| First Leasing Corporation Limited |
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| Annual
Report 1999 |
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| CONTENTS |
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| Company
Information |
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| Notice
of Meeting |
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| Directors'
Report |
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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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| Pattern
of Shareholding |
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| Categories
of Shareholders |
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| COMPANY
INFORMATION |
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| BOARD
OF DIRECTORS |
|
| Mr.
Khurshid Hadi |
|
Chairman/Chief Executive |
|
| Mr.
Arshad Nawab |
|
Director |
|
| Mr.
Shoaib Qureshi |
|
Director |
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| Mr.
Zaigham Mehmood Rizvi |
|
(Nominee - Pak Libya
Holding Company (Pvt) Ltd.) |
|
| Mr.
Ramadan A. Haggiagi |
|
(Nominee - Pak Libya
Holding Company (Pvt) Ltd.) |
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| Mr. Nasim Beg |
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|
(Nominee - National
Investment Trust) |
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| Mr.
K. M. M. Shah |
|
(Nominee - National
Investment Trust) |
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| COMPANY
SECRETARY |
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| Mr.
Zahid Ali H. Jamall |
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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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| Te1:5661843
Fax:5685329 |
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| BRANCH
OFFICES |
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| 5th
Floor, Davis Hytes, Davis Road, Lahore |
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| 1st
Floor, State Life Building, Peshawar |
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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
Digham & Co. Advocates |
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| REGISTRAR
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 |
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| Te1:
5688808, 5685805 |
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| BANKERS |
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| Allied
Bank of Pakistan Limited |
|
Bank of America |
|
| Credit
Agricole Indosuez |
|
Emirates Bank
International |
|
| Habib
Bank Limited |
|
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 Ltd. |
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| NOTICE
OF MEETING |
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| Notice
is hereby given that the Seventh Annual General Meeting of First Leasing
Corporation |
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| Limited
will be held at FTC Conference Room, Finance & Trade Centre,
Shahrah-e-Faisal, Karachi |
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| on
Wednesday 22nd December, 1999 at 8.00 a.m. to transact the following
business: |
|
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| Ordinary
Business |
|
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| 1.
To confirm the minutes of the Extra Ordinary General Meeting held on July 23,
1999. |
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|
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| 2.
To receive, consider and adopt the audited accounts together with the
Directors' and Auditors' |
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| Report
thereon for the year ended June 30, 1999. |
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| 3.
To appoint Auditors for the year 1999-2000. The present Auditors, Messrs,
Ford, Rhodes, |
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| Robson,
Morrow, Chartered Accountants retire and being eligible have offered
themselves |
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| for
reappointment. |
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| 4.
Any other business with the permission of the Chair. |
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|
By Order of the Board |
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|
Zahid Ali H. Jamall |
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| Karachi:
30th November, 1999 |
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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 December 13,
1999 to |
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| December
22, 1999 (both days inclusive) |
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| 2.
A member entitled to attend, speak and vote at the meeting is entitled to
appoint a proxy |
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| 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 (if any)
under which |
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| it
is signed or a notarially certified copy of such power of authority, in order
to be valid, |
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| must
be deposited at the registered office of the company not less than 48 hours
before |
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| the
time of the meeting. |
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| 4.
