Vision. Mission Prefrably to provide lease finance and other products

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2 Vision To catalyze the untapped potential of the economy through ease of access to finances across sectors ranging from the agrobased to industrial leading the country towards prosperity. Mission Prefrably to provide lease finance and other products a 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 e requirements of the customer, be it a small f a r m e r, s m a l l a n d m e d i u m s i z e entrepreneur(s) or enterprise(s) or woman owned business, for sustainable and long term financial solutions. 1

3 Corporate Information Board of Directors Syed Ali Murtaza Kazmi Syed Hassan Naqvi Mrs.Masooma Hussain Mr. Naim Farooqui Mr. Muhammad Aftab Alam Mr. Anis Khan Mr. Muhammad Bilal Sheikh Chairman Chief Executive Independent NonExecutive Director NonExecutive Director NonExecutive Director NonExecutive Director Independent NonExecutive Director Independent NonExecutive Director Executive Director CFO & Company Secretary Registered Office Mr. Rehan Anjum Third Floor, Imperial Court Building Dr. Ziauddin Ahmed Road, Karachi Audit Committee Branch Offices Mr. Muhammad Aftab Alam Chairman Mr. Anis Khan Member Mrs.Masooma Hussain Member Larkana / Naudero Branch Raza Shah Mohalla, VIP Road, Larkana Human Resource Committee Syed Ali Murtaza Kazmi Mr. Muhammad Bilal Sheikh Mr. Naim Farooqui Syed Hassan Naqvi Banker Sindh Bank Limited Bank Islami Pakistan Limited United Bank Limited NRSP Microfinance Bank Auditors BDO Ebrahim & Co. Chartered Accountants nd 2 Floor, Block C Lakson Square Building1 Sarwar Shaheed Road Karachi. Web: Chairman Member Member Member Hyderabad Branch Plot No. 11 Faraz Villas Housing Scheme Taluka Qasimabad Hyderabad Islamabad Branch Select One Plaza, F11 Markaz, Sindh Bank Ltd, Islamabad Lahore Branch 2nd Floor, Plot No. S19, R30 ShahraheQuaideAzam Lahore Legal Advisor Muhammad Nadeem Khan nd Suite # 28A, 2 Floor Fareed Chamber Abdullah Haroon Road Karachi 2

4 Table of Contents Notice of Annual General Meeting 04 Directors Report 05 Statement of Compliance with the Public Sector Companies (Corporate Governance) Rules, Review Report to the members on Statement of Compliance with Public Sector Companies (Corporate Governance) Rules, 2013 Auditors Report to the Members Balance Sheet Profit and Loss Account Statement of Comprehensive Income Cash Flow Statement Statement of Changes in Equity Notes to the Financial Statements Form of Proxy

5 Notice of Annual General Meeting Notice is hereby given that the Fourth Annual General Meeting of Sindh Leasing Company Limited ( Company ) will be held on October 24, 2017 at 12:00 Noon at the Registered office of the Company, Third Floor, Imperial Court Building, Dr. Ziauddin Ahmed Road, Karachi, to transact the following business: 1. To confirm the minutes of the Third Annual General Meeting held on October 20, To receive, consider and adopt the Audited Accounts of the Company for the year ended June 30, 2017, along with the Directors and Auditor's Reports thereon. 3. To approve the reappointment of external auditors of the Company for the year ending June 30, 2018 and fix their remuneration. 4. Any other business with the permission of the Chair. By Order of the Board Rehan Anjum Company Secretary Karachi: August 16,

6 Director s Report On behalf of the Board of Directors of Sindh Leasing Company Limited (SLCL, the Company), it is my pleasure to present the Fourth Annual Audited Financial Statements for the year ended June 30, Review of Business and Operation The Company earned a gross revenue of Rs million during the year under review against a gross revenue of Rs million in the corresponding period last year. Total administrative expenses and provisions for the year amounted to Rs million against Rs million last year. Profit before tax for the current year is Rs million. While the net revenue of SLCL increased to Rs million during the period under review from Rs million in the corresponding period last year so did the operating expenses to account for increased marketing and development of infrastructure expenses. General provisions amounting to Rs million, due to enhanced disbursements, increased by about 63% over the corresponding period last year. Disbursement in the current year of both leases and loans amounting to Rs 1, million is an impressive growth. Increase in the net revenue by about 77% over the last year has mainly been on account of higher disbursement in finance leases and loans and investments in high yielding instruments of surplus funds available as a result of additional equity of Rs. 1.0 Billion provided by GOS. Our lease and loan portfolio grew by % despite declining 30 proposals amounting to Rs 1, million. This growth shows effective implementation of business strategy where funds are utilized in the best possible manner, with a zero percent overdue as a result of a robust customer screening process. Operating Results Balance Sheet As at June 30, 2017 As at June 30, 2016 (PKR Million) Paid up capital 2, , Total equity 2, , Fixed Assets Net investment in finance leases 1, Auto and Working capital loans Profit & Loss For the year Ended June 30, 2017 For the year Ended June 30, 2016 Revenue Net Administrative expenses General Provision Net Profit before provision & tax Board of Directors During the year under review Syed Saeed Reza and Mr. Imran Malik submitted their resignations from the Board as Directors of the Company. The Board wishes to place on record its appreciation for their valuable contribution in the Company. The Board has appointed Mr. Anis Khan and nominated Mrs. Masooma Hussain (subject to SECP approval) as Directors of Sindh Leasing Company Limited. In order to comply with subsection (2) of Rule 3 of the Public sector companies (Corporate Governance) Rules 2013 which requires the majority of the members of the Board of Director to be independent, Syed Shahnawaz Nadir Shah tendered his resignation from the Board and Mr. Muhammad Aftab Alam was coopted as independent Director. 5

7 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: No. of meeting(s) Total no. of S.No Name of Director heldduring the Tenor in the year meeting(s) attended 1 Muhammad Bilal Sheik h Mr. Sohail Rajput ** 5 1* 3 Syed Shahnawaz Nadir shah** 5 4* 4 Syed Saeed Reza** 5 1* 5 Muhammad Imran Malik** 5 4* 6 Mr. Ali Murtaza Kazmi 5 4* 7 Mr. M. Naim uddin Farooqui Syed Hassan Naqvi 5 3* 9 Mr. Muhammad Aftab Alam 5 1* 10 M r. Anis Khan 5 0* * Leave of absence was granted to Directors who could not attend the Board meeting. * * Directors who have tendered their resignations. 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: Attendance by each director was as follows: S.No Name of Director No. of meeting(s) held during the year Total no. of meeting(s) attended 1 Syed Saeed Reza ** 4 1* 2 Syed Shahnawaz Nadir shah ** 4 3* 3 Mr. Ali Murtaza Kazmi Mr. Muhammad Aftab Alam 4 1* 5 Mr. Anis Khan 4 0 * Leave of absence was granted to Directors who could not attend the Board meeting. * * Members who have tendered their resignations. Pattern of Shareholding The pattern of shareholding as at June 30, 2017 is as follows: No of Shareholding No of Shares Shareholders From To Held Percentage ,999, ,999, ,999, ,000, Total 200,000, 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. 6

