annual report june 2016 - sindh leasing company ltd.annual report june 2016 s indhleasing 4 notice...

Annual Report June 2016 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.


2

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

Syed Shahnawaz Nadir Shah Mr. Ali Murtaza KazmiSyed Saeed Reza - Chairman

- Member - Member

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

Banker

Branch Offices

Sindh Bank Limited

Mr. Muhammad Imran MalikMr. Muhammad Bilal SheikhMr. Naim FarooquiSyed Hassan Naqvi

Larkana / Naudero BranchRaza Shah Mohalla, VIP Road,Larkana

Chairman -

Chief Executive-

Hyderabad Branch

Auditors

BDO Ebrahim & Co.Chartered Accountants

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

Legal Advisor

Muhammad Nadeem Khan ndSuite # 28-A, 2 Floor

Fareed Chamber Abdullah Haroon Road Karachi

Web: www.sindhleasingltd.com

Plot No. 11Faraz Villas Housing SchemeTaluka QasimabadHyderabad

Bank Islami Pakistan Limited

Mr. Muhammad Bilal Sheikh

Syed Hassan Naqvi*Syed Shahnawaz Nadir Shah

Syed Saeed Reza

Mr. Muhammad Imran Malik

Mr. Ali Murtaza Kazmi

Mr. Naim Farooqui

Human Resource Committee

- Chairman - Member

-- MemberMember

Member

United Bank Limited

- Non-Executive Director

* Subject to SECP approval

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


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Table of Contents

Directors’ Report 05

Statement of Compliance with the Public Sector Companies (Corporate Governance) Rules, 2013 08

12

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

28Form of Proxy

Statement of Comprehensive Income

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

13

14

16

17

18

15

19


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Notice of Annual General Meeting

Notice is hereby given that the Third Annual General Meeting of Sindh Leasing Company Limited (“Company”) will be held on October 20,

2016 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 First Extra Ordinary General Meeting held on August 30, 2016.

2. To receive, consider and adopt the Audited Accounts of the Company for the year ended June 30, 2016, 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, 2017 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 30, 2016


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Directors’ Report

On behalf of the Board of Directors of Sindh Leasing Company Limited (SLCL, the Company), it is my pleasure to present the Third Annual Audited Financial Statements for the year ended June 30, 2016.

Review of Business and Operation

The Company earned a net revenue of Rs. 114.54 million during the year under review against a budgeted net revenue of Rs 102.57 million. Total administrative expenses and provisions for the year amounted to Rs 62.51 million against a budgeted amount of Rs 64.98 million. Profit after tax for the current year is Rs 44.25 million, this compares with a budgeted amount of Rs 25.55 million.

In comparison to the prior year and inspite of lower KIBOR rate during the current year management’s prudent drive helped generate revenue of such a magnitude to overcome the downward trend in revenue, resulting in an approximate 35% increase in profit after tax. In addition the current year SLCL set up two branches in the North region which increased administrative expenses also.

For the reporting year ended June 30, 2016, SLCL’s performance remained satisfactory. The Company managed to book various lease assets and working capital loan of Rs. 1,142.54 million respectively during current year. SLCL is gradually gearing up to aggressively market its product which is evident from the fact that in the last quarter alone leases and working capital loan worth Rs. 338.19 million were booked.

Board of Directors

During the year under review Mr. Naim Farooqui resigned as the Chief Executive and relinquished charge on 4th December 2015. The Board subsequently appointed Mr. Rehan Anjum as Chief Executive Officer with effect from 15th December 2015. He has been serving the company as Chief Financial Officer and Company Secretary since its inception.

The Board in its meeting held on April 27, 2016 re-appointed Mr. Naim Farooqui as the Executive Director of the Company.

Subsequent to the year ended June 2016, Mr. Muhammad Bilal Sheikh has been appointed as the new Chief Executive Officer of the Company. Prior to joining he was the President and CEO of Sindh Bank Limited and the founder President of the Bank since November 01, 2010 to November 04, 2015. Mr. Sheikh is a seasoned banker with over 49 years of diversified experience in banking with an impressive track record of managing the institutions both in Public & Private sector he has served /headed. He has headed several banks/financial institutions in the last 18 years.

Prior to joining Sindh Bank Ltd., he has served as President & CEO of My Bank, President & CEO, PICIC Commercial Bank, Chairman, NDFC and DMD, PICIC Limited.

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:

S.No Name of Director

No. of meeting(s) held

the year during

Total no. of meeting(s) attended

As at June 30, 2016

As at June 30, 2015

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

1,000.00 1,000.001,104.00 1,059.75

27.49 32.37852.04 444.18243.13 8.09

For the year Ended June

30, 2016

For the year Ended June

30, 2015

114.54 99.7858.71 47.833.81 5.56

52.02 46.3844.25 32.71

Operating Results Balance Sheet

Paid-up capital

Total equity

Fixed Assets

Net investment in nance leasesAuto and Working capital loans

Prot & Loss

Revenue – NetAdministrative expensesGeneral Provision - NetProt before taxProt after tax

Earnings Per Share (EPS) 0.44 0.33

1 Muhammad Bilal Sheikh 5 42 Mr. Sohail Rajput 5 4 *3 Syed Shahnawaz Nadir shah 5 54 Syed Saeed Reza 5 55 Muhammad Imran Malik 5 4*67

Mr. Ali Murtaza KazmiMr. M. Naimuddin Farooqui

55

55

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


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Directors’ Report

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:

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

year

Total no. of meeting(s) attended

No of

Shareholders

Shareholding

From To

No of Shares

Held Percentage

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

Pattern of Shareholding

The pattern of shareholding as at June 30, 2016 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.

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 present auditors M/s. BDO Ebrahim & Co., Chartered Accountants, retire and being eligible, offer themselves for re-appointment. On recommendation of the Audit Committee the Board has approved re-appointment of retiring auditor M/s BDO Ebrahim & Co. for the year ending June 30, 2017.