Members are requested to notify any change in their address immediately. |
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| DIRECTORS'
REPORT |
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| BUSINESS
ENVIRONMENT |
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| A
combination of persistent recession that has militated against industrial
investment and persistent |
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| fiscal
deficit that maintain pressure on interest rates, has made this a very
difficult year for smaller |
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| financial
institutions. The new governments sensitivity to these issues is manifest in
its repeated |
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| promise
of lower rates. Nevertheless benefits of a rational, coherent economic policy
can only filter |
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| through
in due course. Ineffective economic management of the past has been the major |
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| contribution
to prevailing business difficulties and as reported last year, perils for the
financial |
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| services
industry loomed large. |
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| The
leasing industry is at the end of the lending food-chain and no amount of
innovation or effort |
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| in
these past years has permitted alternatives to the commercial banks as a
source of funds. |
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| Consequently
when those same financial institutions enter the leasing business, the
ramifications |
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| for
the leasing industry will be a deterioration portfolio quality and
uncompetitive pricing. The slim |
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| intermediation
margins and growing recovery problems compound to make the environment an |
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| extremely
difficult one in which to operate. |
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| On
the brighter side, the current recovery climate that has the full force of
political support has |
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| helped
in cleaning up slow-moving lease rentals and most lessors have reported an
improvement |
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| in
client behaviour other than the terminally ill cases. However the period
under review was affected |
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| by
political events and besides a contraction in leasing demands, we suffered
losses on account |
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| of
forex premiums and penal interest on overdue installments. |
|
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| There
can be no guarantee of business recovery but rational, realistic policies
focused on the |
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| resolution
of economic problems, can certainly offer a promise of a more stable
environment in |
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| which
to conduct business. |
|
|
| REVIEW
OF OPERATIONS |
|
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| The
financial year has been a disappointing one for your company due to the high
cost of funds, |
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| a
problematic slow-down in recoveries and large-scale repossession of assets
into our own books. |
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| Several
steps have been taken to restructure the company, inter-alia. |
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|
| Renegotiation
in borrowing agreements that include better pricing and longer tenures. |
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| Currently
we have replaced Rs. 250 million of short-term borrowing and are negotiating
for |
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| another
Rs. 200 million in long-term funds. |
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| More
effective recovery procedures whereby nearly all the portfolio is active and
current. |
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| A
major revision in leasing activity, away from large ticket industrial assets
towards smaller |
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| ticket
leases for assets with proven resale value. |
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| Introduction
of corporate consumer finance products with better returns and greater
security. |
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| Continued
development of the operating lease division. |
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| OPERATING
RESULTS OF THE COMPANY |
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| The
accompanying charts reflect our diversified lease portfolio over various
industry segments and |
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| the
assets are mix. |
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| First
Leasing earned a pre-tax profit of Rs. 5.86 million and the recommended
appropriation thereof |
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| is a follows: |
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|
1999 |
1998 |
|
|
|
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|
(Rupees in
million) |
|
|
|
|
| Income
from finance lease operations |
|
|
160.78 |
153.86 |
|
| Profit
from operating leases |
|
|
661 |
3.50 |
|
| Corporate
finance & treasury operations |
|
|
11.62 |
23.48 |
|
| Capital gains |
|
|
3.79 |
4.14 |
|
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|
------------------ |
------------------ |
|
|
|
|
182.80 |
184.98 |
|
| Operating cost |
|
|
176.94 |
153.28 |
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|
------------------ |
------------------ |
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| Operating profit |
|
|
5.86 |
31.70 |
|
| Provision
for taxation |
|
|
1.96 |
3.69 |
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|
------------------ |
------------------ |
|
| Profit
after taxation |
|
|
3.90 |
28.01 |
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|
|
------------------ |
------------------ |
|
| Unappropriated
profit brought forward |
|
|
2.94 |
7.81 |
|
|
|
|
684 |
35.82 |
|
| APPROPRIATIONS |
|
|
| Special reserve |
|
|
0.78 |
5.60 |
|
| Dividend
Nil (1998: 10 %) |
|
|
-- |
27.27 |
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|
|
------------------ |
------------------ |
|
|
|
|
0.78 |
32.87 |
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|
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|
------------------ |
------------------ |
|
| Unappropriated
profit carried forward |
|
|
6.06 |
2.95 |
|
|
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|
========== |
========== |
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| The
historical trend in respect of growth and profitability is set out below: |
|
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|
12 months to |
18 months to |
12 months to |
12 months to |
12 months to |
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|
31st December |
30th June |
30th June |
30th June |
30th June |
|
|
1994 |
1996 |
1997 |
1998 |
1999 |
|
|
|
|
| Net
investment in leases |
|
532.30 |
85,565 |
90,865 |
862.12 |
861.18 |
|
| Income
from finance lease operations |
8,380 |
20,880 |
180.26 |
153.86 |
160.78 |
|
| Operating profit |
|
34.40 |
45.39 |
46.24 |
31.70 |
5.86 |
|
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|
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| DIVIDENDS |
|
| No
dividend has been declared by the Board for the year ended 30th June 1999.
