annual report june 2017 - sindh leasing company ltd. · 11/1/2017 · mr. anis khan mr. muhammad...

Annual Report June 2017 SINDH EL ASING

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VisionTo catalyze the untapped potential of theeconomy through ease of access to financesacross sectors – ranging from the agro-basedto industrial – leading the country towards

prosperity.

MissionPrefrably to provide lease finance and other productsa n d s e r v i c e s , t a i l o r m a d e t o s u i t t h erequirements of the customer, be it a smallf a r m e r , s m a l l a n d m e d i u m s i z eentrepreneur(s) or enterprise(s) or womanowned business, for sustainable and long term

financial solutions.

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Corporate Information

Board of Directors

- Non-Executive Director- Non-Executive Director

- Executive Director

- Independent Non-Executive Director- Independent Non-Executive Director

CFO & Company Secretary

Mr. Rehan Anjum

Audit Committee

Registered Office

Mrs.Masooma HussainMr. Anis KhanMr. Muhammad Aftab Alam - Chairman

- Member - Member

Third Floor, Imperial Court BuildingDr. Ziauddin Ahmed Road, Karachi

Banker

Sindh Bank Limited

Syed Ali Murtaza KazmiMr. Muhammad Bilal SheikhMr. Naim FarooquiSyed Hassan Naqvi

Chairman -

Chief Executive-

Auditors

BDO Ebrahim & Co.Chartered Accountants

nd2 Floor, Block C Lakson Square Building-1Sarwar Shaheed Road Karachi.

Web: www.sindhleasingltd.com

Bank Islami Pakistan Limited

Mr. Muhammad Bilal Sheikh

Syed Hassan NaqviMrs.Masooma Hussain

Mr. Muhammad Aftab Alam

Syed Ali Murtaza Kazmi

Mr. Anis Khan

Mr. Naim Farooqui

Human Resource Committee

- Chairman - Member

-- MemberMember

Member

United Bank Limited

- Non-Executive Director

Branch Offices

Larkana / Naudero BranchRaza Shah Mohalla, VIP Road,Larkana

Hyderabad Branch

Legal Advisor

Muhammad Nadeem Khan ndSuite # 28-A, 2 Floor

Fareed Chamber Abdullah Haroon Road Karachi

Plot No. 11Faraz Villas Housing SchemeTaluka QasimabadHyderabad

Islamabad Branch

Select One Plaza, F-11 Markaz, Sindh Bank Ltd, Islamabad

Lahore Branch

2nd Floor, Plot No. S-19, R-30Shahrah-e-Quaid-e-AzamLahore

- Independent Non-Executive Director

NRSP Microfinance Bank


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Table of Contents

Directors’ Report 05

Statement of Compliance with the Public Sector Companies (Corporate Governance) Rules, 2013 12

16

Notice of Annual General Meeting 04

Auditors’ Report to the Members

Balance Sheet

Profit and Loss Account

Cash Flow Statement

Statement of Changes in Equity

Notes to the Financial Statements

47Form of Proxy

Statement of Comprehensive Income

Review Report to the members on Statement of Compliance with Public Sector Companies (Corporate Governance) Rules, 2013

18

19

21

22

23

20

24

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Notice of Annual General Meeting

Notice is hereby given that the Fourth Annual General Meeting of Sindh Leasing Company Limited (“Company”) will be held on October 24,

2017 at 12:00 Noon at the Registered office of the Company, Third Floor, Imperial Court Building, Dr. Ziauddin Ahmed Road, Karachi, to

transact the following business:

1. To confirm the minutes of the Third Annual General Meeting held on October 20, 2016.

2. To receive, consider and adopt the Audited Accounts of the Company for the year ended June 30, 2017, along with the Directors’ and

Auditor's Reports thereon.

3. To approve the re-appointment of external auditors of the Company for the year ending June 30, 2018 and fix their remuneration.

4. Any other business with the permission of the Chair.

By Order of the Board

Rehan Anjum

Company Secretary

Karachi: August 16, 2017


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Director’s Report

On behalf of the Board of Directors of Sindh Leasing Company Limited (SLCL, the Company), it is my pleasure to present the Fourth Annual Audited Financial Statements for the year ended June 30, 2017.

Review of Business and Operation

The Company earned a gross revenue of Rs. 224.16 million during the year under review against a gross revenue of Rs. 125.63 million in the corresponding period last year. Total administrative expenses and provisions for the year amounted to Rs 136.75 million against Rs 62.51 million last year. Profit before tax for the current year is Rs 56.85 million.

While the net revenue of SLCL increased to Rs. 224.16 million during the period under review from Rs 125.63 million in the corresponding period last year so did the operating expenses to account for increased marketing and development of infrastructure expenses. General provisions amounting to Rs. 6.215 million, due to enhanced disbursements, increased by about 63% over the corresponding period last year.

Disbursement in the current year of both leases and loans amounting to Rs 1,338.94 million is an impressive growth. Increase in the net revenue by about 77% over the last year has mainly been on account of higher disbursement in finance leases and loans and investments in high yielding instruments of surplus funds available as a result of additional equity of Rs. 1.0 Billion provided by GOS.

Our lease and loan portfolio grew by 69.24 % despite declining 30 proposals amounting to Rs 1,245.81 million. This growth shows effective implementation of business strategy where funds are utilized in the best possible manner, with a zero percent overdue as a result of a robust customer screening process.

Balance Sheet

As at June 30,

2017

As at June 30,

2016

---------- (PKR Million) ---------

Paid -up capital

Total equity

2,000.00 1,000.00

2,1 48. 76 1,104.00

Fixed Assets 31. 53 27.49

Net investment in finance leases 1,384 .84 852.04

Auto and Working capital loans 468. 56 243.13

Profit & Loss

For the year

Ended June 30,

2017

For the year

Ended June 30,

2016

Revenue – Net 193. 59 114.54

Administrative expenses 130. 53 58.71

General Provision – Net 6.22 3.81

Profit before provision & tax 63. 06 55.83

Operating Results

Board of Directors

During the year under review Syed Saeed Reza and Mr. Imran Malik submitted their resignations from the Board as Directors of the Company. The Board wishes to place on record its appreciation for their valuable contribution in the Company. The Board has appointed Mr. Anis Khan and nominated Mrs. Masooma Hussain (subject to SECP approval) as Directors of Sindh Leasing Company Limited.

In order to comply with subsection (2) of Rule 3 of the Public sector companies (Corporate Governance) Rules 2013 which requires the majority of the members of the Board of Director to be independent, Syed Shahnawaz Nadir Shah tendered his resignation from the Board and Mr. Muhammad Aftab Alam was co-opted as independent Director.

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Attendance by each director was as follows:

S.No Name of DirectorNo. of meeting(s) held

during the year

1 Syed Saeed Reza ** 4 1*

2 Syed Shahnawaz Nadir shah ** 4 3*

3 Mr. Ali Murtaza Kazmi 4 4

4 Mr. Muhammad Aftab Alam 4 1*

5 Mr. Anis Khan 4 0

* Leave of absence was granted to Directors who could not attend the Board meeting.

* * Members who have tendered their resignations.

Pattern of Shareholding

No of

Shareholders

Shareholding

From To

No of Shares

Held Percentage

1

1 99,999,994

199,999,993

2 00,000,000

199,999,993

7

1

7

8 Total 200,000,000

99.999993

0.000007

100

meeting(s)

Total no. of

attended

S.No Name of Director

No. of meeting(s) Total no. of

meeting(s)

attended

1 5 5

2 5 1*

3 5 4*

4 5 1*

5 5 4*

6 5 4*

7 5 5

8 5 3*

9 5 1*

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Muhammad Bilal Sheikh

Mr. Sohail Rajput **

Syed Shahnawaz Nadir shah**

Syed Saeed Reza**

Muhammad Imran Malik**

Mr. Ali Murtaza Kazmi

Mr. M. Naim uddin Farooqui

Syed Hassan Naqvi

Mr. Muhammad Aftab Alam

M r. Anis Khan 5 0*

* Leave of absence was granted to Directors who could not attend the Board meeting.

* * Directors who have tendered their resignations.

heldduring the

Tenor in the year

Audit Committee’s Meetings

During the year under review, four meetings of the Audit committee of SLCL were held. Attendance by each director was as follows:

The pattern of shareholding as at June 30, 2017 is as follows:

Corporate and Financial Reporting Framework

This part of the Directors’ report to shareholders is given as required under section 236 of the Companies Ordinance 1984:

1. The financial statements prepared by the management of Sindh Leasing Company Limited present fairly its state of affairs, the result of its operations, cash flows and changes in equity.

Directors' Meeting

During the year under review, five meetings of the Board of Directors of SLCL were held. Attendance by each director was as follows:


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2. Proper books of account of Sindh Leasing Company Limited have been maintained.

3. Appropriate accounting policies have been consistently applied in preparation of financial statements. Accounting estimates are based on reasonable and prudent judgment.

4. International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements.

5. The system of internal control is sound in design and has been effectively implemented and monitored.

6. There are no significant doubts upon the ability of Sindh Leasing Company Limited to continue as a going concern.

7. The appointment of Chairman and other members of Board and the terms of their appointment along with the Remuneration policy adopted are in the best interests of the Public Sector Company as well as in line with the best practices.

External Auditors

The Audit Committee has recommended the name of M/S BDO Ebrahim & Co., Chartered Accountants as external Auditors of the Company for the year ending June 30, 2018. The Board of Directors, on the recommendation of the Audit Committee has proposed the name of retiring auditors BDO Ebrahim & Co., Chartered Accountants as external Auditors for the next term. The retiring auditors M/s. BDO Ebrahim & Co., Chartered Accountants, being eligible, offer themselves for re-appointment in the forthcoming Annual General Meeting.

Key Operating and Financial Data

Key operating and financial data of last four years as annexed to the Annual Report.

Internal Control and Compliance

The management has built and implemented internal controls to ensure accuracy and reliability of financial reporting. Review and monitoring of internal controls is an ongoing process. The internal audit function has been out sourced to Grant Thornton Anjum Rahman, Chartered Accountants who report directly to the Audit Committee.

Credit Rating

JCR-VIS Credit Rating Company Limited (JCR-VIS) has maintained the entity ratings of Sindh Leasing Company Limited (SLCL) to ‘A+’ (Single A Plus) long term and ‘A-1’ (A- One) short term. Outlook on the assigned ratings is ‘Stable’.

