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INTRODUCTION

Internship is the final compulsory component of Master of Business Administration

programme. It is required to be undertaken individually by involvement in the workoperation of any concerned organization. Basically internship is a practical application of

the knowledge obtained in the area of specialization of the MBA and every student is

required to study and analytically review the concerned aspect of the organization and

also to report whether the theoretical concepts are being applied or not. Being a student

of MBA with the major in Finance, I have selected the Securities and Exchange

Commission of Pakistan for the purposes of internship.

Securities and Exchange Commission of Pakistan is a newly established body corporate

and it enjoys full operational, administrative and financial autonomy. The regulatory

scope of the Commission is the securities market, administration of company law and

regulation of some non-banking financial companies, in view of the strong inter-linkage

among the three areas.

In addition to regulating the above areas, the Commission is also responsible for

regulating leasing companies. Leasing companies have been on the scene for almost a

period of fifteen years now. Leasing was started as a result of the government decision to

eliminate interest or Riba from all financial transactions. As such, leasing (Ijara) was

accepted as one of the permissible mode of financing. Leasing is an important source of

medium to long term financing, and the leasing sector was set up to develop a vital role in

the capital formation of the country. Presently 33 leasing companies are registered under

the Companies Ordinance, 1984 and with the exception of one, all are listed on the stock

exchanges.

In the Internship Report in the Chapter 1, complete introduction of the organization with

specific reference of its functional profile have been given. As most of us know that

Government of Pakistan has established this organization to provide a regulatory

Ejaz Alam Khan H5279752 MBA (Finance) 1


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environment, which is conducive to sustainable growth and long-term viability of the

corporate sector.

In Chapter 2, keeping in view the area of my interest, responsibilities of the Specialized

Companies Division of the Commission are discussed. This Division is responsible for

regulation of Leasing, Mutual Funds, Modaraba companies and other specialized

companies (except insurance companies). Its regulatory functions include licensing of

these institutions under the relevant laws and rules, monitoring the performance and

examination and analysis of financial statements.

In Chapter 3, an industry analysis of the Leasing Industry has been made and also tried

to provide all aggregate indicators for the last five years of the sector with its trends of

key ratios. An overall inference is also part of it.

In Chapter 4, three leading leasing companies have also been analysed with reference to

their history, performance, balance sheet and income statement. Their last five years

financial data and significant ratios are also given.

At the end, some recommendations for improvement of the leasing sector as well as forthe Securities and Exchange Commission of Pakistan have also been included in this

report.



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1. ORGANIZATION OF SECURITIES AND EXCHANGE

COMMISSION OF PAKISTAN

The establishment of Securities and Exchange Commission of Pakistan with effect from

1st January, 1999 is an important milestone in the evolution of the regulatory framework

for the capital market in Pakistan. Since 1981, the capital market and the corporate sector

were being regulated by the Corporate Law Authority, a department of the Ministry of

Finance, which had been set up to administer all the corporate laws in the country. The

status of the Authority as a department of the Government circumscribed its effectiveness

as it lacked administrative and financial autonomy to recruit professionally qualified staff

and to develop necessary infrastructures. The rapid expansion of the market during early1990s highlighted the need for establishment of an independent regulatory body with full

operational and administrative autonomy. The process of restructuring the Authority into

an autonomous Commission was started in 1997 under the Capital Market Development

Programme of Asian Development Bank. A number of models of regulatory bodies, set

up in the recent past in other countries of the region, were studied and after careful

consideration, it was decided that:

the proposed Commission should be named Securities and ExchangeCommission of Pakistan and it should enjoy full operational,administrative and financial autonomy;

the regulatory scope of the Commission should cover securities market,administration of company law and regulation of some non-bankingfinancial companies, in view of the strong inter-linkages among the threeareas; and

the Commission should associate outside professionals and key policy

makers with its policy formulation process.

The policy decisions regarding the constitution and the structure of the Commission were

incorporated in the Securities and Exchange Commission of Pakistan Act, 1997 (the Act),

which was passed by Parliament and promulgated in December 1997.



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On 1st January 1999, Mr. Shamim Ahmad Khan, the then Chairman, Corporate Law

Authority, was appointed as the first chairman of the Commission. Four commissioners

were also appointed out of whom, the following three joined the Commission:

Mr. Abdul Rehman Qureshi Mr. Tariq Iqbal Khan Mr. Zafar-ul-Haq Hijazi

Subsequent to the resignation of Mr. Shamim Ahmad Khan in January 2000, Mr. Khalid

A. Mirza (a senior official of the International Finance Corporation (IFC), posted as

Chief of IFCs Regional Mission in Bangkok, Thailand) was appointed as Chairman of

the Commission. He took over on 31st March 2000.

Although the Commission became operational on 1st January 1999, it could not enjoy

financial autonomy during the remaining part of the financial year. Till 30th June 1999,

the Commission could only use the budgetary allocations, which had been made for the

Authority in the budget of the Federal Government for the fiscal year 1998-99.

Transformation of a government department into an autonomous body established under

a statute required considerable groundwork. During the calendar year 1999, foundations

of the new regulatory body were laid through a number of measures:

A Corporate Plan was prepared with the assistance of ADB consultantswhich covered organizational structure, reporting relationships andfunctional profiles; information system strategy; plans to up-gradefacilities like premises, equipment etc; skills development and financialplans.

Based on the Corporate Plan, the work of the Commission was distributedamong its six Divisions, powers of the Commission were delegated to theindividual Commissioners and Appellate Benches as envisaged in the Actwere constituted.

A Service Manual, determining the terms and conditions of theCommissions employees, was prepared.

Accounting and financial procedures were prepared and put into operation.



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Steps were taken to generate public awareness about the establishment ofthe Commission through seminars, the media, and circulars. A website(http//www.secp.gov.pk) was established that disseminates informationregarding all-important developments and policy decisions of the

Commission.

New office premises at Islamabad (NIC Building, Blue Area) andadditional space for the regional office at Karachi (5th Floor of SLICBuilding No.2, Wallace Road) were arranged.

1.1 SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN ACT,

1997

The Commission is governed by the Securities and Exchange Commission of Pakistan

Act, 1997 which encompasses the constitution of the Commission, appointment and

terms and conditions of the Chairman and Commissioners, functions and powers of the

Commission and financial arrangements. The main provisions of the Act are given

below:

SUMMARY OF MAIN PROVISIONS OFSECURITIES AND EXCHANGE COMMISSION OF PAKISTAN ACT, 1997

The Commission would be a body corporate and a legal person.

The Commission would comprise of such number of commissioners including achairman as may be fixed by the Federal Government but minimum andmaximum number of commissioners shall be five and seven respectively. Thetenure of the chairman will be three years while that of the commissionersshall be two or three years to be determined through random ballot to facilitatecontinuity of the Commission. The incumbents would be eligible for a secondterm.

The Commission would administer the following laws:

The Securities and Exchange Ordinance, 1969;

The Companies Ordinance, 1984;

The Modaraba Companies and Modaraba (Floatation andControl) Ordinance, 1980;

The Insurance Act, 1938 (since replaced by the InsuranceOrdinance, 2000);

The Companies Legal Advisers Act, 1974; and

The Securities and Exchange Commission of Pakistan Act,1997.



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All the powers of the Authority and the Federal Government (except powerfor rules making) under the above laws are exercised by the Commission.