8 2. Proper books of account of Sindh Leasing Company Limited have been maintained. 3. Appropriate accounting policies have been consistently applied in preparation of financial statements. Accounting estimates are based on reasonable and prudent judgment. 4. International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements. 5. The system of internal control is sound in design and has been effectively implemented and monitored. 6. There are no significant doubts upon the ability of Sindh Leasing Company Limited to continue as a going concern. 7. The appointment of Chairman and other members of Board and the terms of their appointment along with the Remuneration policy adopted are in the best interests of the Public Sector Company as well as in line with the best practices. External Auditors The Audit Committee has recommended the name of M/S BDO Ebrahim & Co., Chartered Accountants as external Auditors of the Company for the year ending June 30, The Board of Directors, on the recommendation of the Audit Committee has proposed the name of retiring auditors BDO Ebrahim & Co., Chartered Accountants as external Auditors for the next term. The retiring auditors M/s. BDO Ebrahim & Co., Chartered Accountants, being eligible, offer themselves for reappointment in the forthcoming Annual General Meeting. Key Operating and Financial Data Key operating and financial data of last four years as annexed to the Annual Report. Internal Control and Compliance The management has built and implemented internal controls to ensure accuracy and reliability of financial reporting. Review and monitoring of internal controls is an ongoing process. The internal audit function has been out sourced to Grant Thornton Anjum Rahman, Chartered Accountants who report directly to the Audit Committee. Credit Rating JCRVIS Credit Rating Company Limited (JCRVIS) has maintained the entity ratings of Sindh Leasing Company Limited (SLCL) to A+ (Single A Plus) long term and A1 (A One) short term. Outlook on the assigned ratings is Stable. Dividend The Company has not declared any dividend for the year ended June 30, Challenges In the absence of certificates of investments (COI) the Company would have to rely on financing from other banks including Sindh Bank 1% above KIBOR (presently 6.15%) for an aggregate of 7.15%. Taking into account the intermediation cost/operating expense of around 3% would increase our cost to 10%. The reputable borrowers in the market avail bank around 2% above KIBOR which comes to 8% or so, therefore incurring 2% loss will be difficult to sustain in this competitive financial market. In an extremely difficult market where SLCL has to compete with Banks offering cut throat rates to sound customers. Increase in its capital was a logical step till it becomes eligible to raise deposits from public at acceptable rates. Future Outlook As a result of improved security situation in the country prospects of more foreign investment have increased. This would result in job creation and opportunity for financing assets to be used in these projects. Considering the improved economic environment and the expertise SLCL possesses it is well poised to compete at all levels with the market considering its support by the GoS which guarantees its continued patronage in a market as volatile and competitive as this. The new leadership in the provincial government is likely to expedite implementation of Government projects resulting in trickling down of economic activity and creation of employment opportunities. The Management s thrust to reach out to Corporate Sector and individuals through aggressive marketing including publication of Advertisements would add to the visibility of the company. Acknowledgements The Board acknowledges the support of the sponsors, i,e the Government of Sindh (GoS) and its valued customers who have reposed confidence in the Company. It is hoped that the Company would continue to enjoy their patronage and support. I would also like to place on record appreciation for the guidance and support provided by the Securities and Exchange Commission of Pakistan. Acknowledgements are also for the committed staff without whose unwavering dedication and support this Company could not have achieved the growth as highlighted above. Muhammad Bilal Sheikh Chief Executive August 16,

9 ز ر رٹ ڈا رڈ آف ڈا ز ھ ) ( 30 ن 2017 ا م وا ل ہ (audited) ا ؤ ت س ر ں رو راور آ ہ ز ر ل آ رو ل ا ت آ ل ا ا ا ت اور ل ت ر ل رو رو ر دہ ل از رو ر ل ا ت دوران آ رو ز ر ت ھ رو ر اور اس ا و رو ر وغ ں (marketing) اور ڈ ا ا ت م ت رو و ادا ں ل 63 دہ ل ( lease )اور ت دو ں ادا ں رو ا ا ل آ (revenue) 77 ا ھ ا دہ ا ا (equity) ز ا ا ل ہ (surplus) ز د ب و (lease) رى ت اور ز دہ اوار د وا د و ات (instruments) ادا ں رى 30 و ) رى و ( رو د و د را اور ت رٹ ا ا ا رى ) ( ذ ز ا ل زا ا د ادا ں (و ں) ں ل آ 30 ن 201۶ 30 ن 201۷ كرو ۲ ۰۰۰ ۰۰ ادا ہ ۱ ۱۰۴ ۰۰ ۲ ۱۴۸ ۷۶ ( ) ا دہ ا ۲۷ ۴۹ ۳۱ ۵۳ ت ا ۸۵۲ ۰۴ ۱ ۳۸۴ ۸۴ رى ۲۴۳ ۱۳ ۴۶۸ ۵۶ ت د راورور اور ن ل دوران ۱۹۳ ۵۹ آ ۱۳۰ ۵۳ ا ا ت ا 3 81 ۶ ۲۲ دہ از م ۵۵ ۸۳ ۶۳ ۰۶ از ۴۴ ۲۵ ۴۴ ۷۵ از 0 44 ۰ ۲۶ ( ( (اى ا ) آ 8

10 ز رڈز آف ڈا ز ر ل ر اور ب ان رڈآفڈا ز ا دےد رڈان وا ت ا اس ت ر رڈ رڈ ر ھ ڈا ز با ن ا باور ) SECP رى وط ( د ) ر ر ر ( ہ ) ا ( 2013 رول 3 ذ (2) رڈ آف ڈا ز ار ن ا آزاد اس از در ہ رڈ ا د اور ب آ ب ر آزاد ڈا ڈا ز ا س ز ر ل دوران رڈ آف ڈا ز ا س ڈا ى درج ذ ڈا ز م ا س اد ل 1 ب ل 5 ۵ 2 ب ن را ت** ۱* 5 3 از در ہ** 5 ۴ 4 ر ** ۱ 5 5 ب ان ** *4 5 6 ب 5 5 ۷ ب ا رو ۵ ۵ ۸ ى *۳ ۵ ۹ ب آ ب ۱* ۵ ۱۰ ب ا ن ۰* ۵ * ڈا ا س ان ر دے دى ** وہڈا ز ں ا دےد ا س آڈٹ درجذ ى ڈا را س ( آڈٹ ا ا (ا ز ر ل ا س اد م ز ڈا ل 4 ۱ ر ** 1 4 ۳ از در ہ** 2 9

11 3 ب ۴ 3 4 ب آ ب ۱* ۴ ۵ ب ا ن ۴ ۰ * ڈا ا س ان ر دے دى **وہڈا ز ں ا دےد ا از ) ر ر ن) 30 ن 2017 ا از ) ر ر ن) درج ذ : ر اد ن اد ۱ ۱ ۰ ۰۰۰۰۰۷ ۷ ۲۰۰ ۰۰۰ ۰۰۰ ۱۹۹ ۹۹۹ ۹۹۴ ۷ ۱۰۰ ۲۰۰ ۰۰۰ ۰۰۰ ۸ ا ر ر اور ر ر ڈ رز ڈا ر رٹ 1984 آرڈ 236 ورى 1. ھ ر دہ ت ( statements )آ اور ا رد و ل ت 2. ھ ں ر ر 3. د و ات رى ا ؤ ں ا ل ا ؤ ں د اور ظ ا ازے 4. د و ات رى ا ا ا و ا رڈز ن ان رآ 5. ا رو ا م ڈ ا ط اور اس ر ذ اور ا 6. ھ ا رى ر وا ادارے رے ص ت آڈ ز 7. اور رڈ د ان ا ب ان ا ب ت اور ان وں د اور ں ا ل آڈٹ ز ڈى او ا ا ا ر ڈ ا و م 30 ن 2018 ا م ل رش رڈ آف ڈا ز آڈٹ رش وش آڈ ز ز ڈى او ا ا ا ر ڈ ا و ر و آڈ ز ا ت ا ب م وش وا آڈ ز ز ڈى او ا ا ا ر ڈ ا و اس ت ا وہ دو رہ اور وہ ا آپ م ا س دو رہ ا ب ر 10

12 ا آ اور ا او ر ر ں ا آ اور ا او ر اس ر رٹ ا رو ا اور ٹ ر ر ر در اور ا رو ا اور اس ذ ا رو ا ہ اور ا ا ا رو آڈٹ م ا ا ر ن ر ڈ ا و د د اور وہ آڈٹ اہ را ر رٹ JCRVIS ٹر (JCRVIS) ھ ا تا ( entity )ر + Aاور ا تر 1A ارر دى ر آؤٹ در 30 ن 2017 وا ل ا ن رى م د (COI) رى د ں ل ھ ا ر ر اور (KIBOR) دہ ز دہ ح (intermediation) /آ ا ا ت ر ا ازہ رى 10 ى وف ض وا 2 KIBOR ز دہ ح 8 اس 2 ن ر د ا ا ر ں ا ں خ ر اور SLCL ان ں ا ا اس م و اس ت ا وہ ام ا س ڈ زٹ خ ے ر ا ا و ا ن ر ل رى ا ت ھ اس ز ں اور ان ں ا ل وا ا ت رى ا ا ں ل ر ے اور رت ھ ر م ں ر ھ ر ر اس د اور اس ر د دت ز دہ ت ر و ذ ى د ا ات وع ں اور روز ر ا ا ں ا زورا ر ر ل ا رات ا ذر ا د ے ا ا ز ر آف ھ اور ز رز ا ا ں دو رہا د ا ر ان اور رىر ر ا ا آف ن وا ا اس ت ر رڈ ں ا ا ل اور ا اف ورى د رہ اس ل ا آ ۱۶ ا 201۷ 11

13 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 1. The independent directors meet the criteria of independence, as defined under the Rules. The Board has the requisite percentage of independent directors. At present the board includes : Rule No. 2(d) Y Tick the relevant box N 2. Category Independent Directors Names 1. Mr. Muhammad Aftab Alam 2. Mr. Ali Murtaza Kazmi 3.Mr. Anis Khan Date of appointment April 27, November 14, 2014 Feb 14, (2) Executive Directors NonExecutive Directors Mr. Mohammad Bilal Sheikh July 11, Mr.Hasan Naqvi 2.Naim Farooqui August 15, 2016 November 14, Any casual vacancy occurring on the board was filled up by the directors within ninety days. 3(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. 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. The chairman of the board is working the Company. separately from the chief executive of The chairman has been elected from amongst the independent directors. 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. (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. ( (b) The Board has set in place adequate systems and controls for the identification and redressal of grievances arising from unethical practices. 3(5) * 3(7) 4(1) 4(4) 5(2) 5(4) 10. The Board has established a system of sound internal control, to ensure 5(5) 12

