Annual Report June 2018 - Sindh Leasing Company Ltd.Notice is hereby given that the fifth Annual...

Annual Report June 2018 SINDH EL ASING

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

prosperity.

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

financial solutions.

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Corporate Information

Board of Directors

- Non-Executive Director- Non-Executive Director

- Executive Director

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

CFO & Company Secretary

Mr. Rehan Anjum

Audit Committee

Registered Office

Mrs.Masooma HussainMr. Muhammad Raja AbbasMr. Muhammad Aftab Alam - Chairman

- Member - Member

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

Banker

Sindh Bank Limited

Syed Ali Murtaza KazmiMr. Muhammad Bilal SheikhMr. Naim FarooquiDr. Noor Alam

Chairman -

Chief Executive-

Auditors

BDO Ebrahim & Co.Chartered Accountants

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

Web: www.sindhleasingltd.com

Bank Islami Pakistan Limited

Mr. Muhammad Bilal Sheikh

Dr. Noor AlamMrs.Masooma Hussain

Mr. Muhammad Aftab Alam

Syed Ali Murtaza Kazmi

Mr. Muhammad Raja Abbas

Mr. Naim Farooqui

Human Resource Committee

- Chairman - Member

-- MemberMember

Member

United Bank Limited

- Non-Executive Director

Branch Offices

Larkana / Naudero BranchRaza Shah Mohalla, VIP Road,Larkana

Hyderabad Branch

Legal Advisor

Muhammad Nadeem Khan ndSuite # 28-A, 2 Floor

Fareed Chamber Abdullah Haroon Road Karachi

Plot No. 11Faraz Villas Housing SchemeTaluka QasimabadHyderabad

Islamabad Branch

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

Lahore Branch

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

- Independent Non-Executive Director

NRSP Microfinance Bank


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Table of Contents

Directors’ Report 05

Statement of Compliance with the Public Sector Companies (Corporate Governance) Rules, 2013 14

19

Notice of Annual General Meeting 04

Auditors’ Report to the Members

Balance Sheet

Profit and Loss Account

Cash Flow Statement

Statement of Changes in Equity

Notes to the Financial Statements

53Form of Proxy

Statement of Comprehensive Income

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

21

23

25

26

27

24

28

4


Notice of Annual General Meeting

Notice is hereby given that the fifth Annual General Meeting of Sindh Leasing Company Limited (“Company”) will be held on October 18, 2018

at 4.00 p.m. at the Registered office of the Company, Third Floor, Imperial Court Building, Dr. Ziauddin Ahmed Road, Karachi, to transact the

following business:

Normal Business:

1. To confirm the minutes of the Fourth Annual General Meeting held on October 24, 2017.

2. To receive, consider and adopt the Audited Accounts of the Company for the year ended June 30, 2018, 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, 2019 and fix their

remuneration.

Special Business:

1. To approve amendment in Clause 3 of Articles of Association and Memorandum of Association Clause 5 during the year.

2. To approve payment of remuneration and provision of certain facilities to the CEO of the Company.

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

By Order of the Board

Rehan Anjum

Company Secretary

Karachi: August 15, 2018


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Director’s Report

On behalf of the Board of Directors of Sindh Leasing Company Limited (SLCL, the Company), it is my pleasure to present the fifth Annual Audited Financial Statements for the year ended June 30, 2018.

Review of Business and Operation

The Company earned a gross revenue of Rs. 280.193 million during the year under review against a gross revenue of Rs. 224.163 million in the corresponding year. Total administrative expenses for the year amounted to Rs 177.874 million against Rs 130.528 million last year. Profit before tax and provision for the current year is Rs 88.198 million as compared to Rs 63.064 million of the corresponding year.

Disbursement in the current year of both leases and loans amounting to Rs 2,448.483 million as compared to Rs 1,338.94 million last year and Rs. 1,800 million as per the budget for the year is an impressive growth. Our lease and loan portfolio grew by 80% despite declining 31 proposals amounting to Rs 938.610 million.

Steady growth in our lease and loan portfolio exhibits sound business acumen. Our customer screening process being tough and accurate will be maintained so as to ensure further growth of unblemished clean business portfolio. A further injection of Rs 1.5 billion equity shows the confidence that our sponsor Government of Sindh has in our company, which we are determined to maintain and enhance as we progress into the ensuing year.

During the year the company has obtained permission to issue certificates of deposit from Securities and Exchange Commission of Pakistan (SECP). Up till June 30, 2018, the Company has raised Rs. 23.9 million through issue of certificate of deposits.

Operating Results

The Company has transferred an amount of Rs. 31.667 million to revenue reserve during the year.

As at June 30, 2018, the value of investments of provident fund and gratuity fund of the Company are Rs. 19.1778 million and Rs. 9.396 million respectively.

Risk management

Principal risks in the current economic and business scenario and regulatory compliance facing the Company are as follows:

Credit Risk

The risk exposure to actual loss (opportunity cost) as a result of the default/failure to perform by a client with which SLCL does business.

Market Risk

The risk exposure due to external forces that could significantly change the fundamentals that affect any borrower’s overall objectives and strategies and may even put the borrower out of business.

Liquidity Risk

Liquidity risk is the exposure to incur loss as a result of the inability to meet cash flow obligations in a timely and cost-effective manner.

Balance SheetAs at June

30, 2018As at June

30, 2017

----------(PKR Million) ---------Paid-up capital 3,500.00 2,000.00Total equity 3,712.091 2,148.760Fixed Assets 23.274 31.530Net investment in nance leases 2,700.274 1,384.840Auto and Working capital loans 689.555 468.560

Prot & Loss

For the year Ended June

30, 2018

For the year Ended June

30, 2017

Revenue –

Net

266.073 193.594Administrative expenses 177.874 130.528Prot before provision & tax 88.198 63.065Prot after tax

63.334 44.755

EPS

0.28 0.26

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Operational Risk

This risk arises due to operations that are inefficient and ineffective in satisfying customers and achieving the quality, cost and time objectives.

Risk management is a continuous on-going process to detect and manage risks. The above risks are managed mainly through risk-adjusted pricing of individual lease / loan transactions, setting of risk limits for individual positions or portfolios, use of guarantees, securitization of risks, buying and selling of assets, diversification, negotiation of price contracts, regular monitoring of the Company’s consolidated credit exposure and exposure limits defined by the regulator and regular risk assessment of each customer for updating its risk rating.

Board of Directors

During the year under review Mr. Anis Khan and Syed Hassan Naqvi submitted their resignations from the Board as Directors of the Company. The Board wishes to place on record its appreciation for their valuable contribution in the Company. The Board has appointed Mr. Muhammad Raja Abbas and Dr. Noor Alam as a representative of Government of Sindh as Directors of Sindh Leasing Company Limited.

Directors' Meeting

Director’s Report

S.No Name of Director

No. ofmeeting(s)

held during theTenor in the

year

Total no. of

meeting(s) attended

1 Mr. Ali Murtaza Kazmi 4 3*2 Syed Hassan Naqvi 4 2 *3 Mr. Anis Khan 4 44 Muhammad Bilal Sheikh 4 45 Mr. Muhammad Aftab Alam 4 46 Mr. M. Naimuddin Farooqui 4 47

Mrs. Masooma Hussain 4 1**

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

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

** Directors who has appointed during the year.

Audit Committee’s Meetings

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

year

Total no. of meeting(s)

attended1 Mr. Muhammad Aftab Alam 4 42 Mr. Anis Khan 4 43

Mrs. Masooma Hussain 4 1*

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

* Member who has appointed during the year.

Pattern of Shareholding

No. of shareholders

Shares held by

Shareholding No. of shares held

Percentage

From To

1 Government of Sindh

1 349,999,993 349,999,993 99.999998

7 Directors 349,999,994 350,000,000 7 0.000002

8 Total 350,000,000 100


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The pattern of shareholding as at June 30, 2018 is as follows:

Corporate and Financial Reporting Framework

This part of the Directors’ report to shareholders is given as required under section 226 & 227 of the Companies Act 2017:

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 Audit Committee has recommended the name of M/S BDO Ebrahim & Co., Chartered Accountants as external Auditors of the Company for the year ending June 30, 2019. The Board of Directors, on the recommendation of the Audit Committee has proposed the name of retiring auditors BDO Ebrahim & Co., Chartered Accountants as external Auditors for the next term. The retiring auditors M/s. BDO Ebrahim & Co., Chartered Accountants, being eligible, offer themselves for re-appointment in the forthcoming Annual General Meeting.

Key Operating and Financial Data

Key operating and financial data of last five years is annexed to the Annual Report.