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.

1 Syed Saeed Reza 4 42 Syed Shahnawaz Nadir shah 4 43 Muhammad Imran Malik 4 3*

1 1 99,999,993 99,999,993 99.999993

7 99,999,994 100,000,000 7 0.000007

8 Total 100,000,000 100


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Directors’ Report (Contd.)

Credit Rating

JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the entity ratings of Sindh Leasing Company Limited (SLCL) from ‘A/A-2’ (Single A/A-Two) to ‘A+/A-1’ (Single A Plus/A-One). Outlook on the assigned ratings is ‘Stable’.

Dividend

The Company has not declared any dividend for the year ended June 30, 2016.

Constraint

As we have deployed all of our initial Capital of Rs 1 Billion in setting up a lease and loan portfolio our main constraint in furthering this is availability of cheap financing. In the absence of certificates of investments (COI) we would have to rely on financing from other banks including Sindh Bank Ltd. @ 1% above KIBOR (presently 6.15%) i.e. 7.15% and taking into account the intermediation cost/operating expense of around 3% increases our cost to 10%. The reputable borrowers in the market avail bank facilities at a rate of 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 would be logical step till it becomes eligible to raise deposits from public at acceptable rates.

Future Outlook

The outgoing fiscal year in general has been fruitful and progressive as it was calibrated with economic growth, price stability, improvement in tax collection and reduction in fiscal deficit and low inflation. This is expected to continue considering the various measures being taken by the government for economic reforms and improved security within the region. The reforms would further pick momentum once we successfully overcome the longstanding impediment to foreign investments in our stock exchange that would further elevate our already rising index. The MSCI Pakistan Index will be reclassified to emerging markets status, coinciding with the May 2017 semi-annual index review,” MSCI said in its annual review meeting. Due to investors interest stock market index rose from 35,000 to 40,000.

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. Additional capital injection of Rs 1 Billion for the Company has been announced in the last budget presented in June 2016, which would further improve its financial condition and enable it to achieve its objectives. The Management’s thrust to reach out to Corporate Sector and individuals through aggressive marketing by way of Advertisements would add to the visibility of the company. Having fulfilled the regulatory requirement set by SECP, SLCL will be in a position to generate additional funds through issuance of certificate of investment (COI) by 2017.

SLCL is in a position to fulfill all of its lease/loan commitments as of now and for the years to come considering its financing/funding available through an approved credit line of Rs. 950M from Sindh Bank Limited (SBL) and an approved limit of Rs. 500M from the sponsors (GoS)of which Rs 250M has been drawn. Negotiations with other banks are underway and are expected to be in favor of SLCL.

Over all the prospects for SLCL’s growth are quite promising.

Acknowledgements

We acknowledge the support of our sponsors, the Government of Sindh (GoS) and the valued customers who have reposed confidence in leasing company. It is hoped that we 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 in order for the thin and lean staff without whose unwavering dedication and support the Company could not have achieved the growth that it did in the first full year of operation.

Muhammad Bilal Sheikh Chief ExecutiveAugust 30, 2016


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9


�رڈز آف ڈا��ز

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10


رى �ا� دا

� ��ن � �اد � � � � � �اد �

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11


ر�و�/�ر�ں��

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ا�ِ �

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ا��ت اور �� ر�ل � �ِ � ر� �� اس �ت � �� رى ر� �۔ ا� � �� ا� ا�ك ا� � � � �� رى � د��

ر�و�ں � دور � � � ا��ت � و� � اس � �ا� � � �� ى آ � � اور� � �� ا�� ا�� ۔ ا� ا� � آ� ��ن ا�� دو�رہ در� �ى ا��

�ر� � � � �ر � �� ا� ا� � آ� � �� ہ ا�س � �� ٢٠١٧ � �� ا�� ہ � � آ� ��- �� روں � د� � و� � ا�ك �ر�

ا�� ٣٥٠٠٠ � ٤٠٠٠٠ � �ھ � �۔� �� ذ �ے � � � � �� وع �� اور روز �ر � �ا� �ا �ں �۔�� دت � ا� � � �ر� � �و

ہاس � �� ر�ل � � �ے � اور اس � �� ل � � �� ۔ � � ا�د � � �� ن ٢٠١٦ � � � � ١ ارب رو� � ا�ن � � � � و

�ر�� ر� اور ا�ر �زى � ذر� �ر�ر� اور ا�اد � � ��ں �ر � � آ� �۔ ا� اى � � � ��ں � �ور�ت �رى �� ا� ا� � ا� اس �� ء� ٢٠١٧ � ا�� ز �ا � � �۔ �� وآ�) � ا�ا � (� ا �� آف ا� � ��

وا�) �ر �ہ ا� ا� � ا� � د�ب ��/�� ھ � � (ا� � ا�) � �� ٩٥٠ � رو� � �ر �ہ ��ٹ �� اور ٥٠٠ � رو� � ا��ز (� ا

ہا� ��دہ اور آ� وا� ��ں � �/ �� ت � و�وں � �را � � � ٢٥٠ � رو� و�ل � � � �، ��ا� � �� ر� �� ا� ا� � ا� ا� �ز� � � � و

ہا� ا� � ا� � � � �ں �- ��۔ د� �ں � �ا�ات �رى � اور ا� � � و

ا� ا� � ا� � �� ا�ن �� ا� ا�ا �

ا�اف

ن� �� اور �� ا� ا��ز ، �ر� آف �ھ، اور �ز ��ں � �� ا� � � ا�ں � �� دو�رہ ا�د �۔ � ا� ر� �� ا��ر� ا� ا� � آف ��ن � �� وا� � � � �ا� �� اس �ت � ر�رڈ � �� ں۔ ا� �اً � � � ��ل �� ا�وز �� ر� �۔

ہ�� اس � ا� � � �ل آ�� ۔ ف�� ورى � � � �د � � � و � اور �� ا�ا

� �ل �� ا�� آ��

٣٠ا� ٢٠١٦


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 Rules Rule 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 Names Date of

appointment

Independent Directors

1.Syed Saeed Reza

2. Mr. Muhammad Imran Malik 3. Mr. Ali Murtaza Kazmi

November 14, 2014

Executive Directors Mr. Naim Farooqui

Non-Executive Directors

1.Mr. Sohail Rajput 2.Syed Shahnawaz Nadir Shah 3.Mohammad Bilal Sheikh

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) √

April 16, 2016

November 14, 2014


13

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



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.