The Government can assign administration of any other law to theCommission.

Terms and conditions of the employees shall be determined by the Commissionwith the approval of the Policy Board.

The main functions of the Commission in respect of securities market are:

regulation of securities market;

regulation and supervision of the activities of capital marketinstitutions like central depository and stock exchanges clearinghouses;

registering and regulating work of stock brokers, sub-brokers, trustees,bankers to the issue, registrars to the issue, under-writers, portfoliomanagers and investment advisers;

regulation of collective investment schemes (Unit Trusts and MutualFunds); and

regulating substantial acquisition of shares and mergers and takeoverof companies.

A Securities and Exchange Policy Board shall be constituted, which shall consistof seven members out of whom three would be from private sector while fourwould be ex-officio namely; Secretary, Finance Division, Secretary, Law andJustice Division, Chairman of the Commission and a Deputy Governor of theState Bank. The tenure of the private sector members of the Policy Board shallbe four years. The main functions of the Board are:

to advise the Federal Government on all matters relating to

securities market, regulation of companies and corporate sectorand protection of interest of investors, measures to encourage selfregulation by the stock exchanges and non bank financialinstitutions and measures to promote securities market;

to approve the budget of the Commission; and

to oversee the performance of the Commission to the extent thatpurposes of the Act are achieved;

The Commission shall administer and control a Fund consisting of all sumsreceived from Federal Government, grants and sums raised by the Commissionand fees, penalties and other charges levied by the Commission.

The Fund shall be expended for the purposes of meeting lawful expenditure ofthe Commission.

The Commission is required to prepare an Annual Report on the activities ofthe Commission to be released to the public and to be submitted to the FederalGovernment and the Parliament.

The accounts of the Commission are to be audited by two auditors; one to beappointed by the Federal Government and the other by the Commission.



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The Commission has been vested with sufficient powers to carry outinvestigation and inspection and call for any information relevant to its scopeof work.

An Appellate Bench is to be constituted by the Commission to hear appeals inrespect of an order passed by a Commissioner.

The decision of the Government to assign regulation of the insurance industry to the

Commission was taken after its establishment.

1.2 ADMINISTRATIVE STRUCTURE OF THE COMMISSION

In accordance with the approved Corporate Plan, the Commission has been organizedinto the following six Divisions:-

Securities Division; Enforcement Division; Specialized Companies Division; Company Law Administration Division; Insurance Division; and Support Services Division

1.3 FUNCTIONAL PROFILE OF THE DIVISIONS

Securities Division is responsible for all activities related to the securitiesmarket functions, including licensing and coordination, regulation ofsecondary market, public offerings, market intermediaries and marketsurveillance.

Enforcement and Monitoring Division is responsible for review of accounts oflisted companies, investigation and compliance of relevant laws andregulations by the management and prosecution (except in relation tospecialized companies, including insurance companies).

Specialized Companies Division is responsible for regulation of MutualFunds, Modaraba companies, Leasing and other specialized companies(except insurance companies). Its functions include licensing, regulatorycompliance and enforcement of all applicable laws

Company Law Administration Division is charged with the responsibility ofincorporating all companies and enforcing Companies Ordinance and other



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statutes and regulations in all (listed/unlisted/private) companies. TheDivision is also responsible for supervision of the field offices in various citiesworking as company registration offices.

Insurance Division is responsible for regulating the insurance sector. It would

exercise powers of the Commission under the law, and will administer the lawof insurance, covering licensing and supervision of insurers and otherregulated entities under that law.

Support Services Division is responsible for provision of efficient supportservices to the entire Commission. It would also attend to legal matterspertaining to various statutes, managing the funds and maintaining accounts,development and administration of human resources and introducingautomation systems through information technology. It is envisaged that theregional offices shall have their own dedicated support services units, whichwould implement the policies and procedures prescribed by the Support

Services Division at the head office.

Each of the above six Divisions have been divided into Wings for administrative

purposes, which are mentioned below:

Securities Division

Licensing and Coordination;

Secondary Market Regulation;

Public Offering; and

Surveillance

Enforcement Division

Accounts

Investigation

Compliance and Prosecution

Specialized Companies Division

Modaraba Companies and Modarabas

Leasing Companies

All Other Specialized Companies and Mutual Funds.

Company Law Administration Division

Coordination and Liaisoning

Regulation and Compliance



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Enforcement, Investigation and Prosecution

Licensing, Approvals and Appeals

Insurance Division

Actuarial Services Life Insurance Prudential Supervision

Non-life Insurance Prudential Supervision

Market Conduct Supervision

Enforcement and Prosecution

Support Services Division

Finance and Accounts

Administration

Legal

Human Resource

Information Technology.

The Commission is a collegiate body having collective responsibility. Chairman of the

Commission is its Chief Executive Officer and is responsible for the working of the

whole Commission while the Commissioners would assist him in over-all supervision.

Each Executive Director while heading a Division, or one or more Wings of a Division,

would be directly responsible to the Commission. The Wings have further been divided

function-wise into Sections to be headed by a Joint Director accountable to the respective

Director.

1.4 SECURITIES AND EXCHANGE POLICY BOARD

While ensuring full autonomy of the Commission, the Act provides for establishment of a

Securities and Exchange Policy Board (the Policy Board). The main objective of the

Policy Board is to provide guidance to the Commission in all matters relating to its

functions and to formulate policies in consultation with the Commission. The Policy

Board is also responsible for advising the Government on any matter falling within the



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purview of the Act and other Corporate Laws; and also to express its opinion on policy

matters referred to by the Government or the Commission.

The Act provides that the Federal Government shall appoint a Policy Board consisting of

seven members out of whom four would be ex-officio while three would represent the

private sector. The ex-officio members are: (i) Secretary, Finance Division; (ii)

Secretary, Law and Justice Division; (iii) Chairman of the Commission; and (iv) a

Deputy Governor of the State Bank of Pakistan. Following a recent amendment in the

Act, the size of the Policy Board has been increased to nine members, including the

Secretary, Commerce Division, as another ex-officio member. The term of an ex-officio

member is the period of incumbency of his/her official position whereas the term of a

private sector member is for a fixed period of four years. The first Policy Board was

constituted as under:

1. Mr. M. Khalil Mian (Chairman)2. Mr. Bashir Ahmed3. Mr. Khurshid Marker4. Ex-officio Secretary, Finance Division;5. Ex-officio Secretary, Law Division;6. Ex-officio Chairman of the Commission; and7. Mr. Mukhtar Nabi Qureshi, Deputy Governor of the State Bank of Pakistan.

On the resignation of Mr. M. Khalil Mian, the Government appointed Mr. Khalid A.

Mirza, Chairman of the Commission as Chairman of the Policy Board on 29th June 2000.

1.5 FINANCIAL ARRANGEMENTS

Since Commission is financially autonomous, a Fund has been established for meeting

the financial requirements of the Commission. The Fund is administered and controlled

by the Commission and consists of the following:-

such sums as the Federal Government may grant from time to time;

grants of money and sums borrowed or raised by the Commission for thepurposes of meeting any of its obligations or discharging any of its duties; and



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taxes, fees, penalties or other charges levied under this Act, the Ordinance, theSecurities and Exchange Ordinance, 1969 (XVII of 1969), the ModarabaCompanies and Modaraba (Floatation and Control) Ordinance, 1980 (XXXIof 1980), Law of Insurance and under any other law that is for the time being

administered by the Commission.