14 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. 11. The Board has developed and enforced an appropriate conflict of interest policy to lay down circumstancesor considerations when a person may be deemed to have actual or potential conflict of interests, and the procedure for disclosing such interest. 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. (b) A Committee has been formed to investigating deviations from the company 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. 5(5)(c) (iii) The Board has developed a vision or mission statement, corporate strategy 15. and significant policies of the company. A complete record of particulars of 5(6) significant policies along with the dates on which they were approved or amended has been maintained. The Board has quantified the outlay of any action in respect of any service 16. delivered or goods sold by the Company as a public service obligation, and have submitted its request for appropriate compensation to the Government 5(8) N/A for consideration. (a) The Board has met at least four times during the year. 6(1) 17. (b) (c) Written notices of the board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. 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 basis. 8 The Board has reviewed and approved the related party transactions placed 19. before it after recommendations of the audit committee. A party wise record 9 of transactions entered into with the related parties during the year has been maintained. The Board has approved the profit and loss account for, and balance sheet 20. 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 10 company s website. Monthly accounts were also prepared and circulated amongst the board members. 21. All the board members underwent an orientation course arranged by the company annually to apprise them of the material developments and 11 information as specified in the Rules. 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 12 13

15 board members. (d) The committees were chaired by the following nonexecutive directors: Committee Number of Members Name of Chair Audit Committee Three Mohd. Aftab Alam Risk Management Committee Two Ali Murtaza Kazmi Human Resources Committee Three Syed Hasan Naqvi Procurement Committee Three Anis Khan Nomination Committee Three Ali Murtaza Kazmi The Board has approved appointment of Chief Financial Officer, Company Secretary and Chief Internal Auditor, with their remuneration and terms and conditions of employment, and as per their prescribed qualifications. The company has adopted International Financial Reporting Standards notified by the Commission under clause (i) of subsection (3) of section 234 of the Ordinance. 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. 13/ 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 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 The financial statements of the company were duly endorsed by the chief executive and chief financial officer, before approval of the board 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 Aftab Alam Independent Chartered Accountant Ali Murtaza Kazmi Independent Lawyer Anis Khan Independent Marketing Specialist 21 The Chief executive and chairman of the Board are not members of the audit committee. 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 The Company has appointed its external auditors in line with the requirements envisaged under the Rules 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. The external auditors have not been appointed to provide nonaudit services and the auditors have confirmed that they have observed applicable guideline issued by IFAC in this regard. 23(4) 23(5) 34. The Company has complied with all the corporate and financial reporting requirements of the Rules. * Not applicable for Government Nominee Director. Muhammad Bilal Sheikh Chief Executive Officer 14

16 Explanation for NonCompliance 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/subrule no. Reasons for noncompliance Future course of action 1. Rule 21 Only in one Board meeting where the Chairman of the Board has resigned, member of Audit committee chair the board meeting as independent director Board has appointed another member of Audit committee and now the Chairman of the Board is not a member of Audit Committee 15

17 Review Report to the Members on Statement of Compliance with the Public Sector Companies (Corporate Government) Rules, nd Floor, Block C Lakson Square Building1 Sarwar Shaheed Road Karachi. We have reviewed the Statement of Compliance with the Public Sector Companies (Corporate Governance) Rules 2013 (the Rules) for the year ended June 30, 2017 prepared by the Board of Directors of Sindh Leasing Company Limited to comply with the provisions of the Rules. The responsibility for compliance with the Rules is that of the Board of Directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Company's compliance with the provisions of the Rules and report if it does not and to highlight any noncompliance 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, Further, we highlight below instance of noncompliance with the requirements of the Rules reflected in the paragraph 29, where these are stated in the Statement of Compliance. S.No. Reference Clause description 211. Rule The Chairman of Board of Director is a member of the Audit Committee Dated: August 16, 2017 Place: Karachi CHARTERED ACCOUNTANTS Engagement Partner: Mr. Zulfikar Ali Causer 16

18 Financial Highlights (Rs. in million) Operational Results Gross Revenues Financial Charges Gross Margin Profit Before Taxation Profit After Taxation Balance Sheet Net Investment in Finance Leases Working Capital and Auto Loans Shareholders' Equity 1, , , , Total Liabilities Total Assets 1, , , , Categorywise Lease Disbursements Rs Million Vehicles 23% Year Equipments 7% Vehicles 30% Categorywise Lease Disbursements Rs Million Year Equipments 14% Equipment Machinery Vehicles Equipment Machinery Vehicles Machinery 70% Machinery 56% Profit Before Taxation Profit After Taxation Rs. in million Rs. in million YEARS YEARS 300 Gross Income vs Financial Cost Net Investment in Lease Finance Rs. in million Rs. in million YEARS YEARS Shareholders Equity Total Asset Base , Rs. in million , , , Rs. in million , , , , YEARS YEARS 17

19 Auditors Report to the Members 2nd Floor, Block C Lakson Square Building1 Sarwar Shaheed Road Karachi. We have audited the annexed Balance Sheet of Sindh Leasing Company Limited, as at June 30, 2017 and the related Profit & loss account, Statement of Comprehensive Income, Cash Flow Statement and Statement of Changes in Equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the company s management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 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) iii) the expenditure incurred during the year was for the purpose of the company s business; and the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the company; c) In our opinion and to the best of our information and according to the explanations given to us, the Balance Sheet, profit & loss account, Statement of Comprehensive Income, Cash Flow Statement and Statement of Changes in Equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the company s affairs as at June 30, 2016 and of the income, its comprehensive income its cash flows and changes in equity for the year then ended; and d) In our opinion no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980). Date: August 16, 2017 Place: Karachi BDO Ibrahim & Co Chartered Accountants Engagement partner Mr. Zulfikar Ali Causer 18

20 BALANCE SHEET AS AT JUNE 30, Rupees Note ASSETS NONCURRENT ASSETS Property, plant and equipment 5 31,527,292 27,484,390 Intangible assets 6 490, ,170 Net investment in finance leases 7 972,844, ,255,867 Long term loans and advances 8 16,162,371 23,431,856 Long term deposits 488, ,600 1,021,513, ,520,883 CURRENT ASSETS Short term investments 9 900,000, ,740,403 Accrued markup 10,480,368 1,846,619 Loans and advances ,669, ,183,783 Current maturity of noncurrent assets ,724, ,372,027 Prepayments 12 4,840,086 4,500,331 Other receivables 13 1,909,700 Cash and bank balances ,170,786 44,181,433 2,037,794, ,824,596 TOTAL ASSETS 3,059,307,588 1,517,345,479 EQUITY AND LIABILITIES CAPITAL AND RESERVES Authorized share capital 200,000,000 (2016: 100,000,000) ordinary shares of Rs. 10/ each 2,000,000,000 1,000,000,000 Issued, subscribed and paidup share capital 15 2,000,000,000 1,000,000,000 Reserves ,757, ,002,645 2,148,757,597 1,104,002,645 NON CURRENT LIABILITIES Long term security deposits against leases ,045, ,951,700 Long term loan ,000, ,000,000 Deferred taxation ,045, ,951,700 CURRENT LIABILITIES Trade and other payables 20 18,874,523 10,664,099 Current maturity of security deposits against leases 17 5,221,800 Short term borrowings 21 82,498,269 Markup accrued 22 21,458,211 1,369,315 Taxation net 23 4,452, , ,504,938 12,391,134 CONTINGENCIES AND COMMITMENTS 24 TOTAL EQUITY AND LIABILITIES 3,059,307,588 1,517,345,479 The annexed notes from 1 to 39 form an integral part of these financial statements. Chairman Chief Executive 19

21 PROFIT AND LOSS ACCOUNT Note Rupees INCOME Income from finance lease, auto loans and working capital loans 140,057,430 88,826,015 Return on investments and deposits 25 83,005,628 36,394,167 Other income 1,100, , ,163, ,625,542 EXPENSES Finance cost 26 (30,570,708) (11,086,083) Administrative expenses 27 (130,528,171) (58,707,965) Profit before provision and taxation 63,064,888 55,831,494 Provision for potential lease losses (4,004,759) (3,194,727) Provision against working capital loans (2,285,790) (2,214,210) Provision against auto finance loans (155,646) Reversal of provision against auto finance loans 74,849 Workers' Welfare Fund 28 1,758,090 Profit before taxation 56,849,188 52,025,001 Taxation 29 (12,094,236) (7,770,992) Profit for the year 44,754,952 44,254,009 Earnings per share basic and diluted (Rupee) The annexed notes from 1 to 39 form an integral part of these financial statements. Chairman Chief Executive 20