√

10.

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

5(5) √

11.

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

5(5)(b) (ii)

√

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

5(5)(b) (vi)

√

13.

(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.

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

5(5)(c) (ii)

√

√

14.

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, in accordance with the SPPRA Rules.

5(5)(c) (iii)

√

15.

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.

5(6) √

16.

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 has submitted its request for appropriate compensation to the Government for consideration.

5(8) N/A

17.

(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.

6(1)

6(2)

6(3)

√

18.

The Board has carried out performance evaluation of its members, including the 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 / half yearly/quarterly basis*. * Strike out whichever is not applicable

8 √


14


19.

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.

9 √

20.

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.

10 √

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

11 √

22.

(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 board

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

Committee Number of Members

Name of Chair

Audit Committee Three Saeed Reza

Risk Management Committee

Nil N/A

Human Resources Committee

Three Mr. M. Imran Malik

Procurement Committee Three Mr. M. Imran Malik

Nomination Committee Four

Mr. Ali Murtaza Kazmi

12 √*

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 qualification.

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 √




15




29.

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

Name of member Category Professional background”

Syed Saeed Reza Independent Leasing Specialist

Syed Shahnawaz Nadir Shah

Non- Executive Investment Specialist

Mr. M. Imran Malik Independent Ex-Banker

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.

√

√ * All Commitees except for Risk management Committee had not been formed at June 30 2016, Subsiquently Constitued

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 √

Muhammad Bilal Sheikh Chief Executive

√ ** Securities and Exchange Commission of Pakistan has granted exemption for non compliance of this rule.


16

Explanation for Non-Compliance with the Public 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.No Rule/sub-rule no.

Reasons for non-compliance Future course of action

1. Rule 5(2)

Company did not recommend at least three individuals to the Government

for appointment as Chief Executive of the Company but appointed Mr.

Rehan Anjum the senior most staff at SLCL as its Chief Executive. This

we understand was due to the fact that the incumbent CEO had to

immediately join his new assignment and SLCLs Board had relieved him

immediately for the same. According to the company, to follow the

process as defined in Public Sector Companies code of Corporate

Governance, it would have consumed time and was therefore felt

expedient to appoint the next senior most staff temporarily as its CEO.

However the subsequent appointment of CEO followed the required

procedure.

None

2. Rule 5(6)

Being a new Company we are still in the process of forming following

policies:

· Marketing of goods to be sold or services to be rendered by the

Public Sector Company

· Capital expenditure planning and control

· Protection of public interests

These policies have been

approved in the Fourteenth Board

meeting held on August 30, 2016.

3. Rule 12 Being a new Company we are still in the process of forming Risk

Management Committee.

Risk Committee has been

constituted in the Fourteenth

Board meeting held on August

30, 2016.

4. Rule 13/14 As at year end the positions of Chief Executive, Chief Financial Officer and Company Secretary were assigned to a single person. However, full time chief executive has been appointed subsequent to year end.

None


17

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

Place: Karachi

Dated: August 30, 2016CHARTERED 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, 2016 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, 2016.

Further, we highlight below instances of non-compliance with the requirements of the Rules reflected in the paragraphs 8, 15, 22 and

23 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. Rule 5(2) Company has not recommended at least three individuals to the

Government for appointment as Chief Executive of the Company2.

Rule 5(7)

Certain signicant policies have not been formulated

3.

Rule 12

The Board has not formed the Risk Management Committee, as specied in the Rules.

4.

Rule 13/14

As at year end the positions of Chief Executive, Chief Financial Ofcer and Company Secretary were assigned to a single person.


18

Auditors’ Report to the Members

We have audited the annexed Balance Sheet of Sindh Leasing Company Limited, as at June 30, 2016 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 30, 2016

Place:Karachi

BDO Ibrahim & Co

Chartered AccountantsEngagement partner Mr. Zulfikar Ali Causer

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


19

BALANCE SHEETAS AT JUNE 30, 2016

___________ ___________________Chairman Chief Executive

2016 2015

Note

ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 5 27,484,390 32,369,754

Intangible assets 6 974,170 611,003

Net investment in finance leases 7 628,255,867 357,053,069

Long term loans and advances 8 23,431,856 13,431,219

Long term deposits 374,600 374,600

680,520,883 403,839,645

CURRENT ASSETS

Short term investments 9 339,740,403 347,669,705

Accrued markup 1,846,619 3,270,961

Loans and advances 10 221,183,783 -

Current maturity of non-current assets 11 225,372,027 85,698,795

Prepayments 12 4,500,331 3,887,259

Taxation - net 21 - 5,686,994

Cash and bank balances 13 44,181,433 392,385,487

836,824,596 838,599,201

TOTAL ASSETS 1,517,345,479 1,242,438,846

EQUITY AND LIABILITIES

CAPITAL AND RESERVES

Authorized share capital

1,000,000,000 1,000,000,000

Issued, subscribed and paid-up share capital 14 1,000,000,000 1,000,000,000

Reserves 15 104,002,645 59,748,636

1,104,002,645 1,059,748,636

NON CURRENT LIABILITIES

Long term security deposits against leases 16 150,951,700 70,250,138

Long term loan 17 250,000,000 -

Deferred taxation 18 - 6,124,085

400,951,700 76,374,223

CURRENT LIABILITIES

Trade and other payables 19 10,664,099 10,506,040

Markup accrued 1,369,315 809,947

Short term borrowings 20 - 95,000,000

Taxation - net 21 357,720 -

12,391,134 106,315,987

CONTINGENCIES AND COMMITMENTS 22

TOTAL EQUITY AND LIABILITIES 1,517,345,479 1,242,438,846

The annexed notes from 1 to 36 form an integral part of these financial statements.