Dividend

The Company has not declared any dividend for the year ended June 30, 2017.

Challenges

In the absence of certificates of investments (COI) the Company would have to rely on financing from other banks including Sindh Bank Ltd. @ 1% above KIBOR (presently 6.15%) for an aggregate of 7.15%. Taking into account the intermediation cost/operating expense of around 3% would increase our cost to 10%. The reputable borrowers in the market avail bank financing @ around 2% above KIBOR which comes to 8% or so, therefore incurring 2% loss will be difficult to sustain in this competitive financial market. In an extremely difficult market where SLCL has to compete with Banks offering cut throat rates to sound customers. Increase in its capital was a logical step till it becomes eligible to raise deposits from public at acceptable rates.

Future Outlook

As a result of improved security situation in the country prospects of more foreign investment have increased. This would result in job creation and opportunity for financing assets to be used in these projects.

Considering the improved economic environment and the expertise SLCL possesses it is well poised to compete at all levels with the market considering its support by the GoS which guarantees its continued patronage in a market as volatile and competitive as this.

The new leadership in the provincial government is likely to expedite implementation of Government projects resulting in trickling down of economic activity and creation of employment opportunities. The Management’s thrust to reach out to Corporate Sector and individuals through aggressive marketing including publication of Advertisements would add to the visibility of the company.

Acknowledgements

The Board acknowledges the support of the sponsors, i,e the Government of Sindh (GoS) and its valued customers who have reposed confidence in the Company. It is hoped that the Company would continue to enjoy their patronage and support. I would also like to place on record appreciation for the guidance and support provided by the Securities and Exchange Commission of Pakistan. Acknowledgements are also for the committed staff without whose unwavering dedication and support this Company could not have achieved the growth as highlighted above.

Muhammad Bilal Sheikh Chief ExecutiveAugust 16, 2017

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11

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�ا� �ا �ں �۔�� ل � �� ر� �ے اور � �رت �ھ �� ر� � �� م �ں � �� ر �� ھ �ر� � �� ر� � �� د� � ۔� � اس � � �� د اور اس � �ر� � ��

�� ذ � �ى د�� ا��ات � � � �� وع �ں � اور روز �ر � �ا� �ا �ں �� دت �ز��دہ ��ت � � �ر� � �و�-ا�� زورا� �ر�� ر� �ل ا�رات � ا�� ذر� � ا� ��د� �� ے �۔ ��

ا�ر �� ر� � � � ا� ا��ز ، �ر� آف �ھ، اور �ز � ��رز � �� ا� � � ا�ں � � � دو��رہ ا�د �۔ � ا� ر� �� ان � �� اور �� رى ر� �۔

� � �� ًا� ا� � آف ��ن � �� وا� � � � �ا� �� اس ��ت � ر�رڈ � �� ں۔ ا� �ا � � � ��ل � اور �� ا�اف �� ورى � � � �د � � �

� � ��رہ �� اس � �� ۔ �

� �ل �� ا�� آ��

۱۶ا� 201۷

12


Statement of Compliance with the Public Sector Companies (Corporate Governance) Rules, 2013

I. This statement is being presented to comply with the Public Sector Companies (Corporate Governance) Rules, 2013 (hereinafter called “the Rules’) issued for the purpose of establishing a framework of good governance, whereby a public sector company is managed in compliance with the best practice of public sector governance.

II. The company has complied with the provisions of the Rules in the following manner:

S. No. Provision of the RulesRule No.

Y N

Tick the relevant box

1.The independent directors meet the criteria of independence, as defined under the Rules.

2(d) √

2.

The Board has the requisite percentage of independent directors. At present the board includes :

Category NamesDate of

appointment

Independent Directors

1. Mr. Muhammad Aftab Alam

2. Mr. Ali Murtaza Kazmi

3.Mr. Anis Khan

April 27, 2017

November 14 , 2014

Feb 14, 2017

Executive Directors

Mr. Mohammad Bilal Sheikh July 11 , 2016

Non-Executive Directors

1.Mr.Hasan Naqvi

2.Naim Farooqui

August 15, 2016November 14,

2014

3(2)

√

3.Any casual vacancy occurring on the board was filled up by the directors within ninety days .

3(4) √

4.The directors have confirmed that none of them is serving as a director on more than five public sector companies and listed companies simultaneously, except their subsidiaries.

3(5) √*

5.The appointing authorities have applied the fit and proper criteria given in the Annexure in making nominations of the persons for election as board members under the provisions of the Ordinance.

3(7) √

6.The chairman of the board is working separately from the chief executive of the Company.

4(1) √

7.The chairman has been elected from amongst the independent directors.

4(4) √

8.The Board has evaluated the candidates for the position of the chief executive on the basis of the fit and proper criteria as well as the guidelines specified by the commission.

5(2) √

9.

(a) The company has prepared a “Code of Conduct ” and has ensured that appropriate steps have been taken to disseminate it throughout the company along with its supporting policies and procedures, including posting the same on the company’s website. (www.sindhleasingltd.com)

(b) The Board has set in place adequate systems and controls for the identification and redressal of grievances arising from unethical practices.

5(4) √

10.The Board has established a system of sound internal control, to ensure

5(5) √


13

11.5(5)(b)

(ii)√

12.5(5)(b)

(vi)√

13.5(5)(c)

(ii)

√

14.5(5)(c)

(iii)√

15. 5(6) √

16. 5(8) N/A

17.

6(1)

6(2)

6(3)

√

18.

8 √

19. 9 √

20. 10 √

21. 11 √

22.

compliance with the fundamental principles of probity and propriety; objectivity, integrity and honesty; and relationship with the stakeholder, in the manner prescribed in the Rules.

The Board has developed and enforced an appropriate conflict of interest policy to lay down circumstancesor considerations when a person may be deemed to have actual or potential conflict of interests, and the procedure for disclosing such interest.

The Board has developed and implemented a policy on anticorruption to minimize actual or perceived corruption in the company.

(a) The Board has ensured equality of opportunity by establishing open and fair procedures for making appointments and for determining terms and conditions of service.

(b) A Committee has been formed to investigating deviations from the company’s code of conduct.

The Board has ensured compliance with the law as well as the company’s internal rules and procedures relating to public procurement, tender regulations, and purchasing and technical standards, when dealing with suppliers of goods and services.

The Board has developed a vision or mission statement, corporate strategy and significant policies of the company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained.

The Board has quantified the outlay of any action in respect of any service delivered or goods sold by the Company as a public service obligation, and have submitted its request for appropriate compensation to the Government for consideration.

(a) The Board has met at least four times during the year.

(b) Written notices of the board meetings, along with agenda and working papers, were circulated at least seven days before the meetings.

(c) The minutes of the meetings were appropriately recorded and circulated.

The Board has carried out performance evaluation of its members, includingthe chairman and chief executive, on the basis of a process, based on specified criteria, developed by it. The board has also monitored and assessed the performance of senior management on annual basis.

The Board has reviewed and approved the related party transactions placed before it after recommendations of the audit committee. A party wise record of transactions entered into with the related parties during the year has been maintained.

The Board has approved the profit and loss account for, and balance sheet as at the end of the first second and third quarter of the year as well as the financial year end, and has placed the annual financial statements on the company’s website. Monthly accounts were also prepared and circulated amongst the board members.

All the board members underwent an orientation course arranged by the company annually to apprise them of the material developments and information as specified in the Rules.

(a) The Board has formed the requisite committee, as specified in the Rules.

(b) The Committees were provided with written term of reference defining their duties, authority and composition.

(c) The minutes of the meetings of the committee were circulated to all the

12 √

14


board members.(d) The committees were chaired by the following non-executive directors:

Committee Number of Members

Name of Chair

Audit Committee Three Mohd. Aftab AlamRisk Management Committee

Two Ali Murtaza Kazmi

Human Resources Committee

Three Syed Hasan Naqvi

Procurement Committee Three Anis KhanNomination Committee Three Ali Murtaza Kazmi

23.The Board has approved appointment of Chief Financial Officer, Company Secretary and Chief Internal Auditor, with their remuneration and terms and conditions of employment, and as per their prescribed qualifications.

13/14 √

24.The company has adopted International Financial Reporting Standards notified by the Commission under clause (i) of sub-section (3) of section 234 of the Ordinance.

16 √

25.The directors’ report for this year has been prepared in compliance with the requirements of the Ordinance and the Rules and fully described the salient matters required to be disclosed.

17 √

26. The directors, CEO and executives do not hold any interest in the shares of the company other than that disclosed in the pattern of shareholding.

18 √

27.A formal and transaction procedure for fixing the remuneration packages of individual directors has been set in place. The annual report of the company contains criteria and details of remuneration of each director.

19 √

28. The financial statements of the company were duly endorsed by the chief executive and chief financial officer, before approval of the board.

20 √

29.

The Board has formed an audit committee, with defined and written terms of reference, and having the following members:

Name of member CategoryProfessional background

Aftab Alam Independent Chartered Accountant

Ali Murtaza Kazmi Independent Lawyer Anis Khan Independent Marketing Specialist

The Chief executive and chairman of the Board are not members of the audit committee.

21√

30.The Board has set up and effective internal audit function, which has an audit charter, duly approved by the committee, and which worked in accordance with the applicable standards.

22 √

31. The Company has appointed its external auditors in line with the requirements envisaged under the Rules.

23 √

32.The external auditors of the company have confirmed that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guideline on Code of Ethics as applicable in Pakistan.

23(4) √

33.The external auditors have not been appointed to provide non-audit services and the auditors have confirmed that they have observed applicable guideline issued by IFAC in this regard.

23(5) √

34. The Company has complied with all the corporate and financial reporting requirements of the Rules.

√

√ * Not applicable for Government Nominee Director.