22 STATEMENT OF COMPREHENSIVE INCOME Rupees Profit for the year 44,754,952 44,254,009 Other comprehensive income Total comprehensive income for the year 44,754,952 44,254,009 The annexed notes from 1 to 39 form an integral part of these financial statements. Chairman Chief Executive 21

23 CASH FLOW STATEMENT Rupees CASH FLOW FROM OPERATING ACTIVITIES Profit before taxation 56,849,188 52,025,001 Adjustment for: Depreciation 6,929,174 5,828,478 Amortization 483, ,833 Provision for potential lease losses 4,004,759 3,194,727 Provision against working capital loans 2,285,790 2,214,210 Provision against auto finance loans 155,646 Reversal of provision against auto finance loans (74,849) Gain on disposal of property, plant and equipment (540,025) Finance cost 30,570,708 11,086,083 43,659,144 22,915,977 Operating profit before working capital changes 100,508,332 74,940,978 Movement in working capital Decrease / (increase) in current assets Long term loans and advances 652,600 (8,810,123) Long term deposits (114,000) Prepayments (339,755) (613,072) Other receivables (1,909,700) Accrued markup (8,633,749) 1,424,342 Increase in current liabilities Trade and other payables 8,210, ,059 (2,134,180) (7,840,794) Cash generated from operations 98,374,152 67,100,184 Finance cost paid (10,481,812) (10,526,715) Taxes paid (7,999,821) (7,850,363) Increase in net investment in finance lease (532,797,068) (407,856,313) Increase / (decrease) in auto finance loan 7,543,137 (7,560,604) Increase in loans and advances (225,771,009) (223,397,993) Increase in security deposit against leases 132,315,153 80,701,562 (637,191,420) (576,490,426) Net cash used in operating activities (538,817,268) (509,390,242) CASH FLOW FROM INVESTING ACTIVITIES Capital expenditure incurred own use and intangible assets (13,254,117) (1,743,114) Proceeds from sale of property, plant and equipment 2,822,066 Short term investments net (560,259,597) 7,929,302 Net cash (used in) / generated from investing activities (570,691,648) 6,186,188 6,186,188 CASH FLOW FROM FINANCING ACTIVITIES Proceeds from long term loan 250,000, ,000,000 Proceeds from issue of shares 1,000,000,000 Short term borrowings 82,498,269 (95,000,000) Net cash generated from financing activities 1,332,498, ,000,000 Net increase / (decrease) in cash and cash equivalents 222,989,353 (348,204,054) Cash and cash equivalents at beginning of the year 44,181, ,385,487 Cash and cash equivalents at end of the year 267,170,786 44,181,433 The annexed notes from 1 to 39 form an integral part of these financial statements. Chairman Chief Executive 22

24 STATEMENT OF CHANGES IN EQUITY Note Revenue Issued, Capital reserve reserve subscribed Un Total Statutory and paidup appropriated reserve share capital profit Rupees Balance as at July 1, ,000,000,000 21,762,330 37,986,306 1,059,748,636 Total comprehensive income for the year Profit for the year Other comprehensive income 44,254,009 44,254,009 Transfer to statutory reserve 16.1 Balance as at June 30, ,000,000,000 22,127,005 43,889,335 (22,127,005) 60,113,310 1,104,002,645 Transaction with owner Shares issued during the year 1,000,000,000 1,000,000,000 Total comprehensive income for the year Profit for the year Other comprehensive income Transfer to statutory reserve 16.1 Balance as at June 30, ,000,000,000 22,377,476 66,266,811 44,754,952 (22,377,476) 82,490,786 44,754,952 2,148,757,597 The annexed notes from 1 to 39 form an integral part of these financial statements. Chairman Chief Executive 23

25 NOTES TO THE FINANCIAL STATEMENTS 1. LEGAL STATUS AND NATURE OF BUSINESS Sindh Leasing Company Limited (the Company) was incorporated in Pakistan on December 16, 2013 as an unlisted public company under the repealed Companies Ordinance, The Company was granted licence on March 27, 2014 to carry out leasing business as a NonBanking Finance Company (NBFC) under the NonBanking Finance Companies (Established and Regulations) Rules, 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. JCRVIS Credit Rating Company Limited (JCRVIS) has assigned A+ and A1 ratings to the Company for medium to long term and short term respectively. The rating has been upgraded on June 20, The license of the Company to carry out the business of leasing has been renewed and valid for a period of three years w.e.f January 24, BASIS OF PREPARATION 2.1 Statement of compliance These financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by International Accounting Standards Board (IASB) as are notified under the repealed Companies Ordinance 1984, the NonBanking Finance Companies (Establishment and Regulations) Rules, 2003 (the NBFC Rules), the NonBanking Finance Companies and Notified Entities Regulations, 2008 (the NBFC Regulations) and the directives issued by the Securities and Exchange Commission of Pakistan (SECP). In case the requirements differ, the provisions of and directives issued under the NBFC Rules, the NBFC Regulations, repealed Companies Ordinance, 1984 and the directives issued by SECP shall prevail. The financial statements of the Company have been prepared in accordance with the provisions of the repealed Companies Ordinance, 1984 as per the directive of Securities and Exchange Commission of Pakistan issued vide Circular No. 17 dated July 20, Basis of measurement These financial statements have been prepared under historical cost convention except for certain financial assets and financial liabilities which have been stated at their fair values, cost or amortized cost. These financial statements have been prepared following accrual basis of accounting except for cash flow information. 2.3 Functional and presentation currency These financial statements are presented in Pak Rupees which is the Company's functional currency and presentation currency. 3 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS TO PUBLISHED APPROVED ACCOUNTING STANDARDS 3.1 Amendments that are effective in current year but not relevant to the Company The Company has adopted the amendments to the following approved accounting standards as applicable in Pakistan which became effective during the year from the dates mentioned below against the respective standard: IFRS 10 IFRS 11 IFRS 12 Consolidated Financial Statements Amendments regarding application of the consolidation exception Joint Arrangements Amendments regarding the accounting for acquisitions of an interest in a joint operation Disclosure of Interests in Other Entities Amendments regarding the application of the consolidation exception Effective date (annual periods beginning on or after) January 01, 2016 January 01, 2016 January 01, 2016 IAS 1 IAS Presentation of Financial Statements Amendments resulting from the disclosure initiative Property, Plant and Equipment Amendments regarding the clarification of acceptable methods of depreciation and amortisation and amendments bringing bearer plants into the scope of IAS 16 January 01, 2016 January 01, 2016

26 NOTES TO THE FINANCIAL STATEMENTS IAS 27 Separate Financial Statements (as amended in 2011) Amendments reinstating the equity method as an accounting option for investments in in subsidiaries, joint ventures and associates in an entity's separate financial statements Effective date (annual periods beginning on or after) January 01, 2016 IAS 28 IAS 38 IAS 41 Investments in Associates and Joint Ventures Amendments regarding the application of the consolidation exception Intangible Assets Amendments regarding the clarification of acceptable methods of depreciation and amortisation Agriculture Amendments bringing bearer plants into the scope of IAS 16 January 01, 2016 January 01, 2016 January 01, 2016 Other than the amendments to standards mentioned above, there are certain annual improvements made to IFRS that became effective during the year: Annual Improvements to IFRSs ( ) Cycle: IFRS 5 IFRS 7 IAS 19 IAS 34 Noncurrent Assets Held for Sale and Discontinued Operations Financial Instruments: Disclosures Employee Benefits Interim Financial Reporting IFRS 2 IFRS 4 IFRS 10 IAS 7 IAS 12 IAS 28 Sharebased Payment Amendments to clarify the classification and measurement of sharebased payment transactions InsuranceContracts Amendments regarding the interaction of IFRS 4 and IFRS 9 Consolidated Financial Statements Amendments regarding the sale or contribution of assets between an investor and its associate or joint venture Statement of Cash Flows Amendments resulting from the disclosure initiative Income Taxes Amendments regarding the recognition of deferred tax assets for unrealised losses Investmentsin Associates and Joint Ventures Amendments regarding the sale or contribution of assets between an investor and its associate or joint venture January 01, 2018 January 01, 2018 Deferred indefinitely January 01, 2017 January 01, 2017 Deferred indefinitely 25