100,000,000 (2015: 100,000,000) ordinary shares of Rs. 10/- each

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


20

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2016

2016 2015

Note

INCOME

Income from finance lease, auto loans and working capital loans 88,826,015 19,550,661 Return on investments and deposits 23 36,394,167 92,202,228 Other income 405,360 258,129

- (11,389,931)

125,625,542 100,621,087 EXPENSES

Finance cost 24 (11,086,083) (845,268)Administrative expenses 25 (58,707,965) (47,834,529)Profit before provision and taxation 55,831,494 51,941,290 Provision for potential lease losses (3,194,727) (3,806,000)Provision against auto finance loans (155,646) -Provision against working capital loans (2,214,210) -Provision for Workers' Welfare Fund 26 1,758,090 (1,758,090)Profit before taxation 52,025,001 46,377,200 Taxation 27 (7,770,992) (13,668,523)Profit for the year 44,254,009 32,708,677

Earnings per share - basic and diluted (Rupee) 28 0.44 0.33


Unrealised loss on remeasurement of financial assets

“at fair value through profit and loss”

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



21

STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED JUNE 30, 2016

2016 2015

Profit for the year 44,254,009 32,708,677

Other comprehensive income - -

Total comprehensive income for the year 44,254,009 32,708,677


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



22

CASH FLOW STATEMENTFOR THE YEAR ENDED JUNE 30, 2016

2016 2015

CASH FLOW FROM OPERATING ACTIVITIES

Profit before taxation 52,025,001 46,377,200

Adjustment for:

Depreciation 5,828,478 5,256,450

Amortization 436,833 35,938

Provision for potential lease losses 3,194,727 3,806,000

Provision against auto finance loans 155,646 -

Provision against working capital loans 2,214,210 -

Finance cost 11,086,083 845,268

- 11,389,931

22,915,977 21,333,587

Operating profit before working capital changes 74,940,978 67,710,787

Movement in working capital

(Decrease) / increase in current assets

Long term loans and advances (8,810,123) (7,213,063)

Long term deposits - (75,000)

Prepayments (613,072) (272,874)

Accrued markup 1,424,342 (2,531,235)

Increase / (decrease) in current liabilities

Trade and other payables 158,059 (5,757,728)

(7,840,794) (15,849,900)

Cash generated from operations 67,100,184 51,860,887

Finance cost paid (10,526,715) (35,321)

Taxes paid (7,850,363) (16,046,195)

Increase in net investment in finance lease (407,856,313) (414,496,905)

Increase in auto finance loan (7,560,604) (8,089,999)

Increase in loans and advances (223,397,993) -

Increase in long term security deposit against lease 80,701,562 65,400,138

(576,490,426) (373,268,282)

Net cash used in operating activities (509,390,242) (321,407,395)

CASH FLOW FROM INVESTING ACTIVITIES

Capital expenditure incurred - own use and intangible assets (1,743,114) (4,176,776)

Short term investments - net 7,929,302 540,940,364

Net cash generated from investing activities 6,186,188 536,763,588

6,186,188 536,763,588

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from long term loan 250,000,000 -

Short term borrowings (95,000,000) 95,000,000

Net cash generated from financing activities 155,000,000 95,000,000

Net (decrease) / increase in cash and cash equivalents (348,204,054) 310,356,193

Cash and cash equivalents at beginning of the year 392,385,487 82,029,295

Cash and cash equivalents at end of the year 44,181,433 392,385,487

- 0.38


Unrealised loss on remeasurement of financial assets

“at fair value through profit and loss”

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



23

STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED JUNE 30, 2016

Capital

reserve

Revenue

reserve

Note

Balance as at July 1, 2014 1,000,000,000 5,407,992 21,631,967 1,027,039,959

Total comprehensive income for the period - - 32,708,677 32,708,677

Transfer to statutory reserve 15.1 - 16,354,338 (16,354,338) -

Balance as at June 30, 2015 1,000,000,000 21,762,330 37,986,306 1,059,748,636

Total comprehensive income for the year - - 44,254,009 44,254,009

Transfer to statutory reserve 15.1 - 22,127,005 (22,127,005) -

Balance as at June 30, 2016 1,000,000,000 43,889,335 60,113,310 1,104,002,645


Issued,

subscribed

and paid-up

share capital

TotalStatutory

reserve

Un-

appropriated

profit

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



24

FOR THE YEAR ENDED JUNE 30, 2016

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 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 27, 2016.

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 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, Companies Ordinance, 1984 and the directives issued by SECP shall prevail.

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 Standards or interpretations that are effective in current year but not relevant to the Company

The following new standards and interpretations have been issued by the International Accounting Standards Board (IASB) which have been adopted locally by the Securities and Exchange Commission of Pakistan vide SRO 633(I)/2014 dated July 10, 2014 with effect from following dates. The Company has adopted these accounting standards and interpretations which do not have significant impact on the Company's financial statements other than certain disclosure requirement about fair value of financial instruments as per IFRS 13 "Fair Value Measurement".