All expenditure of the Commission, including the following items, is charged to the

Fund:-

Any expenditure lawfully incurred by the Commission, including theremuneration of Commissioners and employees, including provident fundcontributions, superannuating allowances or gratuities and legal fees and costand other fees and costs.

Any other expenses, costs or expenditure properly incurred or accepted by theCommission in the performance of its functions or the exercise of its powersunder this Act.

Purchasing or hiring equipment, machinery and any other materials, acquiringland and erecting buildings, and carrying out any other work and undertakingsin the performance of its functions or the exercise of its powers under this Act.

Repaying any financial accommodation received or moneys borrowed underthis Act and the profit, return, mark-up or interest due thereon (howsoevercalled).

Generally, any expenses for carrying into effect the provisions of this Act.

The Commission is required to prepare and submit its budget to the Policy Board within

ninety days of its establishment and thereafter not later than thirty days before the expiry

of each financial year. The Commission is required to keep proper accounts and at the

end of each financial year prepare a statement of accounts, which shall include a balance

sheet, and an account of income and expenditure. The Commission is also required to get

its accounts audited by auditors appointed with the approval of the Federal Government.

The Federal Government may if it deems fit; also require the accounts of the Commission

for any financial year audited by the Auditor General of Pakistan. The Policy Board is

required to send, within one hundred and twenty days after the end of each financial year,

together with the annual report of the Commission, a copy of the statement of accounts of

the Commission certified by the auditors and a copy of the auditors' report to the Federal



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Government which shall cause them to be published in the official Gazette and submit to

Parliament within two months of their receipt. The accounts of the Commission have

been jointly audited by two firms of Chartered Accountants and submitted to the

Government. A copy of the audited annual accounts for the period ended June 30, 3000

is annexed.

1.6 ADMINISTRATION, HUMAN RESOURCE DEVELOPMENT AND

SUPPORT SERVICES

Support Services Division (SSD) is responsible for provision of efficient support services

to the entire Commission including:

Matters relating to finance and accounts;

Handling of all legal matters relating to corporate laws being administered by theCommission, dealing with court cases, and providing legal advice to theCommission;

Development of human resource, training of employees and appropriaterecruitment rules for the induction of staff;

Administrative matters relating to the security of the Commissions property,handling of the upkeep of the office premises and all other managerial issues; and

Computerization, automation of the system and all matters relating to informationtechnology.

SSD has been organized into five Wings, namely:-

Finance and Accounts Administration Legal Human Resource Information Technology

The Commission has been endeavouring for the establishment of its organizational set up

and framing of rules, regulations and procedures. SSD has been able to undertake the

following assignments which were necessary for the operationalization of the

Commission:-



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A separate Finance and Accounts Wing was established on 1st July 1999, the datewhen the Commission became autonomous in terms of financing.

A standing operating procedure with regard to expenditure, revenue, imprest,

accounting system for CROs and procurement of fixed assets was prepared.

A formal Financial and Accounting Manual was prepared with the help ofconsultants appointed by ADB. The pay roll of the employees was computerizedwhich worked successfully during the period.

Accounting records were maintained according to the prescribed procedure.

Habib Bank was nominated as a banker of the Commission and 18 collectionaccounts and 9 checking accounting were opened with its branches at variousstations.

Internal audit was introduced and a separate Pre-audit Department wasestablished.

Consequent upon the above arrangements, Finance and Accounts Wing was able to

reconcile its receipts and get its accounts audited within the statutory period.

SSD is at present engaged in revamping the system for administration of human resource,

establishment of a separate legal department as well as a department of informationtechnology.

1.7 STAFFING

Section 43 of the Act empowers the Commission to determine suitability of officers and

staff working in the Authority for appointment in the Commission. Such employees were

not granted any right or lien to appointment on any post in the Commission. Pursuant to

these statutory provisions, the Commission carried out an exercise to determine the

suitability of the employees of the Authority and after careful consideration decided to

release 21 officers working in BS-17 to BS-21 and 59 other staff members. On the basis

of the qualifications and experience prescribed under the Corporate Plan, the Commission

has so far inducted 39 new officers upgrading the professional expertise of the



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Commission and improving its ability to discharge its responsibilities. Total existing

strength of officers and employees and organizational chart of the Commission are

annexed.

1.8 COMPUTERIZATION

Computerization was originally introduced in the organization (then the Authority) in

early 1992, with the objective of facilitating name search of companies and to keep a

database of companies incorporated under the Companies Ordinance, 1984. Over the

years, the need was felt to expand and enhance the programme in order to improve

operational capability and also to keep pace with similar organizations in the region.

Presently, the company database system is being used in the Commission at its

Headquarters and in the CROs. The database contains some basic information about all

registered companies. The existing system, however, is not efficient and up-to-date and

CROs are not electronically linked to headquarters. Record creation for new companies

is centralized at the head office, whereas subsequent changes to the company records are

done at their respective CROs and then replicated at all branches.

A database containing annual and half-yearly accounts of public-listed companies is

being maintained at headquarters. This database system is being used to generate various

reports such as non-payment of dividends by listed companies. At present, there are about

761 listed companies, and the database contains accounting data of these companies for

the last two years.

The Commission is cognizant of the present problems faced by it in its monitoring

procedures, the inherent delay in manual handling of all matters, problems faced by the

public in getting quick and timely service from the Commission and the lack of an

electronic communication system with the stock exchanges and CROs. The Commission

is taking steps to address such problems through a carefully designed automation

programme.



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It is also proposed to provide on a fast track basis, certain basic functions, such as:-

Availability of new names.

Registration of new companies.

Registration of mortgages/charges.

Inspection of documents.

Copies of documents.

Filing of documents

These reforms are expected to bring marked improvements both in the quality and speed

of service to the corporate sector.

Software is being developed to enable monitoring of the three stock exchanges on real

time basis. Unusual features in trading would be picked up and examined for timely

corrective measures.

The Commissions Headquarters and CROs are being connected through WAN.

Databases are being developed for use by all regional offices. Updating of data would befacilitated by a properly designed communication system. Internal correspondence and

circulars would also be handled electronically by way of e-mails and intranet facilities.



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2. REGULATION OF SPECIALIZED COMPANIES

In addition to regulating the Securities Market and administering the Companies

Ordinance, 1984, the Commission is also responsible for regulating leasing companies

Modarabas and credit rating agencies. These functions are being carried out under the

following laws and rules:-

Leasing Companies (Establishment and Regulation) Rules, 1996 framed

under section 506 of the Companies Ordinance, 1984 alongwith NBFIs

Prudential Regulations issued by the State Bank of Pakistan.

Investment Companies and Investment Advisers Rules, 1971 which

regulate closed-end mutual funds.

Asset Management Companies Rules, 1995 which regulate open-end

mutual funds.

Modaraba Companies and Modaraba (Floatation and Control) Ordinance,

1980 and Modaraba Companies and Modaraba Rules, 1981.

Credit Rating Companies Rules, 1995.

This responsibility has been entrusted to the Specialized Companies Division (SCD.

