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 agro-based 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 Mr. Muhammad Imran Malik Syed Hassan Naqvi* Syed Shahnawaz Nadir Shah Mr. Naim Farooqui Syed Saeed Reza Mr. Ali Murtaza Kazmi Mr. Muhammad Bilal Sheikh - - Chairman Chief Executive - Independent Non-Executive Director - Non-Executive Director - Non-Executive Director - Non-Executive Director - Independent Non-Executive Director - Independent Non-Executive Director - Executive Director CFO & Company Secretary Mr. Rehan Anjum Audit Committee Registered Office Syed Saeed Reza - Chairman Mr. Ali Murtaza Kazmi - Member Syed Shahnawaz Nadir Shah - Member Third Floor, Imperial Court Building Dr. Ziauddin Ahmed Road, Karachi Human Resource Committee Mr. Muhammad Imran Malik Mr. Muhammad Bilal Sheikh Mr. Naim Farooqui Syed Hassan Naqvi Banker Sindh Bank Limited Bank Islami Pakistan Limited United Bank Limited - Chairman - Member - Member - Member Branch Offices Larkana / Naudero Branch Raza Shah Mohalla, VIP Road, Larkana Hyderabad Branch Plot No. 11 Faraz Villas Housing Scheme Taluka Qasimabad Hyderabad Auditors BDO Ebrahim & Co. Chartered Accountants nd 2 Floor, Block C Lakson Square Building-1 Sarwar Shaheed Road Karachi. Web: * Subject to SECP approval 2 Islamabad Branch Select One Plaza, F-11 Markaz, Sindh Bank Ltd, Islamabad Lahore Branch 2nd Floor, Plot No. S-19, R-30 Shahrah-e-Quaid-e-Azam Lahore Legal Advisor Muhammad Nadeem Khan nd Suite # 28-A, 2 Floor Fareed Chamber Abdullah Haroon Road Karachi

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 Third Annual General Meeting of Sindh Leasing Company Limited ( Company ) will be held on October 20, 2016 at 12:00 Noon at the Registered office of the Company, Third Floor, Imperial Court Building, Dr. Ziauddin Ahmed Road, Karachi, to transact the following business: 1. To confirm the minutes of the First Extra Ordinary General Meeting held on August 30, To receive, consider and adopt the Audited Accounts of the Company for the year ended June 30, 2016, along with the Directors and Auditor's Reports thereon. 3. To approve the re-appointment of external auditors of the Company for the year ending June 30, 2017 and fix their remuneration. 4. Any other business with the permission of the Chair. By Order of the Board Rehan Anjum Company Secretary Karachi: August 30,

6 Directors Report On behalf of the Board of Directors of Sindh Leasing Company Limited (SLCL, the Company), it is my pleasure to present the Third Annual Audited Financial Statements for the year ended June 30, Review of Business and Operation The Company earned a net revenue of Rs million during the year under review against a budgeted net revenue of Rs million. Total administrative expenses and provisions for the year amounted to Rs million against a budgeted amount of Rs million. Profit after tax for the current year is Rs million, this compares with a budgeted amount of Rs million. In comparison to the prior year and inspite of lower KIBOR rate during the current year management s prudent drive helped generate revenue of such a magnitude to overcome the downward trend in revenue, resulting in an approximate 35% increase in profit after tax. In addition the current year SLCL set up two branches in the North region which increased administrative expenses also. For the reporting year ended June 30, 2016, SLCL s performance remained satisfactory. The Company managed to book various lease assets and working capital loan of Rs. 1, million respectively during current year. SLCL is gradually gearing up to aggressively market its product which is evident from the fact that in the last quarter alone leases and working capital loan worth Rs million were booked. Operating Results Balance Sheet Paid-up capital Total equity Fixed Assets Net investment in nance leases Auto and Working capital loans As at June As at June 30, 30, (PKR Million) , , , , Pro t & Loss For the year Ended June 30, 2016 For the year Ended June 30, 2015 Revenue Net Administrative expenses General Provision - Net Pro t before tax Pro t after tax Earnings Per Share (EPS) Board of Directors During the year under review Mr. Naim Farooqui resigned as the Chief Executive and relinquished charge on 4th December The Board subsequently appointed Mr. Rehan Anjum as Chief Executive Officer with effect from 15th December He has been serving the company as Chief Financial Officer and Company Secretary since its inception. The Board in its meeting held on April 27, 2016 re-appointed Mr. Naim Farooqui as the Executive Director of the Company. Subsequent to the year ended June 2016, Mr. Muhammad Bilal Sheikh has been appointed as the new Chief Executive Officer of the Company. Prior to joining he was the President and CEO of Sindh Bank Limited and the founder President of the Bank since November 01, 2010 to November 04, Mr. Sheikh is a seasoned banker with over 49 years of diversified experience in banking with an impressive track record of managing the institutions both in Public & Private sector he has served /headed. He has headed several banks/financial institutions in the last 18 years. Prior to joining Sindh Bank Ltd., he has served as President & CEO of My Bank, President & CEO, PICIC Commercial Bank, Chairman, NDFC and DMD, PICIC Limited. Directors' Meeting During the year under review, five meetings of the Board of Directors of SLCL were held. Attendance by each director was as follows: S.No Name of Director No. of meeting(s) held during the year Total no. of meeting(s) attended 1 Muhammad Bilal Sheikh Mr. Sohail Rajput 5 4 * 3 Syed Shahnawaz Nadir shah Syed Saeed Reza Muhammad Imran Malik 5 4* 6 7 Mr. Ali Murtaza Kazmi Mr. M. Naimuddin Farooqui * Leave of absence was granted to Director who could not attend the meeting

7 Directors Report Audit Committee s Meetings During the year under review, four meetings of the Audit committee of SLCL were held. Attendance by each director was as follows: S.No Name of Director No. of meeting(s) held during the year Total no. of meeting(s) attended 1 Syed Saeed Reza Syed Shahnawaz Nadir shah Muhammad Imran Malik 4 3 * * Leave of absence was granted to member who could not attend the meeting. Pattern of Shareholding The pattern of shareholding as at June 30, 2016 is as follows: No of Shareholders Shareholding From To No of Shares Held Percentage ,999,993 99,999, ,999, ,000, Total 100,000, 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. 2. Proper books of account of Sindh Leasing Company Limited have been maintained. 3. Appropriate accounting policies have been consistently applied in preparation of financial statements. Accounting estimates are based on reasonable and prudent judgment. 4. International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements. 5. The system of internal control is sound in design and has been effectively implemented and monitored. 6. There are no significant doubts upon the ability of Sindh Leasing Company Limited to continue as a going concern. 7. The appointment of Chairman and other members of Board and the terms of their appointment along with the Remuneration policy adopted are in the best interests of the Public Sector Company as well as in line with the best practices. External Auditors The present auditors M/s. BDO Ebrahim & Co., Chartered Accountants, retire and being eligible, offer themselves for re-appointment. On recommendation of the Audit Committee the Board has approved re-appointment of retiring auditor M/s BDO Ebrahim & Co. for the year ending June 30, 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. 6