Consolidated Financial Statements

Joint Arrangements

Disclosure of Interests in Other Entities

Fair Value Measurement

Separate Financial Statements (Revised 2011)

IFRS 10

IFRS 11

IFRS 12

IFRS 13

IAS 27

IAS 28 Investments in Associates and Joint Ventures (Revised 2011)

January 1, 2015

January 1, 2015

January 1, 2015

January 1, 2015

January 1, 2015

January 1, 2015

Effective date

(annual periods

beginning on or after)

3.2 Amendments not yet effective

The following amendments and interpretations with respect to the approved accounting standards as applicable in Pakistan would be effective from the dates mentioned below against the respective standard or interpretation:


25



Effective date

(annual periods

beginning on or after)

IFRS 2 January 01, 2018

IFRS 10


Share-based Payment - Amendments to clarify the classification and measurement of share-

based payment transactions

Consolidated Financial Statements - Amendments regarding the sale or contribution of assets

between an investor and its associate or joint venture

Deferred indefinitely

Consolidated Financial Statements - Amendments regarding application of the consolidation

exception



IAS 1 January 01, 2016






Separate Financial Statements (as amended in 2011) - Amendments reinstating the equity

method as an accounting option for investments 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

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

Statement of Cash Flows - Amendments resulting from the disclosure initiative

Income Taxes - Amendments regarding the recognition of deferred tax assets for unrealised

losses

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



Intangible Assets - Amendments regarding the clarification of acceptable methods of

depreciation and amortisation

Agriculture - Amendments bringing bearer plants into the scope of IAS 16

The Annual Improvements to IFRSs that are effective for annual periods beginning on or after January 01, 2016 are as follows:

Annual Improvements to IFRSs (2012 – 2014) Cycle:

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

IFRS 7 Financial Instruments: Disclosures

IAS 19 Employee Benefits

IAS 34 Interim Financial Reporting

3.3 Standards or interpretations not yet effective


26



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:

IFRS 1 First Time Adoption of International Financial Reporting Standards

IFRS 9 Financial Instruments

IFRS 14 Regulatory Deferral Accounts

IFRS 15 Revenue from Contracts with Customers

IFRS 16 Leases

The effects of IFRS 15 - Revenues from Contracts with Customers 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.

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.


27



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 financial assets at fair value through profit or loss.

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, above 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.


28



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.

4.10 Employees benefits

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

4.10.1 Staff retirement benefits

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 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.


29



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.

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 Segment reporting

Segment results that are reported to the Company's CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items, if any, comprise corporate assets and tax assets and liabilities. Management has determined that the Company has a single reportable segment and therefore it has only presented entity wide disclosures.

4.22 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.


30



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.

PROPERTY, PLANT AND EQUIPMENT

Year ended June 30, 2016

Net carrying value basis

Opening net book value (NBV) 16,431,160 3,617,250 6,258,688 1,644,963 4,417,693 32,369,754

- 104,230 - 838,884 - 943,114

Depreciation charge (1,852,843) (410,667) (1,584,149) (848,071) (1,132,748) (5,828,478)

Closing net book value 14,578,317 3,310,813 4,674,539 1,635,776 3,284,945 27,484,390

Gross carrying value basis

18,427,466 4,141,709 7,885,706 2,911,890 5,648,270 39,015,041

Accumulated depreciation (3,849,149) (830,896) (3,211,167) (1,276,114) (2,363,325) (11,530,651)

14,578,317 3,310,813 4,674,539 1,635,776 3,284,945 27,484,390

Year ended June 30, 2015

Net carrying value basis

Opening net book value (NBV) 18,296,202 3,837,634 7,265,486 503,867 4,193,180 34,096,369

- 180,851 535,699 1,813,194 1,250,000 3,779,744

Adjustment / transfer - - 4,017 (253,926) - (249,909)

Depreciation charge (1,865,042) (401,235) (1,546,514) (418,172) (1,025,487) (5,256,450)

Closing net book value 16,431,160 3,617,250 6,258,688 1,644,963 4,417,693 32,369,754


18,427,466 4,037,479 7,885,706 2,073,006 5,648,270 38,071,927

Accumulated depreciation (1,996,306) (420,229) (1,627,018) (428,043) (1,230,577) (5,702,173)

16,431,160 3,617,250 6,258,688 1,644,963 4,417,693 32,369,754

Depreciation rate % per annum 10 10 20 33.33 20

Total

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

Leasehold

improvements

Furniture and

fixtures

Electrical

equipments

Computer

equipmentsVehicles

Additions (at cost)

Net book value

Additions (at cost)

Net book value

Cost

Cost

Description

5.

2016 2015

Note Rupees Rupees

6. INTANGIBLE ASSETS

Software licenses 6.1 974,170 611,003


31



33.33 33.33

7. NET INVESTMENT IN FINANCE LEASES

Lease rentals receivable 827,469,236 465,589,270

Add: Residual value of leased assets 150,951,700 70,250,138

Gross investment in finance leases 978,420,936 535,839,408

Less: Unearned finance lease income (126,378,600) (91,653,385)

Net investment in finance leases 852,042,336 444,186,023

Less: Current maturity of net investment in finance leases (216,785,742) (83,326,954)

635,256,594 360,859,069

Provision for potential lease losses 7.1 (7,000,727) (3,806,000)

628,255,867 357,053,069

Balance at beginning of the year 3,806,000 -

Provision made during the year 3,194,727 3,806,000

Balance at end of the year 7,000,727 3,806,000

Amortization rate (% per annum)

6.1 Net carrying value basis

Opening balance 611,003 -

Additions (at cost) 8.2 800,000 646,941

1,411,003 646,941

Amortization charge (436,833) (35,938)

Closing net book value 974,170 611,003


Cost 1,446,941 646,941

Accumulated amortization (472,771) (35,938)

Net book value 974,170 611,003

2016 2015

Note Rupees Rupees

7.2 Details of investment in finance lease

2016 2015 2016 2015

Rupees Rupees Rupees Rupees

Less then one year 283,166,950 121,257,059 216,785,742 83,326,954

One to five years 695,253,986 414,582,349 635,256,594 360,859,069

978,420,936 535,839,408 852,042,336 444,186,023

finance lease finance lease

Gross investments in Net investments in

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:

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.