27 NOTES TO THE FINANCIAL STATEMENTS IAS Amendments not yet effective Investment Property Amendments to clarify transfers or property to, or from, investment property Effective date (annual periods beginning on or after) January 01, 2018 Annual Improvements to IFRSs ( ) Cycle: IFRS 12 IAS 28 Disclosure of Interests in Other Entities Investments in Associates and Joint Ventures January 01, 2017 January 01, 2018 IFRS 1 IFRS 9 IFRS 14 IFRS 16 IFRS 17 The following amendments to the approved accounting standards as applicable in Pakistan would be effective from the dates mentioned below against the respective standard: The Annual Improvements to IFRSs that are effective for annual periods beginning on or after January 01, 2017 are as follows: First Time Adoption of International Financial Reporting Standards Financial Instruments Regulatory Deferral Accounts Leases Insurance Contracts 3.3 Standards or interpretations not yet effective The following new standards and interpretations have been issued by the International Accounting Standards Board (IASB), which have not been adopted locally by the Securities and Exchange Commission of Pakistan: The effects of IFRS 16 Leases and IFRS 9 Financial Instruments are still being assessed, as these new standards may have a significant effect on the Company s future financial statements. The Company expects that the adoption of the other amendments and interpretations of the standards will not have any material impact and therefore will not affect the Company's financial statements in the period of initial application. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented unless or otherwise stated. 4.1 Property, plant and equipments Owned assets These are stated at cost less accumulated depreciation and impairment, if any. Depreciation is charged to income over the useful life of the asset on a systematic basis, by applying the straight line method at the rates specified in note 5 to the financial statements. In respect of additions and disposal of assets during the period, depreciation is charged from the date of acquisition and up to the date preceding the disposal respectively. Maintenance and normal repairs are charged to profit and loss account as and when incurred. Major renewals and improvements are capitalized and assets so replaced, if any, are retired. An item of tangible fixed assets is derecognized 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 workinprogress These are stated at cost less accumulated impairment losses, if any and represent expenditure in connection with specific assets incurred during the construction period. These are transferred to specific assets as and when assets are available for use / sale. Cost also includes applicable borrowing costs. Transfers are made to relevant operating fixed assets category as and when assets are available for use intended by the management. 26

28 NOTES TO THE FINANCIAL STATEMENTS 4.2 Intangibles These are stated at cost less accumulated amortization and impairment, if any. Amortization is charged to income over the useful life of the asset on a systematic basis by applying the straight line method. The cost of intangible asset comprises of its purchase price and any directly attributable expenditure incurred in preparing the asset for its intended use. 4.3 Net investment in finance leases Leases in which the Company transfers substantially all the risks and rewards incidental to the ownership of an asset to the lessees are classified as finance leases. A receivable is recognized at an amount equal to the present value of the minimum lease payments under the lease agreement, including guaranteed residual value and unamortized initial direct cost which are included in the financial statements as "net investment in finance leases". 4.4 Provision against non performing leases and other loans Provision against non performing leases and other loans is maintained at a level which, in the judgment of management, is adequate to provide for losses on lease portfolio and other loan portfolio which can be reasonably anticipated. The provision is increased by additional charge to income and is decreased by charge offs, net of recoveries. Calculating provision against non performing leases and other loans is subject to numerous judgments and estimates. In evaluating the adequacy of provision, management considers various factors, including the requirements of the NBFC Regulations, the nature and characteristics of the obligor, current economic conditions, credit concentrations or deterioration in pledged collateral, historical loss experience and delinquencies. Lease and other loan receivables are charged off, when in the opinion of management, the likelihood of any future collection is believed to be minimal. 4.5 Long term loans and advances Long term loans and advances are initially recognised at cost being the fair value of consideration received together with the associated transaction costs. Subsequently, these are carried at amortised cost using the effective interest rate method. Transaction costs relating to long term loans and advances are being amortised over the period of agreement. 4.6 Financial assets 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 reevaluates this classification on a regular basis. a) Loans and receivables Loans and receivables are nonderivative 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 noncurrent assets. b) Heldtomaturity Heldtomaturity 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 subcategories, 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 nonderivative financial assets that are designated as available for sale or are not classified as (a) loans and receivables, (b) held to maturity investments or (c) financial assets at fair value through profit or loss. 27

29 NOTES TO THE FINANCIAL STATEMENTS 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 Subsequent measurement Subsequent to initial recognition, financial assets designated by the management as loans and receivables, held to maturity, financial assets at fair value through profit or loss and available for sale are valued as follows: a) Loans and receivables Loans and receivables are carried at amortised cost. b) Held to maturity Subsequent to initial measurement, held to maturity investments are carried at amortised cost. c) Financial assets at fair value through profit or loss After initial recognition, investments are remeasured at fair value determined with reference to the periodend quoted rates. Gains or losses on remeasurement 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 availableforsale. After initial recognition, investments classified as availableforsale are remeasured at fair value, determined with reference to the yearend 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 disposedoff, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in income. 4.7 Basis of valuation of investments Fair value of the investments in units of mutual funds are determined by reference to Net Asset Value (NAV) rate notified by the Mutual Fund Association of Pakistan (MUFAP) as of the period end. All regular way purchases and sales of investments are recognised on the trade date i.e. the date the Company commits to purchase / sell the investments. 4.8 Impairment The carrying amount of assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indication exists then the asset's recoverable amount is estimated. Where the carrying value exceeds the estimated recoverable amount, assets are written down to their recoverable amount. The resulting impairment loss is taken to profit and loss account. 4.9 Taxation Tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss account except to the extent that it relates to items recognized directly in equity or in other comprehensive income, in which case it is recognized in equity or other comprehensive income 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 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. 28

30 NOTES TO THE FINANCIAL STATEMENTS 4.10 Employees benefits The Company's employees benefits comprise of provident fund and gratuity scheme for eligible employees. a) Defined benefit plan (Gratuity Fund) The Company has a gratuity scheme for all its confirmed employees who attain the minimum qualification period for entitlement to gratuity. The Gratuity Fund is maintained by a trust created and duly approved. The employees are eligible to one basic pay per year. All outgoing employees are entitled for gratuity excluding those who have been dismissed by the Company. b) Defined contribution plan (Provident Fund) The Company contributes to contributory provident fund scheme for all its permanent employees. Equal monthly contributions, both by the Company and the employees are made to the fund, at the rate of 10% of the basic salary. Obligation for contributions to defined contribution plan by the Company is recognized as an expense in the profit and loss account Revenue recognition 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 Income on nonperforming lease and loan receivables Revenue from finance leases is not accrued when rent is past due by ninety days or more. Income on nonperforming loan and lease receivables is recognized on receipt basis in accordance with the requirements of the NBFC Regulations Interest income Interest income is recognized on time proportionate basis using effective interest method Return on investment Markup 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 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 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 Repossessed leased assets These are the assets acquired in settlement of nonperforming 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 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. 29

31 NOTES TO THE FINANCIAL STATEMENTS 4.16 Cash and bank balances Cash in hand and at banks are carried at nominal amount 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 Transactions with related parties Transactions with related parties are carried out at arm's length prices 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 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 nonadjusting 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 Significant accounting judgments and critical accounting estimates / assumptions The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which forms the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in period of revision and future periods if the revision affects both current and future periods. The estimates and judgments that have a significant effect on the financial statements are in respect of the following: a) Determining the residual values and useful lives of tangible fixed assets Management has made estimates of residual values, useful lives and recoverable amounts of certain items of property, plant and equipment. Any change in these estimates in future years might affect the carrying amounts of the respective items of property, plant and equipment with corresponding effect on the depreciation charge and impairment loss. b) Provision against non performing leases and other loans Calculating provision against non performing leases and other loans is subject to numerous judgments and estimates as explained in note 4.4 of these financial statements. c) Recognition of taxation and deferred tax The Company takes into account relevant provisions of the prevailing income tax laws while providing for current and deferred taxes as explained in note 4.9 of these financial statements. 30