Internal Control and Compliance

The management has devised internal controls to enhance accuracy and reliability of financial reporting. Cyclical reviews and monitoring of internal controls is given paramount importance to assert nonstop functioning of all processes which lead to accurate results. Moreover our decision to outsource the internal audit function to Grant Thornton Anjum Rahman, Chartered Accountants who report directly to the Audit Committee further supplements our confidence on our systems as they provide unbiased opinions on each testing review.

Credit Rating

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

Dividend

The Company has not declared any dividend for the year ended June 30, 2018.

Challenges

Favorable economic environment has stimulated activity in various sectors, namely the SME and Consumer sector(s). This has resulted in an increase in demand of various products that compliment ones’ lifestyle and status such as the increase in demand of Saloon cars and SUV vehicles. Commercial Banks backed by their excessive liquidity and huge margin for negotiation are always ahead in the race of taking full advantage of such financing opportunities. This challenge of Sindh Leasing Co. Ltd (SLCL) has remained unchanged to date, but our permission to raise deposits through issuance of Certificate of Deposit (COD) would put SLCL in a good enough position to face these challenges with its sound business strategy and approach.

Future Outlook

As per Monetary Policy Statement of July 2018, SBP projects FY 2019 GDP growth to be around 5.5 percent against the annual target of 6.2 percent. Further due to the risking trend of core inflation (ie 5.2 percent in June 2018) SBP’s model-based range for average CPI inflation will range from 6.00 to 7.00 percent. In order to control inflationary pressures, SBP announced a 25 bps increase in the Policy rate in January 2018, 50 bps in May 2018 and 100 bps in July 2018, increasing the Policy rate from 5.75 percent to 7.5 percent. Under

Director’s Report

8


current circumstances of deteriorating economic numbers, further rise(s) in the Policy rate cannot be ruled out.

Corporate Social Responsibility

Our company’s efforts are not only channeled towards the growth of business but also the wellbeing of society. In view of this SLCL is proud to inform that it has contributed an equivalent of one days’ salary of its employees and employer contribution into the construction of the “Daimer Basha & Mohmand Dams.”

Acknowledgements

The Board appreciates the support that our sponsors, i,e the Government of Sindh (GoS) and the confidence that its valued customers have exhibited in the Company. The company is positive this confidence would continue. The guidance and support provided by our regulators the Securities and Exchange Commission of Pakistan cannot go unrecognized. Our staff has showcased dedication and support that is expected of them and this Company could not have achieved the growth as highlighted above without this.

Muhammad Bilal Sheikh

Chief Executive

August 15, 2018

Director’s Report


9

ڈا��ز ر�رٹ

�، �رڈ آف ڈا��ز � �� ھ �� (�) � �٣٠ن �٢٠١٨ ا�م �� وا� �ل � �� ہ (audited) ا�ؤ� � ��

�� ت �س � ر� �ں۔

ور آ�� ہ �رو�را

� � ز� �ر �ل � �� آ�� (revenue) 280.193 � رو� �� ل ا� �ت � � �� آ�� (revenue) �224.163 �۔ �ل �

ز� �� ا�� ا�ا�ت �� ل � 130.528 � رو� � �� 177.874 رو� ر��۔ �� ل � 63.064 � رو� � � ا

اس �ل اس � �� 88.198 � رو� ر�۔

��دہ �ل � � (lease) اور �� ت دو�ں � � � ادا�ں � �� 2,448.483 � رو�ر� � � �� ل اس � �� 1,338.94 رو� � اور �ل �

�� و� � اس � � � � �1,800 رو� �۔�رى � (lease) اور �� ت � �رٹ �� ٨٠ � ا�� ا �و�� ٢١ �� و� � � �� 938.610

� � �د � دى �۔

رر� �ے � �� رى �(lease) اور �� ت � �ازن � �رى �ا� �� ۔�را �ز � �� ل � �� (process) � اور در� � � ��ا

غاور �ف �رو�رى �رٹ �� ۔ �� 1.5 ارب رو� � � �� (equity) � �رے �(sponsor) �� ھ � �رى � � ا�د � دا

ور �� آ� وا� � � ��ں � � � � �� ۔ ر� � ا �، � � � � ��م � � ا� ��ا�� ء� �رى �� ۔ ٣٠ �ن ٢٠١٨ �، � ڈ�زٹ � �� ا�ا ��ر� ا� ا� � آف ��ن (SECP) � ڈ�زٹ � � ن� � ��ل � دورا ء� 23.9 � رو� � ا�� ۔�� ا�ا �

� �

ادا �ہ ��

equity ��

� �� ا�� ت

� �� رى

�د�ر اور ور� � �� ت

ن � اور �ن �ل � دورا

آ�� – ��

ا�� ا�ا�ت

(provision)ز� اور �و و�ن �� ا

ز� �� ا

(EPS)� � آ��

ن� ٣١٫٦٦٧ � رو� � ر� آ�� (revenue) � ذ�� ۔ �ل � دورا

٣٠ �ن ٢٠١٨ � � � �او�� اور �� رى � �ر �� ١٩٫١٧٧٨ رو� اور٩٫٣٩٦ � رو� �۔

3,500.00 2,000.00

3,712.091 2,148.760

23.274 31.530

٣٠ �ن ٣٠٢٠١٨ �ن٢٠١٧رو�

2,700.274 1,384.840

689.555 468.560

٣٠ �ن ٣٠٢٠١٨ �ن٢٠١٧رو�

266.073 193.594

177.874 130.528

88.198 63.065

63.334 44.755

0.28 0.26

10


(Risk management) رو�رى �ے � � ا�� ڈ��

� � در � �دى �رو�رى �ات ��دہ � ، �رو�رى � �� اور ا�� (regulatory)� �درج ذ� �:

�� ن � �ہ

ن� � � � � �د�ہ ��/ � �ر�د� د�� در� �ہ درا� �رو�رى �ن (�رو�رى �� ) � � � �SLCL � �� رو�ر �� ا

�� م � � � � � �۔

�ر� � �ہ

ہ�ض �اہ � �رو�ر �و� ��ں � �� در� �ہ �� ا��ں � �� ض �اہ � �� اور � �ں � �� اور � � � � و

� � �ل دے۔

� � (liquidity) � �ہ

�� و� � � ��وا� �ن �۔ ر�ں ��را اور �� ذ� دا � � � �ہ �ض �اہ � �و� �را

آ�� (operational) � �ہ

�� اور �د، �� اور و� � �� اور � �� آ�� ا �� ۔�� ہ ��

غ�� اور اس � ا�م �ے۔ ��رہ � �ات � ا�م ا� � ا�ادى �/(lease)�ض �ے � � ا� � �رى �� (process)� �� وں � �ا

� � د�، � �ے- �� ہ � � ذر� � �� ، ا�ادى �ز� � �رٹ �� ے � �ود � � � �� ، �� ا� ل � �� ، �ے � �ظ

� �� ، ا�� ت � �� و �و� � ��، �ع، �ں � �ا�ات، ��ات، �ا� � � ا�م �ہ �� ا�زر اورر�� ا�زر � � �ود اور �

�� ے � �ا� � � اور اس �ے � در� �ى � ��۔

�رڈز آف ڈا��ز

ن� � � � � �� وا� ��ت � �ا� �� اس �ت � ےد� �۔۔ �رڈ ا ز�ِ �ر �ل � �ب ا� �ن اور � � �ى � � �رڈ آف ڈا��ز � ا� د

ر�رڈ � �� ۔۔ �رڈ � �ر �ھ �� ڈا��ز � �ب � را� �س اور ڈا� �ر �� ر ��ہ �ھ �ر� � ا�ب �� ۔

ڈا��ز � ا�س

ن �SLCL �رڈ آف ڈا��ز � �ر ا�س ��۔ � ڈا�� ى � � درج ذ� � ز� �ر �ل � دورا


11

�س � �اد

� �ل � � �� ڈا��ز � �م � �ر

4 3* �ب � �� 1

4 2 * � � �ى 2

4 4 �ب ا� �ن 3

4 4 �ب � �ل � 4

4 4 �ب � آ�ب �� 5

4 4 �ب � � ا�� رو� 6

4 1** � �� 7

�س � �اد

� �ل � � �� ڈا��ز � �م � �ر

4 4 �ب � آ�ب �� 1

4 4 �ب ا� �ن 2

4 1 �ز �� 3

ےدى �۔ ن� اس ا�س � ر� د *� ڈا�� ا�س � �� ا

نا�ب �ا۔ ہڈا��ز � � �ل � دورا ** و

آڈٹ � � ا�س

ز� �ر �ل � � � آڈٹ � � �ر ا�س ��۔ � ڈا�� ى � � درج ذ� �؛

نا�ب �ا۔ ہڈا��ز � � �ل � دورا *و

12


� ر� � ر�ن

٣٠ �ن ٢٠١٨ � � ر� � ر�ن درج ذ� �:

� اور �� ر�ر� ڈ�� را ادا

� ��رز � � ڈا�� ر�رٹ � � � ٢٠١٧ � � ا� � � � ٢٢٦ اور ٢٢٧ � � �ورى �

١. �ھ �� ر �دہ �� ت (statements) آ�� ، � � اور ا�� رد و�ل � ��ت � � �� ۔

٢. �ھ �� ں � ��ں (books) � �� ر � ر� �۔

٣. �� د�و�ات � �رى � �� ا�ؤ� ��ں � ا�ل � � �۔ ا�ؤ� �ں � �د �� اور �ظ ا�ازے �۔

� � �۔ ن � �رآ ٤. �� د�و�ات � �رى � � ا��ا� ا�و� �ر ، � ��ن � �� ، ا��

٥. ا�رو� �ا� � �م � ڈ�ا� �ط � اور اس � �� ر � �ذ � � � � اور �ا� � ��

رے � �� رے � �� ص �ت � �۔ ٦. �ھ �� ا� �رى ر� وا� ادا

ن� ��وں � �� د � اور �� ں � ا�ل نا�ب � �ت اور ا ن � ا�ب ، ا ٧. �� اور �رڈ � د� �ا

� �۔

ا�� آڈ�ز�� ۔ �رڈ آف ڈا��ز ،آڈٹ � � �رش � � �م ٣٠ �ن ٢٠١٩ � ا�م �� ل � � � �رش وا�ا� ا� �، �ر�ڈ ا�و ��آڈٹ � �ز � ڈى ا � �ر �و� آڈ�ز � ا� �ت � � ا�ب � � �م �� ۔ �وش �� وا� آڈ�ز �ز � �� وا�ا� ا� �، �ر�ڈ ا�و ��وش �� آڈ�ز �ز � ڈى ا ہا� آپ � �� م ا�س � دو�رہ ا�ب � � � � ر� �۔ �� ہدو�رہ � � � اور و � اس �ت � ا� � � و وا�ا� ا� �، �ر�ڈ ا�و ڈى ا

ا� آ�� اور �� ا�اد و�ر

�� ں � ا� آ�� اور �� ا�اد و�ر اس �� ر�رٹ � �� ۔

ا�رو� �ا� اور �

ہ �� ر�ر� � در� اور � �� ا�رو� �ا� � �� اور اس � �ذ � �۔�ر �ر ا�رو� �ا� � ��ہ اور �ا� � ا�� ا� دى � � �� و�ق � و �� آڈٹ � � �اہ را� ِ�� م �� (processes) � �م �� ر� � در� �� ا �� ۔ ا�رو� آڈٹ � �م �ا� �� ا� ر�ن، �ر�ڈ ا�و

ہ� �� ے � � ��ارى � را� د� �۔ ر�رٹ �� ، � �د �� ا� �م � �رے ا�د � ا�� و

11349,999,993349,999,99399.999998

7349,999,994350,000,00070.000002

8350,000,000100


13

��ٹ ر��

رر� � ر� ��JCR-VISٹ ر� � � (JCR-VIS) � �ھ �� ا�ت ا�(entity) ر�+Aاور � ا�ت ر� ��A-1ا

� آؤٹ � � �

��

� � �٣٠ن ٢٠١٨ � � �� وا� �ل � � � � �� ا�ن � � �۔

در� ��

�ا� �� ل �د �ز، � SMEاور �ر�، � ��ں � �وغ د�۔ اس � � �د ��ت � � � ا�� ں � ر� � اور � �

ور �SUVڑ�ں � � � ا�� ۔�ر� � ا� � � � (liquidity) اور �ت � �� ى ��وا د� � � � �ن (saloon car)�را

��ٹ (margin) � و� � ا� �رو�رى �ا�ں � ��ہ ا�� اس �� ر� � � � ر� � ۔�ھ �� (SLCL)� در� � ور � �SLCL اس � � � � �ز� � �� ء� ذر� ڈ�ز� � ا�� ا ن� ا�ا ء� ا�زت � ا �� ا�ا � و� � ��د �، � � ڈ�زٹ � �

ن�� ر �� ۔ � اور ا�وچ � �د � ا

��

�SBP �� ٢٠١٨ � �� ن � �� ل ٢٠١٩ � � �� اوار (GDP) � � �ا�ازہ �� ٥٫٥ � � � ��GDP �٦٫٢ �ف

�۔ �� دى ا�اط زر (�ن ٢٠١٨ � �٥٫٢) �� ر�ن ، � � �SBP �ڈل � �د � �رف � � ٦ � ٧ � � ر� � ر� �۔ ا�اط زر � � د�ؤ

� �� ، �SBP �� خ � ٢٥ � �ا� � ا�� رى ٢٠١٨ � �، ٥٠ � �ا� � ٢٠١٨ اور ١٠٠ � �ا� �� ٢٠١٨ � ا�� اور �� خ

� ٥٫٧٥ � ��٧٫٥ ا�� د�۔��دہ ا� �� ا�ادو�ر � �ر�ل �، �� ا��(ا��) � ا�ن � �د � � � �۔

رى را� �� ذ� دا ادا

�رى �� ف �رو�ر � �� ے � �ى � � � �۔ SLCLاس � � اس �ت � ا�ع د� �� س �� اس � �ز� �

ا� دن � �اہ � �وى ر� ڈ�� اور � ڈ� � � �وا� � اور اس � آ� � �� ۔

ا�ر �

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

��ن � �� وا� ر�� اور � � �� ا� � � ر� � �۔ �رے ً � � �� اور �� د � � � ��رہ ��

�� اس � �� ۔

� �ل �

� ا��

١٥ ا� ٢٠١٨

14


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

Name of Company: Sindh leasing Company Limited Name of line ministry: Finance Ministry

I. This statement presents the overview of the compliance 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 practices of public sector governance.

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

S. No.

Provision of the RulesRule No.

Y N

Tick the relevant box

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

2(d) √

2.

The Board has at least one-third of its total members as independent directors. At present the Board includes:

Category NamesDate of

appointmentIndependent Directors

1. Mr. Muhammad Aftab Alam

2. Mr. Raja Muhammed Abbas

3. Mr. Ali Murtaza Kazmi

October 24, 2017

April 27, 2018

October 24, 2017

Executive Directors

Mr. Mohammad Bilal Sheikh October 24, 2017

Non-Executive Directors

1. Mr. Asif Jahangir

2. Naim Farooqui

3. Mrs. Masooma Hussain

April 27, 2018

October 24, 2017October 24, 2017

3(2)

√

3.

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

3(5) √*

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

3(7) √

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

4(1) √

6.The chairman has been elected by the Board of directors except where Chairman of the Board has been appointed by the Government.

4(4) √

7.The Board has evaluated the candidates for the position of the chief executive on the basis of the t and proper criteria as well as the guidelines specied by the commission.

5(2) √

8.

(a) The company has prepared a “Code of Conduct” to ensure that professional standards and corporate values are in place.

(b) The Board 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.

5(4) √

(www.sindhleasingltd.com)

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


15

9.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 stakeholders, in the manner prescribed in the Rules.

5(5) √

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

5(5)(b) (ii)

√

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

5(5)(b) (vi)

√

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

5(5)(c)(ii)

√

13.

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

5(5)(c) (iii)

√

14.The Board has developed a vision or mission statement and corporate strategy of the company.

5(6)√

15.The Board has developed signicant policies of the company. A complete record of particulars of signicant policies along with the dates on which they were approved or amended, has been maintained.

5(7) √

16.

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

5(8) N/A

17.The Board has ensured compliance with policy directions requirements received from the Government.

5(11)

18.

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

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

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

6(1)

6(2)

6(3)

√

19.

The Board has monitored and assessed the performance of senior management on annual/half-yearly/quarterly basis* and held them accountable for accomplishing objectives, goals and key performance indicators set for this purpose.

8(2) √

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

9 √

21.The Board has approved the prot and loss account for, and balance sheet as at the end of the rst second and third quarter of the year as well as the nancial year end, and has placed the annual nancial statements on the company’s website.

10 √

22.

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

11 √

23.

(a) The Board has formed the requisite committee, as specied in the Rules.(b) The Committees were provided with written term of reference dening their

duties, authority and composition.

12 √

16


(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 Mohd. Aftab AlamRisk Management Committee

Three Ali Murtaza Kazmi

Human Resources Committee

Four Asif Jahangir

Procurement Committee Three Raja Mohd. AbbasNomination Committee Four Ali Murtaza Kazmi

24.The Board has approved appointment of Chief Financial Ofcer, Company Secretary and Chief Internal Auditor, by whatever name called, with their remuneration and terms and conditions of employment, and as per their prescribed qualications.

13 √

25.The Chief Financial Ofcer and the Company Secretary have requisite qualication prescribed in the Rules.

14

26. The company has adopted International Financial Reporting Standards notied by the Commission under clause sub-section (1) of section 225 of the Act.

16 √

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

17 √

28.The directors, CEO and executives, or their relatives, are not, directly or indirectly, concerned or interested in any contract or arrangement entered into by or on behalf of the company except those disclosed to the company.

18 √

29.

(a) A formal and transparent procedure for xing the remuneration packages of individual directors has been set in place and no director is involved in deciding his own remuneration.

(b) The annual report of the company contains criteria and details of remuneration of each director.

19 √

30. The nancial statements of the company were duly endorsed by the chief executive and chief nancial ofcer, before approval of the board.

20 √

31.

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

Name of member CategoryProfessional background

Mr. Mohammed Aftab Alam

Independent Chartered Accountant

Mrs. Masooma Hussain Non-Executive BankingMr. Raja Muhammad Abbas

Non-Executive Bureaucrat

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

21(1)and

21(2)

√

32.

(a) The chief nancial ofcer, the chief internal auditor, and a representative of the external auditors attended all meetings of the audit committee at which issues relating to accounts and audit were discussed.

(b) The audit committee met the external auditors, at least once a year, without the presence of the chief nancial ofcer, the chief internal auditor and other executives.(c) The audit committee met the chief internal auditor and other members of the internal audit function, at least once a year, without the presence of chief nancial ofcer and the external auditors.

21(3)√


17

33.

(a) The Board has set up an effective internal audit function, which has an audit charter, duly approved by the audit committee.(b) The chief internal auditor has requisite qualication and experience

22 √

prescribed in the Rules.(c) The internal audit reports have been provided to the external auditors for their review.

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

23(4) √

35.The auditors have conrmed that they have observed applicable guidelines issued by IFAC with regard to provision of non-audit services.

23(5) √

√ * Not applicable for Government Nominee Director.

MUHAMMAD BILAL SHEIKH AND MASOOMA HUSSAINCEO & Chairman Board of Directors

18


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

We confirm that all other material requirements envisaged in the Rules have been complied with except for the following, toward which reasonable progress is being made by the Company to seek compliance by the end of June 30, 2018:

S.No Rule/sub-ruleno

Reason for non-compliance Future course of action

1. Rule 6(2) The Chairman was approving the notices of meetings including the agenda verbally.

From now all notices of meetings will be approved by the Chairman in writing before their circulation.

MUHAMMAD BILAL SHEIKH AND MASOOMA HUSSAINCEO & Chairman Board of Directors


19

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

Place: Karachi

Dated: August 15, 2018CHARTERED ACCOUNTANTS

Engagement Partner: Mr. Raheel Shahnawaz

We have reviewed the enclosed Statement of Compliance with the best practices contained in Public SectorCompanies

(Corporate Governance) Rules 2013 (the Rules) for the year ended June 30, 2018 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 respects with the best practices contained in the

Rules as applicable to the Company for the year ended June 30, 2018.

Further, we highlight below instance of non-compliance with the requirements of the Rules reflected in the paragraph 17

where these are stated in the Statement of Compliance.

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

S.No. Reference Clause description

Written notices of meetings, including the agenda, are not approved by the Chairman.Rule 6(2)1

20


27.04

32.71

44.25

44.75

63.33

Financial Highlights

(Rs. in million)

2014 2015 2016 2017 2018

Operational Results

Gross Revenues 50.32 100.62 125.63 224.16

Financial Charges 0.00 0.85 11.09 30.57

Gross Margin 50.32 70.25 114.54 193.59

Prot Before Taxation 39.77 46.38 52.03 56.85

Prot After Taxation 27.04 32.71 44.25 44.75

Balance Sheet

Net Investment in Leases 40.00 444.19 852.04 983.85

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

Total Liabilities 23.93 182.69 413.34 910.55

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

Year 2017-18

Equipment

Vehicles

Prot After TaxationProt Before Taxation

Category-wise Lease Disbursements Rs. 1,338.00 Million

Year 2016-17

Equipment

Machinery

Vehicles

0

500

1000

1500

Rs. in

millio

n

Net Investment in Lease Finance

Total Asset Base

0

500

1000

1500

2000

2500

Rs. in

millio

n

Gross Income vs Financial Cost

Rs. in

millio

n

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Rs. in

millio

n

Machinery

Category-wise Lease Disbursements Rs. 2,448.00 Million

Rs. in

mil

lio

n

0

25

50

75

100

39.77

46.38

52.03

56.85

75.04

YEARS

2014 2015 2016 2017 2018

50.32

100.62

125.63

224.16

280.19

0.00 0.85 11.09

30.57 14.12

0

50

100

150

200

250

300

280.19

14.12

266.07

75.04

63.33

2,700.27

3,500.00

567.22

4,279.31

Rs. in

mil

lio

n

0

25

50

75

100

YEARS

2014 2015 2016 2017 2018

YEARS

2014 2015 2016 2017 2018

Shareholders Equity

1,000.00 1,000.00 1,000.00

2,000.00

3,500.00

YEARS

2014 2015 2016 2017 2018

YEARS

2014 2015 2016 2017 2018

YEARS

2014 2015 2016 2017 2018

40.00

444.19

852.04 983.85

4,279.31

2,700.27

3,059.31

1,242.441,517.35

1,050.96

23%

70%

7%8% 24%

68%

Vehicles

Machinery EquipmentMachinery

Vehicles

Equipment


21

Auditors’ Report to the MembersOpinion

We have audited the annexed financial statements of Sindh Leasing Company Limited (the Company), which comprise the statement of financial position as at June 30,2018, and profit and loss account, the statement of comprehensive income, the statement of cash flows and the statement of changes in equity for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, 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 the audit.

In our opinion and to the best of our information and according to the explanations given to us, the statement of financial position, profit and loss account, statement of comprehensive income, the statement of cash flows and the statement of changes in equity together with the notes forming part thereof conform with the accounting and reporting standards as applicable in Pakistan and give the information required by the Companies Act, 2017 (XIX of 2017), 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, 2018 and of the profit and other comprehensive income, its cash flows and the changes in equity and for the year then ended.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in

Pakistan. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants as adopted by the Institute of Chartered Accountants of Pakistan and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Information Other than the Financial Statements and Auditor’s Report Thereon

Management is responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Board of Directors for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting and reporting standards as applicable in Pakistan and the requirements of Companies Act, 2017 (XIX of 2017) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Board of directors are responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs as applicable in Pakistan will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs as applicable in Pakistan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

22


• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the board of directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Report on Other Legal and Regulatory Requirements

Based on our audit, we further report that in our opinion:

a) proper books of account have been kept by the Company as required by the Companies Act, 2017 (XIX of 2017);

b) the statement of financial position, the profit and loss account and other comprehensive income, the statement of cash flows and the statement of changes in equity together with the notes thereon have been drawn up in conformity with the Companies Act, 2017 (XIX of 2017) and are in agreement with the books of account and returns;

c) investments made, expenditure incurred and guarantees extended during the year were for the purpose of the Company’s business; and

d) in our opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.

The engagement partner on the audit resulting in this independent auditor’s report is Raheel Shahnawaz.

Auditors’ Report to the Members

Date: August 15, 2018

Place:Karachi

CHARTERED ACCOUNTANTS


23

BALANCE SHEETAS AT JUNE 30, 2018

___________ ___________________Chairman Chief Executive

Note

ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 7 23,273,880 31,527,292

Intangible assets 8 8,318 490,583

Net investment in nance leases 9 2,049,986,587 972,844,219

Long term loans and advances 10 34,511,067 16,162,371

Long term deposits 432,600 488,600

2,108,212,452 1,021,513,065

CURRENT ASSETS

Short term investments 11 453,959,611 900,000,000

Accrued markup 10,689,042 10,480,368

Loans and advances 12 647,649,089 444,669,002

Current maturity of non-current assets 13 641,244,567 408,724,581

Prepayments 14 5,522,933 4,840,086

Other receivables 15 - 1,909,700

Cash and bank balances 16 412,035,562 267,170,786

2,171,100,804 2,037,794,523

TOTAL ASSETS 4,279,313,256 3,059,307,588

EQUITY AND LIABILITIES

CAPITAL AND RESERVES

Authorized share capital

3,500,000,000 2,000,000,000

Issued, subscribed and paid-up share capital 17 3,500,000,000 2,000,000,000

Reserves 18 212,091,271 148,757,597

3,712,091,271 2,148,757,597

NON CURRENT LIABILITIES

Long term security deposits against leases 19 424,922,243 278,045,053

Long term loan 20 - 500,000,000

Certicates of deposit 21 11,600,001 -

Deferred taxation 22 - -

436,522,244 778,045,053

CURRENT LIABILITIES

Trade and other payables 23 28,651,130 18,874,523

19 82,829,232 5,221,800

21 12,300,000 -

Short term borrowings 24 - 82,498,269

Markup accrued 25 43,265 21,458,211

Taxation - net 26 6,876,114 4,452,135

130,699,741 132,504,938

CONTINGENCIES AND COMMITMENTS 27

TOTAL EQUITY AND LIABILITIES 4,279,313,256 3,059,307,588

The annexed notes from 1 to 42 form an integral part of these nancial statements.

350,000,000 (2017: 200,000,000) ordinary shares of Rs. 10/- each

Current maturity of security deposits against leases

Current portion of certicates of deposit

2018 2017

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

24


PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2018

___________________Chief Executive

INCOME

Income from nance lease, auto loans and

working capital loans 218,043,583 140,057,430

Return on investments and deposits 28 61,204,260 83,005,628

Other income 945,608 1,100,709

280,193,451 224,163,767

EXPENSES

Finance cost 29 (14,120,926) (30,570,708)

Administrative expenses 30 (177,874,448) (130,528,171)

Prot before provision and taxation 88,198,077 63,064,888

Provision for potential lease losses (10,884,770) (4,004,759)

Provision against working capital loans (2,000,000) (2,285,790)

Provision against auto nance loans (275,948) -

Reversal of provision against auto nance loans - 74,849

Prot before taxation 75,037,359 56,849,188

Taxation 31 (11,703,685) (12,094,236)

Prot for the year 63,333,674 44,754,952

Earnings per share - basic and diluted (Rupee) 32 0.28 0.26


Note

2018 2017

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

___________Chairman


25

STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED JUNE 30, 2018

___________________Chairman Chief Executive

Prot for the year 63,333,674 44,754,952

Other comprehensive income - -

Total comprehensive income for the year 63,333,674 44,754,952


Note

2018 2017

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

___________

26


___________

CASH FLOW STATEMENTFOR THE YEAR ENDED JUNE 30, 2018

___________ ___________________Chairman Chief Executive

CASH FLOW FROM OPERATING ACTIVITIES

Prot before taxation 75,037,359 56,849,188

Adjustment for:

Depreciation 6,559,919 6,929,174

Amortization 482,265 483,587

Property, plant and equipment written off 2,866,664 -

Provision for potential lease losses 10,884,770 4,004,759Provision against working capital loans 2,000,000 2,285,790

Provision against auto nance loans 275,948 -

Reversal of provision against auto nance loans - (74,849)

Gain on disposal of property, plant and equipment (435,842) (540,025)

Finance cost 14,120,926 30,570,708

36,754,650 43,659,144

Operating prot before working capital changes 111,792,009 100,508,332

Movement in working capital

Decrease / (increase) in current assets

Long term loans and advances 3,540,805 652,600

Long term deposits 56,000 (114,000)

Prepayments (682,847) (339,755)

Other receivables 1,909,700 (1,909,700)Accrued markup (208,674) (8,633,749)

Increase in current liabilities

Trade and other payables 9,776,607 8,210,424

14,391,591 (2,134,180)

Cash generated from operations 126,183,600 98,374,152

Finance cost paid (35,535,872) (10,481,812)

Taxes paid (9,279,706) (7,999,821)

Increase in net investment in nance lease (1,315,434,188) (532,797,068)

(Increase) / decrease in auto nance loan (27,278,385) 7,543,137

Increase in loans and advances (204,980,087) (225,771,009)

Increase in security deposit against leases 224,484,622 132,315,153

(1,368,023,616) (637,191,420)

Net cash used in operating activities (1,241,840,016) (538,817,268)

CASH FLOW FROM INVESTING ACTIVITIES

Capital expenditure incurred - own use and intangible assets (1,747,829) (13,254,117)

Proceeds from sale of property, plant and equipment 1,010,500 2,822,066

Short term investments - net 446,040,389 (560,259,597)

Net cash generated from / (used in) investing activities 445,303,060 (570,691,648)

(570,691,648)

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from certicates of deposit 23,900,001 -

Proceeds from issue of shares 1,500,000,000 1,000,000,000

Long term loan (500,000,000) 250,000,000

Short term borrowings (82,498,269) 82,498,269

Net cash generated from nancing activities 941,401,732 1,332,498,269

Net increase in cash and cash equivalents 144,864,776 222,989,353

Cash and cash equivalents at beginning of the year 267,170,786 44,181,433

Cash and cash equivalents at end of the year 412,035,562 267,170,786(0) 0.34


Note

2018 2017

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


27

STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED JUNE 30, 2018


Capital reserve

Revenue

reserve

Note

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

Transaction with owner

Shares issued during the year 1,000,000,000 - - 1,000,000,000

Total comprehensive income for the year

Prot for the year - - 44,754,952 44,754,952

Other comprehensive income - - - -

- - 44,754,952 44,754,952

Transfer to statutory reserve 18.1 - 22,377,476 (22,377,476) -

Balance as at June 30, 2017 2,000,000,000 66,266,811 82,490,786 2,148,757,597

Transaction with owner

Shares issued during the year 1,500,000,000 - - 1,500,000,000

Total comprehensive income for the year

Prot for the year - - 63,333,674 63,333,674

Other comprehensive income - - - -

- - 63,333,674 63,333,674

Transfer to statutory reserve 18.1 - 31,666,837 (31,666,837) -

Balance as at June 30, 2018 3,500,000,000 97,933,648 114,157,623 3,712,091,271


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

Issued,

subscribed and

paid-up share

capital

TotalUn-

appropriated

prot

Statutory

reserve

___________

28


FOR THE YEAR ENDED JUNE 30, 2018

NOTES TO THE FINANCIAL STATEMENTS

1. LEGAL STATUS AND NATURE OF BUSINESS

Sindh Leasing Company Limited (the Company) was incorporated in Pakistan on December 16, 2013 as an unlisted public company under the repealed Companies Ordinance, 1984. The Company was granted license on March 27, 2014 to carry out leasing business as a Non-Banking Finance Company (NBFC) under the Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003.

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 reaffirmed on May 28, 2018. The license of the Company to carry out the business of leasing has been renewed and valid for a period of three years w.e.f January 24, 2017.

2. GEOGRAPHICAL LOCATION AND ADDRESSES OF BUSINESS UNITS

"The registered office of the Company is situated at 3rd Floor, Imperial Court Building, Dr. Ziauddin Ahmad Road, Karachi. The Company presently has five branch offices located as follows:

- Plot # 117-118, Shah Abdul Latif Educational Trust, Block -A, Sindhi Muslim Cooperative Housing Society, Karachi,

- Plot No.11, Faraz Villas Housing Scheme, Taluka Qasimabad, Hyderabad,

- Second Floor, Plot No.S-19 R-30, Shahrah-e-Quaid-e-Azam, Lahore,

- F-11 Markaz, Islamabad, and

- Raza Shah Mohalla, VIP Road, Larkana, Naudero.

3. BASIS OF PREPARATION

3.1. Statement of compliance

These financial statements have been prepared in accordance with the accounting and reporting standards as applicable in Pakistan. The accounting and reporting standards applicable in Pakistan comprise of International Financial Reporting Standards (IFRS Standards) issued by the International Accounting Standards Board (IASB) as notified under the Companies Act, 2017 and provisions of and directives issued under the Companies Act, 2017. Where provisions of and directives issued under the Companies Act, 2017 differ from the IFRS Standards, the provisions of and directives issued under the Companies Act, 2017 have been followed.

The third and fifth schedules to the Companies Act, 2017 became applicable to Company for the first time for the preparation of these financial statements. The Companies Act, 2017 (including its third and fifth schedules) forms an integral part of the statutory financial reporting framework applicable to the Company. Specific additional disclosures and changes to the existing disclosures have been included in these financial statements.

3.2. 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.

3.3. Functional and presentation currency

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

4. NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS TO PUBLISHED APPROVED ACCOUNTING STANDARDS

4.1. Amendments that are effective in current year and are relevant to the Company

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


29

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018

IAS 7

January 01,

2017

IAS 12

January 01,

2017

IFRS 12

January 01,

2017

Statement of Cash Flows - Amendments resulting from the

disclosure initiative

Income Taxes - Amendments regarding the recognition of

deferred tax assets for unrealised losses

Effective date

(annual

periods

beginning onor after

Other than the amendments to standards mentioned above, there are certain annual

improvements made to IFRS that became effective during the year:

Annual Improvements to IFRSs (2014 – 2016) Cycle:

Disclosure of Interests in Other Entities

4.2. Amendments not yet effective

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

March 2018

IFRS 2January 01,

2018

IFRS 4January 01,

2018

IFRS 7

IFRS 9

IFRS 9

January 01,

2018

IFRS 9

January 01,

2019

IFRS 10

Financial Instruments : Disclosures - Additional hedge

accounting disclosures (and consequential amendments)

resulting from the introduction of the hedge accounting

chapter in IFRS 9

Applies when

IFRS 9 is

applied

Financial Instruments - Reissue to incorporate a hedge

accounting chapter and permit the early application of the

requirements for presenting in other comprehensive income

the 'own credit' gains or losses on nancial liabilities

designated under the fair value option without early applying

the other requirements of IFRS 9

January 01,

2018

Conceptual framework for Financial reporting 2018-original

Share-based Payment - Amendments to clarify the

classication and measurement of share-based payment

transactions

Deferred

indenitely

InsuranceContracts - Amendments regarding the interaction

of IFRS 4 and IFRS 9

Consolidated Financial Statements - Amendments regarding

the sale or contribution of assets between an investor and its

associate or joint venture

Financial Instruments - Finalised version, incorporating

requirements for classication and measurement,

impairment, general hedge accounting and derecognition.

Financial Instruments - Amendments regarding prepayment

features with negative compensation and modications of

nancial liabilities

30



IAS 19January 01,

2019

IAS 28

Employee benets - Amendments regarding plan

amendments, curtailments or settlements

Investmentsin Associates and Joint Ventures - Amendments

regarding the sale or contribution of assets between an

investor and its associate or joint venture

Deferred

indenitely

IAS 28

January 01,

2019

IAS 39

IAS 40 January 01,

2018

IFRS 1 January 01,

2018

IAS 28 January 01,

2018

IFRS 3

January 01,

2019

IFRS 11

January 01,

2019

IAS 12 January 01,

2019

IAS 23 January 01,

2019

Investmentsin Associates and Joint Ventures - Amendments

regarding long-term interests in associates and joint ventures

Applies when

IFRS 9 is

applied

Investment Property - Amendments to clarify transfers or

property to, or from, investment property.the annual improvement to IFRSs that are effective form the dates mentioned below aganist respective standard:

Financial Instruments: Recognition

Amendments to permit an entity to elect to apply

the hedge accounting requirements in IAS value

hedge of the interest rate exposure of a

of nancial assets or nancial liabilities 9 is

applied, and to extend the fair value certain

and Measurements-

continue to

39 for a fair

portion of a portfolio

when IFRS

option to

contracts that meet the 'own use' scope exception


First-time Adoption of International Financial Reporting

Standards


Investments in Associates and Joint Ventures

Business Combinations

Joint Arrangements

Income Taxes

Borrowing Costs

4.3. Standards or interpretations not yet effective

The following new standards have been issued by the International Accounting Standards Board (IASB), which have been adopted locally by the Securities and Exchange Commission of Pakistan effective from the dates mentioned below against the respective standard:

IFRS 9 July 01, 2018

IFRS 15 July 01, 2018

IFRS 16 January 1, 2019

Revenue from Contracts with Customers

Leases

Financial Instruments

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 (SECP):

Effective date

(annual

periods

beginning onor after)


31


IFRS 1 First Time Adoption of International Financial Reporting Standards

IFRS 14 Regulatory Deferral Accounts

IFRS 17 Insurance Contracts

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.

5. SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING THE FINANCIAL POSITION AND PERFORMANCE

a) During the year ended June 30, 2018, total issue of 150,000,000 right shares of Rs. 10 each amounting to Rs. 1,500,000,000 to the subscriber of the Company have been allotted by the Board of Directors in their meeting held on January 30, 2018.

b) During the year ended June 30, 2018, the Company has obtained permission to issue certificates of deposit from Securities and Exchange Commission of Pakistan (SECP), vide letter no. SC/NBFC/SLCL/131/2017/39, dated September 27, 2017.

c) During the year ended June 30, 2018, the total lease disbursements made by the company amounted to Rs. 2,448 million. Out of these disbursements, major disbursements, amounting to in aggregate, Rs. 1,770 million, were made to following industries:

- Ceramics

- Food

- Hotel

- Sugar

d) During the year ended June 30, 2018, the Company has disbursed Rs. 500 million against repayment of its long term loan from Government of Sindh.

e) For discussion on the Company's performance, please refer to Director's report.

6. 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.

6.1 Property, plant and equipments

Owned assets

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

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

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

Capital work-in-progress

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

6.2 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.

32



6.3 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".

6.4 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.

6.5 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.

6.6 Financial assets

6.6.1 Classification

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

a) Loans and receivables

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

b) Held-to-maturity

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

c) Financial assets at fair value through profit or loss

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

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

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

d) Available for sale

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

6.6.2 Initial recognition and measurement

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


33


6.6.3 Subsequent measurement

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

a) Loans and receivables

Loans and receivables are carried at amortised cost.

b) Held to maturity

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

c) Financial assets at fair value through profit or loss

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

d) Available for sale

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

6.7 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.

6.8 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.

6.9 Certificates of Deposit

Return on Certificates of Deposit (CODs) issued by the Company is recognised on a time proportionate basis taking into account the relevant CODs issue and final maturity dates.

6.10 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.

6.10.1 Current

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

6.10.2 Deferred

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

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

34



6.11 Employees benefits

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

a) Defined benefit plan (Gratuity Fund)

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

b) Defined contribution plan (Provident Fund)

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

6.12 Revenue recognition

6.12.1 Finance lease

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.

6.12.2 Income on non-performing lease and loan receivables

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

6.12.3 Interest income

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

6.12.4 Return on investment

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

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

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

6.12.5 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 losses 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.

6.13 Offsetting

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

6.14 Repossessed leased assets

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

6.15 Provisions

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


35


6.16 Cash and bank balances

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

6.17 Cash and cash equivalents

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

6.18 Transactions with related parties

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

6.19 Earnings per share

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

6.20 Proposed dividend and transfer between reserves

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

6.21 Significant accounting judgments and critical accounting estimates / assumptions

The preparation of financial statements requires management to make judgments, 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 judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

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

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

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

b) Provision against non performing leases and other loans

Calculating provision against non performing leases and other loans is subject to numerous judgments and estimates as explained in note 6.4 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 6.10 of these financial statements.

36



7. PROPERTY, PLANT AND EQUIPMENT

Year ended June 30, 2018Net carrying value basis

Opening net book value (NBV) 15,620,771 2,896,576 3,095,767 835,294 9,078,884 31,527,292Additions (at cost) 1,525,279 77,050 61,000 84,500 - 1,747,829Disposals (NBV) (refer note 7.2) - - - - (574,658) (574,658)Adjustment (2,866,664) - - - - (2,866,664)Depreciation charge (1,887,174) (417,128) (1,579,113) (614,315) (2,062,189) (6,559,919)

Closing net book value (refer note 7.1) 12,392,212 2,556,498 1,577,654 305,479 6,442,037 23,273,880

Gross carrying value basisCost 20,016,745 4,218,759 7,946,706 3,163,010 10,832,175 46,177,395Accumulated depreciation (7,624,533) (1,662,261) (6,369,052) (2,857,531) (4,390,138) (22,903,515)

Net book value 12,392,212 2,556,498 1,577,654 305,479 6,442,037 23,273,880

Year ended June 30, 2017Net carrying value basis

Opening net book value (NBV) 14,578,317 3,310,813 4,674,539 1,635,776 3,284,945 27,484,390Additions (at cost) 2,930,664 - - 166,620 10,156,833 13,254,117Disposals (NBV) - - - - (2,282,041) (2,282,041)Depreciation charge (1,888,210) (414,237) (1,578,772) (967,102) (2,080,853) (6,929,174)

Closing net book value 15,620,771 2,896,576 3,095,767 835,294 9,078,884 31,527,292

Gross carrying value basisCost 21,358,130 4,141,709 7,885,706 3,078,510 11,406,833 47,870,888Accumulated depreciation (5,737,359) (1,245,133) (4,789,939) (2,243,216) (2,327,949) (16,343,596)

Net book value 15,620,771 2,896,576 3,095,767 835,294 9,078,884 31,527,292

Depreciation rate % per annum 10 10 20 33.33 20

Total

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

Leaseholdimprovements

Furniture and xtures

Electrical equipments

Computer equipments

Vehicles

7.1. The cost of fully depreciated assets which are still in use as at June 30, 2018 is Rs. 2.073 million and written down value is nil (2017: Rs. 0.272 million and written down value is nil).

7.2. The following property, plant and equipment were disposed off during the year:

CostAccumulated

depreciationNet book amount Sale proceeds

Vehicle

Honda City 1,250,000 675,342 574,658 1,010,500 Tender Mr. Syed Pir Ali Shah

2017 4,398,270 2,116,229 2,282,041 2,822,066

Description Method of disposal

Particulars of

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


37


8.1 Net carrying value basis

Opening balance 490,583 974,170

Additions (at cost) - -

490,583 974,170

Amortization charge (482,265) (483,587)

Closing net book value 8,318 490,583

Gross carrying value basis

Cost 1,446,941 1,446,941

Accumulated amortization (1,438,623) (956,358)

Net book value 8,318 490,583

33.33 33.33Amortization rate (% per annum)

9. NET INVESTMENT IN FINANCE LEASES

Lease rentals receivable 2,643,680,220 1,300,897,498

Add: Residual value of leased assets 507,751,475 283,267,353

Gross investment in nance leases 3,151,431,695 1,584,164,851

Less: Unearned nance lease income (451,158,103) (199,325,447)

Net investment in nance leases 2,700,273,592 1,384,839,404

Less: Current maturity of net investment in nance leases (628,396,749) (400,989,699)

2,071,876,843 983,849,705

Provision for potential lease losses 9.1 (21,890,256) (11,005,486)

2,049,986,587 972,844,219

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

Balance at beginning of the year 11,005,486 7,000,727

Provision made during the year 10,884,770 4,004,759

Balance at end of the year 21,890,256 11,005,486

9.2 Details of investment in nance lease

2018 2017 2018 2017

Rupees Rupees Rupees Rupees

Less then one year 908,730,874 462,650,140 628,396,749 400,989,699

One to ve years 2,242,700,821 1,121,514,711 2,071,876,843 983,849,705

3,151,431,695 1,584,164,851 2,700,273,592 1,384,839,404

nance lease

Net investments in Gross investments in

nance lease

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

8. INTANGIBLE ASSETS

Software licenses 8.1 8,318 490,583

Note

2018 2017

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

38



10. LONG TERM LOANS AND ADVANCES

Secured - considered good

Loans to employees 10.1 12,329,779 15,870,584

Auto nance loan 10.2 35,385,851 8,107,466

47,715,630 23,978,050

Loans to employees 3,153,412 3,420,157

Auto nance loan 9,694,406 4,314,725

12,847,818 7,734,882

34,867,812 16,243,168

Provision against doubtful loans 10.3 (356,745) (80,797)

34,511,067 16,162,371

Less: Current portion shown under current assets

Note

2018 2017

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

2018 2017 2018 2017 2018 2017 2018 2017

Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees

Total

Balance at the

beginning of the year

Disbursements made

during the year

Repayments received

during the year

Balance at the end of

the year

Chief Executive Executives Non Executives

-

-

-

-

-

-

-

-

14,895,032

387,000

(3,144,171)

12,137,861

15,517,636

2,832,732

(3,455,336)

14,895,032

975,552

343,820

(1,127,454)

191,918

505,548

912,000

(441,996)

975,552

15,870,584

730,820

(4,271,625)

12,329,779

16,023,184

3,744,732

(3,897,332)

15,870,584

10.1 Loans to employees

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.

10.2 This represents vehicle financing facility provided to customers on markup basis. The mark-up on these finances ranges from 9.16% to 12.45% (2017: 9.16% to 12.45%) per annum. These finances are repayable within a period of 3 to 5 years (2017: 3 to 5 years) and are secured against first exclusive charge by way of hypothecation of the motor vehicles and personal guarantee of the customers.

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

Balance at beginning of the year 80,797 155,646

Reversal of provision - (74,849)

Provision made during the year 275,948 -

Balance at end of the year 356,745 80,797

Note

2018 2017

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

11. SHORT TERM INVESTMENTS

Held to maturity

11.1 3,959,611 -

Term deposit receipts

NRSP Micronance Bank Limited 450,000,000 -

Sindh Bank Limited - 900,000,000

11.2 450,000,000 900,000,000

453,959,611 900,000,000

Government Securities - Market

Treasury Bills

10.4 Chief Executive Officer and Directors have not taken any loans and advances from the Company.


39


11.1

Market Treasury Bills 11.1.1 3,959,611 -

Government SecuritiesNote

2018 2017

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

11.1.1 These carry interest rate of 6.6% per annum and have maturity dates ranging from August 16, 2018 to August 30, 2018. The market value of investment in Market Treasury Bills as at June 30, 2018 amounted to Rs. 3.958 million.

11.1.2 As per the requirements of Regulations14(4)(i) of the NBFC Regulations, the Company is required to invest at least 15% of its outstanding funds raised through issue of Certificates of Investments in the Government Securities. As at June 30, 2018, the Company had 16.56% of its funds raised through Certificates of Investments invested in Market Treasury Bills.

11.2 Term deposit receipts

NRSP Micronance Bank Limited 11.2.1 450,000,000 -

Sindh Bank Limited - 900,000,000

450,000,000 900,000,000

Note

2018 2017

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

11.2.1 This represents investment made by the Company in Term Deposit Receipts for a period of one year and having a maturity date of March 21, 2019. This investment carries mark-up at the rate of 8.50% (2017: 7.00%) per annum.

12. LOANS AND ADVANCES

Secured - considered good

Working capital loan 12.1 654,149,089 449,169,002

Less: Provision against doubtful loans 12.2 (6,500,000) (4,500,000)

647,649,089 444,669,002

Note

2018 2017

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

12.1 This represents working capital loan facility provided to customers on markup basis. The mark-up on these finances ranges from 9.04% to 10.30% (2017: 9.05% to 9.50%) 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.

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

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

Provision made during the year 2,000,000 2,285,790

Balance at end of the year 6,500,000 4,500,000

13. CURRENT MATURITY OF

NON-CURRENT ASSETS

Net investment in nance leases 9 628,396,749 400,989,699

Long term loans and advances 10 12,847,818 7,734,882

641,244,567 408,724,581

14. PREPAYMENTS

851,526 701,992

3,763,955 3,206,819

907,452 931,275

5,522,933 4,840,086

15. OTHER RECEIVABLES

Other receivables 15.1 1,909,700

1,909,700

Prepaid insurance

Prepaid rent

Prepaid membership fee

Note

2018 2017

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

15.1 This amount represents front end fee receivable from customers.

40



16. CASH AND BANK BALANCES

Cash and other equivalent

Cash in hand 30,911 34,197

Cash at bank

Current account 1,111,016 111,016

Saving account 16.1 410,893,635 267,025,573

412,004,651 267,136,589

412,035,562 267,170,786

Note

2018 2017

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

16.1 This represents daily product account (saving account) maintained with several Banks carrying mark-up at the rate of 5.00% to 9.15% (2017: 4.00% to 9.15%) per annum receivable on monthly basis.

17.

2018 2017

350,000,000 200,000,000

3,500,000,000 2,000,000,000

ISSUED, SUBSCRIBED AND PAID-UP

SHARE CAPITAL

(Number of shares)

Ordinary shares of Rs. 10

each fully paid in cash

17.1 The Government of Sindh, held 349,999,993 shares as at June 30, 2018. The remaining shares are held by the Directors of the Sindh Leasing Company Limited in nominee capacity.

17.2 During the year, the Company has increased authorised share capital and issued, subscribed and paid-up share capital from Rs. 2,000 million to Rs. 3,500 million by passing special resolution in the meeting of Board of Directors of the Company held on January 30, 2018.

18. RESERVES

Capital reserve

18.1 97,933,648 66,266,811

Revenue reserve

114,157,623 82,490,786

212,091,271 148,757,597

Statutory reserve

Un-appropriated prot

Note

2018 2017

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

18.1 This represents reserve created in compliance with Non-Banking Finance Companies and Notified Entities Regulation, 2008 (NBFC Regulations). In accordance with NBFC Regulations, the Company is required to transfer atleast 20% of its profit after tax to a statutory reserve. In order to comply with this requirement, the Company has transferred an amount of Rs. 31.666 million, representing 50% of profit after tax, (2017: Rs. 22.377 million) to the statutory reserve.

19.

Lease deposits 19.1 507,751,475 283,266,853

(82,829,232) (5,221,800)

424,922,243 278,045,053

LONG TERM SECURITY DEPOSITS AGAINST

LEASES

Less: Current maturity of security deposits

against leases

Note

2018 2017

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

20.

Unsecured

Loan from Government of Sindh 20.1 - 500,000,000

LONG TERM LOAN Note

2018 2017

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

19.1 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.


41


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

21. CERTIFICATES OF DEPOSIT

(Unsecured)

Certicates of deposit 23,900,001 -

Less: Current portion shown under current liability (12,300,000) -

21.1 11,600,001 -

Note

2018 2017

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

21.1. These represent certificates of deposit issued by the Company for periods ranging from 3 months to 3 years and carry mark-up rates ranging from 6.0% to 8.5% per annum.

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

Tax effect of:

1,513,294 5,094,857

169,468,127 77,415,545

(160,418,680) (84,104,748)

(10,562,741) 1,594,346

- -

Difference in net book value of net investment

in nance lease

Difference between accounting book value and

tax base of property, plant and equipment

Carry forward tax losses

Others

Note

June 2018 June 2017

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

23. TRADE AND OTHER PAYABLES

Payable to vendors 753,550 613,696

Withholding tax payable 298,040 1,113,026

Advance from customers 13,210,578 15,504,829

Accrued expenses 10,775,395 -

Gratuity payable 23.1 2,000,000 35,921

Others 1,613,567 1,607,051

28,651,130 18,874,523

23.1 Movement of provision for gratuity payable is as follows:

Balance as at July 01, 2017 35,921 1,903,741

Net charge for the year 6,895,682 3,806,680

6,931,603 5,710,421

Payments made during the year (4,931,603) (5,674,500)

Balance as at June 30, 2018 2,000,000 35,921

23.2 During the year ended June 30, 2017, the Company had created a separate fund for gratuity for all of it's permanent employees. The fund is maintained by the Trustees and all decisions regarding investments and distribution of income etc. are made by the Trustees independent of the Company. The fund is approved and registered by the Commissioner of Income Tax in accordance with sub-rule (1) of Rule (9) of Part-III of the Sixth Schedule of the Income Tax Ordinance, 2001.

Deferred tax asset arising due to timing difference calculated at applicable tax rates as at balance sheet date amounted to Rs. 11.110 million (2017: Rs. 23.427 million) debit. Deferred tax asset has not been recognized in these financial statements in accordance with the stated accounting policy of the Company.

Note

2018 2017

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

42



24. SHORT TERM BORROWINGS

Secured

From banking company 24.1 - 82,498,269

Note

2018 2017

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

24.1 This facility is running finance facility with Sindh Bank Limited that carries a markup at three months KIBOR plus 1.00% per annum. Total sanctioned limit is Rs. 200.00 million. This facility is secured against 1st charge over current assets of the Company with 25% margin. Principal amount of this facility has been settled during the year ended June 30, 2018.

25. MARKUP ACCRUED

Markup accrued on:

Long term loan - 19,970,478

Short term borrowings - 1,487,733

Certicate of deposit 43,265 -

43,265 21,458,211

26. TAXATION - NET

Provision for taxation 57,722,056 46,199,982

Less: Advance income tax (50,845,942) (41,747,847)

6,876,114 4,452,135

Note

2018 2017

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

Tax assessment/

Years Tax provision tax return

2017 11,429,921 10,377,255

2016 11,306,103 11,970,418

2015 10,168,372 12,757,346

26.1. As at June 30, 2018, as per the treatments adopted in tax returns filed that are based on the applicable tax laws and decisions of the appellate authorities on similar matters, the provision in the accounts for income tax is sufficient as there are strong grounds that the said treatments are likely to be accepted by the tax authorities. A comparison of provision on account of income taxes with last tax assessment is as follows:

28. RETURN ON INVESTMENTS AND DEPOSITS

From nancial assets

Interest / markup on:

Term deposit receipts 21,217,808 61,474,933

PLS accounts 39,977,929 17,534,621

Fund placements - 489,726

Treasury bills 8,523 -

Capital gain on fund placements - 3,506,348

61,204,260 83,005,628

29. FINANCE COST

Mark up on short term borrowings 3,547,826 2,866,929

Mark up on long term loan 10,397,036 27,501,710

Bank charges 176,064 202,069

14,120,926 30,570,708

Note

2018 2017

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

27. CONTINGENCIES AND COMMITMENTS

27.1 Contingencies

A letter of guarantee issued on behalf of a client amounting to Rs. 177.483 million (2017: Rs. 224.85 million).

27.2 Commitments

Finance lease contracts committed but not executed at the balance sheet date amounted to Rs. 419.42 million (2017: Rs. 767.72 million).


43


30. ADMINISTRATIVE EXPENSES

Salaries and benets 30.1 41,139,103 27,330,102

Directors' remuneration 34 99,720,868 67,611,193

Rent, rates and taxes 5,838,740 5,202,294

Communication and utility expenses 2,276,624 2,238,141

Travelling and conveyance 5,792,976 5,362,742

Repair and maintenance 1,343,024 1,045,726

Insurance expense 30.2 2,043,850 2,565,715

Auditors' remuneration 30.3 231,000 273,291

Advertising expense 234,618 2,480,865

Depreciation 6,559,919 6,929,174

Amortization 482,265 483,587

Legal and professional charges 1,711,387 1,736,135

Fees and subscription 7,453,543 4,971,218

Printing and stationary 474,730 596,438

Others 2,571,801 1,701,550

177,874,448 130,528,171

Note

2018 2017

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

30.1 This amount includes Rs. 19.498 million (2017: Rs. 8.867 million) in respect of employees’ retirement benefits.

30.2 The Company has obtained insurance coverage from Sindh Insurance Company Limited rated "A+" by Pakistan Credit Rating Agency (an agency registered with the Commission) against any losses that may be incurred as a result of employee's fraud or gross negligence. The sum insured of the insurance policy is Rs. 3.850 million (2017: Rs. 3.850 million).

30.3 Auditors' remuneration

Audit fee 179,000 170,000

Out of pocket expenses 25,000 25,000

Other Services 27,000 78,291

231,000 273,29131. TAXATION

Current 31.1 12,756,351 11,429,921

Prior (1,052,666) 664,315

Deferred -

31.2 11,703,685 12,094,236

31.1 The income tax for the year ended June 30, 2018 has been charged at the rate applicable as per the provision of Income Tax Ordinance, 2001 (the Ordinance).

31.2

Accounting prot for the current year 75,037,359 56,849,188

Tax on income at 30% (2017: 31% ) 22,511,208 17,054,756

- -

Tax effect of lease income and rentals - -

(9,754,857) (5,624,835)

Effect of nal tax under presumptive tax regime - -

Tax effect of tax losses - -

Effect of deferred tax - -

Effect of prior year adjustment (1,052,666) 664,315

11,703,685 12,094,236

32. EARNINGS PER SHARE - BASIC AND DILUTED

Prot for the year - Rupees 63,333,674 44,754,952

Weighted average number of ordinary shares 226,712,329 173,424,658

Earnings per share - basic and diluted - Rupee 0.28 0.26

Relationship between tax expense and accounting prot

Tax effect of difference of accounting and tax

base of owned assets

Tax effect of expenses that are not deductible

determining taxable prot

Note

2018 2017

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

Note

2018 2017

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

44



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

33 RECONCILIATION OF MOVEMENT OF LIABILITIES TO CASH FLOWS ARISING FROM FINANCING ACTIVITIES

Long term

loan

Certicates of

deposit

Balance as at July 1, 2017 500,000,000 - 500,000,000

Repayment of long term loan (500,000,000) - (500,000,000)

Proceeds from certicates of deposit - 23,900,001 23,900,001

Balance as at June 30, 2018 - 23,900,001 23,900,001

Description

Liabilities

Total

Chief

Executive Directors Executives Total

Fee - 1,350,000 - 1,350,000

Managerial remuneration 85,771,094 - 15,656,388 101,427,482

Perquisites and allowances 900,000 - 1,877,412 2,777,412

Retirement benet 11,699,774 - 3,217,769 14,917,543

98,370,868 1,350,000 20,751,569 120,472,437

Number of persons 1 6 6 13

Chief

Executive Directors Executives Total

Fee - 750,000 - 750,000

Managerial remuneration 33,377,386 2,125,000 7,344,276 42,846,662

Perquisites and allowances 21,695,316 1,381,250 6,617,412 29,693,978

Retirement benets 8,069,741 212,500 1,897,898 10,180,139

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

Number of persons 1 6 6 13

Rupees

Rupees

2017

2018

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

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

The remuneration of Chief Executive has been approved on eighteenth Board meeting of the Company held on August 16, 2017.

The current and corresponding years figures includes remuneration of company's executives whose basic salary exceeds twelve hundred thousand rupees in a financial year.

34. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES

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


45


35. 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.

Companies

Sindh Insurance Company Limited

Sindh Leasing Employees Gratuity Fund

Sindh Leasing Employees Provident Fund

Sindh Bank Limited

Sindh Microfinance Bank Limited

Sindh Modaraba Management Limited

Sindh Engro Coal Mining Limited

Arif Habib Limited

Pioneer Cement Limited

Haleeb Foods Limited

Key Executives

Mr. Muhammad Bilal Sheikh CEO

Mr. