Our mission, shared values and objectives 1. Quality policy 2. Corporate information 3. Corporate Governance Report

Transcription

1 Annual Report JUNE

2 CONTENTS Our mission, shared values and objectives 1 Quality policy 2 Corporate information 3 Directorate & Management Annual Report Management Discussion & Analysis Corporate Governance Report Statement of Management s Responsibility For Financial Reporting Certificate from the Company s Secretary Independent auditor s report to the members (a) 30(b) 31-31(b) Statement of financial position 32 Statement of profit and loss and other comprehensive income 33 Statement of changes in equity 34 Statement of cash flows 35 Notes to the financial statements 36-72

3 1 OUR MISSION We are dedicated to provide, to a broad range of individual and corporate clients, the best in financial services, with focus on competitive quality products and excellent levels of customer care and satisfaction. OUR SHARED VALUES We strive to meet changing needs of our customers and exceed their expectations by providing consistently high quality products, services and solutions. We foster a climate that encourages innovation and teamwork among our people while helping them to grow and develop to their full potential. We ensure the creation of wealth for all stakeholders and provide fair reward and recognition accordingly. We support mutually beneficial and enduring relationships with our stakeholders. We respect the diversity of our team members, customers and communities. We conduct our business with the highest level of integrity and ethical standards. OUR OBJECTIVES Provide excellent customer service and advice. Respond proactively to new customer needs. Highly effective and motivated team members. Maximize profits and returns to stakeholders. Increase market share. Identify diversification and innovation opportunities.

4 2 QUALITY POLICY Service Excellence We are committed to service excellence through providing a professional and timely service to our customers while maintaining value-adding relationship with all stakeholders. Meeting Customer Expectations Our ultimate goal is to meet customer expectations with a diligent and efficient service. People Development Our people are our most valuable asset and we shall: provide them with appropriate training in line with organisational needs and objectives, aim at achieving employee satisfaction and encouraging their participation in decision making processes, and promote safe, sound and motivating work environment. Continual Improvement We are committed towards developing and maintaining efficient and reliable processes. We undertake to continually improve/ innovate our products/ services. Competitive Products and Services We will design and deliver competitive products and services to suit the requirements of our customers as well as the market at large. Compliance and Good Governance We ensure compliance with relevant laws and regulations and are committed to good governance and effective practices. Quality Objectives This Quality Policy will serve as basis for defining the Quality Objectives of SICOM Financial Services Ltd and we will ensure that it is reviewed on a regular basis.

5 3 CORPORATE INFORMATION Chairperson Directors Gujadhur S K Bhoojedhur Obeegadoo K G (Mrs) Chellapermal R Dabee D K Gopee G (up to 6 November 2012) Lobine K Ramdewar N (Mrs) Company Secretary Lee Shing Po T M (Mrs) Head Chadien M Deputy Head Kasenally Boodoo A (Mrs) Registered Office Auditors SICOM Building Sir Célicourt Antelme Street, Port Louis Telephone : (230) Fax : (230) Address: sfsl@sicom.intnet.mu Website : BDO & Co Main Banker State Bank of Mauritius Ltd

6 4 DIRECTORATE & MANAGEMENT DIRECTORS PROFILE Mr S Gujadhur, FCCA Chairperson, SICOM Financial Services Ltd Mr Sheokumar Gujadhur is a fellow of the Association of Chartered Certified Accountants. He was formerly an Executive Vice-President at Air Mauritius, where he worked from 1978 until He served in the Planning and Finance departments at Air Mauritius and he headed the revenue department of the Company for approximately ten years before setting up and managing the Internal Audit Department throughout the Air Mauritius Group. In his capacity as the first Internal Auditor of the Company, Mr Sheokumar was initially responsible for, inter alia; structuring the Internal Audit department and devising the Internal audit procedure and protocols for the Company. He also assisted in setting up the Audit Committee of the Board in 2000 and acted as its Secretary until November Mr Sheokumar Gujadhur has also served on the boards of some subsidiaries of the ex-w.e.a.l Group and the Medine Group and is currently a Director of GFin Corporate Services Ltd. Mrs K Bhoojedhur-Obeegadoo, BSc (Hons), FIA Mrs Karuna Bhoojedhur-Obeegadoo holds a BSc (Hons) in Actuarial Science from the London School of Economics and is a Fellow of the Institute of Actuaries, U.K. She has worked with a major international reinsurance Company in London before joining the State Insurance Company of Mauritius Ltd in 1984, where she was in charge of the Life, Pensions and Actuarial Departments of the Company. Mrs Bhoojedhur-Obeegadoo currently heads the SICOM Group of Companies and is a member of the Board of Directors of the companies within the Group. She has also been a Director in several companies where SICOM is a shareholder. Mr R Chellapermal, ACCA Ag Deputy Financial Secretary, Ministry of Finance & Economic Development Mr Radhakrishna Chellapermal was admitted as a member of the Association of Chartered Certified Accountants in He joined the Ministry of Finance in 1983 after working in the private sector for 6 years. At the Ministry, Mr Chellapermal has been involved in various projects relating to the financial services sector including the establishment of the Stock Exchange, review of Company law and the regulatory framework governing the global business (offshore) sector. Mr Radhakrishna Chellapermal is presently member of the Board of the Financial Services Commission, Board of Investment and State Investment Corporation Ltd.