32 NOTES TO THE FINANCIAL STATEMENTS 5. PROPERTY, PLANT AND EQUIPMENT Description Leasehold improvements Furniture and fixtures Electrical equipments Computer equipments Vehicles Total Year ended June 30, 2017 Net carrying value basis Opening net book value (NBV) Additions (at cost) Disposals (NBV) Depreciation charge Closing net book value Gross carrying value basis Cost Accumulated depreciation Net book value (Rupees) 14,578,317 2,930,664 (1,888,210) 15,620,771 21,358,130 (5,737,359) 15,620,771 3,310,813 (414,237) 2,896,576 4,141,709 (1,245,133) 2,896,576 4,674,539 (1,578,772) 3,095,767 7,885,706 (4,789,939) 3,095,767 1,635, ,620 (967,102) 835,294 3,078,510 (2,243,216) 835,294 3,284,945 10,156,833 (2,282,041) (2,080,853) 9,078,884 11,406,833 (2,327,949) 9,078,884 27,484,390 13,254,117 (2,282,041) (6,929,174) 31,527,292 47,870,888 (16,343,596) 31,527,292 Year ended June 30, 2016 Net carrying value basis Opening net book value (NBV) Additions (at cost) Depreciation charge Closing net book value Gross carrying value basis Cost Accumulated depreciation Net book value 16,431,160 (1,852,843) 14,578,317 18,427,466 (3,849,149) 14,578,317 3,617, ,230 (410,667) 3,310,813 4,141,709 (830,896) 3,310,813 6,258,688 (1,584,149) 4,674,539 7,885,706 (3,211,167) 4,674,539 1,644, ,884 (848,071) 1,635,776 2,911,890 (1,276,114) 1,635,776 4,417,693 (1,132,748) 3,284,945 5,648,270 (2,363,325) 3,284,945 32,369, ,114 (5,828,478) 27,484,390 39,015,041 (11,530,651) 27,484,390 Depreciation rate % per annum Note Rupees Rupees 6. INTANGIBLE ASSETS Software licenses , , Net carrying value basis Opening balance 974, ,003 Additions (at cost) 800, ,170 1,411,003 Amortization charge (483,587) (436,833) Closing net book value 490, ,170 Gross carrying value basis Cost 1,446,941 1,446,941 Accumulated amortization (956,358) (472,771) Net book value 490, ,170 Amortization rate (% per annum)

33 NOTES TO THE FINANCIAL STATEMENTS 7. NET INVESTMENT IN FINANCE LEASES Lease rentals receivable 1,300,897, ,469,236 Add: Residual value of leased assets 283,267, ,951,700 Gross investment in finance leases 1,584,164, ,420,936 Less: Unearned finance lease income (199,325,447) (126,378,600) Net investment in finance leases 1,384,839, ,042,336 Less: Current maturity of net investment in finance leases (400,989,699) (216,785,742) 983,849, ,256,594 Provision for potential lease losses 7.1 (11,005,486) (7,000,727) 972,844, ,255, This represents general provision against potential lease losses recorded on the lease portfolio at the rate of 1% of the balance. The movement of provision is as follows: Balance at beginning of the year 7,000,727 3,806,000 Provision made during the year 4,004,759 3,194,727 Balance at end of the year 11,005,486 7,000, Details of investment in finance lease Gross investments in Net investments in finance lease finance lease Rupees Rupees Rupees Rupees Less then one year 462,650, ,166, ,989, ,785,742 One to five years 1,121,514, ,253, ,849, ,256,594 1,584,164, ,420,936 1,384,839, ,042, 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. 8. LONG TERM LOANS AND ADVANCES Note Rupees Rupees Considered good Loans to employees ,870,584 16,023,184 Advance against lease 500,000 Auto finance loan 8.2 8,107,466 15,650,603 23,978,050 32,173,787 Less: Current portion shown under current assets Loans to employees 3,420,157 2,283,597 Auto finance loan 4,314,725 6,302,688 7,734,882 8,586,285 16,243,168 23,587,502 Provision against doubtful loans 8.3 (80,797) (155,646) 16,162,371 23,431,856 32

34 NOTES TO THE FINANCIAL STATEMENTS 8.1 Loans to employees Chief Executive Rupees Rupees Executives Rupees Rupees Balance at the beginning of the year Disbursements made during the year Repayments received during the year Balance at the end of the year 299,994 15,517,636 6,813,067 2,832,732 10,979,938 (299,994) (3,455,336) (2,275,369) 14,895,032 15,517,636 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 markup at the rate of 5 percent per annum. Job entitled car loans are repayable in 60 monthly installments and are interest free. 8.2 This represents vehicle financing facility provided to customers on markup basis. The markup on these finances ranges between 9.16% to 12.45% (2016: 9.36% to 12.30%) per annum. These finances are repayable within a period of 3 to 5 years (2016: 3 to 5 years) and are secured against first exclusive charge by way of hypothecation of the motor vehicles and personal guarantee of the customers. 8.3 This represents general provision recorded on the auto finance loan portfolio at the rate of 1% of the outstanding balance. The movement of provision is as follows: Note Rupees Rupees Balance at beginning of the year 155,646 Reversal of provision (74,849) Provision made during the year 155,646 Balance at end of the year 80, , SHORT TERM INVESTMENTS 9.1 Held to maturity Certificate of investments ,000,000 Term deposit receipts 9.2 JS Bank Limited 100,000,000 Sindh Bank Limited 900,000, ,000, ,000,000 At fair value through profit and loss Units of open ended mutual funds ,740, ,000, ,740,403 Certificate of investment PAIR Investment Company Limited 50,000, Term deposit receipts Note Rupees Rupees Sindh Bank Limited ,000,000 JS Bank Limited 100,000, ,000, ,000, This represents investment made by the Company in Term Deposit Receipts for a period of one year and having maturity date of August 31, This investment carries markup at the rate of 7.00% per annum (2016: 7.15%). 33

35 NOTES TO THE FINANCIAL STATEMENTS 9.3 Units of open ended mutual funds Cost Market value (Rupees) NAFA Income Opportunity Fund [Nil (2016: 17,730,096)] 189,740, ,740, ,740, ,740, LOANS AND ADVANCES Considered good Working capital loan ,169, ,397,993 Less: Provision against doubtful loans 10.2 (4,500,000) (2,214,210) 444,669, ,183, This represents working capital loan facility provided to customers on markup basis. The markup on these finances ranges between 9.05% to 9.50% (2016: 9.10% to 9.36%) per annum. These finances are repayable within a period of one year and are secured against ranking charge by way of hypothecation of fixed assets, unregistered hypothecation charge over stock and receivables, equitable mortgage over properties, personal guarantee, corporate guarantee and post dated cheques from the customers 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: Note Rupees Rupees Balance at beginning of the year 2,214,210 Provision made during the year 2,285,790 2,214,210 Balance at end of the year 4,500,000 2,214, CURRENT MATURITY OF NONCURRENT ASSETS Net investment in finance leases 7 400,989, ,785,742 Long term loans and advances 8 7,734,882 8,586, ,724, ,372, PREPAYMENTS Prepaid insurance Prepaid rent Prepaid membership fee 13. OTHER RECEIVABLES 701,992 1,174,325 3,206,819 2,891, , ,609 4,840,086 4,500,331 Other receivables ,909,700 1,909, This amount represents front end fee receivable from costumers 14. CASH AND BANK BALANCES Cash and other equivalent Cash in hand 34,197 34,397 Stamp papers in hand 181,900 34, ,297 Cash at bank Current account 111, ,826 Saving account ,025,573 43,767, ,136,589 43,965, ,170,786 44,181,433 34

36 NOTES TO THE FINANCIAL STATEMENTS 14.1 This represents daily product account (saving account) maintained with several Banks carrying markup at the rate of 4.00% to 9.15% (2016: 4.00% to 6.75%) per annum receivable on monthly basis. 15. ISSUED, SUBSCRIBED AND PAIDUP SHARE CAPITAL (Number of shares) 200,000, ,000,000 Ordinary shares of Rs. 10 each fully paid in cash 2,000,000,000 1,000,000, The Government of Sindh, held 199,999,993 shares as at June 30, The remaining shares are held by the Directors of the Sindh Leasing Company Limited in nominee capacity. 16. RESERVES Capital reserve Statutory reserve Revenue reserve Unappropriated profit Note Rupees Rupees ,266,811 43,889,335 82,490,786 60,113, ,757, ,002, This represents reserve created in compliance with NonBanking 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 million, representing 50% of profit after tax, (2016: Rs million) to the statutory reserve. 17. LONG TERM SECURITY DEPOSITS AGAINST LEASES Lease deposits ,266, ,951,700 Less: Current maturity of security deposits against leases (5,221,800) 278,045, ,951, These represent deposit received from lessee under finance lease and are adjustable against the residual value of the asset leased at the expiry of respective lease term. 18. LONG TERM LOAN Unsecured Loan from Government of Sindh ,000, ,000, This represents long term loan obtained from Sindh Province Pension Fund which is the reserve fund of Government of Sindh. The loan has been received in two tranches amounting to Rs. 250 million each on December 2, 2015 and December 16, 2016 respectively for a period of three years at a rate of return of 6 months KIBOR plus 1%. The loan is unsecured and the interest is payable on quarterly basis. 19. DEFERRED TAXATION Deferred Taxation 19.1 The net balance for deferred taxation is in respect of following temporary differences: Note Rupees Rupees Tax effect of: Difference between accounting book value and tax base of property, plant and equipment Difference in net book value of net investment in finance lease Carry forward tax losses Others 5,094,857 2,522,626 77,415,545 48,840,261 (84,104,748) (46,129,231) 1,594,346 (5,233,656) 35