This is the first |
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| year
that First Leasing Corporation has passed over the payment of a dividend. The
Board assures |
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| its
shareholders that as has been the practice in all past years, the policy of
providing an economic |
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| return
on investment of our shareholders will be paramount in our efforts. |
|
|
| STRATEGIC
INVESTMENT |
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| In
view of the assumption of management of Bankers Equity Limited by the State
Bank of Pakistan, |
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| no
progress has been made on the sale of our investment to the major
shareholders. Management |
|
| is
now in active discussion with government and the State Bank on the future
course to be adopted. |
|
|
| ELECTION
OF DIRECTORS |
|
| In
terms of section 178 (1) of the Companies Ordinance 1984, the following were
elected Directors |
|
| at
the election held on 23rd December, 1998: |
|
|
| 1.
Mr. Khurshid Hadi |
|
| 2.
Mr. Zaigham M. Rizvi |
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| 3.
Mr. Ramadan A. Haggiagi |
|
| 4.
Mr. Nasim Beg |
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| 5.
Mr. K.M.M. Shah |
|
| 6.
Mr. Arshad Nawab |
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| 7.
Mr. Shoaib Qureshi |
|
|
| INFORMATION
TECHNOLOGY |
|
| The
company has taken measures to ensure that its computer applications, system
and hardware |
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| are
Year 2000 Compliant. |
|
|
| ACKNOWLEDGMENT |
|
| The
Board of Directors wish to place on record their sincere appreciation of the
devoted services |
|
| of
our staff and to reemphasize our commitment to the development of their
professional careers |
|
| and
to their well-being. The Board also acknowledges the support of all our
institutional lenders. |
|
|
|
|
For and on behalf of the Board |
|
|
|
Khurshid Hadi |
|
| Karachi:
30th November, 1999 |
|
Chairman/Chief Executive |
|
|
|
|
| FORD
RHODES, ROBSON, MORROW |
|
| Chartered
Accountants |
|
|
| Finlay
House, |
|
Telephone H.O: |
(92-211) 241 5582 |
|
| I.I.
Chundrigar Road, |
Branch: |
(92-21) 240 1081 |
|
| P.O. Box 4719, |
|
Telefax: |
(92-21) 241 9592 |
|
| Karachi 74000, |
|
E Mail: |
frrm@cyber.net.pk. |
|
| Pakistan. |
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of FIRST LEASING CORPORATION LIMITED |
|
| as
at June 30, 1999 and the related profit and loss account and cash flow
statement, |
|
| 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 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 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 and the cash flow
statement, |
|
| 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, 1999 and of
the |
|
| profit
and of the cash flows for the year then ended; |
|
|
|
|
|
| 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; and |
|
|
|
|
|
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| e)
without qualifying our opinion, we draw attention to matters referred to in
note 7.1. |
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| Pending
the outcome of the matters referred to therein, no provision has been made |
|
| for
the diminution in value of investment in Bankers Equity Limited as the |
|
| management