7 5 DIRECTOR S PROFILE (CONT D) Mr D.K Dabee B.Sc (UK) Solicitor General, Attorney General s office Mr Dheerendra Kumar Dabee is the Solicitor-General (Attorney General's Office) and a Senior Counsel. He previously held office of Parliamentary Counsel. He is the main non-political legal adviser to Government and the legal adviser of a number of public bodies. He is currently a Board Director of Air Mauritius Ltd, SBM Ltd and SICOM Financial Services Ltd. He is also a member of the Commonwealth Secretariat Arbitral Tribunal. Mr Dheerendra Kumar Dabee is a former Laureate (Economics side), a Graduate in Law and Political Science from Birmingham University (UK) and, since 1981 a Barrister-at-Law from the Middle Temple. Mr K Lobine, LLB (Hons) Mr Khushal Lobine read law at the University of Wolverhampton and at Cardiff Law School. He was called to the Bar of England and Wales and is also a member of the Honourable Society of the Lincoln s Inn. He is well versed in Alternative Disputes Resolution (ADR) and assists the process in resolving disputes through mutual facilitation and mediation. Mr Lobine is also the Chairman of the Wastewater Management Authority since He is a practising barrister and regularly advises local authorities, governmental institutions and parastatal bodies as well as private companies in the field of contract management, preparation and vetting of international bidding documents, Construction and Environmental Law and procurement procedures. He also provides legal advice and services in the field of Global Business, Company Law and Insurance Law. Mrs N Ramdewar, FCCA, MBA (Finance) Mrs Nandita Ramdewar is a fellow of the Association of Chartered Certified Accountants and holds a Masters in Business Administration in Finance from Manchester Business School. She occupies the position of Group Senior Manager (Corporate), where she is in charge of the Financial Services, Finance, HR, Legal and Corporate matters for the SICOM Group of Companies. She is also the Company Secretary of the State Insurance Company of Mauritius Ltd and SICOM General Insurance Ltd and is a member of the Board of some of the subsidiaries of the SICOM Group. She has also been a Director in several companies where SICOM is a shareholder.

8 6 MANAGEMENT PROFILE Head SICOM Financial Services Ltd Mr M Chadien, FCCA, MBA Mr Moorganaden Chadien is a fellow of the Association of Chartered Certified Accountants and holds a Masters in Business Administration from the University of Surrey. He joined the State Insurance Company of Mauritius in 1994 and subsequently moved to SICOM Financial Services Ltd during its setting-up in He is now the Head of SICOM Financial Services Ltd and responsible for the day to day operations of the Company. Deputy Head SICOM Financial Services Ltd Mrs A Kasenally Boodoo, BSc (Hons), MBA Mrs Ameerah Kasenally-Boodoo holds a BSc (Honours) in Economics from the London School of Economics and Political Science and a Masters in Business Administration from the University of Birmingham. She joined the State Insurance Company of Mauritius in 2003 where she worked in the Investment department before moving on to SICOM Financial Services Ltd in 2008 where she is assuming the post of Deputy Head, assisting in the running of the Company s operations.

9 7 ANNUAL REPORT The Directors have the pleasure to submit the Company s thirteenth Annual Report of SICOM Financial Services Ltd (the Company ) together with the audited financial statements for the financial year ended 30 June PRINCIPAL ACTIVITIES The Company is actively engaged in depository and investment business activities and holds a deposit taking license as a Non-Bank Financial Institution. The Company also transacts leasing business and manages SICOM General Fund and SICOM Overseas Diversified Fund, which are constituted under the SICOM Unit Trust. FINANCIAL RESULTS Deposits The total deposits of the Company were maintained at Rs 3.2 billion for the year ended 30 June 2013, in spite of the drop in interest rates and fierce competition. Investments Investments inclusive of term deposits, stood at Rs 3.5 billion for the financial year ended 30 June 2013 as compared to Rs 3.6 billion for the financial year ended 30 June The investments of the Company consisted of Deposits, Loans, Government Securities, Finance and Operating Lease and Local Equity. Interest Income Total interest income amounted to Rs million for the financial year ended 30 June 2013, as compared to Rs million last year. The decrease in interest income is explained by the drop in interest rates on investments and the review in the interest rate on the loan to the holding Company in line with market conditions. Profit Profit before tax stood at Rs 38.4 million for the financial year under review, as compared to Rs 42.7 million last year on the back of the drop in interest income as explained above.

10 8 ANNUAL REPORT (CONT D) DIRECTORS SERVICE CONTRACTS There are no service contracts between the Company and its Directors. CORPORATE SOCIAL RESPONSIBILITY (CSR) The total CSR funds of the Company amounted to Rs 667,836. An amount of Rs 583,918 was allocated to projects in line with SICOM Group's CSR guidelines. The remaining Rs 83,918 has been entrusted to the SICOM Foundation which has been set up this year. The setting up of the Foundation reflects the particular importance that the Group places on its Corporate Social Responsibility. Such structure will enable the Group to conduct its CSR activities in a more effective and dedicated manner. DONATIONS During the year, the Company made no charitable and political donations. QUALITY ASSURANCE SICOM Financial Services Ltd is an ISO 9001 Certified Company and the Company underwent successfully its surveillance audit in June On-going efforts are being made to reinforce the Company s commitment to continually improve its customer services standards and business processes. AUDITORS The remuneration of Auditors for the financial year amounted to Rs 276,000 (2012: Rs 292,215) for audit services and Rs 28,750 (2012: Rs 15,657) for other services (taxation fees). ACKNOWLEDGEMENT The Directors would like to place on record their appreciation of the support given to SICOM Financial Services Ltd by the Government of Mauritius, the Bank of Mauritius, the Financial Services Commission, its valued Customers, Bankers and Stockbrokers.