____________________

Muhammad Bilal Sheikh

Chief Executive Officer


15

Explanation for Non-Compliance with thePublic Sector Companies (Corporate Governance) Rules, 2013

We confirm that all other material requirements envisaged in the Rules have been complied with except for the following, toward which reasonable progress is being made by the Company to seek compliance by the end of June 30, 2017:

S.NoRule/sub-rule

no.Reasons for non-compliance Future course of action

1. Rule 21

Only in one Board meeting where the Chairman of the

Board has resigned, member of Audit committee chair

the board meeting as independent director

Board has appointed another member of Audit

committee and now the Chairman of the Board

is not a member of Audit Committee

16


Review Report to the Members on Statement of Compliance with thePublic Sector Companies (Corporate Government) Rules, 2013

Place: Karachi

Dated: August 16, 2017CHARTERED ACCOUNTANTS

Engagement Partner: Mr. Zulfikar Ali Causer

We have reviewed the Statement of Compliance with the Public Sector Companies (Corporate Governance) Rules 2013

(the Rules) for the year ended June 30, 2017 prepared by the Board of Directors of Sindh Leasing Company Limited to

comply with the provisions of the Rules.

The responsibility for compliance with the Rules is that of the Board of Directors of the Company. Our responsibility is to review, to the

extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Company's

compliance with the provisions of the Rules and report if it does not and to highlight any non-compliance with the requirements of the

Rules. A review is limited primarily to inquiries of the Company's personnel and review of various documents prepared by the Company

to comply with the Rules.

As a part of our audit of the financial statements we are required to obtain an understanding of the accounting and internal control

systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board of

Directors' statement on internal control covers all risks and controls or to form an opinion on the effectiveness of such internal controls,

the Company's corporate governance procedures and risks.

The Rules requires the Company to place before the Audit Committee, and upon recommendation of the Audit Committee, place before

the Board of Directors for their review and approval its related party transactions distinguishing between transactions carried out on

terms equivalent to those that prevail in arm's length transactions and transactions which are not executed at arm's length price and

recording proper justification for using such alternate pricing mechanism. We are only required and have ensured compliance of this

requirement to the extent of the approval of the related party transactions by the Board of Directors upon recommendation of the Audit

Committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arm's

length price or not.

Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does not

appropriately reflect the Company’s compliance, in all material aspects with the Public Sector Companies (Corporate Governance)

Rules 2013, as applicable to the Company for the year ended June 30, 2017.

Further, we highlight below instance of non-compliance with the requirements of the Rules reflected in the paragraph 29, where these

are stated in the Statement of Compliance.

2nd Floor, Block C Lakson Square Building-1Sarwar Shaheed Road Karachi.

S.No. Reference Clause description 1. 21 Rule The Chairman of Board of Director is a member of the Audit Committee


17

Financial Highlights

(Rs. in million)

2014 2015 2016 2017

Operational Results

Gross Revenues 50.32 100.62 125.63 224.16

Financial Charges 0.00 0.85 11.09 30.57

Gross Margin 50.32 70.25 114.54 193.59

Profit Before Taxation 39.77 46.38 52.03 56.85

Profit After Taxation 27.04 32.71 44.25 44.75

Balance Sheet

Net Investment in Finance Leases 40.00 444.19 852.04 983.85

Shareholders' Equity 1,000.00 1,000.00 1,000.00 2,000.00

Total Liabilities 23.93 182.69 413.34 910.55

Total Assets 1,050.96 1,242.44 1,517.35 3,059.31

Equipments7%

Machinery70%

Vehicles23%

Year 2016-17

Equipment

Vehicles

0

25

50

75

100

2014 2015 2016 2017

27.04 32.71

44.25 44.75

Rs.

in m

illio

n

YEARS

Profit After Taxation

0

25

50

75

100

2014 2015 2016 2017

39.7746.38

52.0356.85

Rs.

in m

illio

n

YEARS

Profit Before Taxation

Category-wise Lease Disbursements Rs. 699.00 Million

Equipments14%

Machinery56%

Vehicles30%

Year 2015-16

Equipment

Machinery

Vehicles

0

500

1000

1500

2014 2015 2016 2017

40.00

444.19

852.04

983.85

Rs.

in m

illio

n

YEARS

Net Investment in Lease Finance

Total Asset Base

0

500

1000

1500

2000

2500

2014 2015 2016 2017

1,000.00 1,000.00 1,000.00

2,000.00

Rs.

in m

illio

n

YEARS

Shareholders Equity

300

Gross Income vs Financial Cost

50.32

100.62

125.63

224.16

0.00 0.85 11.09

30.57

0

50

100

150

200

250

2014 2015 2016 2017

Rs. i

n m

illio

n

YEARS

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2014 2015 2016 2017

1,050.96 1,242.44 1,517.35

3,059.31

Rs.

in m

illio

n

YEARS

Working Capital and Auto Loans - 13.43 253.19 468.56

Machinery

Category-wise Lease Disbursements Rs. 893.17 Million

18


Auditors’ Report to the Members

We have audited the annexed Balance Sheet of Sindh Leasing Company Limited, as at June 30, 2017 and the related Profit & loss account, Statement of Comprehensive Income, Cash Flow Statement and Statement of Changes in Equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.

It is the responsibility of the company’s management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that:

a) in our opinion, proper books of accounts have been kept by the company as required by the Companies Ordinance, 1984;

b) in our opinion:

i) the Balance Sheet and profit & 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 & loss account, Statement of Comprehensive Income, Cash Flow Statement and Statement of Changes in Equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the company’s affairs as at June 30, 2016 and of the income, its comprehensive income its cash flows and changes in equity for the year then ended; and

d) In our opinion no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980).

Date: August 16, 2017

Place:Karachi

BDO Ibrahim & Co

Chartered AccountantsEngagement partner Mr. Zulfikar Ali Causer

2nd Floor, Block C Lakson Square Building-1Sarwar Shaheed Road Karachi.


19

NoteASSETS

NON-CURRENT ASSETSProperty, plant and equipment 5 31,527,292 27,484,390Intangible assets 6 490,583 974,170Net investment in finance leases 7 972,844,219 628,255,867Long term loans and advances 8 16,162,371 23,431,856Long term deposits 374,600

CURRENT ASSETSShort term investments 9 900,000,000 339,740,403Accrued markup 10,480,368 1,846,619Loans and advances 10 444,669,002 221,183,783Current maturity of non-current assets 11 408,724,581 225,372,027Prepayments 12 4,840,086 4,500,331Other receivables 13 1,909,700 -Cash and bank balances 14 267,170,786 44,181,433

2,037,794,523 836,824,596

TOTAL ASSETS 3,059,307,588 1,517,345,479

EQUITY AND LIABILITIES

CAPITAL AND RESERVESAuthorized share capital

2,000,000,000 1,000,000,000

Issued, subscribed and paid-up share capital 15 2,000,000,000 1,000,000,000Reserves 16 148,757,597 104,002,645

2,148,757,597 1,104,002,645NON CURRENT LIABILITIES

Long term security deposits against leases 17 278,045,053 150,951,700Long term loan 18 500,000,000 250,000,000Deferred taxation 19 - -

778,045,053 400,951,700CURRENT LIABILITIES

Trade and other payables 20 18,874,523 10,664,09917 5,221,800 -

Short term borrowings 21 82,498,269 -Markup accrued 22 21,458,211 1,369,315Taxation - net 23 4,452,135 357,720

132,504,938 12,391,134CONTINGENCIES AND COMMITMENTS 24

TOTAL EQUITY AND LIABILITIES 3,059,307,588 1,517,345,479

The annexed notes from 1 to 39 form an integral part of these financial statements.

200,000,000 (2016: 100,000,000) ordinary shares of Rs. 10/- each

Current maturity of security deposits against leases

488,6001,021,513,065 680,520,883

2017 2016

----------------Rupees----------------------

BALANCE SHEETAS AT JUNE 30, 2017

___________ ___________________Chairman Chief Executive

20


Note

INCOMEIncome from finance lease, auto loans andworking capital loans 140,057,430 88,826,015 Return on investments and deposits 25 83,005,628 36,394,167 Other income 1,100,709 405,360

224,163,767 125,625,542 EXPENSES

Finance cost 26 (30,570,708) (11,086,083)Administrative expenses 27 (130,528,171) (58,707,965)Profit before provision and taxation 63,064,888 55,831,494 Provision for potential lease losses (4,004,759) (3,194,727)Provision against working capital loans (2,285,790) (2,214,210)Provision against auto finance loans - (155,646)Reversal of provision against auto finance loans 74,849 -Workers' Welfare Fund 28 - 1,758,090Profit before taxation 56,849,188 52,025,001 Taxation 29 (12,094,236) (7,770,992)Profit for the year 44,754,952 44,254,009

Earnings per share - basic and diluted (Rupee) 30 0.26 0.44


2017 2016

----------------Rupees----------------------

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2017



21

Profit for the year 44,754,952 44,254,009

Other comprehensive income - -

Total comprehensive income for the year 44,754,952 44,254,009


2017 2016

----------------Rupees----------------------

STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED JUNE 30, 2017


22


CASH FLOW FROM OPERATING ACTIVITIESProfit before taxation 56,849,188 52,025,001Adjustment for:

Depreciation 6,929,174 5,828,478Amortization 483,587 436,833Provision for potential lease losses 4,004,759 3,194,727Provision against working capital loans 2,285,790 2,214,210Provision against auto finance loans - 155,646Reversal of provision against auto finance loans (74,849) -Gain on disposal of property, plant and equipment (540,025) -Finance cost 30,570,708 11,086,083

43,659,144 22,915,977Operating profit before working capital changes 100,508,332 74,940,978Movement in working capital

Decrease / (increase) in current assetsLong term loans and advances 652,600 (8,810,123)Long term deposits (114,000) -Prepayments (339,755) (613,072)Other receivables (1,909,700) -Accrued markup (8,633,749) 1,424,342

Increase in current liabilitiesTrade and other payables 8,210,424 158,059

(2,134,180) (7,840,794)

Cash generated from operations 98,374,152 67,100,184

Finance cost paid (10,481,812) (10,526,715)Taxes paid (7,999,821) (7,850,363)Increase in net investment in finance lease (532,797,068) (407,856,313)Increase / (decrease) in auto finance loan 7,543,137 (7,560,604)Increase in loans and advances (225,771,009) (223,397,993)Increase in security deposit against leases 132,315,153 80,701,562

(637,191,420) (576,490,426)Net cash used in operating activities (538,817,268) (509,390,242)

CASH FLOW FROM INVESTING ACTIVITIESCapital expenditure incurred - own use and intangible assets (13,254,117) (1,743,114)Proceeds from sale of property, plant and equipment 2,822,066 -Short term investments - net (560,259,597) 7,929,302

Net cash (used in) / generated from investing activities (570,691,648) 6,186,1886,186,188

CASH FLOW FROM FINANCING ACTIVITIESProceeds from long term loan 250,000,000 250,000,000Proceeds from issue of shares 1,000,000,000 -Short term borrowings 82,498,269 (95,000,000)

Net cash generated from financing activities 1,332,498,269 155,000,000Net increase / (decrease) in cash and cash equivalents 222,989,353 (348,204,054)Cash and cash equivalents at beginning of the year 44,181,433 392,385,487Cash and cash equivalents at end of the year 267,170,786 44,181,433

- -The annexed notes from 1 to 39 form an integral part of these financial statements.