32



2016 2015

Note Rupees Rupees8. LONG TERM LOANS AND ADVANCES

Considered good

Loans to employees 8.1 16,023,184 7,113,061

Advance to supplier 8.2 - 600,000

Advance against lease 500,000 -

Auto finance loan 8.3 15,650,603 8,089,999

32,173,787 15,803,060

Loans to employees 2,283,597 1,061,655

Auto finance loan 6,302,688 1,310,186

8,586,285 2,371,841

23,587,502 13,431,219

Provision against doubtful loans 8.4 (155,646) -

23,431,856 13,431,219

Less: Current portion shown under current assets

8.1 Loans to employees

2016 2015

Rupees Rupees

2016 2015

Rupees Rupees

299,994 499,998 6,813,067 -

- - 10,979,938 7,838,638

(299,994) (200,004) (2,275,369) (1,025,571)

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

Chief Executive Executives

Balance at the beginning

of the year

Disbursements made

during the year

Repayments received

during the year

Balance at the end of 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 represented advance given to supplier for purchase of Almanac (accounting software) which has been capitalized during the year.

8.3 This represents vehicle financing facility provided to customers on markup basis. The mark-up on these finances ranges between 9.36% to 12.30% (2015: 10.00% and 12.30%) per annum. These finances are repayable within a period of 3 to 5 years (2015: 5 years) and are secured against first exclusive charge by way of hypothecation of the motor vehicles and personal guarantee of the customers.

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

2016 2015

Note Rupees Rupees

Balance at beginning of the year - -

Provision made during the year 155,646 -

Balance at end of the year 155,646 -

9. SHORT TERM INVESTMENTS

Held to maturity

Certificate of investments 9.1 50,000,000 100,000,000

Term deposit receipts 9.2

- JS Bank Limited 100,000,000 -

- United Bank Limited - 100,000,000

150,000,000 200,000,000

At fair value through profit and loss

Units of open ended mutual funds 9.3 189,740,403 147,669,705

339,740,403 347,669,705


33



9.1

Pair Investment Company Limited 9.1.1 50,000,000 100,000,000

Certificate of investment

9.1.1 This represents investment made by the Company in certificate of investments for a period of three months and having maturity date of August 25, 2016. This investment carries mark-up at the rate of 6.5% per annum (2015: 8.5%).

9.2.1 This represents investment made by the Company in Term Deposit Receipts for a period of three months and having maturity date of September 16, 2016. This investment carries mark-up at the rate of 7.15% per annum.

2016 2015

Note Rupees Rupees

9.2 Term deposit receipts

JS Bank Limited 9.2.1 100,000,000 -

United Bank limited - 100,000,000

100,000,000 100,000,000

2016 2015

NIT - Government Bond Fund

nil (2015: 9,649,059 units) - 109,059,636 - 97,669,705 - (11,389,931)

- 50,000,000 - 50,000,000 - -

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

189,740,403 159,059,636 189,740,403 147,669,705 - (11,389,931)

Unrealised loss

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

ABL - Government Securities Fund - B

nil (2015: 4,983,852 units)

NAFA - Income Opportunity Fund

17,730,096 units (2015: nil)

Cost Market value

9.3 Units of open ended mutual funds

2016 20152016 2015

10. LOANS AND ADVANCES

Considered good

Working capital loan 10.1 223,397,993 -

Less: Provision against doubtful loans 10.2 (2,214,210) -

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 9.10% to 9.36% (2015: nil) 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 - - Provision made during the year 2,214,210 -

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

2016 2015

Note Rupees Rupees

2016 2015

Note Rupees Rupees


34



2016 2015

Note Rupees Rupees

11. CURRENT MATURITY OF NON-CURRENT ASSETS

Net investment in finance leases 7 216,785,742 83,326,954

Long term loans and advances 8 8,586,285 2,371,841

225,372,027 85,698,795

12. PREPAYMENTS

1,174,325 560,481

2,891,397 3,186,153

434,609 140,625

4,500,331 3,887,259

13. CASH AND BANK BALANCES

Cash and other equivalent

Cash in hand 34,397 17,255

Stamp papers in hand 181,900 32,000

216,297 49,255

Cash at bank

Current account 197,826 76,851

Saving account 13.1 43,767,310 392,259,381

43,965,136 392,336,232

44,181,433 392,385,487

Prepaid insurance

Prepaid rent

Prepaid membership fee

13.1 This represents daily product account (saving account) maintained with Sindh Bank Limited carrying mark-up at the rate of 4.00% to 6.75% (2015: 6.75%) per annum receivable on monthly basis.

14.

2016 2015

100,000,000 100,000,000

1,000,000,000 1,000,000,000

ISSUED, SUBSCRIBED AND PAID-UP SHARE CAPITAL

(Number of shares)

Ordinary shares of Rs. 10

each fully paid in cash

14.1 The Government of Sindh, held 99,999,993 shares as at June 30, 2016. The remaining shares are held by the Directors of the Sindh Leasing Company Limited in nominee capacity.

15. RESERVES

Capital reserve

15.1 43,889,335 21,762,330

Revenue reserve

60,113,310 37,986,306

104,002,645 59,748,636

Un-appropriated profit

Statutory reserve

15.1 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. 22.127 million, representing 50% of profit after tax, (2015: Rs. 16.354 million) to the statutory reserve.

16.

Lease deposits 16.1 150,951,700 70,250,138

LONG TERM SECURITY DEPOSITS AGAINST LEASES


35



16.1 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.

17.