37 NOTES TO THE FINANCIAL STATEMENTS Deferred tax asset arising due to timing difference calculated at applicable tax rates as at balance sheet date amounted to Rs million (2016: Rs million) debit. Deferred tax asset has not been recognized in these financial statements in accordance with the stated accounting policy of the Company. 20. TRADE AND OTHER PAYABLES Payable to vendors 613,696 92,564 Withholding tax payable 1,113, ,396 Advance from customers 15,504,829 3,471,400 Bonus payable 2,000,000 Gratuity payable ,921 1,903,741 Others 1,607,051 2,363,998 18,874,523 10,664, Movement of provision for gratuity payable is as follows: Balance as at July 01, ,903, ,661 Net charge for the year 3,806, ,080 5,710,421 1,903,741 Payments made during the year (5,674,500) Balance as at June 30, ,921 1,903, SHORT TERM BORROWINGS Note Rupees Rupees 20.2 During the year, the Company has created a separate fund for gratuity for all of it's permanent employees. The fund is maintained by the Trustees and all decisions regarding investments and distribution of income etc. are made by the Trustees independent of the Company. The fund is approved and registered by the Commissioner of Income Tax in accordance with subrule (1) of Rule (9) of part III of the sixth schedule of the Income Tax ordinance, Secured From banking company ,498, This facility is running finance facility with Sindh Bank Limited that carries a markup at three months KIBOR plus 1.00% per annum. Total sanctioned limit is Rs million. This facility is secured against 1st charge over current assets of the Company with 25% margin. 22. MARKUP ACCRUED Markup accrued on: Long term loan 19,970,478 1,369,315 Short term borrowings 1,487,733 21,458,211 1,369, TAXATION NET Provision for taxation 46,199,982 31,516,772 Less: Advance income tax (41,747,847) (31,159,052) 4,452, , CONTINGENCIES AND COMMITMENTS 24.1 Contingencies A letter of guarantee issued on behalf of a client amounting to Rs million (2016: Rs million) Commitments Finance lease contracts committed but not executed at the balance sheet date amounted to Rs million (2016: Rs million). 36

38 NOTES TO THE FINANCIAL STATEMENTS 25. RETURN ON INVESTMENTS AND DEPOSITS Note Rupees Rupees From financial assets Interest / markup on: Term deposit receipts 61,474,933 2,968,250 PLS accounts 17,534,621 7,200,268 Fund placements 489,726 26,151,352 Dividend income 74,297 Capital gain on fund placements 3,506,348 83,005,628 36,394, FINANCE COST Mark up on short term borrowings 2,866, ,539 Mark up on long term loan 27,501,710 10,807,603 Bank charges 202,069 43,941 30,570,708 11,086, ADMINISTRATIVE EXPENSES Salaries and benefits ,330,102 22,474,860 Directors' remuneration 30 67,611,193 12,174,075 Rent, rates and taxes 5,202,294 6,091,034 Communication and utility expenses 2,238,141 1,717,133 Travelling and conveyance 5,362,742 2,507,475 Repair and maintenance 1,045,726 1,035,029 Insurance expense ,565,715 1,468,217 Auditors' remuneration , ,000 Advertising expense 2,480,865 50,187 Depreciation 6,929,174 5,828,478 Amortization 483, ,833 Legal and professional charges 1,814,426 1,198,968 Fees and subscription 4,971,218 1,815,406 Printing and stationary 596, ,164 Others 1,701,550 1,235, ,528,171 58,707, This amount includes Rs million (2016: Rs million) in respect of employees retirement benefits The Company has obtained insurance coverage from Sindh Insurance Company Limited rated "A+" by Pakistan Credit Rating Agency (an agency registered with the Commission) against any losses that may be incurred as a result of employee's fraud or gross negligence. The sum insured of the insurance policy is Rs Million (2016: Rs Million) Auditors' remuneration Audit fee 170, ,000 Out of pocket expenses 25,000 25, , , WORKERS' WELFARE FUND The corresponding figure represents reversal of provision for Workers' Welfare Fund based on the fact that the Company is excluded from definition of industrial establishment as per The Sindh Workers' Welfare Fund Act, 2014 and The Workers' Welfare Fund Ordinance, 1971 since the Company is wholly owned by the Government of Sindh. 37

39 NOTES TO THE FINANCIAL STATEMENTS Note Rupees Rupees 29. TAXATION Current ,429,921 11,306,103 Prior 664,315 2,588,974 Deferred (6,124,085) 12,094,236 7,770, The income tax for the year ended June 30, 2017 has been charged at the rate applicable as per the provision of Income Tax Ordinance, 2001 (the Ordinance) Relationship between tax expense and accounting profit Accounting profit for the current year 56,849,188 52,025,001 Tax on income at 30% (2016: 32% ) 17,054,756 16,648,000 Tax effect of difference of accounting and tax base of owned assets 451,634 Tax effect of lease income and rentals 22,753,988 Tax effect of expenses that are not determining taxable profit (5,624,835) 6,143,759 Effect of final tax under presumptive tax regime (1,324,633) Tax effect of tax losses (33,366,646) Effect of deferred tax (6,124,085) Effect of prior year adjustment 664,315 2,588,974 12,094,236 7,770, EARNINGS PER SHARE BASIC AND DILUTED Profit for the year Rupees 44,754,952 44,254,009 Weighted average number of ordinary shares 173,424, ,000,000 Earnings per share basic and diluted Rupee There is no dilution effect on the basic earning per share as the Company has no convertible, dilutive potential ordinary shares outstanding as at the year end. 31. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES The aggregate amount charged in the financial statements for the year in respect of the remuneration and benefits to the Chief Executive, Directors and Executives are as follows: Chief Executive 2017 Rupees Directors Executives Total Fee 750, ,000 Managerial remuneration 33,377,386 2,125,000 7,344,276 42,846,662 Perquisites and allowances 21,695,316 1,381,250 6,617,412 29,693,978 Retirement benefit 8,069, ,500 1,897,898 10,180,139 63,142,443 4,468,750 15,859,586 83,470,779 Number of persons

40 NOTES TO THE FINANCIAL STATEMENTS Chief Executive 2016 Rupees Directors 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 benefits 754, , ,844 1,959,812 7,534,701 4,639,374 8,708,196 20,882,271 Number of persons Director's remuneration / fee represents remuneration paid for attending Board and subcommittee meetings. The Chief Executive and certain employees at the executive level are also provided with the Company owned and maintained car and other benefits in accordance with their entitlement as per rules of the Company. The remuneration of Chief Executive has been approved on thirteenth Board meeting of the Company held on July 27, RELATED PARTY TRANSACTIONS The Company has a related party relationship with its Associated Company / Undertaking, Government of Sindh, staff retirement funds, key management personnel and other related parties. The details of significant related party transactions during the year and balances as at June 30, 2017 are as follows: Transactions during the year Profit on term deposit Profit on daily product account Remuneration paid Directors' meeting fees Services received from Sindh Insurance Company Limited Receipt of funds against long term loan from Government of Sindh Receipt of funds against increase in paid up capital from Government of Sindh Interest on long term loan from Government of Sindh Interest on running finance with Sindh Bank Limited Rent paid to Sindh Bank Limited Receipt of fund against running finance from Sindh Bank Limited For the year ended June 30, 2017 Associated Other related Key management Directors Company party personnel Rupees 54,638,356 4,666,764 70,078,305 1,410,000 1,356, ,000,000 1,000,000,000 27,501,710 2,866,929 1,555,165 82,498,269 For the year ended June 30, 2017 Associated Other related Key management Directors Rupees Balances Bank balances 80,440,933 Term Deposit Receipt SBL 900,000,000 Markup accrued on bank 11,873,828 Long term loan 500,000,000 Markup accrued 19,970,478 Lessee Sindh Nooriabad Co. 2,225,132 Short term borrowing 82,498,269 39

41 NOTES TO THE FINANCIAL STATEMENTS For the year ended June 30, 2016 Associated Other related Key management Directors Rupees Transactions during the year Profit on daily product account 7,171,735 Remuneration paid 17,911,459 Retirement benefits 1,959,812 Directors' meeting fees 1,011,000 Services received from Sindh Insurance Company Limited 1,447,953 Long term loan from Government of Sindh 250,000,000 Interest on long term loan from Government 10,807,603 Balances Bank balances 37,915,367 Long term loan 250,000,000 Markup accrued 1,369, FINANCIAL RISK MANAGEMENT 33.1 Financial risk factors The Company s activities expose it to a variety of financial risks from the use of financial instruments, including: Credit risk Liquidity risk Market risk The Board of Directors has overall responsibility for the establishment and oversight of the Company s risk management framework. The Board is also responsible for developing and monitoring the Company s risk management policies 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 Exposure to credit risk Rupees Rupees The maximum exposure to credit risk at the reporting date is: Net investment in finance leases 972,844, ,255,867 Long term loans and advances 16,162,371 23,431,856 Long term deposits 488, ,600 Short term investments 900,000, ,740,403 Accrued markup 10,480,368 1,846,619 Loans and advances 444,669, ,183,783 Current maturity of noncurrent assets 408,724, ,372,027 Cash at bank 267,136,589 43,965,136 3,020,505,730 1,484,170,291 40