2017 2016

----------------Rupees----------------------

CASH FLOW STATEMENTFOR THE YEAR ENDED JUNE 30, 2017



23

------------------------------------------------- Rupees-------------------------------------------------

Total

1,000,000,000

44,754,952--

2,148,757,597

-

44,754,952-

(22,377,476)82,490,786

1,000,000,000

---

2,000,000,000

-

--

22,377,47666,266,811

1,059,748,636

44,254,009

-

-

1,104,002,645

37,986,306

44,254,009

-

(22,127,005)

60,113,310

1,000,000,000

-

-

-

1,000,000,000

21,762,330

-

-

22,127,005

43,889,335

Revenue

reserve

Un-

profit

Capital reserveIssued,

subscribed

and paid-up

share capital

Statutory

reserveappropriated

Note

Balance as at July 1, 2015

Total comprehensive income for the year

Profit for the year

Other comprehensive income

Transfer to statutory reserve 16.1

Balance as at June 30, 2016

Transaction with owner

Shares issued during the year

Total comprehensive income for the year

Profit for the yearOther comprehensive income

Transfer to statutory reserve 16.1Balance as at June 30, 2017


STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED JUNE 30, 2017


24


FOR THE YEAR ENDED JUNE 30, 2017

NOTES TO THE FINANCIAL STATEMENTS

1. LEGAL STATUS AND NATURE OF BUSINESS

Sindh Leasing Company Limited (the Company) was incorporated in Pakistan on December 16, 2013 as an unlisted public company under the repealed Companies Ordinance, 1984. The Company was granted licence on March 27, 2014 to carry out leasing business as a Non-Banking Finance Company (NBFC) under the Non-Banking Finance Companies (Established and Regulations) Rules, 2003. The registered office of the Company is situated at 3rd Floor, Imperial Court Building, Dr. Ziauddin Ahmad Road, Karachi.

100% shares of the Company are held by the Government of Sindh.

JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned A+ and A-1 ratings to the Company for medium to long term and short term respectively. The rating has been upgraded on June 20, 2017. The license of the Company to carry out the business of leasing has been renewed and valid for a period of three years w.e.f January 24, 2017.

2. BASIS OF PREPARATION

2.1 Statement of compliance

These financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by International Accounting Standards Board (IASB) as are notified under the repealed Companies Ordinance 1984, the Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003 (the NBFC Rules), the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (the NBFC Regulations) and the directives issued by the Securities and Exchange Commission of Pakistan (SECP). In case the requirements differ, the provisions of and directives issued under the NBFC Rules, the NBFC Regulations, repealed Companies Ordinance, 1984 and the directives issued by SECP shall prevail.

The financial statements of the Company have been prepared in accordance with the provisions of the repealed Companies Ordinance, 1984 as per the directive of Securities and Exchange Commission of Pakistan issued vide Circular No. 17 dated July 20, 2017.

2.2 Basis of measurement

These financial statements have been prepared under historical cost convention except for certain financial assets and financial liabilities which have been stated at their fair values, cost or amortized cost.

These financial statements have been prepared following accrual basis of accounting except for cash flow information.

2.3 Functional and presentation currency

These financial statements are presented in Pak Rupees which is the Company's functional currency and presentation currency.

3 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS TO PUBLISHED APPROVED ACCOUNTING STANDARDS

3.1 Amendments that are effective in current year but not relevant to the Company

The Company has adopted the amendments to the following approved accounting standards as applicable in Pakistan which became effective during the year from the dates mentioned below against the respective standard:

IFRS 10

January 01, 2016

IFRS 11

January 01,

2016

IFRS 12

January 01,

2016

IAS 1

January 01,

2016

IAS 16

January 01,

2016

Effective date

(annual

periods

beginning on

Consolidated Financial Statements - Amendments

regarding application of the consolidation exception

Joint Arrangements - Amendments regarding the

accounting for acquisitions of an interest in a joint operation

Disclosure of Interests in Other Entities - Amendments

regarding the application of the consolidation exception

Presentation of Financial Statements - Amendments

resulting from the disclosure initiative

Property, Plant and Equipment - Amendments regarding the

clarification of acceptable methods of depreciation and

amortisation and amendments bringing bearer plants into

the scope of IAS 16

or after)


25

January 01,

2016

IAS 28

January 01,

2016

accounting option for investments in in subsidiaries, joint

ventures and associates in an entity's separate financial

statements

Investments in Associates and Joint Ventures -

Amendments regarding the application of the consolidation

exception

IAS 27 Separate Financial Statements (as amended in 2011) -

Amendments reinstating the equity method as an



IAS 38

January 01,

2016

IAS 41

January 01,

2016

IFRS 5

IFRS 7

IAS 19

IAS 34

Non-current Assets Held for Sale and Discontinued Operations

Financial Instruments: Disclosures

Employee Benefits

Interim Financial Reporting

Intangible Assets - Amendments regarding the clarification

of acceptable methods of depreciation and amortisation

Agriculture - Amendments bringing bearer plants into the

scope of IAS 16

Annual Improvements to IFRSs (2012 – 2014) Cycle:

Other than the amendments to standards mentioned above, there are certain annual improvements made to IFRS that became effective during the year:

Effective date

(annual

periods

beginning on

IFRS 2

January 01,

2018

IFRS 4

IFRS 10

IAS 7

January 01,

2017

IAS 12

January 01,

2017

IAS 28

January 01,

2018

Deferred

indefinitely

Deferred

indefinitely

Share-based Payment - Amendments to clarify the

classification and measurement of share-based payment

transactions

Statement of Cash Flows - Amendments resulting from the

disclosure initiative

Income Taxes - Amendments regarding the recognition of

deferred tax assets for unrealised losses

Consolidated Financial Statements - Amendments regarding

the sale or contribution of assets between an investor and its

associate or joint venture

Investmentsin Associates and Joint Ventures - Amendments

regarding the sale or contribution of assets between an

investor and its associate or joint venture

InsuranceContracts - Amendments regarding the interaction

of IFRS 4 and IFRS 9

or after)

26


IAS 40

January 01,

2018

Effective date

(annual

periods

beginning on

Investment Property - Amendments to clarify transfers or

property to, or from, investment property

3.2 Amendments not yet effective

Annual Improvements to IFRSs (2014 – 2016) Cycle:

IFRS 12

January 01,

2017

IAS 28

Disclosure of Interests in Other Entities

Investments in Associates and Joint Ventures

January 01,

2018

IFRS 1 First Time Adoption of International Financial Reporting StandardsIFRS 9 Financial Instruments

IFRS 14 Regulatory Deferral AccountsIFRS 16 Leases

IFRS 17 Insurance Contracts

3.3 Standards or interpretations not yet effective

The following new standards and interpretations have been issued by the International Accounting Standards Board (IASB), which have not been adopted locally by the Securities and Exchange Commission of Pakistan:

The effects of IFRS 16 - Leases and IFRS 9 - Financial Instruments are still being assessed, as these new standards may have a significant effect on the Company’s future financial statements.

The Company expects that the adoption of the other amendments and interpretations of the standards will not have any material impact and therefore will not affect the Company's financial statements in the period of initial application.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented unless or otherwise stated.

4.1 Property, plant and equipments

Owned assets

These are stated at cost less accumulated depreciation and impairment, if any. Depreciation is charged to income over the useful life of the asset on a systematic basis, by applying the straight line method at the rates specified in note 5 to the financial statements. In respect of additions and disposal of assets during the period, depreciation is charged from the date of acquisition and up to the date preceding the disposal respectively.

Maintenance and normal repairs are charged to profit and loss account as and when incurred. Major renewals and improvements are capitalized and assets so replaced, if any, are retired.

An item of tangible fixed assets is de-recognized upon disposal or when no future economic benefits are expected from its use or disposal. Gains or losses on disposals of fixed assets, if any, are included in income or expense respectively.

Capital work-in-progress

These are stated at cost less accumulated impairment losses, if any and represent expenditure in connection with specific assets incurred during the construction period. These are transferred to specific assets as and when assets are available for use / sale. Cost also includes applicable borrowing costs. Transfers are made to relevant operating fixed assets category as and when assets are available for use intended by the management.

The following amendments to the approved accounting standards as applicable in Pakistan would be effective from the dates mentioned below against the respective standard:

The Annual Improvements to IFRSs that are effective for annual periods beginning on or after January 01, 2017 are as follows:



or after)


27



4.2 Intangibles

These are stated at cost less accumulated amortization and impairment, if any. Amortization is charged to income over the useful life of the asset on a systematic basis by applying the straight line method.

The cost of intangible asset comprises of its purchase price and any directly attributable expenditure incurred in preparing the asset for its intended use.

4.3 Net investment in finance leases

Leases in which the Company transfers substantially all the risks and rewards incidental to the ownership of an asset to the lessees are classified as finance leases. A receivable is recognized at an amount equal to the present value of the minimum lease payments under the lease agreement, including guaranteed residual value and unamortized initial direct cost which are included in the financial statements as "net investment in finance leases".

4.4 Provision against non performing leases and other loans

Provision against non performing leases and other loans is maintained at a level which, in the judgment of management, is adequate to provide for losses on lease portfolio and other loan portfolio which can be reasonably anticipated. The provision is increased by additional charge to income and is decreased by charge offs, net of recoveries.

Calculating provision against non performing leases and other loans is subject to numerous judgments and estimates. In evaluating the adequacy of provision, management considers various factors, including the requirements of the NBFC Regulations, the nature and characteristics of the obligor, current economic conditions, credit concentrations or deterioration in pledged collateral, historical loss experience and delinquencies. Lease and other loan receivables are charged off, when in the opinion of management, the likelihood of any future collection is believed to be minimal.

