ASKARI LEASING LIMITED

Celebrating the future

Feb 21 - 27, 2005

MANAGEMENT

Mr. Nasier Sheikh is the Chief Executive Officer of the Company. He joined Askari Leasing Ltd, on October 1, 2002. He brings with him more than thirty (30) years of experience in senior banking and management positions, with both local and foreign banks. His last position, prior to joining Askari Leasing Limited was being SEVP/Group Head of Askari Commercial Bank Ltd. His other assignments include senior banking positions with prominent bank in the Gulf and Sri Lanka.

OVERVIEW

Askari Leasing Ltd is the leading leasing company in Pakistan, with total asset base of Rs7.74 billion, and, total lease assets of Rs4.3 billion. The company is active in writing leases in fields of Consumer as well as Industrial sectors. In terms of consumer leasing, the company holds the biggest selling automobile brand name of Askar, which enjoys very broad brand recognition within the country. Exposure in Consumer Leasing stands at 62.71%. The company has a very diversified portfolio, covering all sectors of industry with highest exposure being in the transportation & Communication sector, i.e., 8.68%.

The company has 9 full fledged branches in Pakistan, in the major business centers of Karachi, Lahore, Islamabad, Rawalpindi, Faisalabad, Multan, Peshawar, Sialkot and Gujranwala. In addition, the company has representation through SBOs, or, Smaller Branch Offices, in 13 smaller cities. Thus company enjoys a country wide presence and broad brand recognition.

Askari Leasing is a market leader in technology for leasing industry. It is using a FoxPro-based system. It is connected to branches through Internet. It is in the process of converting to SQL server-based system, which will enhance the company's abilities to connect branches through wide area networks using web or other mediums.

It has a total of 147 employees. The management is young, energetic and proactive. In terms of future plans, the company is contemplating to launch House Financing, which is expected to be very well received because of the core strengths of the company. Company has made a name in customer service, quick response and pro-active management. Askari Leasing is well poised to take on new markets and products, because of its core strengths. Working in JVs, Askari Leasing can play on its strengths and capabilities. This should result in profitable organizations.

HISTORY & BACK GROUND

Askari Leasing Limited (ALL), a subsidiary of Army Welfare Trust (AWT), was incorporated in August, 1993 with an authorized share capital of Rs. 500 million and is listed on all three Stock Exchanges of the country. The company has generated enough resources to adequately finance its leasing operations, mainly by securing funds through Certificates of Investment, which is reflective of the confidence of COI holders repose in the company's management and its business potential. The company's operations are based on sound appraisal criteria & standards and are focused on quality lease business. Major areas of financing include consumer auto leasing and big ticket leasing to large local and multinational companies. Askar, the auto lease package has firmly placed the company in auto finance market. Funds have been deployed in a well diversified lease portfolio and the company is successfully playing its role in the growth of national economy.

THE GROUP

AWT was established in 1971 by the Pakistan Army, for promoting the welfare of servicing and retired personnel of the Pakistan Army and their families through a creation of income and employment generating activities. The Trust has evolved into a large business group, and is currently engage in sugar processing, real estate building, commercial banking, leasing, cement, general insurance and travel services. AWT has strong presence in Pakistani Financial sector with commercial bank, a general insurance and a leasing company. Askari Commercial Bank Limited (ACBL), with total assets exceeding Rs107 billion as at September 30, 2004, is among the leading commercial bank in private sector.

PERFORMANCE HIGHLIGHTS (2003-2004)

Askari Leasing Limited has established itself as a frontrunner in the Leasing Industry. Its 'Askar' Auto Leasing Product is well recognized brand name. It is also active in leasing of Equipment, Machinery and Consumer Durables Products. The year in study was characterized by difficult environment for the leasing industry as whole, contributed in part by the existing low interest rate regimes, lack of credit appetite in the corporate sector and very aggressive posturing by the large commercial banks in the consumer and auto lease sector. In this difficult business environment, the management of the company embarked upon the strategies to counter the unfavorable trends. Company entered into marketing alliances with vehicle manufactures to ensure prompt delivery to customers of small cars. This had the desired positive effect on the brand name Askar. In order to further diversify the portfolio to areas other than auto financing, the management also decided to enter into House Finance and Bill Discounting, for which license from SECP have already been received. Management is confident of favorable impact on disbursement as well as profitability during the year follow. Our newly launched product 'Asklife' in the meanwhile is also gaining ground slowly but gradually.