8 Directors Report (Contd.) Credit Rating JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the entity ratings of Sindh Leasing Company Limited (SLCL) from A/A-2 (Single A/A-Two) to A+/A-1 (Single A Plus/A-One). Outlook on the assigned ratings is Stable. Dividend The Company has not declared any dividend for the year ended June 30, Constraint As we have deployed all of our initial Capital of Rs 1 Billion in setting up a lease and loan portfolio our main constraint in furthering this is availability of cheap financing. In the absence of certificates of investments (COI) we would have to rely on financing from other banks including Sindh Bank 1% above KIBOR (presently 6.15%) i.e. 7.15% and taking into account the intermediation cost/operating expense of around 3% increases our cost to 10%. The reputable borrowers in the market avail bank facilities at a rate of around 2% above KIBOR which comes to 8% or so, therefore incurring 2% loss will be difficult to sustain in this competitive financial market. In an extremely difficult market where SLCL has to compete with Banks offering cut throat rates to sound customers increase in its capital would be logical step till it becomes eligible to raise deposits from public at acceptable rates. Future Outlook The outgoing fiscal year in general has been fruitful and progressive as it was calibrated with economic growth, price stability, improvement in tax collection and reduction in fiscal deficit and low inflation. This is expected to continue considering the various measures being taken by the government for economic reforms and improved security within the region. The reforms would further pick momentum once we successfully overcome the longstanding impediment to foreign investments in our stock exchange that would further elevate our already rising index. The MSCI Pakistan Index will be reclassified to emerging markets status, coinciding with the May 2017 semi-annual index review, MSCI said in its annual review meeting. Due to investors interest stock market index rose from 35,000 to 40,000. The new leadership in the provincial government is likely to expedite implementation of Government projects resulting in trickling down of economic activity and creation of employment opportunities. Additional capital injection of Rs 1 Billion for the Company has been announced in the last budget presented in June 2016, which would further improve its financial condition and enable it to achieve its objectives. The Management s thrust to reach out to Corporate Sector and individuals through aggressive marketing by way of Advertisements would add to the visibility of the company. Having fulfilled the regulatory requirement set by SECP, SLCL will be in a position to generate additional funds through issuance of certificate of investment (COI) by SLCL is in a position to fulfill all of its lease/loan commitments as of now and for the years to come considering its financing/funding available through an approved credit line of Rs. 950M from Sindh Bank Limited (SBL) and an approved limit of Rs. 500M from the sponsors (GoS)of which Rs 250M has been drawn. Negotiations with other banks are underway and are expected to be in favor of SLCL. Over all the prospects for SLCL s growth are quite promising. Acknowledgements We acknowledge the support of our sponsors, the Government of Sindh (GoS) and the valued customers who have reposed confidence in leasing company. It is hoped that we would continue to enjoy their patronage and support. I would also like to place on record appreciation for the guidance and support provided by the Securities and Exchange Commission of Pakistan. Acknowledgements are also in order for the thin and lean staff without whose unwavering dedication and support the Company could not have achieved the growth that it did in the first full year of operation. Muhammad Bilal Sheikh Chief Executive August 30,

9 ڈا ز ر رٹ آ رڈ آف ڈا ز ھ (ا ا ا ( ٣٠ ن ٢٠١٦ ا م وا ل ى آڈٹ ہ ا ؤ ) ت) ت س ر ں رو را ور آ ہ ز ر ت آ ١٠٢ ا ر ٥٧ رو ١١٤ ا ر ٥٤ رو ل دہ ا ا ا ت اور و ن ر ٦٤ ا ر ٩٨ رو ر ٦٢ ا ر ٥١ رو ر دہ ل دہ از ٢٥ ا ر ٥٥ رو ٤٤ ا ر ٢٥ رو ر دہ ل K I B O R خ و د ل ا ظ ڈرا ) ى) ا آ ل د آ ر ن ارك از ا ازہ ٣٥ ا ر وہاز ا ا ا دہ ل ر ر ) ( دو ا ) ( و ا ا ا ت ھ ٣٠ ن ٢٠١٦ ا م ر ر ل ر د ا ن ر دہ ل د ا ں اور ور ت ا دے ١ ١٤٥ ا ر ٥٤ رو ر ر ر ا آپ ا وڈ ) ت) ر ا از ر ر ا ر ل آ ى اور ور ت ا دوں ٣٣٨ ا ر ١٩ رو ٣٠ ن ٣٠ ٢٠١٥ ن ٢٠١٦ ك رو ادا ہ ١ ٠٠٠ ٠٠ ١ ٠٠٠ ٠٠ ا ) ا دہ ( ١ ٠٥٩ ٧٥ ١ ١٠٤ ٠٠ ا ت ٢٧ ٤٩ ٣٢ ٣٧ رى ٨٥٢ ٠٤ ٤٤٤ ١٨ د ر اور ور ت ٢٤٣ ١٣ ٨ ٠٩ اور ن ل دورا ن آ ٩٩ ٧٨ ١١٤ ٥٤ ا ا ا ت ٥٨ ٧١ ٤٧ ٨٣ م از دہ- ٣ ٨١ ٥ ٥٦ از ٥٢ ٠٢ ٤٦ ٣٨ از ٤٤ ٢٥ ٣٢ ٧١ آ ) ( (اى ا ( ٠ ٣٣ ٠ ٤٤ 8

10 ڈا ز ر رٹ رڈز آف ڈا ز ز ر ل ب رو ر ا ا دےد اور ٤ د ٢٠١٥ ا ہ ڑ د ازاں رڈ ٥ د ٢٠١٥ ب ر ن ا ر ا آ رى اس وہ آ اور ى ر ت د ر رڈ ا ٢٧ ا ) ٢٠١٦ ا س ( رو ا ڈا ٣٠ ن ا م ل ب ل ر ا آ ا ب اس ٢٠١٥ ٤ ٢٠١٠ ١ وہ ھ ر اور ا آ ر ب ٤٩ ل ع ) ( ر وا اور اور ا ٹ ں ا م ر رڈ ر وا ور وہ ١٨ ں د / ادا روں ھ وہ ر اور اى او ر اور اى او ا ڈى ا اور ڈى ا ڈى ت د ڈا ز ) ا س) ز ر ل دورا ن (ا ا ا ( رڈ آف ڈا ز ڈا ى درج ذ ڈا ز م ا س اد ل 1 ب ل ٥ ٤ ٢ ب ن را ت ٤* ٥ ٣ از در ہ ٥ ٥ ٤ ر ٥ ٥ ٥ ب ان *٤ ٥ ٦ ب ٥ ٥ ٧ ب ا رو ٥ ٥ ڈا ا س ان ر دےدى آڈٹ ا س ز ر ل (ا ا ا ( آڈٹ ر ا س ڈا ى درج ذ ڈا ز م ا س اد ل 1 ر ٤ ٤ ٢ از در ہ ٤ ٤ ٣ ب ان ٤ ٣ ڈا ا س ان ر دےدى 9

11 ڈا ز ر رٹ دا رى ا اد اد ن ٩٩ ٩٩٩٩٩٣ ٩٩ ٩٩٩ ٩٩٣ ٩٩ ٩٩٩ ٩٩٣ ١ ١ ٠ ٠٠٠٠٠٧ ٧ ١٠٠ ٠٠٠ ٠٠٠ ٩٩ ٩٩٩ ٩٩٤ ٧ ١٠٠ ١٠٠ ٠٠٠ ٠٠٠ ٨ ر ر اور ر ر ڈ رز ڈا ر رٹ ١٩٨٤ آرڈ ٢٣٦ ورى ١ ھ ر دہ ا آ اورا ردو ل ت ٢ ھ ں ر ر ٣ د و ات رى ا ؤ ں ا ل ا ؤ ں د اور ظا ازے ٤ د و ات رى ا ا ا و ا رڈز ن ان رآ ٥ ا رو ا م ڈ ا ط اوراس ر ذ اور ا ٦ ھ ا رىر وا ادا رے رے ص ت ٧ اور رڈ د ان ا ب انا ب ت اوران وں د اور ں ا ل - ز و آڈ دہ آڈ ز ز ڈى اوا ا ا ر ڈ ا و وش اور وہاس ت ا وہدو رہ رڈ اور آڈٹ رش وش وا آڈ س ٣٠ ن ٢٠١٧ ا م ل ا رو ول اور ٹ ر ر ر در اور ا رو ول اوراس ذ ا رو ول ہاور ا ا ا رو آڈٹ م ا ا ر ن ر ڈا و د د اوروہ آڈٹ اہ را ر رٹ آر-وى آ ا ٹ ر ھ (اى ا ا ( ا ر اے/اے- ٢ '( اے/اے- دو) اے /اے- ١ ) اے /ا-ون) دى دى ر آؤٹ ڈ ) ( ٣٠ ن وا ل ڈ ا ن 10