4.5 Long term loans and advances

Long term loans and advances are initially recognised at cost being the fair value of consideration received together with the associated transaction costs. Subsequently, these are carried at amortised cost using the effective interest rate method. Transaction costs relating to long term loans and advances are being amortised over the period of agreement.

4.6 Financial assets

4.6.1 Classification

The Company classifies its financial assets in the following categories: loans and receivables, held to maturity, available for sale and financial assets at fair value through profit or loss. The classification depends on the purpose for which the financial assets were acquired. Management determines the appropriate classification of its financial assets at initial recognition and re-evaluates this classification on a regular basis.

a) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date which are classified as non-current assets.

b) Held-to-maturity

Held-to-maturity investments are financial assets with fixed or determinable payments and fixed maturity that the Company has a positive intent and ability to hold to maturity.

c) Financial assets at fair value through profit or loss

This category has two sub-categories, namely; financial instruments classified as held for trading, and those designated at fair value through profit or loss upon initial recognition:

i) Investments which are acquired principally for the purposes of generating profit from short term fluctuation in price or are part of the portfolio in which there is recent actual pattern of short term profit taking are classified as held for trading.

ii) Investments designated at fair value through profit or loss upon initial recognition include those group of financial assets which are managed and their performance evaluated on a fair value basis, in accordance with the investment strategy.

d) Available for sale

Available for sale financial assets are those non-derivative financial assets that are designated as available for sale or are not classified as (a) loans and receivables, (b) held to maturity investments or (c) financial assets at fair value through profit or loss.

28




4.6.2 Initial recognition and measurement

All investments are initially recognised at cost, being the fair value of the consideration given including the transaction cost associated with the investment, except in case of held for trading investments, in which case the transaction costs are charged to the income statement.

4.6.3 Subsequent measurement

Subsequent to initial recognition, financial assets designated by the management as loans and receivables, held to maturity, financial assets at fair value through profit or loss and available for sale are valued as follows:

a) Loans and receivables

Loans and receivables are carried at amortised cost.

b) Held to maturity

Subsequent to initial measurement, held to maturity investments are carried at amortised cost.

c) Financial assets at fair value through profit or loss

After initial recognition, investments are remeasured at fair value determined with reference to the period-end quoted rates. Gains or losses on re-measurement of these investments are recognised in income statement.

d) Available for sale

Investments which do not fall under the above categories and which may be sold in response to the need for liquidity or changes in market rates are classified as available-for-sale. After initial recognition, investments classified as available-for-sale are remeasured at fair value, determined with reference to the year-end quoted rates. Gains or losses on remeasurement of these investments are recognised in the equity through other comprehensive income until the investment is sold, collected or otherwise disposed-off, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in income.

4.7 Basis of valuation of investments

Fair value of the investments in units of mutual funds are determined by reference to Net Asset Value (NAV) rate notified by the Mutual Fund Association of Pakistan (MUFAP) as of the period end.

All regular way purchases and sales of investments are recognised on the trade date i.e. the date the Company commits to purchase / sell the investments.

4.8 Impairment

The carrying amount of assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indication exists then the asset's recoverable amount is estimated. Where the carrying value exceeds the estimated recoverable amount, assets are written down to their recoverable amount. The resulting impairment loss is taken to profit and loss account.

4.9 Taxation

Tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss account except to the extent that it relates to items recognized directly in equity or in other comprehensive income, in which case it is recognized in equity or other comprehensive income.

4.9.1 Current

The charge for current taxation is based on taxable income at the current rate of taxation after taking into account applicable tax credit, rebates and exemption available if any or minimum taxation at the rate of one percent of the turnover whichever is higher. However, for income covered under final tax regime, taxation is based on applicable tax rates under such regime.

4.9.2 Deferred

Deferred tax is recognized using the balance sheet liability method on all temporary differences between the carrying amount of assets and liabilities used for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax is charged or credited to the profit and loss account except deferred tax, if any, on revaluation of investments which is recognized in other comprehensive income.


29



4.10 Employees benefits

The Company's employees benefits comprise of provident fund and gratuity scheme for eligible employees.

a) Defined benefit plan (Gratuity Fund)

The Company has a gratuity scheme for all its confirmed employees who attain the minimum qualification period for entitlement to gratuity. The Gratuity Fund is maintained by a trust created and duly approved. The employees are eligible to one basic pay per year. All outgoing employees are entitled for gratuity excluding those who have been dismissed by the Company.

b) Defined contribution plan (Provident Fund)

The Company contributes to contributory provident fund scheme for all its permanent employees. Equal monthly contributions, both by the Company and the employees are made to the fund, at the rate of 10% of the basic salary. Obligation for contributions to defined contribution plan by the Company is recognized as an expense in the profit and loss account.

4.11 Revenue recognition

4.11.1 Finance leases

The Company follows the finance lease method in accounting for recognition of finance lease. The total unearned finance income i.e. the excess of aggregate installment contract receivables plus residual value over the cost of the leased asset is deferred and then amortized over the term of the lease, so as to produce a systematic return on the net investment in finance leases.

Processing, front end and commitment fees and commission are recognized on accrual basis.

Late payment charges are recognized as income when realized.

4.11.2 Income on non-performing lease and loan receivables

Revenue from finance leases is not accrued when rent is past due by ninety days or more. Income on non-performing loan and lease receivables is recognized on receipt basis in accordance with the requirements of the NBFC Regulations.

4.11.3 Interest income

Interest income is recognized on time proportionate basis using effective interest method.

4.11.4 Return on investment

Mark-up income on debt securities is recognised on time proportion basis using the effective yield on instruments on accrual basis.

Dividend income from investments is recognised when the Company’s right to receive the dividend is established.

Gain / loss on sale of investments is taken to income in the period in which it arises.

4.12 Financial instruments

All financial assets and liabilities are recognized at the time when the Company becomes a party to the contractual provisions of the instrument. All financial assets are derecognized at the time when the Company loses control of the contractual rights that comprise the financial assets. All financial liabilities are derecognized at the time when they are extinguished, i.e. when the obligation specified in the contract is discharged, cancelled or expires. Any gain or loss on recognition of the financial assets and financial liabilities is taken to profit and loss account.

4.13 Offsetting

Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to set off the recognized amounts and the Company intends to either settle on a net basis or to realise the asset and settle liability.

4.14 Repossessed leased assets

These are the assets acquired in settlement of non-performing lease finance. These are stated at lower of the original cost of the related asset and net realizable value of the asset repossessed. Gain or loss on disposal of such assets is taken to income currently.

4.15 Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made.

30




4.16 Cash and bank balances

Cash in hand and at banks are carried at nominal amount.

4.17 Cash and cash equivalents

Cash and cash equivalents comprises of cash balances and bank deposits. For the purpose of cash flow statements, cash and cash equivalents carried in the balance sheet comprises of cash in hand, balance with bank in daily product accounts and stamp papers in hand.

4.18 Transactions with related parties

Transactions with related parties are carried out at arm's length prices.

4.19 Earnings per share

The Company presents basic and diluted earnings per share (EPS) for its shareholders. Basic EPS is calculated by dividing the profit or loss attributable to ordinary share holders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effect of all dilutive potential ordinary shares, if any.

4.20 Proposed dividend and transfer between reserves

Dividends and appropriations to reserves, except appropriations which are required by law, made subsequent to the balance sheet date are considered as non-adjusting events and are recorded in the financial statements in accordance with the requirements of International Accounting Standard (IAS) 10, ‘Events after the Balance Sheet Date’ in the year in which they are approved / transfers are made.

4.21 Significant accounting judgments and critical accounting estimates / assumptions

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which forms the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in period of revision and future periods if the revision affects both current and future periods. The estimates and judgments that have a significant effect on the financial statements are in respect of the following:

a) Determining the residual values and useful lives of tangible fixed assets

Management has made estimates of residual values, useful lives and recoverable amounts of certain items of property, plant and equipment. Any change in these estimates in future years might affect the carrying amounts of the respective items of property, plant and equipment with corresponding effect on the depreciation charge and impairment loss.

b) Provision against non performing leases and other loans

Calculating provision against non performing leases and other loans is subject to numerous judgments and estimates as explained in note 4.4 of these financial statements.

c) Recognition of taxation and deferred tax

The Company takes into account relevant provisions of the prevailing income tax laws while providing for current and deferred taxes as explained in note 4.9 of these financial statements.


31



PROPERTY, PLANT AND EQUIPMENT

Year ended June 30, 2017

Net carrying value basis

Opening net book value (NBV)

Additions (at cost)

Disposals (NBV)

Depreciation charge

Closing net book value

Gross carrying value basis

Cost

Accumulated depreciation

Net book value

Year ended June 30, 2016

Net carrying value basis

Opening net book value (NBV)

Additions (at cost)

Depreciation charge

Closing net book value


Cost

Accumulated depreciation

Net book value

27,484,390

13,254,117

(2,282,041)

(6,929,174)

31,527,292

47,870,888

(16,343,596)

31,527,292

32,369,754

943,114

(5,828,478)

27,484,390

39,015,041

(11,530,651)

27,484,390

Depreciation rate % per annum

14,578,317

2,930,664

-

(1,888,210)

15,620,771

21,358,130

(5,737,359)

15,620,771

16,431,160

-

(1,852,843)

14,578,317

18,427,466

(3,849,149)

14,578,317

10

3,310,813

-

-

(414,237)

2,896,576

4,141,709

(1,245,133)

2,896,576

3,617,250

104,230

(410,667)

3,310,813

4,141,709

(830,896)

3,310,813

10

4,674,539

-

-

(1,578,772)

3,095,767

7,885,706

(4,789,939)

3,095,767

6,258,688

-

(1,584,149)

4,674,539

7,885,706

(3,211,167)

4,674,539

20

1,635,776

166,620

-

(967,102)

835,294

3,078,510

(2,243,216)

835,294

1,644,963

838,884

(848,071)

1,635,776

2,911,890

(1,276,114)

1,635,776

33.33

3,284,945

10,156,833

(2,282,041)

(2,080,853)

9,078,884

11,406,833

(2,327,949)

9,078,884

4,417,693

-

(1,132,748)

3,284,945

5,648,270

(2,363,325)

3,284,945

20

Total

------------------------------------------------------------------------ (Rupees) ------------------------------------------------------------------------

DescriptionLeasehold

improvements

Furniture and

fixtures

Electrical

equipments

Computer

equipmentsVehicles

5.