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12 10 MANAGEMENT DISCUSSION AND ANALYSIS The Bank of Mauritius Guideline on Public Disclosure of Information has been used for the preparation of this Management Discussion and Analysis (MDA) for the financial year ended 30 June The MDA includes forward looking statements and that risk exists that forecasts, projections and other postulations contained therein may not materialise and that actual results may vary from the plans and expectations of the Company. The reader should, therefore, stand cautioned not to place any undue reliance on such statements. The Company does not undertake to update any forward-looking statement that may be made from time to time by the Company or on its behalf. ECONOMIC REVIEW According to the Central Statistics Office (CSO), the growth rate for the Mauritian economy for 2012 was 3.3%. Despite restrained activity in major export sectors and a loss of momentum in the last quarter of 2012, the domestic economy withstood the external headwinds relatively well last year. Data for the last quarter showed that some sectors continued to record strong growth while certain externaloriented sectors struggled amid the difficult international environment and the construction sector lost steam due to the completion of major projects. While the labour market displayed fairly stable conditions, consumption and investment growth in the country continued to be subdued. The investment rate in 2012 was 23.0% while the saving rate reached 15.1%. The headline inflation rate was 3.6% for the twelve months ended June 2013 compared to 5.1% for the previous corresponding period. During the financial year ended June 2013, the Bank Rate decreased by 65 basis points as a result of the financial system being flush with cash. During the same period, there was an appreciation in the USD and EUR, compared to MUR while the GBP and AUD depreciated versus the local currency. After declining in the previous financial year, the SEMDEX rose by 7.8% during the financial year ended 30 June The ongoing recession in Europe remains a hurdle for our key industries notably tourism and the export oriented companies. The CSO has twice lowered its 2013 real gross domestic product growth estimate which currently stands at 3.3%, same as in 2012.

13 11 MANAGEMENT DISCUSSION AND ANALYSIS (CONT D) FINANCIAL REVIEW 1. Performance against objectives The drop in interest rates and the review in the interest rate on the loan to the holding Company in line with market conditions impacted on the current year s objective relative to operating profit and revenue growth. However, profitability ratios were nearly in line with the objectives of the current year. The Company has adopted a prudent approach concerning next year s objective given the difficult market conditions. Performance Area Current year's objective Current year's performance Next year's objective Operating profit growth 2.62% (10.07%) 5.40% Revenue growth (7.83%) (12.55%) (3.17%) Interest expense growth 17.54% (15.00%) (6.33%) Productivity 37.36% 43.44% 42.93% Return on equity 8.30% 8.37% 8.82% Return on average assets 1.17% 1.00% 1.27% Deposit Taking Total deposits of the Company have been maintained for the financial year ended 30 June 2013 at Rs 3.2 billion, in spite of the tough competition on the market. Deposits 3,100 Amount (Rs'm) Financial year ended Deposits (Rs) 30-Jun Jun Jun-13 Deposit takings 3,047,047,576 3,198,392,545 3,223,776,248 Interest Payable to Depositors 263,197, ,641, ,840,063 Average Interest/ Deposit (%)

14 12 MANAGEMENT DISCUSSION AND ANALYSIS (CONT D) Leasing There was a marked improvement in the lease disbursement for the year under review in line with the Company s strategy to focus on its leasing business. In fact, the amount of lease disbursed increased from Rs 88.8 million to Rs million and an amount of Rs 33.1 million has already been approved and will be disbursed during the next financial year. The total investment in finance lease increased by 50.2% to reach Rs million for the year ended 30 June This increase in leasing business can be attributed to our enhanced marketing efforts to promote our leasing business, mainly in specific niche markets. Advertising campaigns and a tie up with a local car dealer has reaped positive results during the year end and helped to increase the visibility of the Company on the market. Leasing Amount (Rs'm) Financial year ended Leasing (Rs) 30-Jun Jun Jun-13 Amount Disbursed 50,151,693 88,842, ,902,180 Revenue Gross finance lease income increased by 31.8% to reach Rs 43.6 million for the year under review as compared to Rs 33.1 million last year. Revenue from our Unit Trust activities picked up slightly to reach Rs 2.2 million this year but total revenue stood at Rs million for the financial year ended 30 June 2013 as compared to Rs million last year due to the drop in interest rates. Revenue Amount (Rs'm) Financial year ended Revenue (Rs) 30-Jun Jun Jun-13 Investment Income 314,053, ,990, ,341,852 Net Leasing activities 6,854,702 12,768,615 16,958,005 Unit Trust 2,360,462 2,139,639 2,197,097 Total 323,268, ,898, ,496,954

15 13 MANAGEMENT DISCUSSION AND ANALYSIS (CONT D) Net Revenue Net revenue reached Rs 67.9 million for the financial year ended 30 June This fall in net revenue compared to last year can be explained by the tight margins obtained due to declining interest rates. Net Revenue Amount (Rs'm) Financial year ended Net Revenue (Rs) 30-Jun Jun Jun-13 Deposit takings 50,855,854 56,348,676 49,501,789 Unit Trust 2,360,462 2,139,639 2,197,097 Leasing activities 4,740,143 14,400,312 16,167,236 Total 57,956,459 72,888,627 67,866,122 Operating profit Net operating profit stood at Rs 38.4 million for the financial year ended 30 June 2013 as compared to Rs 42.7 million last year on the back of the drop in interest rates and the review in the interest rate on the loan to the holding Company in line with market conditions. 50 Operating profit Amount (Rs'm) Financial year ended Operating profit (Rs) 30-Jun Jun Jun-13 Deposit takings 31,126,882 30,456,349 22,442,686 Unit Trust 1,186,649 1,045, ,756 Leasing activities 4,597,468 11,182,887 15,348,784 Total 36,910,999 42,684,532 38,384,226