Registrars are responsible for regulation of leasing companies and Modarabas. In

addition to regulatory functions, the Commission also takes the initiative to develop such

specialized institutions. Regulatory functions include licensing of these institutions under

the relevant laws and rules, monitoring the performance, and examination and analysis of

financial statements. Registrars (Leasing) and Registrar (Modaraba) pay special attention

to profitability and liquidity of the institutions. They also ensure that the managements of

the institutions follow prudent commercial practices and conform to the Prudential

Regulations issued by SBP. Registrar (Modaraba) also enjoys powers, which are vested



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with the Registrar of Companies including filing of documents, maintenance of records,

registration of mortgages and providing facility to the public for inspection of records.

2.1 LEASING COMPANIES

As a result of amendments in the Banking Companies Ordinance, 1962 effected in 1997,

regulation of leasing companies was assigned to Corporate Law Authority. The

Commission is now carrying out this function.

2.2 MONITORING AND REGULATION

Registrar (Leasing) in SCD monitors and regulates leasing companies in terms of the

Leasing Companies (Establishment and Regulation) Rules, 1996 framed under section

506 of the Companies Ordinance, 1984. Under these Rules, leasing companies require

permission of the Commission for change of chief executive and directors, for opening

new branches and for issuance of COIs. Advertisements are also required to be approved

by the Commission. In addition to compliance with the requirements stipulated in the

Leasing Rules, the Registrar (Leasing) also ensures that the requirements of NBFIs Rules

issued by the State Bank of Pakistan as well as requirements of IAS-12 and 17 are duly

observed. SCD monitors periodical reports received from leasing companies, which

provide information on:

Liquidity position. Equity and liabilities Equity and contingent liabilities. Distribution of deposits/COIs by maturity. Source of borrowings and maturity.

Analysis of advances.

2.3 REGULATORY ISSUES

New leasing companies are required to have minimum capital of Rs. 200 millionunder the Leasing Companies (Establishment and Regulation) Rules, 1996.However, at present, only nine companies have paid up capital in excess of Rs.



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200 million. Although existing companies were directed to raise their capital uptoRs. 200 million but 24 leasing companies have yet to raise their capital upto therequired amount. These companies have attributed their default to marketconditions, which did not encourage issuance of right shares.

The Commission has notified for public opinion new rules to be called LeasingCompanies (Establishment and Regulation) Rules, in substitution of the existingRules with the aim of providing a comprehensive regulatory framework for thelease finance sector. The new Rules combine both the establishment of leasingcompanies as well as prudential regulations for the conduct of leasing business.



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3. INDUSTRY ANALYSIS

At first glance, the term industry may seem self-explanatory. After all, everyone is

familiar with the auto industry, the drug industry, and the electric utility industry.

Analysts and investors need methods with which to classify industries. One well-known

and widely used system is the Standard Industrial Classification (SIC) system based

on Census data and developed to classify it on the basis of what they produce.

3.1 OTHER INDUSTRY CLASSIFICATIONS

The SIC system of industry classification is probably the most consistent system

available, and possibly the easiest to use. However, it is not the only industry, designation

in actual use. Standard & Poor's Corporation, at the end of 1982, provide weekly stock

indexes on approximately 100 industry groupings (or parts of industries) Many of these

series go back 30 or 40 years.

3.2 ANALYSING INDUSTRIES

Industries are analysed through the study of a wide range of data, including sales,

earnings, dividends, capital structure, product lines, regulations, innovations, and so on.

Such analysis requires considerable expertise and is usually performed by industry

analysts employed by brokerage firms and other institutional investors.

3.3 INDUSTRIES IN PAKISTAN

In Pakistan, the capital market classifies the industries on the basis of what the companies

are produced. In the following table the total number of industries including their

companies and their performance is shown.



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NUMBER OF INDUSTRIES INCLUDING THEIR COMPANIES AND THEIR

PERFORMANCE

S.No.

Sector 1996 1997 1998 1999 2000

No.of

Cos.

Div.

paid

No.of

Cos.

Div.pai

d

No.of

Cos.

Div.

paid

No.of

Cos.

Div.

paid

No.of

Cos.

Div.paid

1. Mutual Fund39

2339

2439

2239

19

3921

2. Modarabas52

2152

2048

1347

26

4724

3. Leasingcompanies

3018

3219

3220

3220

3221

4. Inv./Sec.Cos/Banks

3915

3918

3915

3920

4025

5. Insurance39

1539

1739

1639

17

3913

6. Textile Spinning 153

34 152

39 149

34 146

51

14480

7. Textile Weaving 28 2 27 7 27 7 26 9 26 78. Textile

Composite51

1153

1653

1654

17

5429

9. Woollen 9 2 8 3 8 1 8 2 7 210. Synthetic &

Rayon27

727

927

926

12

268

11. Jute 8 0 8 1 8 3 8 3 7 212. Sugar & Allied

Ind.38

2138

1838

838

21

3821

13. Cement 20 7 21 3 20 1 20 4 20 614. Tobacco 7 3 6 2 6 2 6 2 6 215. Fuel & Energy

2814

2719

2820

2820

2720

16. Engineering 16 3 16 5 16 5 16 4 16 4

17. Auto & AlliedEngg.

25 11 25 11 25 10 25 11

25 9

18. Cables &Elect.Goods

165

164

155

15 4 155

19. Transport &Comm.

73

72

72

7 2 84

20. Chemical &Pharm.

4127

4125

4123

3923

3923

21. Paper & Boards 15 9 15 7 15 8 15 8 15 722. Vanaspati &

Allied19

019

119

119 0 19

1

23. Construction 4 0 4 0 4 0 4 0 4 224. Leather &

Tanneries8

58

68

48 6 8

6

25. Food & AlliedInd.

22 10 21 10 22 12 22 13

22 13

26. Glass &Ceramics

114

112

112

10 4 105

27. Miscellaneous30

1430

1029

929

12

2912

Total: 782

284 781

298

773

268

765

330

762372



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FIVE YEARS TURNOUT OF COMPANIES WHO HAVE PAID DIVIDEND

36% 38% 35%43% 49%

0

200

400

600

800

1000

1996 1997 1998 1999 2000

Years

No.ofCompanies



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3.4 LEASING INDUSTRY

LEASING SECTOR IN PAKISTAN

Sr.

No.

NAME OF LEASING Shareholders equity

Rs. in million

1 Asian Leasing Corporation Limited 92.48

2 Askari Leasing Limited 638.85

3 Atlas Lease Limited 316.87

4 Capital Assets Leasing Corporation Limited 98.56

5 Crescent Leasing Corporation Limited 338.50

6 Dawood Leasing Company Limited 306.73

7 English Leasing Limited 136.67

8 First Leasing Corporation Limited 297.35

9 Ghandhara Leasing Company Limited 91.7910 Grays Leasing Limited 134.90

11 Ibrahim Leasing Limited 141.86

12 Inter Asia Leasing Company Limited 81.74

13 International Multi Leasing Corporation Limited 85.97

14 Lease Pak Limited 101.00

15 Mercantile Leasing Company Limited 115.23

16 National Asset Leasing Corporation Limited 74.39

17 National Development Leasing Corporation Limited 1240.48

18 Natover Lease and Refinance Limited 43.60

19 Network Leasing Corporation Limited 113.34

20 ORIX Leasing Pakistan Limited 926.2921 Pacific Leasing Company Limited 147.96

22 Pak Apex Leasing Company Limited 120.17

23 Pak Gulf Leasing Company Limited 107.56

24 Pakistan Industrial Leasing Corporation Limited 581.22

25 Pakistan Industrial and Commercial Leasing Limited 229.94

26 Paramount Leasing Limited 294.86

27 Saudi Pak Leasing Company Limited 353.04

28 Security Leasing Corporation Limited 121.53

29 Sigma Leasing Corporation Limited 121.00

30 Trust Leasing Corporation Limited 367.54

31 Union Leasing Limited 288.28

32 Universal Leasing Corporiation Limited 76.20



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Leasing companies have been on the scene for almost a period of fifteen years now.