2017 2016

Note Rupees Rupees

6. INTANGIBLE ASSETS

Software licenses 6.1 490,583 974,170

6.1 Net carrying value basis

Opening balance 974,170 611,003Additions (at cost) - 800,000

974,170 1,411,003Amortization charge (483,587) (436,833)Closing net book value 490,583 974,170


Cost 1,446,941 1,446,941Accumulated amortization (956,358) (472,771)Net book value 490,583 974,170

33.33 33.33Amortization rate (% per annum)

32




7. NET INVESTMENT IN FINANCE LEASES

Lease rentals receivable 1,300,897,498 827,469,236

Add: Residual value of leased assets 283,267,353 150,951,700

Gross investment in finance leases 1,584,164,851 978,420,936

Less: Unearned finance lease income (199,325,447) (126,378,600)

Net investment in finance leases 1,384,839,404 852,042,336

Less: Current maturity of net investment in finance leases (400,989,699) (216,785,742)

983,849,705 635,256,594

Provision for potential lease losses 7.1 (11,005,486) (7,000,727)

972,844,219 628,255,867

7.1 This represents general provision against potential lease losses recorded on the lease portfolio at the rate of 1% of the balance. The movement of provision is as follows:

Balance at beginning of the year 7,000,727 3,806,000Provision made during the year 4,004,759 3,194,727Balance at end of the year 11,005,486 7,000,727

2017 2016 2017 2016

Rupees Rupees Rupees Rupees

Less then one year 462,650,140 283,166,950 400,989,699 216,785,742

One to five years

finance lease

Net investments in

finance lease

Gross investments in

1,121,514,711 695,253,986

1,584,164,851 978,420,936

983,849,705 635,256,594

1,384,839,404 852,042,336

7.2 Details of investment in finance lease

2017 2016Note Rupees Rupees

8. LONG TERM LOANS AND ADVANCES

Considered good

Loans to employees 8.1 15,870,584 16,023,184

Advance against lease - 500,000

Auto finance loan 8.2 8,107,466 15,650,603

23,978,050 32,173,787

Loans to employees 3,420,157 2,283,597

Auto finance loan 4,314,725 6,302,688

7,734,882 8,586,285

16,243,168 23,587,502

Provision against doubtful loans 8.3 (80,797) (155,646)

16,162,371 23,431,856

Less: Current portion shown under current assets

7.3 The leases executed by the Company is for a term of 3 to 5 years. Security deposit varies as per the requirement of the lessee. The Company requires the lessee to insure the leased asset in favour of the Company. Additional surcharge is charged on delayed rentals. The leases are secured against leased assets and security deposits.


33



8.1 Loans to employees

2017 2016

Rupees Rupees

2017 2016

Rupees Rupees

- 299,994 15,517,636 6,813,067

- - 2,832,732 10,979,938

- (299,994) (3,455,336) (2,275,369)

- - 14,895,032 15,517,636

Executives

Balance at the end of

the year

Chief Executive

Balance at the

beginning of the year Disbursements made

during the year Repayments received

during the year

These represent house loans and car loans provided by the Company to its executives staff as per service rules. House loans are repayable in a maximum of 300 monthly installments and carry mark-up at the rate of 5 percent per annum. Job entitled car loans are repayable in 60 monthly installments and are interest free.

8.2 This represents vehicle financing facility provided to customers on markup basis. The mark-up on these finances ranges between 9.16% to 12.45% (2016: 9.36% to 12.30%) per annum. These finances are repayable within a period of 3 to 5 years (2016: 3 to 5 years) and are secured against first exclusive charge by way of hypothecation of the motor vehicles and personal guarantee of the customers.

8.3 This represents general provision recorded on the auto finance loan portfolio at the rate of 1% of the outstanding balance. The movement of provision is as follows:

2017 2016

Note Rupees Rupees

Balance at beginning of the year 155,646 -Reversal of provision (74,849)Provision made during the year - 155,646Balance at end of the year 80,797 155,646

9. SHORT TERM INVESTMENTS

Held to maturityCertificate of investments 9.1 - 50,000,000Term deposit receipts 9.2

JS Bank Limited - 100,000,000Sindh Bank Limited 900,000,000 -

900,000,000 150,000,000At fair value through profit and loss

Units of open ended mutual funds 9.3 - 189,740,403900,000,000 339,740,403

9.1

PAIR Investment Company Limited - 50,000,000

Certificate of investment

2017 2016Note Rupees Rupees

9.2 Term deposit

receipts

Sindh Bank Limited 9.2.1 900,000,000 -

JS Bank Limited - 100,000,000900,000,000 100,000,000

9.2.1 This represents investment made by the Company in Term Deposit Receipts for a period of one year and having maturity date of August 31, 2017. This investment carries mark-up at the rate of 7.00% per annum (2016: 7.15%).

34


9.3 Units of open ended mutual funds

2017 2016 2017 2016

NAFA - Income Opportunity Fund

[Nil (2016: 17,730,096)]

Cost Market value

---------------------------------------(Rupees)------------------------------------------

- 189,740,403 - 189,740,403

- 189,740,403 - 189,740,403



10. LOANS AND ADVANCES

Considered good

Working capital loan 10.1 449,169,002 223,397,993Less: Provision against doubtful loans 10.2 (4,500,000) (2,214,210)

444,669,002 221,183,783

10.1 This represents working capital loan facility provided to customers on markup basis. The mark-up on these finances ranges between 9.05% to 9.50% (2016: 9.10% to 9.36%) per annum. These finances are repayable within a period of one year and are secured against ranking charge by way of hypothecation of fixed assets, unregistered hypothecation charge over stock and receivables, equitable mortgage over properties, personal guarantee, corporate guarantee and post dated cheques from the customers.

10.2 This represents general provision recorded on the working capital loan portfolio at the rate of 1% of the balance. The movement of provision is as follows:

Balance at beginning of the year 2,214,210 -

Provision made during the year 2,285,790 2,214,210

Balance at end of the year 4,500,000 2,214,210

Net investment in finance leases 7 400,989,699 216,785,742Long term loans and advances 8 7,734,882 8,586,285

408,724,581 225,372,027

12. PREPAYMENTS

701,992 1,174,325

3,206,819 2,891,397

931,275 434,609

4,840,086 4,500,331

13. OTHER RECEIVABLES

Other receivables 13.1 1,909,700 -

1,909,700 -

14. CASH AND BANK BALANCES

Cash and other equivalent

Cash in hand 34,197 34,397

Stamp papers in hand - 181,900

34,197 216,297

Cash at bank

Current account 111,016 197,826

Saving account 14.1 267,025,573 43,767,310

267,136,589 43,965,136

267,170,786 44,181,433

Prepaid insurance

Prepaid rent

Prepaid membership fee

11. CURRENT MATURITY OF

NON-CURRENT ASSETS

2017 2016

Note Rupees Rupees

13.1 This amount represents front end fee receivable from costumers


35

14.1 This represents daily product account (saving account) maintained with several Banks carrying mark-up at the rate of 4.00% to 9.15% (2016: 4.00% to 6.75%) per annum receivable on monthly basis.



15.

2017 2016

200,000,000 100,000,000

2,000,000,000 1,000,000,000

ISSUED, SUBSCRIBED AND PAID-UP

SHARE CAPITAL

(Number of shares)

Ordinary shares of Rs.

10 each fully paid in cash

2017 2016

Note Rupees Rupees

16. RESERVES

Capital reserve

16.1 66,266,811 43,889,335

Revenue reserve

82,490,786 60,113,310

148,757,597 104,002,645

Un-appropriated profit

Statutory reserve

15.1 The Government of Sindh, held 199,999,993 shares as at June 30, 2017. The remaining shares are held by the Directors of the Sindh Leasing Company Limited in nominee capacity.

16.1 This represents reserve created in compliance with Non-Banking Finance Companies and Notified Entities Regulation, 2008 (NBFC Regulations). In accordance with NBFC Regulations, the Company is required to transfer atleast 20% of its profit after tax to a statutory reserve. In order to comply with this requirement, the Company has transferred an amount of Rs. 22.377 million, representing 50% of profit after tax, (2016: Rs. 22.127 million) to the statutory reserve.

Lease deposits 17.1 283,266,853 150,951,700

(5,221,800) -

278,045,053 150,951,700

Less: Current maturity of security deposits

against leases

17. LONG TERM SECURITY DEPOSITS AGAINST LEASES

17.1 These represent deposit received from lessee under finance lease and are adjustable against the residual value of the asset leased at the expiry of respective lease term.

18.

Unsecured

Loan from Government of Sindh 18.1 500,000,000 250,000,000

LONG TERM LOAN

19. DEFERRED TAXATION

--

- -

Deferred Taxation

2017 2016

Note Rupees Rupees

19.1 The net balance for deferred taxation is in respect of following temporary differences:

Tax effect of:

5,094,857 2,522,626

77,415,545 48,840,261Difference in net book value of net investment

in finance lease

Difference between accounting book value and

tax base of property, plant and equipment

18.1 This represents long term loan obtained from Sindh Province Pension Fund which is the reserve fund of Government of Sindh. The loan has been received in two tranches amounting to Rs. 250 million each on December 2, 2015 and December 16, 2016 respectively for a period of three years at a rate of return of 6 months KIBOR plus 1%. The loan is unsecured and the interest is payable on quarterly basis.

(84,104,748) (46,129,231) 1,594,346 (5,233,656)

- -

Carry forward tax lossesOthers

36




Deferred tax asset arising due to timing difference calculated at applicable tax rates as at balance sheet date amounted to Rs. 23.427 million (2016: Rs. 4.855 million) debit. Deferred tax asset has not been recognized in these financial statements in accordance with the stated accounting policy of the Company.