believes that no permanent diminution in value has occurred. |
|
|
| Karachi - |
|
| November
30, 1999 |
|
Chartered Accountants |
|
|
|
|
(MEMBER FIRM OF ERNST & YOUNG INTERNATIONAL) |
|
|
|
|
| BALANCE
SHEET AS AT JUNE 30, 1999 |
|
|
|
|
|
1999 |
1998 |
|
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| FIXED
ASSETS - Tangible |
|
3 |
115,377,300 |
104,601,958 |
|
| INVESTMENT
IN LEASES |
|
|
|
|
| Installment
contracts receivable |
|
|
993,062,668 |
973,624,824 |
|
| Residual
value of leased assets |
|
|
100,650,532 |
118,927,069 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
1,093,713,200 |
1,092,551,893 |
|
| Less:
Unearned income |
|
|
(232,532,097) |
(230,435,623) |
|
|
|
|
------------------ |
------------------ |
|
| Net
investment in leases |
|
|
861,181,103 |
862,116,270 |
|
| Less:
Current portion of net investment in leases |
|
|
(320,796,338) |
(391,906,203) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
540,384,765 |
470,210,067 |
|
| LONG-TERM
FINANCE |
|
4 |
-- |
5,893,330 |
|
|
|
|
|
------------------ |
------------------ |
|
|
|
|
540,384,765 |
476,103,397 |
|
| Less:
Provision for lease losses and doubtful receivables |
5 |
(36,381,575) |
(30,223,833) |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
504,003,190 |
445,879,564 |
|
| LONG-TERM
ADVANCES |
|
6 |
5,660,660 |
5,115,169 |
|
| LONG-TERM
INVESTMENTS |
|
7 |
96,929,094 |
74,879,094 |
|
| LONG-TERM
DEPOSIT AND DEFERRED COSTS |
8 |
1,448,469 |
2,010,695 |
|
|
|
|
|
|
|
| CURRENT
ASSETS |
|
|
|
| Current
portion of net investment in leases |
|
|
320,796,338 |
391,906,203 |
|
| Current
maturity of long-term finance |
|
4 |
10,350,967 |
7,045,379 |
|
| Current
maturity of long-term advances |
|
|
480,155 |
287,543 |
|
| Short-term
and morabaha finances |
|
9 |
58,320,729 |
53,479,025 |
|
| Advances,
deposits, prepayments and |
|
|
|
| other
receivables |
|
10 |
101,188,226 |
62,317,624 |
|
| Investment
in marketable securities |
|
11 |
31,314,456 |
23,423,000 |
|
| Cash
and bank balances |
|
12 |
17,189,891 |
19,345,626 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
539,640,762 |
557,804,400 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
1,263,059,475 |
1,190,290,880 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| SHARE
CAPITAL AND RESERVES |
|
|
| Authorised
50,000,000 ordinary shares of Rs.10 each |
|
500,000,000 |
500,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up capital |
|
13 |
272,782,340 |
272,782,340 |
|
| Reserves |
|
14 |
51,689,719 |
47,793,303 |
|
|
|
|
------------------ |
------------------ |
|
| Shareholders'
equity |
|
|
324,472,059 |
320,575,643 |
|
| LONG-TERM
FINANCES UNDER |
|
|
|
| MUSHARIKA
ARRANGEMENTS |
|
15 |
105,945,655 |
97,995,801 |
|
| LONG-TERM
FINANCES |
|
16 |
149,223,514 |
170,527,457 |
|
| OBLIGATIONS
UNDER FINANCE LEASE |
|
17 |
6,267,061 |
11,963,892 |
|
| LONG-TERM
DEPOSITS AND LIABILITIES |
|
18 |
119,810,508 |
162,119,995 |
|
|
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
|
| Current
maturity of long-term liabilities |
|
19 |
155,004,022 |
174,429,597 |
|
| Other
current liabilities |
|
20 |
402,336,656 |
225,400,261 |
|
| Proposed
dividend |
|
|
-- |
27,278,234 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
557,340,678 |
427,108,092 |
|
| COMMITMENTS |
|
21 |
------------------ |
------------------ |
|
|
|
|
1,263,059,475 |
1,190,290,880 |
|
|