16 14 MANAGEMENT DISCUSSION AND ANALYSIS (CONT D) Interest expense Interest paid to depositors fell from Rs million for the financial year ended 30 June 2012 to Rs million for the financial year ended 30 June 2013, following the drop in local interest rates. Interest expense 360 Amount (Rs'm) Financial year ended Interest expense (Rs) 30-Jun Jun Jun-13 Deposit takings 263,197, ,641, ,840,063 Cost Control Non-interest expenses fell from Rs 30.2 million for financial year ended 30 June 2012 to Rs 29.5 million for financial year ended 30 June 2013 due to fall in management fees payable to holding company. Cost Control Amount (Rs'm) Financial year ended Non- interest expenses (Rs) 30-Jun Jun Jun-13 Deposit takings 19,728,972 25,892,327 27,059,103 Unit Trust 1,173,813 1,094,343 1,604,341 Leasing activities 2,257,234 3,217, ,452 Total 23,160,019 30,204,095 29,481,896

17 15 MANAGEMENT DISCUSSION AND ANALYSIS (CONT D) Productivity ratio The productivity ratio stood at 43.44% for the year under review, marginally higher than last year. Productivity 50 Percentage (%) Financial year ended Year Productivity ratio 30-Jun % 30-Jun % 4 30-Jun % Net interest margin The net interest margin of the Company has remained stable at 1.7%, as compared to last year. Net interest margin Percentage (%) Financial year ended Year Net Interest Margin 30-Jun % 30-Jun % 30-Jun %

18 16 MANAGEMENT DISCUSSION AND ANALYSIS (CONT D) Return on equity The return on equity for the financial year ended 30 June 2013 moved up to 8.37%, as compared to 8.08% in Percentage (%) Return on Equity Financial year ended Year Return on Equity 30-Jun % 30-Jun % 30-Jun % Return on average assets The return on average assets increased from 0.95% to 1.00 % for the year ended 30 June Return on average assets Percentage (%) Financial year ended Year Return on Average Assets 30-Jun % 30-Jun % 30-Jun %

19 17 MANAGEMENT DISCUSSION AND ANALYSIS (CONT D) 2. Capital Structure Shareholding Profile Ownership of stated capital at 30 June 2013 is given below: Shareholders Number of Shares Owned % Holding State Insurance Company of Mauritius Ltd 19,800, Development Bank of Mauritius Ltd 200, ,000, June June June 13 (Rs million) (Rs million) (Rs million) Stated capital Accumulated profits Statutory Reserve Investment in available-for-sale (25.8) (29.4) (32.4) Securities Deferred tax (0.3) - - Other intangible assets - (13.1) (11.8) Tier 1 Capital The Company has satisfied the regulatory minimum capital to customer deposit ratio required by the Bank of Mauritius. 30-June June June 13 (Rs million) (Rs million) (Rs million) Portfolio Provision Capital Base Risk Weighted Assets 1, , ,737.1 Capital Adequacy Ratio (%)

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21 19 CORPORATE GOVERNANCE REPORT (CONT D) 2. ULTIMATE HOLDING COMPANY 4 GROUP STRUCTURE Development Bank of Mauritius Ltd (23%) Sugar Insurance Fund Board (20%) SBM Investment Ltd (20%) State Investment Corporation Ltd (12.5%) Port Louis Fund Ltd (12.5%) National Investment Trust Ltd (12%) STATE INSURANCE COMPANY OF MAURITIUS LTD (Insurance, Pension, Investment Management, Trustee Services, Actuarial Services) (99%) SICOM Financial Services Ltd (SWAN) (Deposit taking, Leasing, Investment THE ANGLO-MAURITIUS ASSURANCE SOCIETY Management) LGLO) 70.98%NORITY 30.56% * SICOM General Fund (Unit Trust) SICOM Overseas Diversified Fund (Unit Trust) SICOM Financial Services Ltd manages SICOM Unit Trust which comprises of SICOM General Fund and SICOM Overseas Diversified Fund.

22 20 CORPORATE GOVERNANCE REPORT (CONT D) 3. MAJOR SHAREHOLDER As at 30 June 2013 the following Shareholder held more than 5% of the ordinary share capital of the Company: % Holding State Insurance Company of Mauritius Ltd DIVIDEND POLICY The Company s objective is to provide value to its shareholders through an optimum return on equity. The current policy of dividend distribution is a minimum of 25% of the profit after tax of the Company. During the year under review, the Board has declared and approved a dividend of 75 % of the profit after tax. 5. THE BOARD OF DIRECTORS (a) Composition Directors profile appears on pages 4 and 5. (b) Role of the Board Company Law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the profit of the Company for that period. In preparing those financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Mauritius Companies Act They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Board of Directors of SFSL has the overall responsibility for ensuring that the Company complies with the standards of good corporate governance. The Board of Directors met four times during the year.

23 21 CORPORATE GOVERNANCE REPORT (CONT D) (c) Election of Directors The Directors of the Company are elected every year at the Annual Meeting of Shareholders. (d) Common Directors at 30 June 2013 State Insurance Company of Mauritius Ltd SICOM Financial Services Ltd Mr K Lobine Mrs K G Bhoojedhur- Obeegadoo Mr R Chellapermal Mr D K Dabee Mrs N Ramdewar Mr S K Gujadhur (e) Assessment of Directors For the year under review no evaluation of the Board or its Committees was carried out. The directors forming part of the board, especially those who are members of the Board Committees, have been appointed in the light of their wide range of skills and competence acquired through several years of working experience and professional background. (f) Board Charter The Board of Directors has not adopted a Board Charter and is governed by the provision of the Company s Constitution and the Mauritius Companies Act DIRECTORS S INTEREST IN SHARES The directors do not hold any share in the Company.