12 ڈا ز ر رٹ ر و / ر ں ا ا ارب رو ا ا اور ت ر ا ل اور اس ا ارزاں د رى ا ر وٹ آف ا ) اوآ ( م د د ں ل ھ و ر ) KIBOR دہ ٦ ا ر ( ١٥ ا ز دہ ٧ ا ر ١٥ اور د در اور آ ا ا ت ٣ و رى ١٠ ر وف وا ٢ KIBOR ز دہ ٨ اور اس ح ٢ ن ر رو ر رى ر ا ا ر ا ا ا ں ا خ ں ا اور ر ل ا ا ا ام ل خ ڈ ز ے وہ روا ں ر ا رى ل ر اراور ر ا دى ت و ىاور رے اور ا اط زر ر د ا تاور ر ل ر اس ت رىر ا ا ا كا رى د ر و ں دور ا ت و اس ا ىآ اور ا ا ا ا آ نا دو رہدر ىا ر ر ا ا آ ہا س ٢٠١٧ ا ہ آ - روں د و ا ك ر ا ٤٠٠٠٠ ٣٥٠٠٠ ھ دت ا ر و ذ ے وع اور روز ر ا ا ں ن ١ ٢٠١٦ ارب رو ا ن وہاس ر ل ے اور اس ل ا د ر ر اور ا ر زى ذر ر ر اور ا اد ں ر آ ا اى ں ور ت رى ا ا ا اس آف ا ) اوآ ( ا اء ٢٠١٧ ا ز ا ا ا ا د ب / ھ (ا ا ( ٩٥٠ رو ر ہ ٹ اور ٥٠٠ رو ا ز ) اوا ( ر ہ ٢٥٠ رو و ل ا ر ا ا ا ا ز وہا دہ اور آ وا ں / ت و وں را د ں ا ات رى اور ا وہا ا ا ں - ا ا ا ا ن ا ا ا اف ا ا ا ز ر آف ھ اور ز ں ا ا ں دو رہ ا د ا ر ان اور ا وز ر ر ا ا آف ن وا ا اس ت ر رڈ ں ا ا ل اور ا اف ورى د وہ اس ا ل آ ل ا آ ٣٠ ا ٢٠١٦ 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 Rule No. Y N Tick the relevant box 1. The independent directors meet the criteria of independence, as defined under the Rules. 2(d) The Board has the requisite percentage of independent directors. At present the board includes : Category Names Date of appointment Independent Directors 1.Syed Saeed Reza 2. Mr. Muhammad Imran Malik 3. Mr. Ali Murtaza Kazmi November 14, (2) Executive Directors Mr. Naim Farooqui April 16, 2016 Non-Executive Directors 1.Mr. Sohail Rajput 2.Syed Shahnawaz Nadir Shah 3.Mohammad Bilal Sheikh November 14, Any casual vacancy occurring on the board was filled up by the directors within ninety days. 3(4) 4. The directors have confirmed that none of them is serving as a director on more than five public sector companies and listed companies simultaneously, except their subsidiaries. 3(5) ** 5. The appointing authorities have applied the fit and proper criteria given in the Annexure in making nominations of the persons for election as board members under the provisions of the Ordinance. 3(7) 6. The Chairman of the board is working separately from the Chief Executive of the Company. 4(1) 7. The Chairman has been elected from amongst the independent directors. 4(4) ** 8. The Board has evaluated the candidates for the position of the chief executive on the basis of the fit and proper criteria as well as the guidelines specified by the commission. 5(2) 12

14 Statement of Compliance with the Public Sector Companies (Corporate Governance) Rules, 2013 (Contd.) S. No. Provision of the Rules Rule No. Y N Tick the relevant box 9. (a) The company has prepared a Code of Conduct and has ensured that appropriate steps have been taken to disseminate it throughout the company along with its supporting policies and procedures, including posting the same on the company s website ( (b) The Board has set in place adequate systems and controls for the identification and redressal of grievances arising from unethical practices. 10. The Board has established a system of sound internal control, to ensure compliance with the fundamental principles of probity and propriety; objectivity, integrity and honesty; and relationship with the stakeholder, in the manner prescribed in the Rules. 5(5) 11. The Board has developed and enforced an appropriate conflict of interest policy to lay down circumstances or considerations when a person may be deemed to have actual or potential conflict of interests, and the procedure for disclosing such interest. 5(5)(b) (ii) 12. The Board has developed and implemented a policy on anticorruption to minimize actual or perceived corruption in the company. 5(5)(b) (vi) 13. (a) The Board has ensured equality of opportunity by establishing open and fair procedures for making appointments and for determining terms and conditions of service. (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, in accordance with the SPPRA Rules. 5(5)(c) (iii) 15. The Board has developed a vision or mission statement, corporate strategy and significant policies of the company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. 5(6) 16. The Board has quantified the outlay of any action in respect of any service delivered or goods sold by the Company as a public service obligation, and has submitted its request for appropriate compensation to the Government for consideration. 5(8) N/A (a) The Board has met at least four times during the year. 6(1) 17. (b) Written notices of the board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. 6(2) (c) The minutes of the meetings were appropriately recorded and circulated. 6(3) 18. The Board has carried out performance evaluation of its members, including the chairman and chief executive, on the basis of a process, based on specified criteria, developed by it. The board has also monitored and assessed the performance of senior management on annual / half yearly/quarterly basis*. * Strike out whichever is not applicable 8 13

15 Statement of Compliance with the Public Sector Companies (Corporate Governance) Rules, 2013 (Contd.) S. No. Provision of the Rules Rule No. Y N Tick the relevant box 19. The Board has reviewed and approved the related party transactions placed before it after recommendations of the audit committee. A party wise record of transactions entered into with the related parties during the year has been maintained The Board has approved the profit and loss account for, and balance sheet as at the end of the first second and third quarter of the year as well as the financial year end, and has placed the annual financial statements on the company s website. Monthly accounts were also prepared and circulated amongst the board members All the board members underwent an orientation course arranged by the company to apprise them of the material developments and information as specified in the Rules. 11 (a) The Board has formed the requisite committee, as specified in the Rules. (b) The Committees were provided with written term of reference defining their duties, authority and composition. (c) The minutes of the meetings of the committee were circulated to all the board members. (d) The committees were chaired by the following non-executive directors: Committee Number of Members Name of Chair Audit Committee Three Saeed Reza 22. Risk Management Committee Nil N/A 12 * Human Resources Committee Three Mr. M. Imran Malik Procurement Committee Three Mr. M. Imran Malik Nomination Committee Four Mr. Ali Murtaza Kazmi 23. The Board has approved appointment of Chief Financial Officer, Company Secretary and Chief Internal Auditor, with their remuneration and terms and conditions of employment, and as per their prescribed qualification. 13/ The company has adopted International Financial Reporting Standards notified by the Commission under clause (i) of sub-section (3) of section 234 of the Ordinance 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 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

16 Statement of Compliance with the Public Sector Companies (Corporate Governance) Rules, 2013 (Contd.) S. No. Provision of the Rules Rule No. Y N Tick the relevant box 27. A formal and transaction procedure for fixing the remuneration packages of individual directors has been set in place. The annual report of the company contains criteria and details of remuneration of each director The financial statements of the company were duly endorsed by the chief executive and chief financial officer, before approval of the board. 20 The Board has formed an audit committee, with defined and written terms of reference, and having the following members: Name of member Category Professional background Syed Saeed Reza Independent Leasing Specialist 29. Syed Shahnawaz Nadir Shah Non- Executive Investment Specialist 21 Mr. M. Imran Malik Independent Ex-Banker 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. 23(4) 33. The external auditors have not been appointed to provide non-audit services and the auditors have confirmed that they have observed applicable guideline issued by IFAC in this regard. 23(5) 34. The Company has complied with all the corporate and financial reporting requirements of the Rules. * All Commitees except for Risk management Committee had not been formed at June , Subsiquently Constitued ** Securities and Exchange Commission of Pakistan has granted exemption for non compliance of this rule. Muhammad Bilal Sheikh Chief Executive 15

17 Explanation for Non-Compliance with the Public Sector Companies (Corporate Governance) Rules, 2013 We confirm that all other material requirements envisaged in the Rules have been complied with except for the following, toward which reasonable progress is being made by the Company to seek compliance by the end of June 30, 2017: S.No Rule/subrule no. Reasons for non-compliance Future course of action 1. Rule 5(2) Company did not recommend at least three individuals to the Government for appointment as Chief Executive of the Company but appointed Mr. Rehan Anjum the senior most staff at SLCL as its Chief Executive. This we understand was due to the fact that the incumbent CEO had to immediately join his new assignment and SLCLs Board had relieved him immediately for the same. According to the company, to follow the process as defined in Public Sector Companies code of Corporate Governance, it would have consumed time and was therefore felt expedient to appoint the next senior most staff temporarily as its CEO. However the subsequent appointment of CEO followed the required procedure. None 2. Rule 5(6) Being a new Company we are still in the process of forming following policies: Marketing of goods to be sold or services to be rendered by the Public Sector Company Capital expenditure planning and control Protection of public interests These policies have been approved in the Fourteenth Board meeting held on August 30, Rule 12 Being a new Company we are still in the process of forming Risk Management Committee. Risk Committee has been constituted in the Fourteenth Board meeting held on August 30, Rule 13/14 As at year end the positions of Chief Executive, Chief Financial Officer and Company Secretary were assigned to a single person. However, full time chief executive has been appointed subsequent to year end. None 16