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| The
annexed notes form an integral part of these accounts. The auditors' report
is annexed hereto. |
|
|
|
Khurshid Hadi |
|
|
Zaigham Mehmood Rizvi |
|
|
Chairman/Chief Executive |
|
|
Director |
|
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| FOR
THE YEAR ENDED JUNE 30, 1999 |
|
|
|
|
1999 |
1998 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| INCOME |
|
|
|
| Income
from finance lease operations |
|
22 |
160,778,505 |
153,864,305 |
|
| Profit
from operating leases |
|
23 |
6,611,985 |
3,502,973 |
|
| Corporate
finance and treasury operations |
|
24 |
11,622,877 |
23,482,449 |
|
| Gain
on marketable securities |
|
|
3,788,357 |
4,142,492 |
|
| [including
loss of Rs.250,000 |
|
|
|
| (1998
Rs. Nil) on long term investments] |
|
|
|
|
|
|
|
------------------ |
------------------ |
|
|
|
|
|
|
182,801,724 |
184,992,219 |
|
| EXPENDITURE |
|
|
|
|
|
| Financial
and bank charges |
|
25 |
131,396,128 |
114,587,370 |
|
| Selling,
general and administrative expenses |
|
26 |
31,452,029 |
31,509,734 |
|
| Provision
for diminution in value of investments |
|
|
|
| - short term |
|
|
|
|
4,706,352 |
3,156,147 |
|
| - long
term |
|
|
|
|
450,000 |
-- |
|
| Provision
for lease losses and doubtful receivables |
|
|
8,745,484 |
4,027,481 |
|
| Write
off of net investment in lease finance |
|
|
188,763 |
-- |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
176,938,756 |
153,280,732 |
|
|
|
|
------------------ |
------------------ |
|
| OPERATING
PROFIT |
|
5,862,968 |
31,711,487 |
|
| PROVISION
FOR TAXATION |
|
|
| - current year |
|
|
1,746,878 |
3,696,839 |
|
| - prior years |
|
|
219,674 |
-- |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
1,966,552 |
3,696,839 |
|
|
|
|
------------------ |
------------------ |
|
| PROFIT
AFTER TAXATION |
|
|
3,896,416 |
28,014,648 |
|
| UNAPPROPRIATED
PROFIT BROUGHT FORWARD |
|
2,943,763 |
7,810,279 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
6,840,179 |
35,824,927 |
|
| APPROPRIATIONS: |
|
|
|
|
| Transfer
to special reserve |
|
|
779,283 |
5,602,930 |
|
| Proposed
dividend: Nil (1998: 10%) |
|
|
-- |
27,278,234 |
|
|
|
|
------------------ |
------------------ |
|
|
|
|
779,283 |
32,881,164 |
|
|
|
|
------------------ |
------------------ |
|
| UNAPPROPRIATED
PROFIT CARRIED FORWARD |
|
6,060,896 |
2,943,763 |
|
|
|
|
========== |
========== |
|
| Basic
earnings per share |
|
29 |
0.14 |
1.03 |
|
|
|
|
|
|
| The
annexed notes form an integral part of these accounts |
|
|
|
Khurshid Hadi |
|
|
Zaigham Mehmood Rizvi |
|
|
Chairman/Chief Executive |
|
|
Director |
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED JUNE 30, 1999 |
|
|
|
|
|
|
1999 |
1998 |
|
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| CASH
FLOWS FROM OPERATING ACTIVITIES |
|
| Profit
for the year before taxation |
|
|
5,862,968 |
31,711,488 |
|
|
|
|
| Adjustments
for: |
|
|
|
| Depreciation
on fixed assets |
|
|
15,213,350 |
11,441,352 |
|
| Amortization
of deferred costs |
|
|
859,956 |
253,483 |
|
| Provision
for lease losses and doubtful receivables |
|
|
8,745,484 |
4,027,481 |
|
| Provision
for diminution in value of investments |
|
|
|
|
| - short term |
|
|
4,706,352 |
3,156,147 |
|
| - long term |
|
|
450,000 |
-- |
|
| (Gain)
on sale of marketable securities |
|
|
(4,038,357) |
(4,142,792) |
|
| Loss
on sale of long term investments |
|
|
250,000 |
-- |