20. TRADE AND OTHER PAYABLES

Payable to vendors 613,696 92,564Withholding tax payable 1,113,026 832,396Advance from customers 15,504,829 3,471,400Bonus payable - 2,000,000Gratuity payable 20.1 35,921 1,903,741Others 1,607,051 2,363,998

18,874,523 10,664,09920.1 Movement of provision for gratuity payable is as follows:

Balance as at July 01, 2016 1,903,741 993,661Net charge for the year 3,806,680 910,080

5,710,421 1,903,741Payments made during the year (5,674,500) -Balance as at June 30, 2017 35,921 1,903,741

21. SHORT TERM BORROWINGS

SecuredFrom banking company 21.1 82,498,269 -

20.2 During the year, the Company has created a separate fund for gratuity for all of it's permanent employees . The fund is maintained by the Trustees and all decisions regarding investments and distribution of income etc. are made by the Trustees independent of the Company. The fund is approved and registered by the Commissioner of Income Tax in accordance with sub-rule (1) of Rule (9) of part-III of the sixth schedule of the Income Tax ordinance, 2001.

21.1 This facility is running finance facility with Sindh Bank Limited that carries a markup at three months KIBOR plus 1.00% per annum. Total sanctioned limit is Rs. 200.00 million. This facility is secured against 1st charge over current assets of the Company with 25% margin.

2017 2016

Note Rupees Rupees

22. MARKUP ACCRUED

Markup accrued on:

Long term loan 19,970,478 1,369,315

Short term borrowings 1,487,733 -

21,458,211 1,369,315

23. TAXATION - NET

Provision for taxation 46,199,982 31,516,772

Less: Advance income tax (41,747,847) (31,159,052)

4,452,135 357,720

24. CONTINGENCIES AND COMMITMENTS

24.1 Contingencies

A letter of guarantee issued on behalf of a client amounting to Rs. 224.85 million (2016: Rs. 13.01 million).

24.2 Commitments

Finance lease contracts committed but not executed at the balance sheet date amounted to Rs. 767.72 million (2016: Rs. 228.35 million).


37



27.1 This amount includes Rs. 8.867 million (2016: Rs. 2.089 million) in respect of employees’ retirement benefits.

27.2 The Company has obtained insurance coverage from Sindh Insurance Company Limited rated "A+" by Pakistan Credit Rating Agency (an agency registered with the Commission) against any losses that may be incurred as a result of employee's fraud or gross negligence. The sum insured of the insurance policy is Rs. 3.850 Million (2016: Rs. 3.350 Million).

25. RETURN ON INVESTMENTS AND DEPOSITS

From financial assets

Interest / markup on:

Term deposit receipts 61,474,933 2,968,250

PLS accounts 17,534,621 7,200,268

Fund placements 489,726 26,151,352

Dividend income - 74,297

Capital gain on fund placements 3,506,348 -

83,005,628 36,394,167

26. FINANCE COST

Mark up on short term borrowings 2,866,929 234,539

Mark up on long term loan 27,501,710 10,807,603

Bank charges 202,069 43,941

30,570,708 11,086,083

27. ADMINISTRATIVE EXPENSES

Salaries and benefits 27.1 27,330,102 22,474,860

Directors' remuneration 30 67,611,193 12,174,075

Rent, rates and taxes 5,202,294 6,091,034

Communication and utility expenses 2,238,141 1,717,133Travelling and conveyance 5,362,742 2,507,475Repair and maintenance 1,045,726 1,035,029Insurance expense 27.2 2,565,715 1,468,217Auditors' remuneration 27.3 195,000 160,000Advertising expense 2,480,865 50,187Depreciation 6,929,174 5,828,478Amortization 483,587 436,833Legal and professional charges 1,814,426 1,198,968Fees and subscription 4,971,218 1,815,406Printing and stationary 596,438 515,164Others 1,701,550 1,235,106

130,528,171 58,707,965

27.3 Auditors' remuneration

Audit fee 170,000 135,000Out of pocket expenses 25,000 25,000

195,000 160,000

28. WORKERS' WELFARE FUND

The corresponding figure represents reversal of provision for Workers' Welfare Fund based on the fact that the Company is excluded from definition of industrial establishment as per The Sindh Workers' Welfare Fund Act, 2014 and The Workers' Welfare Fund Ordinance, 1971 since the Company is wholly owned by the Government of Sindh.

Note Rupees Rupees

2017 2016

38




29. TAXATION

Current 29.1 11,429,921 11,306,103 Prior 664,315 2,588,974 Deferred - (6,124,085)

12,094,236 7,770,992

29.1 The income tax for the year ended June 30, 2017 has been charged at the rate applicable as per the provision of Income Tax Ordinance, 2001 (the Ordinance).

2017 2016

Note Rupees Rupees

29.2

Accounting profit for the current year 56,849,188 52,025,001

Tax on income at 30% (2016: 32% ) 17,054,756 16,648,000

- 451,634

Tax effect of lease income and rentals - 22,753,988

(5,624,835) 6,143,759

Effect of final tax under presumptive tax regime - (1,324,633)

Tax effect of tax losses - (33,366,646)

Effect of deferred tax - (6,124,085)

Effect of prior year adjustment 664,315 2,588,974

12,094,236 7,770,992

Relationship between tax expense and accounting profit

Tax effect of difference of accounting

and tax base of owned assets

Tax effect of expenses that are not

determining taxable profit

30. EARNINGS PER SHARE - BASIC AND DILUTED

Profit for the year - Rupees 44,754,952 44,254,009

Weighted average number of ordinary shares 173,424,658 100,000,000

Earnings per share - basic and diluted - Rupee 0.26 0.44

There is no dilution effect on the basic earning per share as the Company has no convertible, dilutive potential ordinary shares outstanding as at the year end.

31. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES

The aggregate amount charged in the financial statements for the year in respect of the remuneration and benefits to the Chief Executive, Directors and Executives are as follows:

Chief

Executive Directors Executives Total

Fee - 750,000 - 750,000Managerial remuneration 33,377,386 2,125,000 7,344,276 42,846,662Perquisites and allowances 21,695,316 1,381,250 6,617,412 29,693,978Retirement benefit 8,069,741 212,500 1,897,898 10,180,139

63,142,443 4,468,750 15,859,586 83,470,779

Number of persons 1 6 6 13

Rupees

2017


39



Chief

Executive Directors Executives Total

Fee - 1,011,000 - 1,011,000Managerial remuneration 3,926,649 2,125,000 3,899,142 9,950,791Perquisites and allowances 2,853,084 1,078,374 4,029,210 7,960,668Retirement benefits 754,968 425,000 779,844 1,959,812

7,534,701 4,639,374 8,708,196 20,882,271Number of persons 2 7 5 14

Rupees2016

Director's remuneration / fee represents remuneration paid for attending Board and sub-committee meetings.

The Chief Executive and certain employees at the executive level are also provided with the Company owned and maintained car and other benefits in accordance with their entitlement as per rules of the Company.

The remuneration of Chief Executive has been approved on thirteenth Board meeting of the Company held on July 27, 2016.

32. RELATED PARTY TRANSACTIONS

The Company has a related party relationship with its Associated Company / Undertaking, Government of Sindh, staff retirement funds, key management personnel and other related parties.

The details of significant related party transactions during the year and balances as at June 30, 2017 are as follows:

54,638,356 - - -

4,666,764 - - -

- - 70,078,305 -

- - - 1,410,000

1,356,677 - - -

- 250,000,000 - -

- 1,000,000,000 - -

- 27,501,710 - -

- 2,866,929 - -

1,555,165 - - -

82,498,269 - - -

Transactions during the year

Profit on daily product account

Remuneration paid

Directors' meeting fees

Receipt of funds against long

term loan from Government of Sindh

Receipt of funds against

increase in paid up capital

Profit on term deposit

-----------------------For the year ended June 30, 2017 -----------------

------------------------------------------------Rupees------------------------------------------------

Services received from Sindh

Rent paid to Sindh Bank Limited

Insurance Company Limited

from Government of Sindh

finance from Sindh Bank Limited

Receipt of fund against running

with Sindh Bank Limited

Interest on running finance

Government of Sindh

Interest on long term loan from

Associated

Company

Other related

party

Key management

personnel

Directors

Associated Other related Key management Directors

Balances

Bank balances 80,440,933 - - -Term Deposit Receipt - SBL 900,000,000 - - -

11,873,828 - - -Long term loan - 500,000,000 - -

- 19,970,478 - -Lessee - Sindh Nooriabad Co. - 2,225,132 - -Short term borrowing 82,498,269 - - -

-----------------------For the year ended June 30, 2017 -----------------

-----------------------------------Rupees-----------------------------------

Markup accrued

Markup accrued on bank

40




Associated Other related Key management Directors

Profit on daily product account 7,171,735 - - -Remuneration paid - - 17,911,459 -Retirement benefits - - 1,959,812 -Directors' meeting fees - - - 1,011,000

- 1,447,953 - -

- 250,000,000 - -

- 10,807,603 - -BalancesBank balances 37,915,367 - - -Long term loan - 250,000,000 - -

Markup accrued - 1,369,315 - -

Transactions during the year

Long term loan from Government of Sindh

--------For the year ended June 30, 2016--------

-----------------------------------Rupees-----------------------------------

Services received from Sindh Insurance Company Limited

Interest on long term loan from Government

33. FINANCIAL RISK MANAGEMENT

33.1 Financial risk factors

The Company’s activities expose it to a variety of financial risks from the use of financial instruments, including:

- Credit risk

- Liquidity risk

- Market risk

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board is also responsible for developing and monitoring the Company’s risk management policies.

33.2 Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligation, and arises principally from the Company’s receivables from customers and investment securities. The Company has established procedures to manage credit exposure including credit approvals, credit limits, collateral and guarantee requirements. These procedures incorporate both internal guidelines and requirements of the NBFC Rules and the NBFC Regulations. The Company also manages risk through credit department which evaluates customers’ credit worthiness and obtains adequate securities where applicable.

2017 2016

Rupees Rupees

33.2.1 Exposure to credit risk

The maximum exposure to credit risk at the reporting date is:

Net investment in finance leases 972,844,219 628,255,867

Long term loans and advances 16,162,371 23,431,856

Long term deposits 488,600 374,600

Short term investments 900,000,000 339,740,403

Accrued markup 10,480,368 1,846,619

Loans and advances 444,669,002 221,183,783

Current maturity of non-current assets 408,724,581 225,372,027

Cash at bank 267,136,589 43,965,136

3,020,505,730 1,484,170,291


41

Impaired but not past due 4,004,759 3,194,727

Neither past due nor impaired 1,380,834,645 848,847,609Total amount 1,384,839,404 852,042,336

The aging of net investment in finance lease at the reporting date is as follows:

Past due but not impaired:

up to 29 days - -

30 to 89 days - -

Past due and impaired

90 days to 1 year - -

1 year to 2 years - -

2 years to 3 years - -

more than 3 years - -

33.2.2 Concentration of credit risk

Concentration of credit risk arises when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. The Company manages credit risk and its concentration exposure through diversification of activities to avoid undue concentration of risks. For this purpose, the Company has established exposure limits for individuals and industrial sectors.