24 22 CORPORATE GOVERNANCE REPORT (CONT D) 7. BOARD COMMITTEES In compliance with the principles of good governance, the Board of Directors has set up three Board Committees, namely: Audit Committee Conduct Review Committee Investment Committee Board of Directors The Board of Directors is responsible for setting the overall strategic direction and for supervising the management of the activities of the Company. The Board of Directors of SICOM Financial Services Ltd is currently made up of six Directors, four of which are non-executive Directors. The Board of Directors discharges part of its responsibilities directly and indirectly through the Audit Committee, Conduct Review Committee and Investment Committee. The Board of Directors met four times during the year. Audit Committee The Audit Committee currently consists of three non-executive Directors, namely, Mr R Chellapermal (Chairman), Mr D K Dabee and Mr K Lobine. The Audit Committee s main tasks are to maintain and, where necessary, review the effectiveness of internal controls in the light of the findings of the external and internal auditors and review the financial statements. The Audit Committee also acts as Risk Management Committee in order to review the adequacy of risk management policies and systems, and to monitor their effectiveness. During the year, the Audit Committee met on four occasions.

25 23 CORPORATE GOVERNANCE REPORT (CONT D) Conduct Review Committee The Conduct Review Committee currently consists of Mr R Chellapermal, Mr G Gopee (up to 6 November 2012), Mr S K Gujadhur, Mr D K Dabee and Mr K Lobine. The Conduct Review Committee monitors all related party transaction issues of the Company. Related party transactions are disclosed in note 29 of the financial statements for the financial year ended 30 June During the year, the Conduct Review Committee met three times. Investment Committee The Investment Committee currently consists of Mrs K G Bhoojedhur-Obeegadoo, Mr R Chellapermal, Mr G Gopee (up to 6 November 2012), Mr D K Dabee, Mr S K Gujadhur, Mr K Lobine and Mrs N Ramdewar. The Investment Committee of SICOM Financial Services Ltd issues guidelines, looks into and advises on investment matters. During the year, the Investment Committee met once. Board and Committees Attendance Board Composition Category Board Investment Committee Conduct Review Committee Audit Committee Number of Meetings held during the year Directors: Mr Gujadhur S (Chairman) Independent Nonexecutive 4 of 4 1 of 1 3 of 3 - Mrs Bhoojedhur- Obeegadoo K G Executive 4 of 4 1 of Mr Chellapermal K Mr Dabee Independent Nonexecutive 4 of 4 1 of 1 3 of 3 4 of 4 Independent Nonexecutive 3 of 4-2 of 3 3 of 4 Mr Gopee (up to 6 November 2012) Non-executive 2 of 4 1 of 1 1 of 3 2 of 4 Mr Lobine K Non-executive 4 of 4 1 of 1 2 of 3 3 of 4 Mrs Ramdewar N Executive 4 of 4 1 of The Executive Directors do not have a service contract with the company.

26 24 CORPORATE GOVERNANCE REPORT (CONT D) Directors Remuneration The Directors of the Company during the year are listed under the Corporate Information section. Total remunerations and benefits paid to Directors by the Company for the financial year under review amounted to Rs 1.7 million (2012 : Rs 2.3 million). The Directors fees and remuneration have not been disclosed on an individual basis due to commercial sensitivity. Shareholder Diary Audited Financial Statements for the : Within three months year ended 30 June 2013 from end of June 2013 Annual Meeting : September 2013 Dividend payment : October REMUNERATION POLICY SICOM Group recognises that the achievement of its mission depends on the quality and commitment of its staff. To achieve its mission and strategic objectives the Group has adopted a suitable remuneration policy which will ensure that all employees are remunerated fairly and are treated consistently throughout the organization. At the same time, the Group adopts proactive remuneration strategies aimed specifically to attract, retain, motivate and compensate by providing a competitive salary package and related benefits. The objectives of our Remuneration Policy are to ensure that our remuneration system: Rewards individuals for their contribution in the achievement of the Company s objectives and induces high level of performance; Rewards exceptional performance by individuals through the performance management system; Allows the organization to compete effectively in the Labour Market and to recruit and retain high caliber staff; Achieves fairness and equity in remuneration and reward. The Policy also reflects the Company s objectives for good corporate governance as well as sustained and long-term value creation for shareholders.

27 25 CORPORATE GOVERNANCE REPORT (CONT D) 9. MANAGEMENT PROFILE The profile of the management team appears on page RELATED PARTY TRANSACTIONS In general, parties can be related to a financial institution because of ownership interest, or they can also be related otherwise, as Directors and Senior Officers. The Company has developed policies, prudent rules and limits to credit exposure and also monitors compliance with the regulatory limits, as per the Company s policy on Materiality of Related Party Transactions. The Company adheres to the Guideline on Related Party Transactions issued by the Bank of Mauritius. Exposure of the Company s top six related parties for the financial year ended 30 June 2013 were Rs million, Rs 50.0 million, Rs 37.3 million, Rs 16.0 million, Rs 11.1 million and Rs 3.9 million. These balances represented 109.7%, 12.2%, 9.0%, 3.9%, 2.7% and 0.9% respectively of Tier 1 Capital. Approval was obtained from the Bank of Mauritius for exposures exceeding required limits. 11. CONSTITUTION The Constitution of the Company does not provide any ownership restriction or pre-emption rights except for what is provided by the Mauritius Companies Act SHAREHOLDERS AGREEMENTS/THIRD PARTY MANAGEMENT AGREEMENTS There were no such agreements during the year under review. 13. INTERNAL AUDIT The Internal Audit function has the overall responsibility of providing independent, objective assurance and consulting activity designed to add value and improve the Company s operations. It derives its authority from the Board through the Audit Committee. The Internal Audit function of SICOM Financial Services Ltd is outsourced to the Internal Audit Department of the State Insurance Company of Mauritius Ltd. The Internal Auditor is responsible for providing assurance to the Board and Management on the implementation, operation and effectiveness of internal control and risk management.

28 26 CORPORATE GOVERNANCE REPORT (CONT D) The Internal Auditor has a direct reporting line to the Audit Committee of SICOM Financial Services Ltd and maintains an open communication channel with Management. The Internal Auditor also has unrestricted access to the records, management or employees of SICOM Financial Services Ltd. 14. RISK MANAGEMENT The aim of the Company is that risks taken must be identified, measured, monitored and managed within a comprehensive risk management framework. SICOM Financial Services Ltd has a proactive approach towards risk management throughout its entire business operations, with risk management forming part of its strategic planning process. The Company regularly monitors identified risks and the likelihood and consequence of each risk. Strategies and operational controls are in place to ensure minimization and effective management of risks identified. The Audit Committee has the mandate, inter alia, to provide an oversight over the performance of the external and internal audit functions, to ensure that Management has designed and implemented an effective system of internal control and to report to the Board on matters reviewed by the Committee. The Audit Committee of the Company also cumulates the functions of Risk Management in order to review the adequacy of risk management policies and systems and to monitor their effectiveness. As for the Conduct Review Committee, it has the mandate, inter alia, to require the Management of the Company to establish procedures to comply with the requirements of Guidelines issued by the Bank of Mauritius, to review the practices of the Company to ensure that any transaction with the related parties that may have a material effect on the stability and solvency of the Company are identified in a timely manner and dealt with and to ensure that adequate controls and information systems are in place to implement the Company s policies. 3.1 Credit risk Credit risk may arise if the loans and leases given become non-performing. The Company has internal procedures to ensure that facilities provided are within set risk parameters. Moreover, a close monitoring of loan and lease repayments is made to minimise credit risk. A credit committee and an arrears committee are held on a regular basis.

29 27 CORPORATE GOVERNANCE REPORT (CONT D) 3.2 Credit exposure by industry sector Total finance lease as at 30 June 2013, classified by industry sectors: Name of Sector (Rs) (Rs) (Rs) Retail 52,197,738 91,535, ,954,426 Corporate 18,843,394 32,680,630 45,659,839 Total 71,041, ,216, ,614,265 Percentage of Tier 1 Capital 18.00% 29.60% 45.30% 3.3 Industry wise breakup on the credit quality in the current year is as under: Gross amount of loans (Rs) Specific provision (Rs) Collective Provision (Rs) Total Provision (Rs) Total Provision (Rs) Total Provision (Rs) Agriculture and fishing 837, ,375 9,990 - Manufacturing 814, ,142 3,361 6,218 Transport 17,290, , ,344 94,271 Construction 5,039, ,398 74,505 65,662 Personal 140,954, , ,984 1,801,677 1,140, ,977 Financial & business services 6,282, ,826 30,322 4,722 Global Business Licence 1,683, ,832 19,444 - Holders Others 13,712, ,124 45,841 17,561 Total 186,614, , ,984 2,258,275 1,467, ,411 Details of Business Loans Unsecured loan to holding Company bearing interest rates of 9% (2012 and 2011: range between 10.25% to 12%) p.a with monthly capital repayments 504,563, ,802, ,868,883 Percentage of Tier 1 Capital % % % The above loans were the only credit exposure to a Related Party.

30 28 CORPORATE GOVERNANCE REPORT (CONT D) 3.3 Interest rate risk As the liabilities of the Company are mainly fixed deposits, over the term of the deposits it is aimed as far as possible to match these liabilities with an appropriate fixed interest rate investment with a similar term. Hence, there is a minimisation of risks as both the interest rate and time components of the liabilities are being catered for. 3.4 Liquidity risk Liquidity risk is the risk that the Company does not have sufficient marketable assets that can be realised to meet financial obligations. The management of liquidity risk by the Company is underpinned by three main areas of focus: To have a dedicated allocation to highly marketable assets To have a diverse base of deposits in terms of profile and deposit period To have a tight control on cash flow management 3.5 Operational risk Operational risk could arise, inter alia, from inadequate or failed processes, insufficient internal control systems, human error and fraud. The Quality Assurance framework of the Company, based on ISO 9001:2008 principles, is an essential component of the Company s strategy to minimise risks as it is focused on the continual improvement of its procedures, processes, systems and controls. 15. HEALTH AND SAFETY POLICY Our policy is to provide and maintain safe and healthy working conditions, equipment and systems of work for all our employees, and to provide such information, training and supervision as they need for this purpose. 16. CODE OF CONDUCT The Company is committed to ethical practices in the conduct of its business and its Code of Conduct sets out standards of business behaviour for its employees.

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32 STATEMENT OF MANAGEMENT S RESPONSIBILITY FOR FINANCIAL REPORTING The Financial Statements for the Company s operations presented in this Annual Report have been prepared by Management, who is responsible for their integrity, consistency, objectivity and reliability. International Accounting Standards of the International Accounting Standards Committee as well as the requirements of the Banking Act and the Guidelines issued thereunder, have been applied and Management has exercised its judgement and made best estimates where deemed necessary. The Company has designed and maintained its accounting systems, related internal controls and supporting procedures, to provide reasonable assurance that financial records are complete and accurate and that assets are safeguarded against loss from unauthorised use or disposal. These supporting procedures include careful selection and training of qualified staff, the implementation of organisation and governance structures providing a well-defined division of responsibilities, authorisation levels and accountability for performance, and the communication of the Company s policies, procedures manuals and guidelines of the Bank of Mauritius throughout the Company. The Company s Board of Directors, acting in part through the Audit Committee and Conduct Review Committee, which are comprised of independent Directors who are not officers or employees of the Company, oversees management s responsibility for financial reporting, internal controls, assessment and control of major risk areas, and assessment of significant and related party transactions. The Group s Internal Auditor, who has full and free access to the Audit Committee, conducts a welldesigned program of internal audits in coordination with the Company s external auditors and the Legal and Compliance function outsourced to the holding Company. Pursuant to the provisions of the Banking Act, the Bank of Mauritius makes such examination and inquiry into the operations and affairs of the Company as it deems necessary.

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39 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 33 Notes Interest income ,963, ,384, ,101,729 Interest expense 21 (219,840,063) (258,641,622) (263,197,370) Net interest income 21 61,122,987 64,743,178 54,904,359 Dividend income 22 1,350, , ,114 Other operating income 23 6,183,425 5,904,116 4,192,545 7,533,903 6,513,752 5,166,659 Operating income 68,656,890 71,256,930 60,071,018 Provision for credit losses (790,768) (757,096) 274,235 Impairment loss on non-current asset held for sale - 2,388,793 (2,388,793) Personnel expenses 24 (7,150,731) (6,680,437) (4,789,371) Other expenses 25 (22,331,165) (23,523,658) (16,256,090) Profit before taxation 26 38,384,226 42,684,532 36,910,999 Income tax expense 16(b) (5,546,516) (6,541,595) (5,396,612) Profit for the year 32,837,710 36,142,937 31,514,387 Other comprehensive income Items that may be reclassified subsequently to profit or loss: Increase/(decrease) in fair value of available-for-sale investments 6 2,075,941 (1,218,575) 1,275,043 Total comprehensive income for the year Rs 34,913,651 34,924,362 32,789,430 Transfer for the year to statutory reserve Rs 4,925,656 5,421,441 4,727,158 Earnings per share 27 Rs The notes on pages 36 to 72 form an integral part of these financial statements. Auditors report on pages 31 to 31(b).

40 STATEMENT OF CHANGES IN EQUITY 34 <-----Other reserves----> Notes Stated Retained Statutory Investment capital earnings reserves revaluation Total Rs Rs At 1 July ,000, ,764,847 16,682, , ,952,137 Profit for the year - 31,514, ,514,387 Other comprehensive income for the year ,275,043 1,275,043 Total comprehensive income for the year - 31,514,387-1,275,043 32,789,430 Dividend 18 - (3,151,439) - - (3,151,439) Transfer to statutory reserve 20 - (4,727,158) 4,727, At 30 June 2011 Rs 200,000, ,400,637 21,409,673 1,779, ,590,128 At 1 July ,000, ,400,637 21,409,673 1,779, ,590,128 Profit for the year - 36,142, ,142,937 Other comprehensive income for the year (1,218,575) (1,218,575) Total comprehensive income for the year - 36,142,937 - (1,218,575) 34,924,362 Dividend 18 - (9,035,734) - - (9,035,734) Transfer to statutory reserve 20 - (5,421,441) 5,421, At 30 June 2012 Rs 200,000, ,086,399 26,831, , ,478,756 At 1 July ,000, ,086,399 26,831, , ,478,756 Profit for the year - 32,837, ,837,710 Other comprehensive income for the year ,075,941 2,075,941 Total comprehensive income for the year - 32,837,710-2,075,941 34,913,651 Dividend 18 - (24,628,282) - - (24,628,282) Transfer to statutory reserve 20 - (4,925,656) 4,925, At 30 June 2013 Rs 200,000, ,370,171 31,756,770 2,637, ,764,125 The notes on pages 36 to 72 form an integral part of these financial statements. Auditors report on pages 31 to 31(b).

41 STATEMENT OF CASH FLOWS 35 CASH FLOWS FROM OPERATING ACTIVITIES Profit for the year 32,837,710 36,142,937 31,514,387 Adjustments for: Provision for credit losses 790, ,096 (274,235) Interest income (280,963,050) (323,384,800) (318,101,729) Interest expense 219,840, ,641, ,197,370 Income tax expense 5,546,516 6,541,595 5,396,612 Dividend income (1,350,478) (609,636) (974,114) Movement in retirement benefit obligations 129,000 17,000 (369,894) Depreciation on property, plant and equipment 3,859,725 2,442, ,948 Amortisation of intangible assets 1,373, ,703 - Impairment loss on non-current asset held for sale - (2,388,793) 2,388,793 Profit on disposal on available-for-sale securities - - (858,799) Loss on disposal of repossessed leased assets 331,152 2,843,167 1,735,756 Changes in operating assets and liabilities (17,605,492) (18,713,997) (15,815,905) Increase in term deposits (97,692,197) (559,223,064) (206,988,909) Decrease in loans and advances to holding company 28,934,096 23,760,920 21,121,127 Increase in net investment in finance leases (62,959,617) (53,174,968) (15,569,156) Increase in non-current asset held for sale - - (13,908,595) Increase in other assets (5,273,487) (1,522,101) (244,585) Increase in deposits from customers 25,383, ,344,969 63,313,680 (Decrease)/increase in other liabilities (2,196,558) (2,425,626) 5,950,646 Interest received 178,162, ,531, ,434,468 Dividend received 1,207, , ,411 Interest paid (281,253,176) (378,428,704) (212,872,772) Income tax paid (4,386,203) (5,661,992) (6,964,377) Net cash used in operating activities (237,678,520) (460,606,090) (127,973,967) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investment securities (95,789,416) (4,803,543) (2,819,279) Purchase of property and equipment (1,230,919) (13,575,331) (6,529,865) Purchase of intangible asset - (13,406,328) - Proceeds from sale and maturity of investment securities 284,238, ,889, ,148,549 Disposal of repossessed leased assets 230, Proceeds from sale of non current asset held for sale - 1,650,000 7,679,672 Net cash generated from investing activities 187,448, ,753, ,479,077 CASH FLOWS FROM FINANCING ACTIVITIES Dividend paid (9,035,734) (3,151,439) (3,618,396) Net cash used in financing activities (9,035,734) (3,151,439) (3,618,396) INCREASE IN CASH AND CASH EQUIVALENTS (59,265,689) 19,996,318 35,886,714 CASH AND CASH EQUIVALENTS AT 1 JULY 99,614,434 79,618,116 43,731,402 CASH AND CASH EQUIVALENTS AT 30 JUNE Rs 40,348,745 99,614,434 79,618,116 The notes on pages 36 to 72 form an integral part of these financial statements. Auditors report on pages 31 to 31(b).

42 NOTES TO THE FINANCIAL STATEMENTS INCORPORATION AND ACTIVITIES SICOM Financial Services Ltd is a public company incorporated in Mauritius on 28 th December 1999 and started operations on 26 th April Its registered office and place of business is situated at SICOM Building, Sir Celicourt Antelme Street, Port Louis, Mauritius. The Company is engaged in depository business, investment business and finance and operating lease activities and holds a deposit taking licence as a Non-Bank Financial-Institution. These financial statements will be submitted for consideration and approval at the forthcoming Annual Meeting of Shareholders of the Company. 2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs) Standards, Amendments to published Standards and Interpretations effective in the reporting period Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12), introduces a presumption that investment properties that are measured using the fair value model in accordance with IAS 40 Investment Property are recovered entirely through sale for the purposes of measuring deferred taxes. This presumption is rebutted if the investment property is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale. This amendment is unlikely to have an impact on the financial statements. Amendment to IAS 1, Financial statement presentation regarding other comprehensive income. The main change resulting from these amendments is a requirement for entities to group items presented in other comprehensive income (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). Standards, Amendments to published Standards and Interpretations issued but not yet effective Certain standards, amendments to published standards and interpretations have been issued that are mandatory for accounting periods beginning on or after 1 January 2013 or later periods, but which the Company has not early adopted. At the reporting date of these financial statements, the following were in issue but not yet effective: IFRS 9 Financial Instruments IAS 27 Separate Financial Statements IAS 28 Investments in Associates and Joint Ventures IFRS 10 Consolidated Financial Statements IFRS 11 Joint Arrangements IFRS 12 Disclosure of Interests in Other Entities IFRS 13 Fair Value Measurement IAS 19 Employee Benefits (Revised 2011) IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine Disclosures Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7) IAS 32 Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) Amendment to IFRS 1 (Government Loans) Annual Improvements to IFRSs Cycle Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) IFRIC 21: Levies Recoverable Amount Disclosures for Non- financial Assets (Amendments to IAS 36) Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39) Where relevant, the Company is still evaluating the effect of these Standards, amendments to published Standards and Interpretations issued but not yet effective, on the presentation of its financial statements.

43 NOTES TO THE FINANCIAL STATEMENTS (CONT'D) SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted by the Company are as follows: (a) Basis of preparation The financial statements of SICOM Financial Services Ltd comply with the Companies Act 2001 and have been prepared in accordance with International Financial Reporting Standards (IFRS). Where necessary, comparative figures have been amended to conform with change in presentation in the current year. The financial statements are prepared under the historical cost convention except that: (i) available-for-sale investments and relevant financial assets and liabilities are stated at fair value; and (ii) held-to-maturity securities and relevant financial assets and liabilities are carried at amortised cost. (b) Revenue recognition Revenues are recognised as follows:- - Interest income is recognised on an accrual basis, by reference to the principal outstanding and at the effective interest rate applicable. - Dividends are accounted when the right for payment is established. - Gross earnings on finance lease are accounted for in the year in which they are receivable. - Front-end fee on finance lease is recognised when the fee is actually received. - Management fee is recognised on an accrual basis. (c) Financial instruments Financial assets and liabilities are recognised in the statement of financial position when the Company has become party to the contractual provisions of the financial instruments. Except where stated separately, the carrying amounts of the Company s financial instruments approximate their fair values. These instruments are measured as set out below:- (i) Financial assets Financial assets are classified into the following specified categories: financial assets 'heldto-maturity' investments, 'available-for-sale' (AFS) financial assets and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. (a) Held-to-maturity investments Government bonds and loan stocks with fixed or determinable payments and fixed maturity dates that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortised cost using the effective interest method less impairment, with revenue recognised on an effective yield basis. (b) Available-for-sale (AFS) financial assets Listed shares held by the Company that are traded in an active market are classified as being AFS and are stated at fair value. Gains and losses arising from changes in fair value are recognised in other comprehensive income. Purchases and sale of financial assets are recognised on trade date (or settlement date), the date on which the Company commits to purchase or sell the asset. Investments are initially measured at fair value plus transaction costs for all financial assets. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investment revaluation reserve is reclassified to profit or loss.