18 Review Report to the Members on Statement of Compliance with the Public Sector Companies (Corporate Government) Rules, nd Floor, Block C Lakson Square Building-1 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, 2016 prepared by the Board of Directors of Sindh Leasing Company Limited to comply with the provisions of the Rules. The responsibility for compliance with the Rules is that of the Board of Directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Company's compliance with the provisions of the Rules and report if it does not and to highlight any non-compliance with the requirements of the Rules. A review is limited primarily to inquiries of the Company's personnel and review of various documents prepared by the Company to comply with the Rules. As a part of our audit of the financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board of Directors' statement on internal control covers all risks and controls or to form an opinion on the effectiveness of such internal controls, the Company's corporate governance procedures and risks. The Rules requires the Company to place before the Audit Committee, and upon recommendation of the Audit Committee, place before the Board of Directors for their review and approval its related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm's length transactions and transactions which are not executed at arm's length price and recording proper justification for using such alternate pricing mechanism. We are only required and have ensured compliance of this requirement to the extent of the approval of the related party transactions by the Board of Directors upon recommendation of the Audit Committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arm's length price or not. Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the Company s compliance, in all material aspects with the Public Sector Companies (Corporate Governance) Rules 2013, as applicable to the Company for the year ended June 30, Further, we highlight below instances of non-compliance with the requirements of the Rules reflected in the paragraphs 8, 15, 22 and 23 where these are stated in the Statement of Compliance. S.No. Reference Clause description 1. Rule 5(2) Company has not recommended at least three individuals to the Government for appointment as Chief Executive of the Company 2. Rule 5(7) Certain signi cant policies have not been formulated 3. Rule 12 The Board has not formed the Risk Management Committee, as speci ed in the Rules. 4. Rule 13/14 As at year end the positions of Chief Executive, Chief Financial Of cer and Company Secretary were assigned to a single person. Dated: August 30, 2016 Place: Karachi CHARTERED ACCOUNTANTS Engagement Partner: Mr. Zulfikar Ali Causer 17

19 Auditors Report to the Members 2nd Floor, Block C Lakson Square Building-1 Sarwar Shaheed Road Karachi. We have audited the annexed Balance Sheet of Sindh Leasing Company Limited, as at June 30, 2016 and the related Profit & loss account, Statement of Comprehensive Income, Cash Flow Statement and Statement of Changes in Equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the company s management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 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 30, 2016 Place: Karachi BDO Ibrahim & Co Chartered Accountants Engagement partner Mr. Zulfikar Ali Causer 18

20 BALANCE SHEET AS AT JUNE 30, Note Rupees ASSETS NON-CURRENT ASSETS Property, plant and equipment 5 27,484,390 32,369,754 Intangible assets 6 974, ,003 Net investment in finance leases 7 628,255, ,053,069 Long term loans and advances 8 23,431,856 13,431,219 Long term deposits 374, , ,520, ,839,645 CURRENT ASSETS Short term investments 9 339,740, ,669,705 Accrued markup 1,846,619 3,270,961 Loans and advances ,183,783 - Current maturity of non-current assets ,372,027 85,698,795 Prepayments 12 4,500,331 3,887,259 Taxation - net 21-5,686,994 Cash and bank balances 13 44,181, ,385, ,824, ,599,201 TOTAL ASSETS 1,517,345,479 1,242,438,846 EQUITY AND LIABILITIES CAPITAL AND RESERVES Authorized share capital 100,000,000 (2015: 100,000,000) ordinary shares of Rs. 10/- each 1,000,000,000 1,000,000,000 Issued, subscribed and paid-up share capital 14 1,000,000,000 1,000,000,000 Reserves ,002,645 59,748,636 1,104,002,645 1,059,748,636 NON CURRENT LIABILITIES Long term security deposits against leases ,951,700 70,250,138 Long term loan ,000,000 - Deferred taxation 18-6,124, ,951,700 76,374,223 CURRENT LIABILITIES Trade and other payables 19 10,664,099 10,506,040 Markup accrued 1,369, ,947 Short term borrowings 20-95,000,000 Taxation - net ,720-12,391, ,315,987 CONTINGENCIES AND COMMITMENTS 22 TOTAL EQUITY AND LIABILITIES 1,517,345,479 1,242,438,846 The annexed notes from 1 to 36 form an integral part of these financial statements. Chairman Chief Executive 19

21 PROFIT AND LOSS ACCOUNT Note Rupees INCOME Income from finance lease, auto loans and working capital loans 88,826,015 19,550,661 Return on investments and deposits 23 36,394,167 92,202,228 Other income 405, ,129 Unrealised loss on remeasurement of financial assets at fair value through profit and loss - (11,389,931) 125,625, ,621,087 EXPENSES Finance cost 24 (11,086,083) (845,268) Administrative expenses 25 (58,707,965) (47,834,529) Profit before provision and taxation 55,831,494 51,941,290 Provision for potential lease losses (3,194,727) (3,806,000) Provision against auto finance loans (155,646) - Provision against working capital loans (2,214,210) - Provision for Workers' Welfare Fund 26 1,758,090 (1,758,090) Profit before taxation 52,025,001 46,377,200 Taxation 27 (7,770,992) (13,668,523) Profit for the year 44,254,009 32,708,677 Earnings per share - basic and diluted (Rupee) The annexed notes from 1 to 36 form an integral part of these financial statements. Chairman Chief Executive 20

22 STATEMENT OF COMPREHENSIVE INCOME Rupees Profit for the year 44,254,009 32,708,677 Other comprehensive income - - Total comprehensive income for the year 44,254,009 32,708,677 The annexed notes from 1 to 36 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 52,025,001 46,377,200 Adjustment for: Depreciation 5,828,478 5,256,450 Amortization 436,833 35,938 Provision for potential lease losses 3,194,727 3,806,000 Provision against auto finance loans 155,646 - Provision against working capital loans 2,214,210 - Finance cost 11,086, ,268 Unrealised loss on remeasurement of financial assets at fair value through profit and loss - 11,389,931 22,915,977 21,333,587 Operating profit before working capital changes 74,940,978 67,710,787 Movement in working capital (Decrease) / increase in current assets Long term loans and advances (8,810,123) (7,213,063) Long term deposits - (75,000) Prepayments (613,072) (272,874) Accrued markup 1,424,342 (2,531,235) Increase / (decrease) in current liabilities Trade and other payables 158,059 (5,757,728) (7,840,794) (15,849,900) Cash generated from operations 67,100,184 51,860,887 Finance cost paid (10,526,715) (35,321) Taxes paid (7,850,363) (16,046,195) Increase in net investment in finance lease (407,856,313) (414,496,905) Increase in auto finance loan (7,560,604) (8,089,999) Increase in loans and advances (223,397,993) - Increase in long term security deposit against lease 80,701,562 65,400,138 (576,490,426) (373,268,282) Net cash used in operating activities (509,390,242) (321,407,395) CASH FLOW FROM INVESTING ACTIVITIES Capital expenditure incurred - own use and intangible assets (1,743,114) (4,176,776) Short term investments - net 7,929, ,940,364 Net cash generated from investing activities 6,186, ,763,588 6,186, ,763,588 CASH FLOW FROM FINANCING ACTIVITIES Proceeds from long term loan 250,000,000 - Short term borrowings (95,000,000) 95,000,000 Net cash generated from financing activities 155,000,000 95,000,000 Net (decrease) / increase in cash and cash equivalents (348,204,054) 310,356,193 Cash and cash equivalents at beginning of the year 392,385,487 82,029,295 Cash and cash equivalents at end of the year 44,181, ,385,487 The annexed notes from 1 to 36 form an integral part of these financial statements Chairman Chief Executive 22