42 NOTES TO THE FINANCIAL STATEMENTS The aging of net investment in finance lease at the reporting date is as follows: Rupees Rupees 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 4,004,759 3,194,727 Neither past due nor impaired 1,380,834, ,847,609 Total amount 1,384,839, ,042, Concentration of credit risk Concentration of credit risk arises when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. The Company manages credit risk and its concentration exposure through diversification of activities to avoid undue concentration of risks. For this purpose, the Company has established exposure limits for individuals and industrial sectors. The Company is exposed to credit risk from its operating activities (primarily for net investments in leases) and from its financing activities, including bank account and other financial instruments. The exposure to banks is managed by dealing with variety of major banks and monitoring exposure limits on continuous basis. The ratings of banks ranges from A+ to AA+. Details of the industrial sector analysis of lease portfolio are as follows: 2017 Financial assets Percentage Gross amount % Rupees Sector Oil and petroleum marketing 1.12% 12,331,158 Health & pharmaceuticals 5.18% 56,977,733 Individuals 4.59% 50,536,292 Construction 7.25% 79,802,228 Sugar 29.07% 319,905,745 Transport 3.80% 41,780,444 Textile 3.02% 33,267,924 Media 13.29% 146,307,304 Energy 1.93% 21,240,835 Service 9.37% 103,160,410 Food 1.93% 21,242,992 Miscellaneous 19.45% 214,042, % 1,100,595, Financial assets Percentage Gross amount % Rupees Sector Oil and petroleum marketing 34.70% 158,054,940 Sugar 16.60% 75,633,624 Cinematography theatre 13.69% 62,376,769 Transport 12.44% 56,643,290 Textile 7.92% 36,053,305 Media 6.11% 27,823,644 Packaging 2.28% 10,403,228 Energy 1.60% 7,285,514 Miscellaneous 4.66% 21,214, % 455,488,688 41

43 NOTES TO THE FINANCIAL STATEMENTS 33.3 Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. Liquidity risk arises because of the possibility that the Company could be required to pay its liabilities earlier than expected or difficulty in raising funds to meet commitments associated with financial liabilities as they fall due. The Company's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when they become due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. The following are the contractual maturities of financial liabilities. Financial liabilities Total Up to three months June 30, 2017 Over three Over one year months to one Over five years to five years year Rupees Long term loan Trade and other payables Markup accrued Short term borrowing June 30, 2017 June 30, ,000,000 2,220,747 21,458,211 82,498, ,177, ,825,877 82,498,269 82,498,269 5,825,877 2,220,747 21,458,211 23,678, ,000, ,000, ,000, 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 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 Details of the interest rate profile of the Company's interest bearing financial assets and financial liabilities were as follows: Effective rate Carrying amount (In percent) Rupees Rupees Fixed rate instruments Financial assets Certificate of Investment ,000,000 Term deposit receipts ,000, ,000,000 Bank balances 4 to to ,025,573 43,767,310 Loans to employees ,870,584 16,023,184 1,182,896, ,790,494 Variable rate instruments Financial assets Net investment in finance lease Auto finance loan Loans and advances 9.15 to to ,384,839, ,042, to to ,107,466 15,650, to to ,669, ,183,783 1,837,615,872 1,088,876,722 Financial liabilities Short term running finance Kibor ,498,269 Long term loan 7.14 to to ,000, ,000, ,498, ,000,000 42

44 NOTES TO THE FINANCIAL STATEMENTS 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 million (2016: Rs million). The analysis assumes that all other variables remain constant 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 Other price risk Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk) whether those changes are caused by factors specific to the individual financial instruments or it s issuer, or factors affecting all similar financial instruments traded in the market. Other price risk arises from the Company s investment in units of mutual funds and ordinary shares of listed companies. To manage its price risk arising from aforesaid investments, the Company diversifies its portfolio and continuously monitors developments in equity markets. In addition, the Company actively monitors the key factors that affect stock price movement. A 10% increase / decrease in redemption prices at year end would have increased / decreased the Company s profit in case of investments classified as at fair value through profit and loss by Rs. Nil (2016: Rs million) Fair value of financial instruments Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties at an arms length transaction other than in a forced or liquidation sale. The carrying values of all financial assets and liabilities reflected in the financial statements approximate their fair values. Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: Fair value measurements using inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs). As at June 30, 2017, the Company held the following financial instruments measured at fair value: Level 1 Level 2 Level 3 Total Rupees Investment in units of mutual funds During the year ended June 30, 2017, there were no transfers between level 1 and level 2 fair value measurements, and no transfers into and out of level 3 financial instruments.as at June 30, 2016, the Company held the following financial instruments measured at fair value: Level 1 Level 2 Level 3 Total Rupees Investment in units of mutual 189,740, ,740, ,740, ,740,403 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. 43

45 NOTES TO THE FINANCIAL STATEMENTS 33.6 Financial instruments by category Financial assets At fair value through profit and loss Short term investments Held to maturity Short term investments Rupees Rupees 189,740,403 50,000,000 Loans and receivables Net investment in finance leases 1,373,833, ,041,609 Long term loans and advances 23,897,253 32,018,141 Long term deposits 488, ,600 Short term investments 900,000, ,000,000 Accrued markup 10,480,368 1,846,619 Loans and advances 444,669, ,183,783 Cash and bank balances 267,170,786 44,181,433 3,020,539,927 1,484,386,588 Financial liabilities Financial liabilities at amortised cost Long term loan Trade and other payables Markup accrued Shortterm borrowings 500,000, ,000,000 2,220,747 4,456,562 21,458,211 1,369,315 82,498, ,177, ,825, CAPITAL RISK MANAGEMENT The objective of the Company when managing capital is to safeguard its ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders, and to maintain a strong capital base to support the sustained development of its business. The Company manages its capital structure by monitoring return on net assets and makes adjustments to it in the light of changes in economic conditions. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend paid to its shareholders or issue new shares. The Company is in compliance with the minimum capital requirement of NBFC Regulations. 35. DEFINED CONTRIBUTION PLAN The Company has contributory provident fund scheme for benefit of all its permanent employees under the title of "Sindh Leasing Company Limited Employees Provident Fund Trust". The Fund is maintained by the Trustees and all decisions regarding investments and distribution of income etc. are made by the Trustees independent of the Company The Trustees have intimated that the size of the Fund at year end was Rs million (2016: Nil ) As intimated by the Trustees, the cost of the investments made at year end was Rs million (2016: Nil) which is equal to 100% of the total fund size. The fair value of the investments was Rs million (2016: Nil) at that date. The category wise break up of investment as per section 218 of the Companies Act, 2017 is given below: Rupees Percentage Rupees Percentage Government securities Listed Securities (Mutual funds) Term Finance Certificates 6,639,006 75% 6,639,006 75% 44

46 NOTES TO THE FINANCIAL STATEMENTS 36. NUMBER OF EMPLOYEES The total number of employees as at year end were 21 (2016: 22) and the average number of employees during the year was 21 (2016: 23). 37. CORRESPONDING FIGURES Corresponding figures have been rearranged and reclassified, wherever necessary presentation. However, no significant reclassifications have been made during the year. for the purpose of comparison and better 38. DATE OF AUTHORIZATION FOR ISSUE These financial statements were authorized for issue by the Board of directors on August 16, GENERAL Figures have been rounded off to the nearest rupee. Chairman Chief Executive 45

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48 Form of Proxy I/We of being member(s) of Sindh Leasing Company Limited holding ordinary shares hereby appoint of or failing him/her of who is/are also member(s) of Sindh Leasing Company Limited th as my/our Proxy in my/our absence to attend and vote for me/us and on my/our behalf at the 4 Annual General Meeting of the company to be held on October 24, 2017, at its registered office in Karachi. Signed this day of, 2017 in the presence of Folio No. Signature on Rs. 5/ Revenue Stamp WITNESSES: Note: 1. Signature: Name: Address: CNIC No: Passport No: 2. Signature: Name: Address: CNIC No: Passport No: 1. The Proxy Form should be deposited in the registered of fice of the Company, as soon as possible but not latter than 48 hours before the time of holding the meeting, failing which; Proxy Form will not be treated as valid. 2. No person shall act as proxy unless he/she is a member of the Company. 47

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