matter of
allowing depreciation |
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| of vehicles with the enhanced
limit of Rs.l.0 |
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| m is still pending and has
been taken up with |
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|
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| the authorities at the forum
of Leasing Association |
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| of Pakistan. For other
matters like enhancement |
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| of paid up capital, a
committee comprised of |
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|
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| representatives of Securities
and Exchange |
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|
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| Commission of Pakistan (SECP)
and leasing |
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| companies has been formed to
look into the |
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| matter. |
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| On the other hand, it is
encouraging to note |
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| that the Government has
resolved a few other |
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| issues favorably. The leasing
companies were |
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| declared exempt by the
Central Board of Revenue |
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| from levy of 10% income tax
on reserves in |
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| excess of 50% of their paid
up capital. In the |
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| matter of Deferred Taxation,
the SECP has advised |
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| to start providing for
deferred tax liability every |
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| year. This is a prudent step
to strengthen the |
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| Balance Sheet of the leasing
companies. The |
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| companies have been allowed
to make up the |
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| deficiency in deferred tax
provision within five |
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| years. |
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|
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| The leasing sector has taken
a turn towards |
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| the betterment. Majority of
the leasing companies |
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| have started to focus on BMR
requirement of |
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| the industry as well as
financing small ticket |
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| consumer leases. This has
also developed higher |
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| competition among the leasing
companies in |
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| the rates being offered to
the consumers. |
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|
| THE COMPANY'S RESULTS |
|
| During the year under review,
lease disbursement |
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| of Rs. 616.36 m was made, up
13.22% from |
|
| last year. Net investment in
lease finance as |
|
| on June 30, 1999 amounted to
Rs. 1,910.08 |
|
| m, by no means a small amount
!. The lease |
|
| portfolio comprised of 66.67%
in machinery, |
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| 29.30% in vehicles and 4.03%
in office equipment. |
|
| The sectoral exposure as on
June 30, 1999, |
|
| was fairly diversified and
comprised of 10.64% |
|
| in Services followed by
10.18% in Textile Spinning, |
|
| 9.25% in Steel, Engineering
& Automobiles, 8.90% |
|
| in Chemicals, Fertilizers
& Pharmaceuticals, 8.83% |
|
| in Cement, 6.66% in Food,
Tobacco & Beverages, |
|
| 6.51% in Consumer, 6.32% in
Electrical & |
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| Electronic Goods, 5.35% in
Textile Weaving / |
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| Knitting, etc. This is quite
a diversified portfolio |
|
| in the current situation. |
|
|
| Gross revenue during the year
amounted to Rs. |
|
| 341.09 m, compared to Rs.
339.35 m of the |
|
| previous year, up 0.51%.
Financial charges |
|
| amounted to Rs. 255.53 m
after taking effect |
|
| of refund of Rs. 11.01
million received from the |
|
| State Bank of Pakistan in
respect of Rs. 17.56 |
|
| m, paid during the year
1996-97, on account |
|
| of late payment of exchange
risk fee. These |
|
| charges were slightly lower
by 0.49% as compared |
|
| with Rs. 256.78 m of the
previous year. |
|
| Administrative expenses rose
by 12.45% to Rs. |
|
| 38.85 m from Rs. 34.55 m.
Provision for doubtful |
|
| debts amounted to Rs. 15.44 m
compared to |
|
| Rs. 5.18 m last year.
Cumulative provision for |
|
| doubtful debts amounted to
Rs. 56.54 m which |
|
| is 2.96% of net investment in
lease finance. |
|
| This provision may be
sufficient if the present |
|
| default culture countrywide
does not persist. |
|
| Your company has however been
suspending |
|
| income on non-performing
leases. |
|
|
| The profit before tax for the
year amounted to |
|
| Rs. 23.74 m compared to Rs.
34.36 m last year. |
|
| After reversing the liability
of Rs. 5.5 m provided |
|
| for deferred tax in the
previous year and providing |
|
| for current taxation
liability of Rs. 3.92 m, the |
|
|
| profit after tax for the year
amounted to |
|
| Rs. 25.31 m as compared to
Rs. 19.71 m of |
|
| the previous year. On account
of deferred tax |
|
| liability an amount of Rs.
24.44 m was appropriated |
|
| in the year under review
which comprised of |
|
| Rs. 14.74 m, being one |