24 STATEMENT OF CHANGES IN EQUITY Note Issued, Capital reserve Revenue reserve subscribed Un- Total Statutory and paid-up appropriated reserve share capital profit Rupees Balance as at July 1, ,000,000,000 5,407,992 21,631,967 1,027,039,959 Total comprehensive income for the period ,708,677 32,708,677 Transfer to statutory reserve ,354,338 (16,354,338) - Balance as at June 30, ,000,000,000 21,762,330 37,986,306 1,059,748,636 Total comprehensive income for the year ,254,009 44,254,009 Transfer to statutory reserve ,127,005 (22,127,005) - Balance as at June 30, ,000,000,000 43,889,335 60,113,310 1,104,002,645 The annexed notes from 1 to 36 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 Companies Ordinance, The Company was granted licence on March 27, 2014 to carry out leasing business as a Non- Banking Finance Company (NBFC) under the Non-Banking Finance Companies (Established and Regulations) Rules, The registered office of the Company is situated at 3rd Floor, Imperial Court Building, Dr. Ziauddin Ahmad Road, Karachi. 100% shares of the Company are held by the Government of Sindh. JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned A+ and A-1 ratings to the Company for medium to long term and short term respectively. The rating has been upgraded on June 27, BASIS OF PREPARATION 2.1 Statement of compliance These financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by International Accounting Standards Board (IASB) as are notified under the Companies Ordinance 1984, the Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003 (the NBFC Rules), the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (the NBFC Regulations) and the directives issued by the Securities and Exchange Commission of Pakistan (SECP). In case the requirements differ, the provisions of and directives issued under the NBFC Rules, the NBFC Regulations, Companies Ordinance, 1984 and the directives issued by SECP shall prevail. 2.2 Basis of measurement These financial statements have been prepared under historical cost convention except for certain financial assets and financial liabilities which have been stated at their fair values, cost or amortized cost. These financial statements have been prepared following accrual basis of accounting except for cash flow information. 2.3 Functional and presentation currency These financial statements are presented in Pak Rupees which is the Company's functional currency and presentation currency. 3 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS TO PUBLISHED APPROVED ACCOUNTING STANDARDS 3.1 Standards or interpretations that are effective in current year but not relevant to the Company The following new standards and interpretations have been issued by the International Accounting Standards Board (IASB) which have been adopted locally by the Securities and Exchange Commission of Pakistan vide SRO 633(I)/2014 dated July 10, 2014 with effect from following dates. The Company has adopted these accounting standards and interpretations which do not have significant impact on the Company's financial statements other than certain disclosure requirement about fair value of financial instruments as per IFRS 13 "Fair Value Measurement". Effective date (annual periods beginning on or after) IFRS 10 IFRS 11 IFRS 12 IFRS 13 IAS 27 Consolidated Financial Statements Joint Arrangements Disclosure of Interests in Other Entities Fair Value Measurement Separate Financial Statements (Revised 2011) January 1, 2015 January 1, 2015 January 1, 2015 January 1, 2015 January 1, 2015 IAS 28 Investments in Associates and Joint Ventures (Revised 2011) January 1, Amendments not yet effective The following amendments and interpretations with respect to the approved accounting standards as applicable in Pakistan would be effective from the dates mentioned below against the respective standard or interpretation: 24

26 NOTES TO THE FINANCIAL STATEMENTS Effective date (annual periods beginning on or after) IFRS 2 Share-based Payment - Amendments to clarify the classification and measurement of sharebased January 01, 2018 payment transactions IFRS 10 Consolidated Financial Statements - Amendments regarding the sale or contribution of assets between an investor and its associate or joint venture Deferred indefinitely IFRS 10 Consolidated Financial Statements - Amendments regarding application of the consolidation January 01, 2016 exception IFRS 11 Joint Arrangements - Amendments regarding the accounting for acquisitions of an interest in a January 01, 2016 joint operation IFRS 12 Disclosure of Interests in Other Entities - Amendments regarding the application of the January 01, 2016 consolidation exception IAS 1 Presentation of Financial Statements - Amendments resulting from the disclosure initiative January 01, 2016 IAS 7 Statement of Cash Flows - Amendments resulting from the disclosure initiative January 01, 2017 IAS 12 Income Taxes - Amendments regarding the recognition of deferred tax assets for unrealised January 01, 2017 losses IAS 16 Property, Plant and Equipment - Amendments regarding the clarification of acceptable January 01, 2016 methods of depreciation and amortisation and amendments bringing bearer plants into the scope of IAS 16 IAS 27 Separate Financial Statements (as amended in 2011) - Amendments reinstating the equity January 01, 2016 method as an accounting option for investments in subsidiaries, joint ventures and associates in an entity's separate financial statements IAS 28 Investments in Associates and Joint Ventures - Amendments regarding the application of the January 01, 2016 consolidation exception IAS 38 Intangible Assets - Amendments regarding the clarification of acceptable methods of January 01, 2016 depreciation and amortisation IAS 41 Agriculture - Amendments bringing bearer plants into the scope of IAS 16 January 01, 2016 The Annual Improvements to IFRSs that are effective for annual periods beginning on or after January 01, 2016 are as follows: Annual Improvements to IFRSs ( ) Cycle: IFRS 5 IFRS 7 IAS 19 Non-current Assets Held for Sale and Discontinued Operations Financial Instruments: Disclosures Employee Benefits IAS 34 Interim Financial Reporting 3.3 Standards or interpretations not yet effective 25

27 NOTES TO THE FINANCIAL STATEMENTS The following new standards and interpretations have been issued by the International Accounting Standards Board (IASB), which have not been adopted locally by the Securities and Exchange Commission of Pakistan: IFRS 1 IFRS 9 IFRS 14 IFRS 15 IFRS 16 First Time Adoption of International Financial Reporting Standards Financial Instruments Regulatory Deferral Accounts Revenue from Contracts with Customers Leases The effects of IFRS 15 - Revenues from Contracts with Customers and IFRS 9 - Financial Instruments are still being assessed, as these new standards may have a significant effect on the Company s future financial statements. The Company expects that the adoption of the other amendments and interpretations of the standards will not have any material impact and, therefore, will not affect the Company's financial statements in the period of initial application. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented unless or otherwise stated. 4.1 Property, plant and equipments Owned assets These are stated at cost less accumulated depreciation and impairment, if any. Depreciation is charged to income over the useful life of the asset on a systematic basis, by applying the straight line method at the rates specified in note 5 to the financial statements. In respect of additions and disposal of assets during the period, depreciation is charged from the date of acquisition and up to the date preceding the disposal respectively. Maintenance and normal repairs are charged to profit and loss account as and when incurred. Major renewals and improvements are capitalized and assets so replaced, if any, are retired. An item of tangible fixed assets is de-recognized upon disposal or when no future economic benefits are expected from its use or disposal. Gains or losses on disposals of fixed assets, if any, are included in income or expense respectively. Capital work-in-progress These are stated at cost less accumulated impairment losses, if any and represent expenditure in connection with specific assets incurred during the construction period. These are transferred to specific assets as and when assets are available for use / sale. 4.2 Intangibles These are stated at cost less accumulated amortization and impairment, if any. Amortization is charged to income over the useful life of the asset on a systematic basis by applying the straight line method. The cost of intangible asset comprises of its purchase price and any directly attributable expenditure incurred in preparing the asset for its intended use. 4.3 Net investment in finance leases Leases in which the Company transfers substantially all the risks and rewards incidental to the ownership of an asset to the lessees are classified as finance leases. A receivable is recognized at an amount equal to the present value of the minimum lease payments under the lease agreement, including guaranteed residual value and unamortized initial direct cost which are included in the financial statements as "net investment in finance leases". 4.4 Provision against non performing leases and other loans Provision against non performing leases and other loans is maintained at a level which, in the judgment of management, is adequate to provide for losses on lease portfolio and other loan portfolio which can be reasonably anticipated. The provision is increased by additional charge to income and is decreased by charge offs, net of recoveries. Calculating provision against non performing leases and other loans is subject to numerous judgments and estimates. In evaluating the adequacy of provision, management considers various factors, including the requirements of the NBFC Regulations, the nature and characteristics of the obligor, current economic conditions, credit concentrations or deterioration in pledged collateral, historical loss experience and delinquencies. Lease and other loan receivables are charged off, when in the opinion of management, the likelihood of any future collection is believed to be minimal. 4.5 Long term loans and advances Long term loans and advances are initially recognised at cost being the fair value of consideration received together with the associated transaction costs. Subsequently, these are carried at amortised cost using the effective interest rate method. Transaction costs relating to long term loans and advances are being amortised over the period of agreement. 26