The Company is exposed to credit risk from its operating activities (primarily for net investments in leases) and from its financing activities, including bank account and other financial instruments. The exposure to banks is managed by dealing with variety of major banks and monitoring exposure limits on continuous basis. The ratings of banks ranges from A+ to AA+.

Details of the industrial sector analysis of lease portfolio are as follows:

Percentage Gross amount

% Rupees SectorOil and petroleum marketing 1.12% 12,331,158Health & pharmaceuticals 5.18% 56,977,733Individuals 4.59% 50,536,292Construction 7.25% 79,802,228Sugar 29.07% 319,905,745Transport 3.80% 41,780,444Textile 3.02% 33,267,924Media 13.29% 146,307,304Energy 1.93% 21,240,835Service 9.37% 103,160,410Food 1.93% 21,242,992Miscellaneous 19.45% 214,042,838

100% 1,100,595,903

Percentage Gross amount

% Rupees SectorOil and petroleum marketing 34.70% 158,054,940Sugar 16.60% 75,633,624Cinematography theatre 13.69% 62,376,769Transport 12.44% 56,643,290Textile 7.92% 36,053,305Media 6.11% 27,823,644Packaging 2.28% 10,403,228Energy 1.60% 7,285,514Miscellaneous 4.66% 21,214,374

100% 455,488,688

2016

2017Financial assets

Financial assets



2017 2016

Rupees Rupees

42


33.3 Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. Liquidity risk arises because of the possibility that the Company could be required to pay its liabilities earlier than expected or difficulty in raising funds to meet commitments associated with financial liabilities as they fall due. The Company's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when they become due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. The following are the contractual maturities of financial liabilities.

Long term loan

Trade and other payables

Short term borrowing

June 30, 2017

June 30, 2016

Financial liabilities Total

Over three

months to one

year

Up to three

months

----------------------------------------------- Rupees -----------------------------------------------

June 30, 2017

Over one year

to five yearsOver five years

Markup accrued

500,000,000

-

-

-

500,000,000

250,000,000

-

2,220,747

21,458,211

-

23,678,958

-

-

-

-

82,498,269

82,498,269

5,825,877

500,000,000

2,220,747

21,458,211

82,498,269

606,177,227

255,825,877

-

-

-

-

-

-

2017 2016 2017 2016

Rupees Rupees

Fixed rate instrumentsFinancial assets

6.5 - 50,000,000

Term deposit receipts 7.15 7.15 900,000,000 100,000,000

Bank balances 4 to 9.15 4 to 6.75 267,025,573 43,767,310

Loans to employees 5 5 15,870,584 16,023,184 1,182,896,157 209,790,494

Variable rate instruments

Financial assets9.15 to 16.91 9.35 to 16.71 1,384,839,404 852,042,336 9.16 to 12.45 9.36 to 11.67 8,107,466 15,650,603 9.05 to 9.50 9.10 to 9.36 444,669,002 221,183,783

1,837,615,872 1,088,876,722

Financial liabilities

Short term running finance Kibor + 1.00 - 82,498,269 -

Long term loan 7.14 to 7.53 7.14 to 7.53 500,000,000 250,000,000

582,498,269 250,000,000

(In percent)Carrying amount

Auto finance loan

Effective rate

Loans and advances

Certificate of Investment

Net investment in finance lease

33.4 Market risk

Market risk is the risk that changes in market price, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposure within acceptable parameters, while optimizing the return.

Market risk comprise of three types of risk : interest rate risk, currency risk and other price risk, such as equity risk.

33.4.1 Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Currently the Company's interest rate exposure arises on net investment in finance lease, term deposit receipts with banks, certificate of investments and bank balances in profit and loss sharing account. The Company monitors the interest rate environment on a regular basis and may change the mix of its portfolio to enhance the earning potential of the Company subject to the above defined guidelines. Other risk management procedures are the same as those mentioned in the credit risk management.

33.4.1.1 Details of the interest rate profile of the Company's interest bearing financial assets and financial liabilities were as follows:




43

33.4.2 Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the year end, profit would have increased / (decreased) by Rs. 12.551 million (2016: Rs. 8.389 million). The analysis assumes that all other variables remain constant.

33.4.3 Foreign exchange risk

Foreign exchange risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. The Company is not exposed to foreign exchange risk at the year end as there is no financial instrument in foreign currency.

33.4.4 Other price risk

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk) whether those changes are caused by factors specific to the individual financial instruments or it’s issuer, or factors affecting all similar financial instruments traded in the market.

Other price risk arises from the Company’s investment in units of mutual funds and ordinary shares of listed companies. To manage its price risk arising from aforesaid investments, the Company diversifies its portfolio and continuously monitors developments in equity markets. In addition, the Company actively monitors the key factors that affect stock price movement.

A 10% increase / decrease in redemption prices at year end would have increased / decreased the Company’s profit in case of investments classified as ‘at fair value through profit and loss’ by Rs. Nil (2016: Rs. 18.974 million).

33.5 Fair value of financial instruments

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties at an arms length transaction other than in a forced or liquidation sale. The carrying values of all financial assets and liabilities reflected in the financial statements approximate their fair values.

Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: Fair value measurements using inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).

As at June 30, 2017, the Company held the following financial instruments measured at fair value:

Level 1 Level 2 Level 3 Total

- - - -

- - - -

---------------------------------------------- Rupees ------------------------------------------------

Investment in units of mutual funds

During the year ended June 30, 2017, there were no transfers between level 1 and level 2 fair value measurements, and no transfers into and out of level 3 financial instruments.As at June 30, 2016, the Company held the following financial instruments measured at fair value:

Level 1 Level 2 Level 3 Total

189,740,403 - - 189,740,403

189,740,403 - - 189,740,403

Investment in units of mutual

---------------------------------------------- Rupees ------------------------------------------------

During the year ended June 30, 2016, there were no transfers between level 1 and level 2 fair value measurements, and no transfers into and out of level 3 financial instruments.



44


2017 2016

Rupees Rupees

33.6 Financial instruments by category

Financial assetsAt fair value through profit and loss

- 189,740,403

Held to maturity

- 50,000,000

Loans and receivables

1,373,833,918 845,041,609

23,897,253 32,018,141

488,600 374,600

900,000,000 100,000,000

10,480,368 1,846,619

Loans and advances 444,669,002 221,183,783

267,170,786 44,181,433

3,020,539,927 1,484,386,588

Financial liabilities

Financial liabilities at amortised cost

500,000,000 250,000,000

2,220,747 4,456,562

21,458,211 1,369,315

82,498,269 -

606,177,227 255,825,877

Markup accrued

Long term loan

Long term deposits

Short term investments


Net investment in finance leases

Long term loans and advances

Short-term borrowings

Accrued markup

Cash and bank balances

Trade and other payables




34. CAPITAL RISK MANAGEMENT

The objective of the Company when managing capital is to safeguard its ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders, and to maintain a strong capital base to support the sustained development of its business.

The Company manages its capital structure by monitoring return on net assets and makes adjustments to it in the light of changes in economic conditions. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend paid to its shareholders or issue new shares. The Company is in compliance with the minimum capital requirement of NBFC Regulations.

35. DEFINED CONTRIBUTION PLAN

The Company has contributory provident fund scheme for benefit of all its permanent employees under the title of "Sindh Leasing Company Limited Employees Provident Fund Trust". The Fund is maintained by the Trustees and all decisions regarding investments and distribution of income etc. are made by the Trustees independent of the Company.

35.1 The Trustees have intimated that the size of the Fund at year end was Rs. 8.902 million (2016: Nil ).

35.2 As intimated by the Trustees, the cost of the investments made at year end was Rs.8.902 million (2016: Nil) which is equal to 100% of the total fund size. The fair value of the investments was Rs. 8.902 million (2016: Nil) at that date. The category wise break up of investment as per section 218 of the Companies Act, 2017 is given below:

Rupees Percentage Rupees Percentage

Government securities - - - -

Listed Securities (Mutual funds) - - - -

Term Finance Certificates 6,639,006 75% - -

6,639,006 75% - -

2017 2016


45



36. NUMBER OF EMPLOYEES

The total number of employees as at year end were 21 (2016: 22) and the average number of employees during the year was 21 (2016: 23).

37. CORRESPONDING FIGURES

Corresponding figures have been rearranged and reclassified, wherever necessary for the purpose of comparison and better presentation. However, no significant reclassifications have been made during the year.

38. DATE OF AUTHORIZATION FOR ISSUE

These financial statements were authorized for issue by the Board of directors on August 16, 2017

39. GENERAL

Figures have been rounded off to the nearest rupee.


46


THIS PAGE IS INTENTIONALLY LEFT BLANK


47

I/We __________________________________________________________________________________________________________

of ____________________________________________________________________________________________________________

being member(s) of Sindh Leasing Company Limited holding ______________________________________________________________

of ______________________________________________ who is/are also member(s) of Sindh Leasing Company Limited

th as my/our Proxy in my/our absence to attend and vote for me/us and on my/our behalf at the 4 Annual General Meeting of the

company to be held on October 24, 2017, at its registered office in Karachi.

Signed this__________________________________ day of __________________________________, 2017

ordinary shares hereby appoint _____________________________________________________________________________________

of ______________________________________________ or failing him/her _______________________________________________

in the presence of ______________________________________________________________________________________________

Form of Proxy

Folio No.

Signatureon Rs. 5/-Revenue Stamp

WITNESSES:

1. Signature:

2. Signature:

Note:

1. The Proxy Form should be deposited in the registered of fice of the Company, as soon as possible

but not latter than 48 hours before the time of holding the meeting, failing which; Proxy Form will

not be treated as valid.

2. No person shall act as proxy unless he/she is a member of the Company.

Name:

Address:

CNIC No:

Passport No:

Name:

Address:

CNIC No:

Passport No:

48


annual report june 2017 - sindh leasing company ltd. · 11/1/2017 · mr. anis khan mr. muhammad...

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