Leasing was started as a result of the government decision to eliminate interest or Riba

from all financial transactions. As such, leasing (Ijara) was accepted as one of the

permissible mode of financing. Leasing is an important source of medium to long term

financing, and the leasing sector was set up to develop a vital role in the capital formation

of the country. Presently 33 leasing companies are registered under the Companies

Ordinance, 1984 and with the exception of one, all are listed on the stock exchanges.

3.5 INDUSTRYS AGGREGATE INDICATORS

In the following sections contain brief description of the overall size of the leasing sectorin Pakistan and its performance over the last five years.

The trend of industrys aggregate indicators for the last five years are given below:

Industry's aggregate indicators Rs. In million

1995 1996 1997 1998 1999 2000

No. of companies 27 30 33 33 32 32Paid up capital 2,766 3898 4234 4352 4566 4762

Retained earnings 1904 2746 3234 3359 3305 3441

Investment in lease finance 9404 21892 25164 28111 29039 30281

Investments 1484 1768 2590 2724 2664 3162

Borrowings 7780 18432 21603 23173 23765 25740

Revenues 2522 4090 5046 5315 5528 5704

Net profit 517 922 906 610 451 573

Financial charges 1058 2758 3006 3293 3634 3709

Operating expenditure 390 926 959 1198 1294 1368

Taxation 92 165 155 293 149 151

Cash Dividend 60 537 399 340 371 409



24/46

3.6 INFERENCE

The number of companies and the paid up capital are the industries input parameters

whereas revenues, profits, financial charges and investments are the output parameters

indicating the extent of the benefits provided by the industry.

The paid up capital has increased from Rs. 3.8 billion in 1996 to Rs. 4.7 billion in 2000,

showing an increase of 24% over the five years. Amongst the output parameters

investment in lease finance increased increased from Rs. 21 billion in 1996 to Rs. 30

billion in 2000, maintaining its increase trend in the five year period and showing an

overall increase of 43%.

28

29

30

31

32

33

1996 1997 1998 1999 2000

No. of Companies

0

1000

2000

3000

4000

5000

1996 1997 1998 1999 2000

Paid up capital

0

10000

20000

30000

40000

1996 1997 1998 1999 2000

Investment in Lease

Finance

Net profit was showing a decreasing trend from 1996 to 1999. It has now increased in

the year 2000 showing increase from Rs. 451 million to Rs. 573 million in 2000 an

improvement of 20% in the year above.

Revenues

4090

50465315

5528 5704

0

1000

2000

3000

4000

5000

6000

1996 1997 1998 1999 2000

Net profit

922 906

610

451

573

0

100

200

300400

500

600

700

800

900

1000

1996 1997 1998 1999 2000



25/46

The revenues have grown from Rs. 4 billion in 1996 to Rs. 5.8 billion in 2000 which

indicates an increase of 45% in the five years period.

The above figures indicate that the leasing industry showed some what better results in

2000 as compared to 1999 as the net profit showed an increasing trend for the first time

in the five years period and the total investment in lease finance grew by Rs. 1.2 billion

as against 928 million in the previous years.

3.7 TRENDS OF KEY RATIOS

The following tables show the key ratios of the leasing industry

Trends of Key Ratios

1996 1997 1998 1999 2000

Earning per share (Rs.) 2.13 1.67 1.40 0.79 0.92

Return on equity (%) 13.99 11.88 7.91 5.73 6.58

Return on Investment (%) 3.33 2.81 1.79 1.25 1.36

Net profit margin (%) 22.56 17.69 11.48 8.16 9.31

Revenue per share (Rs.) 9.46 9.41 12.21 9.70 9.86

Financial charges/Total Expenses (%) 71.44 72.76 69.99 71.57 70.32

Debt Leverage (X) 3.20 3.23 3.42 3.60 3.84

Leasing and Financing/Net Worth (X) 3.40 3.43 3.59 3.57 3.84

Total Assets/Net Worth (X) 4.20 4.23 4.24 4.60 4.84

Current Ratio (X) 1.07 1.25 1.17 1.24 1.38

Financial charges/Total Revenue (%) - - - 65.73 63.78



26/46

3.8 INFERENCE

Net profit margin (%)

22.56

17.69

11.48

8.169.31

0

5

10

15

20

25

1996 1997 1998 1999 2000

Return on equity (%)

13.99

11.88

7.91

5.736.58

0

2

4

6

8

10

12

14

16

1996 1997 1998 1999 2000

The key ratios of the leasing industry indicate that after a difficult year in 1999, the

industry has somewhat stabilized in 2000 as the two key ratios i.e., Net Profit

Margin and Return on Equity, after showing a decline trend up till 1999 have

shown a slight increase in 2000. Net Profit Margin increased from 8.16% to 9.3%

while return on investment grew from 1.25% to 1.36%. This stabilizing trend

indicates that the efforts of the leasing industry to increase lease investments and to

recover stuck up rentals have started to bear fruit.

Return on Investm ent (%)

3.33

2.81

1.79

1.25 1.36

0

0.5

1

1.5

2

2.5

3

3.5

1996 1997 1998 1999 2000

Earning per share (Rs.)

2.13

1.67

1.4

0.790.92

0

0.5

1

1.5

2

2.5

1996 1997 1998 1999 2000



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4. ANALYSIS OF THREE LEADING LEASING COMPANIES

4.1 ASKARI LEASING LIMITED - COMPANY INFORMATION

Askari Leasing Limited, a subsidiary of Army Welfare Trust, is focused on

underwriting quality lease business; with a twofold objective of ensuring safety of

capital and maximizing the shareholders return. The company is involved in the

business of auto financing and big corporate transactions to large local and

multination companies.

Board of Directors CommencedBusinesson

November 1993

Lt. Gen (R) Mohammad Afsar,Chairman

HeadOffice

5th & 6th Floor, AWT Plaza, The Mall,Rawalpindi

Brig (R) Ikram Ul Hassan,Director

Tel: 5511309-11, 111-111-345

Brig (R) Muhammad Ayub,Director

Fax 5565670

Brig (R) Gul Zaman Satti,Director

Offices at: Karachi, Lahore, Islamabad, Rawalpindi,Faisalabad

Mr. Khalid Sharwani, Director Staff Strength

70

Mr. Shujaat Ali Khan, Director Listed at: Karachi, Lahore and Islamabad StockExchanges

Mr. Javed Ahmed Noel, Director Auditors: Taseer Hadi Khalid & Co.,Dr. Amjad Waheed, Director (NITNominee)

LegalAdvisors

Walker Martineu Saleem

Mr. Taimur Afzal, CEO

4.2 PERFORMANCE HIGHLIGHTS

Besides maintaining the status of largest leasing company, it disbursed in excess ofRs. 3 billion during the year, which is the largest ever disbursement by any leasing

company in Pakistan.