28 NOTES TO THE FINANCIAL STATEMENTS 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 re-evaluates this classification on a regular basis. a) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date which are classified as non-current assets. b) Held-to-maturity Held-to-maturity investments are financial assets with fixed or determinable payments and fixed maturity that the Company has a positive intent and ability to hold to maturity. c) Financial assets at fair value through profit or loss This category has two sub-categories, namely; financial instruments classified as held for trading, and those designated at fair value through profit or loss upon initial recognition: i) Investments which are acquired principally for the purposes of generating profit from short term fluctuation in price or are part of the portfolio in which there is recent actual pattern of short term profit taking are classified as held for trading. ii) Investments designated at fair value through profit or loss upon initial recognition include those group of financial assets which are managed and their performance evaluated on a fair value basis, in accordance with the investment strategy. d) Available for sale Available for sale financial assets are those non-derivative financial assets that are designated as available for sale or are not classified as (a) loans and receivables, (b) held to maturity investments or financial assets at fair value through profit or loss 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, above investments are remeasured at fair value determined with reference to the period-end quoted rates. Gains or losses on re-measurement of these investments are recognised in income statement. d) Available for sale Investments which do not fall under the above categories and which may be sold in response to the need for liquidity or changes in market rates are classified as available-for-sale. After initial recognition, investments classified as available-for-sale are remeasured at fair value, determined with reference to the year-end quoted rates. Gains or losses on remeasurement of these investments are recognised in the equity through other comprehensive income until the investment is sold, collected or otherwise disposed-off, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in income. 4.7 Basis of valuation of investments Fair value of the investments in units of mutual funds are determined by reference to Net Asset Value (NAV) rate notified by the Mutual Fund Association of Pakistan (MUFAP) as of the period end. All regular way purchases and sales of investments are recognised on the trade date i.e. the date the Company commits to purchase / sell the investments. 27

29 NOTES TO THE FINANCIAL STATEMENTS 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 Employees benefits The Company's employees benefits comprise of provident fund and gratuity scheme for eligible employees Staff retirement benefits a) Defined benefit plan (Gratuity Fund) The Company has a gratuity scheme for all its confirmed employees who attain the minimum qualification period for entitlement to gratuity. The employees are eligible to one basic pay per year. All outgoing employees are entitled for gratuity excluding those who have been dismissed by the Company. b) Defined contribution plan (Provident Fund) The Company contributes to contributory provident fund scheme for all its permanent employees. Equal monthly contributions, both by the Company and the employees are made to the fund, at the rate of 10% of the basic salary. Obligation for contributions to defined contribution plan by the Company is recognized as an expense in the profit and loss account 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 non-performing lease and loan receivables Revenue from finance leases is not accrued when rent is past due by ninety days or more. Income on non-performing loan and lease receivables is recognized on receipt basis in accordance with the requirements of the NBFC Regulations Interest income Interest income is recognized on time proportionate basis using effective interest method Return on investment Mark-up income on debt securities is recognised on time proportion basis using the effective yield on instruments on accrual basis. Dividend income from investments is recognised when the Company s right to receive the dividend is established. Gain / loss on sale of investments is taken to income in the period in which it arises. 28

30 NOTES TO THE FINANCIAL STATEMENTS 4.12 Financial instruments All financial assets and liabilities are recognized at the time when the Company becomes a party to the contractual provisions of the instrument. All financial assets are derecognized at the time when the Company loses control of the contractual rights that comprise the financial assets. All financial liabilities are derecognized at the time when they are extinguished, i.e. when the obligation specified in the contract is discharged, cancelled or expires. Any gain or loss on recognition of the financial assets and financial liabilities is taken to profit and loss account 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 non-performing lease finance. These are stated at lower of the original cost of the related asset and net realizable value of the asset repossessed. Gain or loss on disposal of such assets is taken to income currently 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 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 non-adjusting events and are recorded in the financial statements in accordance with the requirements of International Accounting Standard (IAS) 10, Events after the Balance Sheet Date in the year in which they are approved / transfers are made Segment reporting Segment results that are reported to the Company's CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items, if any, comprise corporate assets and tax assets and liabilities. Management has determined that the Company has a single reportable segment and therefore it has only presented entity wide disclosures 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. 29

31 NOTES TO THE FINANCIAL STATEMENTS 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. 5. PROPERTY, PLANT AND EQUIPMENT Leasehold Furniture and Electrical Computer Vehicles Total Description improvements fixtures equipments equipments (Rupees) Year ended June 30, 2016 Net carrying value basis Opening net book value (NBV) 16,431,160 3,617,250 6,258,688 1,644,963 4,417,693 32,369,754 Additions (at cost) - 104, , ,114 Depreciation charge (1,852,843) (410,667) (1,584,149) (848,071) (1,132,748) (5,828,478) Closing net book value 14,578,317 3,310,813 4,674,539 1,635,776 3,284,945 27,484,390 Gross carrying value basis Cost 18,427,466 4,141,709 7,885,706 2,911,890 5,648,270 39,015,041 Accumulated depreciation (3,849,149) (830,896) (3,211,167) (1,276,114) (2,363,325) (11,530,651) Net book value 14,578,317 3,310,813 4,674,539 1,635,776 3,284,945 27,484,390 Year ended June 30, 2015 Net carrying value basis Opening net book value (NBV) 18,296,202 3,837,634 7,265, ,867 4,193,180 34,096,369 Additions (at cost) - 180, ,699 1,813,194 1,250,000 3,779,744 Adjustment / transfer - - 4,017 (253,926) - (249,909) Depreciation charge (1,865,042) (401,235) (1,546,514) (418,172) (1,025,487) (5,256,450) Closing net book value 16,431,160 3,617,250 6,258,688 1,644,963 4,417,693 32,369,754 Gross carrying value basis Cost 18,427,466 4,037,479 7,885,706 2,073,006 5,648,270 38,071,927 Accumulated depreciation (1,996,306) (420,229) (1,627,018) (428,043) (1,230,577) (5,702,173) Net book value 16,431,160 3,617,250 6,258,688 1,644,963 4,417,693 32,369,754 Depreciation rate % per annum INTANGIBLE ASSETS Note Rupees Rupees Software licenses , ,003 30

32 NOTES TO THE FINANCIAL STATEMENTS 6.1 Net carrying value basis Note Rupees Rupees Opening balance 611,003 - Additions (at cost) , ,941 1,411, ,941 Amortization charge (436,833) (35,938) Closing net book value 974, ,003 Gross carrying value basis Cost 1,446, ,941 Accumulated amortization (472,771) (35,938) Net book value 974, ,003 Amortization rate (% per annum) NET INVESTMENT IN FINANCE LEASES Lease rentals receivable 827,469, ,589,270 Add: Residual value of leased assets 150,951,700 70,250,138 Gross investment in finance leases 978,420, ,839,408 Less: Unearned finance lease income (126,378,600) (91,653,385) Net investment in finance leases 852,042, ,186,023 Less: Current maturity of net investment in finance leases (216,785,742) (83,326,954) 635,256, ,859,069 Provision for potential lease losses 7.1 (7,000,727) (3,806,000) 628,255, ,053, 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 3,806,000 - Provision made during the year 3,194,727 3,806,000 Balance at end of the year 7,000,727 3,806, Details of investment in finance lease Gross investments in finance lease Net investments in finance lease Rupees Rupees Rupees Rupees Less then one year 283,166, ,257, ,785,742 83,326,954 One to five years 695,253, ,582, ,256, ,859, ,420, ,839, ,042, ,186, 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. 31

33 NOTES TO THE FINANCIAL STATEMENTS 8. LONG TERM LOANS AND ADVANCES Note Rupees Rupees Considered good Loans to employees ,023,184 7,113,061 Advance to supplier ,000 Advance against lease 500,000 - Auto finance loan ,650,603 8,089,999 32,173,787 15,803,060 Less: Current portion shown under current assets Loans to employees 2,283,597 1,061,655 Auto finance loan 6,302,688 1,310,186 8,586,285 2,371,841 23,587,502 13,431,219 Provision against doubtful loans 8.4 (155,646) - 23,431,856 13,431, Loans to employees Rupees Chief Executive Rupees Rupees Executives 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, ,998 6,813, ,979,938 7,838,638 (299,994) (200,004) (2,275,369) (1,025,571) - 299,994 15,517,636 6,813,067 These represent house loans and car loans provided by the Company to its executives staff as per service rules. House loans are repayable in a maximum of 300 monthly installments and carry mark-up at the rate of 5 percent per annum. Job entitled car loans are repayable in 60 monthly installments and are interest free. 8.2 This represented advance given to supplier for purchase of Almanac (accounting software) which has been capitalized during the year. 8.3 This represents vehicle financing facility provided to customers on markup basis. The mark-up on these finances ranges between 9.36% to 12.30% (2015: 10.00% and 12.30%) per annum. These finances are repayable within a period of 3 to 5 years (2015: 5 years) and are secured against first exclusive charge by way of hypothecation of the motor vehicles and personal guarantee of the customers. 8.4 This represents general provision recorded on the auto finance loan portfolio at the rate of 1% of the balance. The movement of provision is as follows: Note Rupees Rupees Balance at beginning of the year - - Provision made during the year 155,646 - Balance at end of the year 155, SHORT TERM INVESTMENTS Held to maturity Certificate of investments ,000, ,000,000 Term deposit receipts JS Bank Limited 100,000, United Bank Limited - 100,000, ,000, ,000,000 At fair value through profit and loss Units of open ended mutual funds ,740, ,669, ,740, ,669,705 32