Unsecured

Loan from Government of Sindh 17.1 250,000,000 -

LONG TERM LOAN

17.1 This represents long term loan from Sindh Province Pension Fund which is the reserve fund of Government of Sindh on December 2, 2015 for a period of three years at a rate of return of 6 months KIBOR plus 1%. The interest is payable on quarterly basis.

18.

Deferred taxation 18.1 - 6,124,085

- 6,124,085

DEFERRED TAXATION

2016 2015

Note Rupees Rupees

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

Tax effect of:

2,522,626 2,909,088

48,840,261 30,597,886

(46,129,231) (25,846,997)

(5,233,656) (1,535,892)

- 6,124,085

Others

Carry forward tax loss

Difference between accounting book value and

tax base of property, plant and equipment

Difference in net book value of net investment

in finance lease

Deferred tax asset arising due to timing difference calculated at applicable tax rates as at balance sheet date amounted to Rs. 4.855 million (2015: nil) debit. Deferred tax asset has not been recognized in these financial statements in accordance with the stated accounting policy of the Company.

19. TRADE AND OTHER PAYABLES

Payable to vendors 92,564 3,829,512

Withholding tax payable 832,396 -

Advance from customers 3,471,400 -

Workers' Welfare Fund 26 - 1,758,090

Bonus payable 2,000,000 2,529,286

Gratuity payable 1,903,741 993,661

Others 2,363,998 1,395,491

10,664,099 10,506,040

20. SHORT TERM BORROWINGS

Secured

From banking company 20.1 - 95,000,000

- 95,000,000

20.1 This facility is secured against lien over deposit with UBL with 5% margin. The facility carries markup at three months KIBOR plus 0.5% per annum. Total sanctioned limit is Rs. 500.00 million.

21. TAXATION - NET

Provision for taxation 31,516,772 20,210,669

Less: Advance income tax (31,159,052) (25,897,663)

357,720 (5,686,994)


36



22 CONTINGENCIES & COMMITMENTS

22.1 Contingencies

A letter of guarantee issued on behalf of a client for opening letter of credit amounting to Rs. 13.01 million (2015: Rs. 14.00 million).

22.2 Commitments

Finance lease contracts committed but not executed at the balance sheet date amounted to Rs. 228.35 million (2015: Rs. 164.00 million).

23. RETURN ON INVESTMENTS AND DEPOSITS

From financial assets

Interest / markup on:

Term deposit receipts 2,968,250 44,630,136

PLS accounts 7,200,268 23,920,984

Fund placements 26,151,352 11,571,593

Dividend income 74,297 12,079,515

36,394,167 92,202,228

24. FINANCE COST

Mark up on short term borrowings 234,539 809,947

Mark up on long term placement 10,807,603 -

Bank charges 43,941 35,321

11,086,083 845,268

25. ADMINISTRATIVE EXPENSES

Salaries and benefits 25.1 30,009,561 28,845,765

Directors' remuneration 4,639,374 465,000

Rent, rates and taxes 6,091,034 4,487,458

Communication and utility expenses 1,717,133 371,509

Travelling and conveyance 2,507,475 2,484,502

Repair and maintenance 1,035,029 995,328

Insurance expense 1,468,217 1,154,464

Auditors' remuneration 25.2 160,000 130,450

Advertising expense

Depreciation 5,828,478 5,256,450

Amortization 436,833 35,938

Legal and professional charges 3,014,374 1,983,079

Printing and stationary 515,164 556,200

Others 1,235,106 975,440

58,707,965 47,834,529

2016 2015

Note Rupees Rupees

25.1 This amount includes Rs. 2.089 million (2015: Rs. 1.874 million) in respect of employees’ retirement benefits.

25.2 Auditors' remuneration

Audit fee 135,000 125,000

Out of pocket expenses 25,000 5,450

160,000 130,450

26. PROVISION FOR WORKERS' WELFARE FUND

This 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.

50,187 92,946


37



27. TAXATION

Current 27.1 11,306,103 10,168,372

Prior 2,588,974 63,019

Deferred (6,124,085) 3,437,132

7,770,992 13,668,523

2016 2015

Note Rupees Rupees

27.1 The income tax for the year ended June 30, 2016 has been charged at the rate applicable as per the provision of Income Tax Ordinance, 2001 (the Ordinance).

27.2

Accounting profit for the current year 52,025,001 46,377,200

Tax on income @ 32% (2015: 33% ) 16,648,000 15,304,476

451,634 75,056

Tax effect of lease income and rentals 22,753,988 20,844,961

6,143,759 5,027,136

Effect of final tax under presumptive tax regime (1,324,633) (1,799,128)

Tax effect of tax losses (33,366,646) (29,284,129)

Effect of deferred tax (6,124,085) 3,437,132

Effect of prior year adjustment 2,588,974 63,019

7,770,992 13,668,523

28. EARNINGS PER SHARE - BASIC AND DILUTED

Profit for the year - Rupees 44,254,009 32,708,677Weighted average number of ordinary shares 100,000,000 100,000,000Earnings per share - basic and diluted - Rupee 0.44 0.33

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

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.

29. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES

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

Chief

Executive Directors Executives Total

2015

Rupees

Chief

Executive

Directors &

Executive

Director

Executives Total

Fee - 1,011,000 - 1,011,000

Managerial remuneration 3,926,649 2,125,000 3,899,142 9,950,791

Perquisites and allowances 2,853,084 1,078,374 4,029,210 7,960,668

Retirement benefit 754,968 425,000 779,844 1,959,812

7,534,701 4,639,374 8,708,196 20,882,271

Number of persons 2 7 5 14

2016

Rupees

Fee - 465,000 - 465,000

Managerial remuneration 7,084,854 - 3,596,773 10,681,627

Perquisites and allowances 4,605,146 - 3,884,335 8,489,481

Retirement benefits 1,113,132 - 447,203 1,560,335

12,803,132 465,000 7,928,311 21,196,443

Number of persons 1 5 5 11


38



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.

30. 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, 2016 are as follows:

Associated

Company

Other related

party

Key

management

personnel

Directors

Profit on term deposit - - - -

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 - -

Balances

Daily product account 37,915,367 - - -

Long term loan - 250,000,000 - -

Markup accrued - 1,369,315 - -

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

-----------------------------------Rupees-----------------------------------Transactions during the year

Services received from

Sindh Insurance

Company Limited

Long term loan from

Government of Sindh

Interest on long term loan

from Government of Sindh

Associated

Company

Other related

party

Key

management

personnel

Directors

Profit on term deposit 44,630,136 - - -

Profit on daily product account 23,916,789 - - -

Remuneration paid - - 19,171,108 -

Retirement benefits - - 1,560,335 -

Directors' meeting fees - - - 465,000

Balances

Daily product account 391,489,464 - - -

--------For the year ended June 30, 2015--------

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

Transactions during the year

31. FINANCIAL RISK MANAGEMENT

31.1 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


39



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.

31.2 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.

2016 2015

Rupees Rupees31.2.1 Exposure to credit risk

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

Net investment in finance leases 628,255,867 357,053,069

Long term loans and advances 23,431,856 13,431,219

Long term deposits 374,600 374,600

Short term investments 339,740,403 347,669,705

Accrued markup 1,846,619 3,270,961

Loans and advances 221,183,783 -

Current maturity of non-current assets 225,372,027 85,698,795

Cash at bank 43,965,136 392,336,232

1,484,170,291 1,199,834,581

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 - -

Impaired but not past due 3,194,727 3,806,000

Neither past due nor impaired 848,847,609 440,380,023

Total amount 852,042,336 444,186,023

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

31.2.2 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+.


40



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

Percentage Gross amount2016 2016

% Rupees Sector

Oil and petroleum marketing 0.00% -Health & pharmaceuticals 11.61% 52,884,689Individuals 3.58% 16,292,238Construction 10.94% 49,844,351Sugar 20.19% 91,963,060Cinematography theatre 0.00% -Transport 7.67% 34,941,467Textile 8.47% 38,574,907Media 32.48% 147,944,127Packaging 0.00% -Energy 16.75% 76,274,027Service 10.46% 47,640,937Miscellaneous 26.48% 120,622,684

100% 676,982,487

Percentage Gross amount2015 2015

% Rupees Sector

Oil 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

2016Financial assets

2015Financial assets

31.3 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 250,000,000 - - 250,000,000 -

Trade and other payables 4,456,562 4,456,562 - - -

1,369,315 1,369,315 - - -

June 30, 2016 255,825,877 5,825,877 - 250,000,000 -

June 30, 2015 106,315,987 106,315,987 - - -

June 30, 2016

Financial liabilities TotalUp to three

months

Over three

months to one

year

Over one year

to five yearsOver five years

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

Markup accrued


41



31.4 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.

31.4.1 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.

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

2016 2015 2016 2015

Rupees RupeesFixed rate instruments

Financial assets

6.5 8.5 50,000,000 100,000,000 Term deposit receipts 7.15 7.2 100,000,000 100,000,000 Bank balances 4 to 6.75 6.75 43,767,310 392,259,381 Loans to employees 5 6 16,023,184 7,113,061

209,790,494 599,372,442

Certificate of Investment

Effective rate Carrying amount(In percent)

2016 2015 2016 2015

Rupees RupeesVariable rate instruments

Financial assets

9.35 to 16.71 10 to 14.49 852,042,336 444,186,023

9.36 to 11.67 10 to 12.3 15,650,603 8,089,999

9.10 to 9.36 - 221,183,783 -

1,088,876,722 452,276,022

Financial liabilities

Short term running finance - 7.59 - 95,000,000

Long term loan 7.14 to 7.53 - 250,000,000 - 250,000,000 95,000,000

Auto finance loan

Loans and advances

Effective rate Carrying amount

(In percent)

Net investment in finance

31.4.2 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. 8.389 million (2015: Rs. 3.573 million). The analysis assumes that all other variables remain constant.

31.4.3 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.

31.4.4 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.


42



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. 18.974 million (2015: Rs. 14.767 million).

31.5 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, 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

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

Investment in units of mutual

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.

2016 2015

Rupees Rupees

31.6 Financial instruments by category

Financial assets

At fair value through profit and loss

189,740,403 147,669,705

Held to maturity

150,000,000 200,000,000

Loans and receivables at amortised cost

852,042,336 444,186,023

31,673,787 15,203,060

374,600 374,600

1,846,619 3,270,961

Loans and advances 221,183,783 -

44,181,433 392,385,487 Cash and bank balances

Short term investments

Short term investments

Net investment in finance leases

Long term loans and advances

Long term deposits

Accrued markup

Financial liabilities

Financial liabilities at amortised cost

250,000,000 -

4,456,562 8,747,950

- 95,000,000

Long term loan

Trade and other payables

Short-term borrowings


43



32. 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.

33. NUMBER OF EMPLOYEES

The total number of employees as at year end were 22 (2015: 24).

34. CORRESPONDING FIGURES

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

35. DATE OF AUTHORIZATION FOR ISSUE

These financial statements were authorized for issue by the Board of directors on August 30, 2016.

36. GENERAL

Figures have been rounded off to the nearest rupee.



44

I/We __________________________________________________________________________________________________________

of ____________________________________________________________________________________________________________

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

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

rd as my/our Proxy in my/our absence to attend and vote for me/us and on my/our behalf at the 3 Annual General Meeting of the

company to be held on October 20, 2016, at its registered office in Karachi.

Signed this__________________________________ day of __________________________________, 2016

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 office 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:

annual report june 2016 - sindh leasing company ltd.annual report june 2016 s indhleasing 4 notice...

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