28/46

The major source of resource mobilization of the company is Certificates of

Investments (COIs) and as on June 30, 2000 total COIs were Rs. 4.7 billion ($80

million).

Pre-tax profit for the year 1999-2000 was Rs. 100 million. The companys

administrative expenses as a percentage of total assets are 0.9% which is the lowest

among the largest leasing companies. The company is rated A+ and A1 long and

short-term obligations by Pakistan Credit Rating Agency.

4.3 BALANCE SHEET

30th June 1996 1997 1998 1999 2000

Reporting Periods (Months) 12 12 12 12 12

EQUITY Rs. in million

Issued, subs. & Paid upcapital

200.00 200.00 240.00 240.00 324.00

Reserves & RetainedEarning

149.74 269.81 254.00 288.00 314.85

Total equity 349.74 469.81 494.00 528.00 638.85

LIABILITIESDeferred liabilities 31.29 74.67 20.00 - -Long Term Loan 8.33 12.50 253.00 83.00 224.58Certificates of Investment 1044.3

31822.40 1494.00 2202.00 3693.00

Lease Key Money 200.50 283.88 317.00 0.435 572.58Short-term loan and runningfinance

285.94 595.39 699.00 443.00 322.33

Short-term COIs 683.60 558.75 1467.00 1365.00 864.12Other current liabilities 135.21 201.02 284.00 458.00 705.80

Total Current Liabilities 1104.75

1355.16 2450.00 2266.00 1892.00

Total Liabilities 2738.94

4018.42 5147.00 5618.00 7221.21

ASSETSTangible Fixed assets 6.51 14.82 21.00 22.00 35.17Net Investment in LeaseFinance

1424.14

2195.17 3786.00 4118.00 3360.00

Long term investment 5.00 5.00 5.00 5.00 5.00Other long term assets 0.50 6.39 10.00 10.00 9.29Current portion of leasefinance

491.34 710.30 1222.00 1216.00 1866.93

Short term finance 73.34 467.51 0.00 25.00 35.91Investments 233.18 362.30 881.00 878.00 1098.00Other current assets 325.35 198.22 252.00 309.00 468.35Cash and Bank Balance 179.58 58.71 191.00 407.00 341.06

Total Current assets 1302.79

1797.04 2546.00 2810.00 3810.83



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Total Assets 2738.94

4018.42 5147.00 5618.00 7221.21

4.4 SIGNIFICANT

RATIOSNet Working capital (Rs.) 198.04 441.87 97.00 544.00 1918.56Current ratio (X) 1.18 1.33 1.04 1.33 2.00Payable/Receivable &

Loans (X)

1.72 0.98 0.00 - 1.96

Total Assets/Net worth

(X)

7.83 8.55 8.38 10.63 11.00

Debt Leverage (X) 6.83 7.55 9.42 7.42 9.00Break-up value (Rs.) 17.49 23.49 25.58 22.00 19.72



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4.5 INCOME STATEMENT

30th June 1996 1997 1998 1999 2000Reporting Periods (Months) 12 12 12 12 12

INCOME Rs. in million

Lease income 312.58 511.13 594.00 638.00 767.04Mark-up income 52.93 102.98 122.00 159.00 107.01Capital Gain on Investment 00.00 00.00 00.00 - 36.13Non-Interest Income 13.42 13.40 0.00 - -Other income 0.35 3.47 0.40 0.69 0.82

Total Income 379.28 630.98 716.40 798.00 911.01

EXPENSESOperating expenses 22.97 31.90 40.70 49.00 67.12Financial expenses 236.49 420.44 530.00 665.00 794.48Prov. For Pot. LeaseLosses/Loan

17.22 43.38 45.30 12.00 30.61

Prov. For Dimn. In value ofInvestment

2.36 0.18 0.00 0.54 (0.11)

Profit before taxation 100.24 135.08 100.00 71.00 100.55Taxation 4.50 15.00 28.00 8.50 9.10

Net Profit 95.74 120.08 72.00 62.00 91.45

APPROPRIATIONDividend 40.00 0.00 20.00 48.00 64.80Reserve for Bonus Shares 0.00 40.00 0.00 - -Statutory Reserve 19.15 24.02 0.00 12.5 18.29Other Reserves 36.00 56.00 19.00 121.00 23.00

4.6 SIGNIFICANT

RATIOSRevenue per Share (Rs.) 18.96 31.55 30.00 33.25 28.00Financial Charges/Total

exp. (%)

84.11 82.32 86.00 91.50 89.00

Net profit margin (%) 25.24 19.03 14.00 7.76 10.00Earning per share (Rs.) 4.79 6.00 4.54 2.60 2.82Earning per face value

(%)

47.90 60.00 00.00 25.80 28.23

Return on Investment

(%)

3.50 2.99 2.64 1.61 1.27

Return on equity (%) 27.37 25.56 20.75 11.70 16.00Dividend per share (%) 2.00 0.00 2.00 2.00 2.00Stock Dividend (%) 0.00 20.00 0.00 - -



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4.7 NATIONAL DEVELOPMENT LEASING CORPORATION LIMITED

-COMPANY INFORMATION

National Development Leasing Corporation Limited is the pioneering and a major

player of the leasing sector in Pakistan. The Corporation was established in 1984as a joint venture between National Development Finance Corporation, Asian

Development Bank, International Finance Corporation and local sponsors.

National Leasing Started business with an equity base of Rs. 20 million which has

over the last 16 years grown to a figure exceeding Rs. 1.2 billion.

Board of Directors Commenced Businesson

June 02, 1984

Mr. Mohammad Salim, Chairman Head Office 10th Floor, NIC Building, Abbasi ShaheedRoad, Karachi

Mr. Mubashir a. Akhtar, CEO Tel: 5660671Mr. Mohammad Naseem,Director

Fax 5680454

Mr. S.M. Saleem, Director Offices at: Karachi, Lahore, Islamabad, FaisalabadMr. Mohammad Sharif, Director Staff

Strength100

Mr. Zahid Haleem Sheikh,Director

Listed at: Karachi, Lahore and Islamabad StockExchanges

Mr. Farrukh Hussain Sheikh,Director

Auditors: Ford, Rhodes, Robson, Morrow.

Ms. Etrat H. Rizci, Director LegalAdvisors

Mohsin Tayyabally & Co.


Profit before taxation of the Corporation was Rs. 95 million during the year 2000

as compared to Rs. 120 million in the previous year. Total income earned during

the year dropped from Rs. 698 million to Rs. 633 million depicting a fall of 10.3%.

The reduction in lease revenue is mainly due to decline in disbursements in

previous years. Cost of borrowings decreased to Rs. 399 million from Rs. 447

million in the previous year, due to availability of comparatively cheaper funds and

efficient handling of short-term borrowings. Administrative and operating

expenses were Rs. 99 million as against Rs. 87 million in 1999, which mainly

reflects the incidence of inflation. The Corporation made provisions of Rs. 57



32/46

million against potential lease losses as compared to Rs. 29 million provided last

year. Provision for diminution of investment witnessed a reversal of Rs. 17

million as against increase of Rs. 16 million in 1999, due to appreciation in the

market value of the portfolio.