34 NOTES TO THE FINANCIAL STATEMENTS Note Rupees Rupees 9.1 Certificate of investment Pair Investment Company Limited ,000, ,000, This represents investment made by the Company in certificate of investments for a period of three months and having maturity date of August 25, This investment carries mark-up at the rate of 6.5% per annum (2015: 8.5%). 9.2 Term deposit receipts JS Bank Limited ,000,000 - United Bank limited - 100,000, ,000, ,000, This represents investment made by the Company in Term Deposit Receipts for a period of three months and having maturity date of September 16, This investment carries mark-up at the rate of 7.15% per annum. 9.3 Units of open ended mutual funds Cost Market value Unrealised loss (Rupees) NIT - Government Bond Fund nil (2015: 9,649,059 units) - 109,059,636-97,669,705 - (11,389,931) ABL - Government Securities Fund - B nil (2015: 4,983,852 units) NAFA - Income Opportunity Fund 17,730,096 units (2015: nil) - 50,000,000-50,000, ,740, ,740, ,740, ,059, ,740, ,669,705 - (11,389,931) 10. LOANS AND ADVANCES Note Rupees Rupees Considered good Working capital loan ,397,993 - Less: Provision against doubtful loans 10.2 (2,214,210) - 221,183, This represents working capital loan facility provided to customers on markup basis. The mark-up on these finances ranges between 9.10% to 9.36% (2015: nil) per annum. These finances are repayable within a period of one year and are secured against ranking charge by way of hypothecation of fixed assets, unregistered hypothecation charge over stock and receivables, equitable mortgage over properties, personal guarantee, corporate guarantee and post dated cheques from the customers 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 - - Provision made during the year 2,214,210 - Balance at end of the year 2,214,210-33

35 NOTES TO THE FINANCIAL STATEMENTS Note Rupees Rupees 11. CURRENT MATURITY OF NON-CURRENT ASSETS Net investment in finance leases 7 216,785,742 83,326,954 Long term loans and advances 8 8,586,285 2,371, ,372,027 85,698, PREPAYMENTS Prepaid insurance Prepaid rent Prepaid membership fee 13. CASH AND BANK BALANCES 1,174, ,481 2,891,397 3,186, , ,625 4,500,331 3,887,259 Cash and other equivalent Cash in hand 34,397 17,255 Stamp papers in hand 181,900 32, ,297 49,255 Cash at bank Current account 197,826 76,851 Saving account ,767, ,259,381 43,965, ,336,232 44,181, ,385, This represents daily product account (saving account) maintained with Sindh Bank Limited carrying mark-up at the rate of 4.00% to 6.75% (2015: 6.75%) per annum receivable on monthly basis. 14. ISSUED, SUBSCRIBED AND PAID-UP SHARE CAPITAL (Number of shares) 100,000, ,000,000 Ordinary shares of Rs. 10 each fully paid in cash 1,000,000,000 1,000,000, The Government of Sindh, held 99,999,993 shares as at June 30, The remaining shares are held by the Directors of the Sindh Leasing Company Limited in nominee capacity. 15. RESERVES Capital reserve Statutory reserve Revenue reserve Un-appropriated profit ,889,335 21,762,330 60,113,310 37,986, ,002,645 59,748, This represents reserve created in compliance with Non-Banking Finance Companies and Notified Entities Regulation, 2008 (NBFC Regulations). In accordance with NBFC Regulations, the Company is required to transfer atleast 20% of its profit after tax to a statutory reserve. In order to comply with this requirement, the Company has transferred an amount of Rs million, representing 50% of profit after tax, (2015: Rs million) to the statutory reserve. 16. LONG TERM SECURITY DEPOSITS AGAINST LEASES Lease deposits ,951,700 70,250,138 34

36 NOTES TO THE FINANCIAL STATEMENTS 16.1 These represent deposit received from lessee under finance lease and are adjustable against the residual value of the asset leased at the expiry of respective lease term. 17. LONG TERM LOAN Note Rupees Rupees Unsecured Loan from Government of Sindh ,000, This represents long term loan from Sindh Province Pension Fund which is the reserve fund of Government of Sindh on December 2, 2015 for a period of three years at a rate of return of 6 months KIBOR plus 1%. The interest is payable on quarterly basis. 18. DEFERRED TAXATION Deferred taxation ,124, The net balance for deferred taxation is in respect of following temporary differences: - 6,124,085 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 loss Others 2,522,626 2,909,088 48,840,261 30,597,886 (46,129,231) (25,846,997) (5,233,656) (1,535,892) - 6,124,085 Deferred tax asset arising due to timing difference calculated at applicable tax rates as at balance sheet date amounted to Rs million (2015: nil) debit. Deferred tax asset has not been recognized in these financial statements in accordance with the stated accounting policy of the Company. 19. TRADE AND OTHER PAYABLES Payable to vendors 92,564 3,829,512 Withholding tax payable 832,396 - Advance from customers 3,471,400 - Workers' Welfare Fund 26-1,758,090 Bonus payable 2,000,000 2,529,286 Gratuity payable 1,903, ,661 Others 2,363,998 1,395,491 10,664,099 10,506, SHORT TERM BORROWINGS Secured From banking company ,000,000-95,000, This facility is secured against lien over deposit with UBL with 5% margin. The facility carries markup at three months KIBOR plus 0.5% per annum. Total sanctioned limit is Rs million. 21. TAXATION - NET Provision for taxation 31,516,772 20,210,669 Less: Advance income tax (31,159,052) (25,897,663) 357,720 (5,686,994) 35

37 NOTES TO THE FINANCIAL STATEMENTS 22 CONTINGENCIES & COMMITMENTS 22.1 Contingencies A letter of guarantee issued on behalf of a client for opening letter of credit amounting to Rs million (2015: Rs million) Commitments Finance lease contracts committed but not executed at the balance sheet date amounted to Rs million (2015: Rs million). 23. RETURN ON INVESTMENTS AND DEPOSITS Note Rupees Rupees From financial assets Interest / markup on: Term deposit receipts 2,968,250 44,630,136 PLS accounts 7,200,268 23,920,984 Fund placements 26,151,352 11,571,593 Dividend income 74,297 12,079,515 36,394,167 92,202, FINANCE COST Mark up on short term borrowings 234, ,947 Mark up on long term placement 10,807,603 - Bank charges 43,941 35,321 11,086, , ADMINISTRATIVE EXPENSES Salaries and benefits ,009,561 28,845,765 Directors' remuneration 4,639, ,000 Rent, rates and taxes 6,091,034 4,487,458 Communication and utility expenses 1,717, ,509 Travelling and conveyance 2,507,475 2,484,502 Repair and maintenance 1,035, ,328 Insurance expense 1,468,217 1,154,464 Auditors' remuneration , ,450 Advertising expense Depreciation 50,187 5,828,478 92,946 5,256,450 Amortization 436,833 35,938 Legal and professional charges 3,014,374 1,983,079 Printing and stationary 515, ,200 Others 1,235, ,440 58,707,965 47,834, This amount includes Rs million (2015: Rs million) in respect of employees retirement benefits Auditors' remuneration Audit fee 135, ,000 Out of pocket expenses 25,000 5, , , PROVISION FOR WORKERS' WELFARE FUND This represents reversal of provision for Workers' Welfare Fund based on the fact that the Company is excluded from definition of industrial establishment as per The Sindh Workers' Welfare Fund Act, 2014 and The Workers' Welfare Fund Ordinance, 1971 since the Company is wholly owned by the Government of Sindh. 36

38 NOTES TO THE FINANCIAL STATEMENTS 27. TAXATION Note Rupees Rupees Current ,306,103 10,168,372 Prior 2,588,974 63,019 Deferred (6,124,085) 3,437,132 7,770,992 13,668, The income tax for the year ended June 30, 2016 has been charged at the rate applicable as per the provision of Income Tax Ordinance, 2001 (the Ordinance) Relationship between tax expense and accounting profit Accounting profit for the current year 52,025,001 46,377,200 Tax on 32% (2015: 33% ) 16,648,000 15,304,476 Tax effect of difference of accounting and tax base of owned assets 451,634 75,056 Tax effect of lease income and rentals 22,753,988 20,844,961 Tax effect of expenses that are not determining taxable profit 6,143,759 5,027,136 Effect of final tax under presumptive tax regime (1,324,633) (1,799,128) Tax effect of tax losses (33,366,646) (29,284,129) Effect of deferred tax (6,124,085) 3,437,132 Effect of prior year adjustment 2,588,974 63,019 7,770,992 13,668, EARNINGS PER SHARE - BASIC AND DILUTED Profit for the year - Rupees 44,254,009 32,708,677 Weighted average number of ordinary shares 100,000, ,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. 29. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES The aggregate amount charged in the financial statements for the period in respect of the remuneration and benefits to the Chief Executive, Directors and Executives are as follows: 2016 Rupees Directors & Chief Executive Executives Total Executive Director Fee - 1,011,000-1,011,000 Managerial remuneration 3,926,649 2,125,000 3,899,142 9,950,791 Perquisites and allowances 2,853,084 1,078,374 4,029,210 7,960,668 Retirement benefit 754, , ,844 1,959,812 7,534,701 4,639,374 8,708,196 20,882,271 Number of persons Chief Executive 2015 Rupees Directors Executives Total Fee - 465, ,000 Managerial remuneration 7,084,854-3,596,773 10,681,627 Perquisites and allowances 4,605,146-3,884,335 8,489,481 Retirement benefits 1,113, ,203 1,560,335 12,803, ,000 7,928,311 21,196,443 Number of persons

39 NOTES TO THE FINANCIAL STATEMENTS Director's remuneration / fee represents remuneration paid for attending Board and sub-committee meetings. The Chief Executive and certain employees at the executive level are also provided with the Company owned and maintained car and other benefits in accordance with their entitlement as per rules of the Company. 30. RELATED PARTY TRANSACTIONS The Company has a related party relationship with its Associated Company / Undertaking, Government of Sindh, staff retirement funds, key management personnel and other related parties. The details of significant related party transactions during the year and balances as at June 30, 2016 are as follows: For the year ended June 30, Associated Company Other related party Key management personnel Directors Transactions during the year Rupees Profit on term deposit Profit on daily product account 7,171, Remuneration paid ,911,459 - Retirement benefits - - 1,959,812 - Directors' meeting fees ,011,000 Services received from Sindh Insurance Company Limited - 1,447, Long term loan from Government of Sindh - 250,000, Interest on long term loan from Government of Sindh - 10,807, Balances Daily product account 37,915, Long term loan - 250,000, Markup accrued - 1,369, Associated Company For the year ended June 30, Other related party Key management personnel Directors Rupees Transactions during the year Profit on term deposit 44,630, Profit on daily product account 23,916, Remuneration paid ,171,108 - Retirement benefits - - 1,560,335 - Directors' meeting fees ,000 Balances Daily product account 391,489, FINANCIAL RISK MANAGEMENT 31.1 Financial risk factors The Company s activities expose it to a variety of financial risks from the use of financial instruments, including: - Credit risk - Liquidity risk - Market risk 38

40 NOTES TO THE FINANCIAL STATEMENTS 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 628,255, ,053,069 Long term loans and advances 23,431,856 13,431,219 Long term deposits 374, ,600 Short term investments 339,740, ,669,705 Accrued markup 1,846,619 3,270,961 Loans and advances 221,183,783 - Current maturity of non-current assets 225,372,027 85,698,795 Cash at bank 43,965, ,336,232 1,484,170,291 1,199,834,581 The aging of net investment in finance lease at the reporting date is as follows: Past due but not impaired: up to 29 days to 89 days - - Past due and impaired 90 days to 1 year year to 2 years years to 3 years - - more than 3 years - - Impaired but not past due 3,194,727 3,806,000 Neither past due nor impaired 848,847, ,380,023 Total amount 852,042, ,186, 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+. 39

41 NOTES TO THE FINANCIAL STATEMENTS Details of the industrial sector analysis of lease portfolio are as follows: 2016 Financial assets Percentage Gross amount % Rupees Sector Oil and petroleum marketing 0.00% - Health & pharmaceuticals 11.61% 52,884,689 Individuals 3.58% 16,292,238 Construction 10.94% 49,844,351 Sugar 20.19% 91,963,060 Cinematography theatre 0.00% - Transport 7.67% 34,941,467 Textile 8.47% 38,574,907 Media 32.48% 147,944,127 Packaging 0.00% - Energy 16.75% 76,274,027 Service 10.46% 47,640,937 Miscellaneous 26.48% 120,622, % 676,982, 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, 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. June 30, 2016 Financial liabilities Total Up to three months Over three months to one year Over one year to five years Over five years Rupees Long term loan 250,000, ,000,000 - Trade and other payables 4,456,562 4,456, Markup accrued 1,369,315 1,369, June 30, ,825,877 5,825, ,000,000 - June 30, ,315, ,315,

42 NOTES TO THE FINANCIAL STATEMENTS 31.4 Market Risk Market risk is the risk that changes in market price, such as foreign exchange rates, interest rates and equity prices will affect the Company s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposure within acceptable parameters, while optimizing the return. Market risk comprise of three types of risk : interest rate risk, currency risk and other price risk, such as equity risk 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: Fixed rate instruments Effective rate Carrying amount (In percent) Rupees Rupees Financial assets Certificate of Investment ,000, ,000,000 Term deposit receipts ,000, ,000,000 Bank balances 4 to ,767, ,259,381 Loans to employees ,023,184 7,113, ,790, ,372,442 Variable rate instruments Effective rate Carrying amount (In percent) Rupees Rupees Financial assets Net investment in finance Auto finance loan Loans and advances 9.35 to to ,042, ,186, to to ,650,603 8,089, to ,183,783-1,088,876, ,276,022 Financial liabilities Short term running finance ,000,000 Long term loan 7.14 to ,000, ,000,000 95,000, 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 (2015: 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. 41

43 NOTES TO THE FINANCIAL STATEMENTS 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 million (2015: 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, 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 Financial instruments by category Rupees Rupees Financial assets At fair value through profit and loss Short term investments 189,740, ,669,705 Held to maturity Short term investments 150,000, ,000,000 Loans and receivables at amortised cost Net investment in finance leases 852,042, ,186,023 Long term loans and advances 31,673,787 15,203,060 Long term deposits 374, ,600 Accrued markup 1,846,619 3,270,961 Loans and advances 221,183,783 - Cash and bank balances 44,181, ,385,487 Financial liabilities Financial liabilities at amortised cost Long term loan Trade and other payables Short-term borrowings 250,000,000-4,456,562 8,747,950-95,000,000 42

44 NOTES TO THE FINANCIAL STATEMENTS 32. CAPITAL RISK MANAGEMENT The objective of the Company when managing capital is to safeguard its ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders, and to maintain a strong capital base to support the sustained development of its business. The Company manages its capital structure by monitoring return on net assets and makes adjustments to it in the light of changes in economic conditions. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend paid to its shareholders or issue new shares. The Company is in compliance with the minimum capital requirement of NBFC Regulations. 33. NUMBER OF EMPLOYEES The total number of employees as at year end were 22 (2015: 24). 34. CORRESPONDING FIGURES Corresponding figures have been rearranged and reclassified, wherever necessary for the purpose of comparison and better presentation. During the year, no significant reclassifications has been made. 35. DATE OF AUTHORIZATION FOR ISSUE These financial statements were authorized for issue by the Board of directors on August 30, GENERAL Figures have been rounded off to the nearest rupee. Chairman Chief Executive 43

45 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 rd as my/our Proxy in my/our absence to attend and vote for me/us and on my/our behalf at the 3 Annual General Meeting of the company to be held on October 20, 2016, at its registered office in Karachi. Signed this day of, 2016 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 office of the Company, as soon as possible but not latter than 48 hours before the time of holding the meeting, failing which; Proxy Form will not be treated as valid. 2. No person shall act as proxy unless he/she is a member of the Company. 44

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