The company has managed to disburse Rs2.7 billion in its leasing business, which include a disbursement of Rs1.9 billion in auto financing. Total disbursement under the year under review showed an increase of 19.43% as compared to previous year. In addition to that, company also marketed Auto Finance business of Rs 867 million for Askari Commercial Bank Limited, a group company of AWT. During period under review our lease income reduced to Rs659.54 million as compared to Rs800.56 million for preceding year in spite of 19.43% increase in disbursement. This erosion in lease income by 17.62% can mainly be attributed to abnormal premature terminations, as well as re-pricing of existing lease, and the generation of additional business at market driven lower rates. To offset the unfavorable effect to the lease income, the management successfully implemented prudent measures to reduce the financial cost by 29.4% through repricing of the company's liabilities.

Through effective measures, the cost is reduced to Rs 526.09 million as compared to Rs745.56 million in the preceding year. The net spread of lease and investment income over financial cost has improved and the company has managed to earn pre-tax profit for the year by Rs139.44 million as compared to Rs. 140.55 million for previous year.

ACHIEVEMENTS

As a leasing institution of high visibility, the company has strong economic performance, established stable infrastructure, broad customer base and strong brand equity. Innovative, professional and customer-friendly products/services have assured the company's leading position in the leasing sector. Askari Leasing introduced the concept of auto-leasing in Pakistan, which has been recognized as an area of huge potential. Askari Leasing's auto-lease product, Askar, is very well recognized brand name and is synonymous with auto leasing in Pakistan. Similarly, Asklife, Askari Leasing's product in leasing of consumer durable products to customers has won wide recognition. Askari Leasing's focus on SME sector in Pakistan has helped small and medium enterprises in establishing themselves. Through the investment in SME sector Askari Leasing is providing an impetus to growth for the country's economy.

Askari Leasing is planning to bring out innovative products aimed at meeting the requirements of its clientele. This will include products to provide housing for middle and lower income market. In addition, Askari Leasing is also planning to bring out products that would provide for working capital needs of businesses. These products will be innovative and will provide for, the hitherto unmet requirements of customers. Askari Leasing also provides short-term and long-term Certificates of Investments at attractive profit rates, which enjoy great confidence of customers.

CREDIT RATING

In terms of the quality of assets, it has a strong portfolio, with low expected credit risk. The independent Credit Rating Agency PACRA has maintained Askari Leasing's entity rating of "A plus" for long-term and "A1" for short-term obligation based on the result of June 30, 2004. Today, Askari Leasing Limited is one of the most dynamically developing, leading leasing company in Pakistan, aimed at efficient performance and customer-tailored approach to both corporate and private clients.

FINANCIAL HIGHLIGHTS

Rs. In Million

30th June, reporting month

2000

2001

2002

2003

2004

EQUITY

Issued, Sub. & Paid up Capital

324

324

324

324

324

Reserve & Retained Earning

315

379

431

528

450

Total Equity

639

703

755

852

774

LIABILITIES

Long Term Liabilities

4,690

5,328

5,354

5,583

4,602

Short Term Liabilities

1,892

1,775

2,318

1,823

2,605

Total Liabilities

7,221

7,806

8,427

7,406

7,207

ASSETS

Tangible Fix Assets

35

94

55

46

50

Net Investment in Lease Finance

3,361

3,885

4,322

4,294

4,300

Total Current Assets

3,812

3,813

3,992

3,867

3,584

Total Assets

7,221

7806

8,427

8,258

7,982

INCOME STATEMENT

Lease Income

767

989

929

800

659

Total income

993

1,172

1,195

1,056

832

Operating Expenses

67

96

130

112

141

Financial Expenses

795

938

951

745

526

Profit Before Taxation

100

77

21

141

139

Net Profit

91

64

21

117

109