4.9 BALANCE SHEET




359.42 359.42 377.40 377.40 377.40


780.00 828.24 822.55 856.00 863.08

Total equity 1139.42

1187.66 1199.95 1233.40 1240.48

LIABILITIESDeferred liabilities 3.28 4.42 4.29 5.32 7.48Long Term Loan 738.15 1280.22 1304.53 1513.58 1274.70Certificates of Investment 221.53 139.96 105.81 174.92 180.33Lease Key Money 466.99 531.97 555.60 535.83 295.60Short-term loan and runningfinance

734.31 423.52 446.98 479.20 311.83

Short-term COIs 1533.92

1436.45 984.57 540.09 453.99

Other current liabilities 434.37 307.00 321.97 322.58 853.30Total Current Liabilities 2702.6

02485.69 2187.78 2001.96 1619.12


5311.98 4923.70 4804.92 3377.23

ASSETSTangible Fixed assets 56.31 60.10 59.08 60.59 60.00Net Investment in LeaseFinance

2904.72

2427.19 2155.54 2183.44 2127.36


1066.28

1339.80 1494.77 1599.33 1721.13

Short term finance 293.61 248.85 59.35 21.01 53.90Investments 353.87 422.70 150.11 125.92 134.25Other current assets 277.13 320.26 316.48 210.50 128.57

Cash and Bank Balance 136.31 81.37 73.27 104.45 86.81Total Current assets 2127.2

02479.68 2215.99 2163.93 2124.66


5311.98 4923.70 4804.92 4617.71

4.10 SIGNIFICANT



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RATIOSNet Working capital (Rs.) -

575.40

-6.01 28.21 161.97 505.55

Current ratio (X) 0.79 0.99 1.01 1.08 1.31Payable/Receivable &

Loans (X)

1.67 1.28 0.78 0.77 0.78


(X)

4.63 4.47 4.10 3.90 3.72

Total Financing/Net

worth (X)

3.74 3.66 3.72 3.59 3.57




34/46




Lease income 806.81 628.98 614.19 571.80 539.50Mark-up income 223.18 136.28 70.23 99.01 58.52Capital Gain on Investment 33.42 8.56 0.47 - 11.63Non-Interest Income 0.00 0.00 32.18 1.13 -Other income 51.63 11.12 22.38 26.06 22.86

Total Income 1115.04

784.94 739.45 698.00 632.51

EXPENSESOperating expenses 113.09 82.36 85.31 86.95 99.32Financial expenses 641.44 517.04 458.11 446.63 398.59Prov. For Potential Lease

Losses/Loan

34.50 55.47 110.76 28.64 56.83

Prov. For Dimn. In value ofInvestment

59.39 0.41 7.24 15.73 (17.37)


Net Profit 211.62 102.16 50.03 90.05 73.14

APPROPRIATIONDividend 107.83 53.91 37.74 56.61 66.04Reserve for Bonus Shares 0.00 17.98 0.00 - -Statutory Reserve 1058 5.11 2.50 4.50 3.66Other Reserves 90.00 28.00 10.00 29.00 4.00

4.12 SIGNIFICANT

RATIOSRevenue per Share (Rs.) 15.51 10.92 9.80 9.25 8.38Financial Charges/Total

exp. (%)

76.00 75.77 66.44 83.70 74.17

Net profit margin (%) 18.98 13.02 6.77 12.90 11.56Earning per share (Rs.) 2.94 1.42 0.66 1.19 0.97Earning per face value

(%)

58.80 28.40 13.26 23.86 19.40

Return on Investment

(%)

4.01 1.92 1.03 1.90 1.58

Return on equity (%) 18.57 8.60 4.17 7.30 5.89Dividend per share (%) 1.50 0.75 0.50 0.75 0.87Stock Dividend (%) 0.00 5.00 00.00 0.00 -



35/46

4.13 ORIX LEASING PAKISTAN LIMITED - COMPANY INFORMATION

ORIX Leasing Pakistan Limited is a subsidiary of ORIX Corporation, the largest

leasing company in Japan and a leading diversified financial services provider

internationally. ORIX Corporation an asset base in excess of US$ 50 billion and

an international presence in 20 Countries.

The Company is mainly involved in leasing of industrial machinery, office

equipment, commercial vehicles and passenger cars. The Companys strength lies

in a large and diversified customer base with special emphasis on small to medium

size entities in all sectors. The companys Consumer Finance and Auto Lease

Departments cater to the needs of individuals for household appliances and saloon

cars. The companys operating lease division provides generators, communication

equipment and vehicles on short-term rentals.

Board of Directors CommencedBusinesson

January 1, 1987

Mr. Yoshihiko Miyauchi,Chairman

HeadOffice

Overseas Investors, Chamber of CommerceBuilding, Karachi

Mr. Shakirullah Durrani, ViceChairman

Tel: 111-242-424, 2426020

Mr. Takeshi Sato, Director Fax 2425897Masatoshi Yokota, Director Offices at: Karachi, Lahore, Islamabad, Sailkot, Faisalabad,

Peshawar, Hyderabad and Multan

Mr. MohammadMazharuddin, Director

StaffStrength

224

Mr. Shaheen Amin, Director Listed at: Karachi, Lahore and Islamabad Stock ExchangtesMr. Mohammad QamarulHaq, Director

Auditors: Sidat Hyder Qamar & Co.

Mr. Humayun Murad, CEO LegalAdvisors

Mansoor Ahmad Khan & Co.,


ORIX Leasing achieved good growth during the year with new business volume at

Rs. 2.7 billion showing an improvement of 33% over the previous years volume.

The company provided financial assistance to 1,436 businesses. As at June 30,



36/46

2000, the company had assets of Rs. 6.1 billion and net worth of Rs. 926.3 million.

For the year ended June 30, 2000 revenues rose to Rs. 980 million (1999: Rs. 905

million) and profit before tax increased to Rs. 156 million (1999: Rs. 150 million)

enabling the company to maintain cash dividend at 40%.

The Pakistan Credit Rating Agency maintained the companys credit rating at A1+

and AA- for short and long term debt respectively on the basis of accounts for the

year ended June 30, 2000. These are the highest credit ratings achieved by a

leasing company in Pakistan.

4.15 BALANCE SHEET




161.11 161.11 161.11 201.39 201.39


524.76 588.08 659.75 669.38 724.90

Total equity 685.87 749.19 820.86 870.70 926.29

LIABILITIESDeferred liabilities 5.28 7.66 10.60 13.54 17.49Long Term Loan 1386.7

0

1948.10 1699.67 1983.88 1948.53

Certificates of Investment 7.79 6.94 7.38 11.53 223.68Long term deposits 394.11 505.55 576.22 679.38 911.38Current maturity of longterm loans

518.66 485.05 718.76 1057.56 974.94

Short-term loan and runningfinance

505.75 288.45 53.36 4.87 241.67

Short-term COIs 124.77 180.79 325.69 134.59 402.92Other current liabilities 371.65 384.43 378.00 472.10 464.25

Total Current Liabilities 1522.83

1338.72 1475.80 1669.12 2083.78


4556.16 4590.53 5228.22 6111.15

ASSETSAssets in own use 36.73 42.38 39.33 34.45 59.30Operating lease assets 0.00 0.00 45.88 113.38 151.65Net Investment in LeaseFinance

1940.47

2493.90 2176.58 2371.44 2878.84


1717.43

1608.40 1854.34 2020.00 2285.31

Short term finance 14.58 14.59 14.50 14.50 24.55Investments 37.72 22.50 10.00 8.77 9.33



37/46

Other current assets 67.57 63.68 58.66 177.24 240.16Cash and Bank Balance 73.96 125.09 211.15 159.18 112.66

Total Current assets 1911.26

1834.26 2148.64 2379.69 2672.01


4556.16 4590.53 5228.22 6111.15

4.16 SIGNIFICANTRATIOS

Net Working capital (Rs.) 388.43 495.54 672.84 710.58 588.23Current ratio (X) 1.26 1.37 1.46 1.43 1.28Total Financing/Net

worth (X)

5.33 5.48 4.91 5.04 5.58


(X)

5.84 6.08 5.59 6.00 6.60





Lease income 631.29 733.50 757.45 762.71 843.02Operating Lease Income - - 9.10 35.61 53.50Markup income 16.81 29.39 57.84 61.81 47.43Other fees and income 8.32 18.89 13.64 44.99 33.80Other income 0.56 0.45 1.05 0.00 2.25

Total Income 656.98 782.23 839.08 905.12 980.00

EXPENSESOperating expenses 95.50 115.60 140.08 171.64 221.92Financial expenses 362.48 474.36 536.99 551.14 562.26Prov. For Pot. LeaseLosses/Loan

32.47 35.17 28.12 31.88 39.72


Net Profit 148.53 132.10 103.89 130.46 130.10

APPROPRIATIONDividend 72.50 72.50 32.22 80.55 80.55Reserve for Bonus Shares 0.00 0.00 40.28 0.00 0.00Capital Reserve for deferred

tax

0.00 0.00 0.00 48.70 34.08

Other Reserves 75.00 65.00 30.00 7.00 7.00

4.18 SIGNIFICANT

RATIOSRevenue per Share (Rs.) 40.78 48.55 52.08 44.94 48.66Financial Charges/Total 73.91 75.88 76.15 73.03 68.24



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exp. (%)Net profit margin (%) 22.61 16.89 12.38 14.41 13.89Earning per share (Rs.) 9.22 8.20 5.16 6.48 6.76Return on Assets (%) 4.22 3.09 2.27 2.66 2.40Return on equity (%) 23.64 18.41 13.23 15.42 15.14Dividend per share (%) 4.50 4.50 2.00 4.00 4.00Stock Dividend (%) 0.00 0.00 25.00 0.00 0.00



39/46

CONCLUSION

Securities and Exchange Commission of Pakistan

The establishment of Securities and Exchange Commission of Pakistan is, no

doubt, an important milestone in the evolution of the regulatory framework for the

capital market. It has been established keeping in view the dire needs of our

corporate sector under a capital market development programme of Asian

Development Bank.

The Commission is functioning under a well-defined organizational structure with

reporting relationships and functional profiles. It is planning to up-grade its

facilities like premises, equipment etc; skills development and financial plans.

Securities and Exchange Policy Board is also functioning well with the main

objective to provide guidance to the Commission in all matters relating to its

functions and to formulate policies in consultation with the Commission.

Commission is financial autonomous and its main source of income is fees,

penalties or other changes levied under the Act and the Ordinances being

administered by it.

During the year ended June 30, 2000 its income was Rs. 150.15 million and

expenditure was Rs. 67.17 million. Its surplus of income over expenditure was

Rs. 82.98 million that is a sign of sound financial position. (Balance Sheet and

income statement are annexed).

The Commission after its establishment has declared surplus 21 officers and 59

staff members pursuant to the statutory provisions to determine the suitability of

the employees and upgrading the professional expertise. Commission has also

inducted 39 new officers to improve its ability to discharge its responsibilities.

This change is also helpful to achieve its objectives.



40/46

The Commission is facing problem in its monitoring procedures by the cause of

inherent delay in manual handling and public is facing problem in getting quick

and timely service. This is due to lack of an electronic communication system

with the stock exchanges and its Company Registration Offices. The Commission

is planning to solve this problems through a carefully designed automation

programme.

Leasing Industry

During the last few years, leasing has evolved as an important financing tool,

especially for the small and medium enterprises. With economic progress being

driven by small and medium enterprises sector growth, the leasing sector is

indeed playing an important role in the process of economic revival of the

country.

The figures of the leasing industry indicate some what better results in 2000 as

compared to 1999 as the net profit as the net profit showed an increasing trend for

the first time in the five years period and the total investment in lease finance

grew by Rs. 1.2 billion as against 928 million in the previous years.

The key ratios of the leasing industry indicate that after a difficult year in 1999,

the industry has somewhat stabilized in 2000 as the two key ratios i.e., Net Profit

Margin and Return on Equity, after showing a decline trend up till 1999 have

shown a slight increase in 2000. Net Profit Margin increased from 8.16% to 9.3%

while return on investment grew from 1.25% to 1.36%. This stabilizing trend

indicates that the efforts of the leasing industry to increase lease investments and

to recover stuck up rentals have started to bear fruit.

Payment of Dividend in the Leasing Sector is also showing an increasing trend as

in 1996 out of 30 companies, 18 companies had declared dividend (60%) and in

2000 out of 32 companies 21 companies have declared dividend (66%).



41/46

RECOMMENDATIONS


Though the Securities and Exchange Commission of Pakistan, during its infancy,

is playing its statutory role efficiently but I have seen in the Commission a

number of complaints from the passive shareholders that the companies are

earning profits but not paying dividend and due to this reason minority

shareholders are not getting the fruits of their investment. Commission in the past

also started action against these types of companies. This action has increased the

number of dividend paying companies (1996 36% and 2000 49%). But I think

it is not sufficient, it should be increased and Commission should play itsstatutory role more efficiently to safeguard the interest of minority shareholders.

This is also one of the main causes of depressed securities market in the country.

In most of our corporate sector, the active shareholders are also management of

the companies and they enjoy the benefits in the form of their salaries and perks

from the companies. The Commission should rationalize the salaries and perks

with earning of the companies by implementing code of corporate governance.

Leasing Sector

As the leasing sector is performing well as compared to other sectors, investors

have better choices in it for investment purposes.



42/46

ANNEXURES


Balance Sheet as at June 30, 2000

Fixed assets 7,993,706

Current assets

Advances, deposits, prepayments and other receivables 25,472,625

Cash and bank balances 114,830,134

140,302,759

Less current liabilities

Accrued and other liabilities 11,564,509

Net current assets 128,738,250

Net assets 136,731,956

Represented by:

The Fund

Grant received from the Government 50,000,000

Assets acquired from the dissolved CLA 1,316,511

Assets acquired from the re-appropriation of fund by the

Government 2,433,000

Surplus of income over expenditure 82,982,445

136,731,956



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Securities and Exchange Commission of PakistanIncome and Expenditure Account for the year ended June 30, 2000

Income

Fee and other recoveries 141,837,181

Income on bank deposits 8,315,862

150,153,043

Expenditure

Salaries, allowances and other benefits 42,218,352

Operating expenses 22,335,241

Assets acquired from the reappropriation of fund by the 2,414,363

Government 202,642

67,170,598

Surplus of income over expenditure transferred to the fund 82,982,445

150,153,043



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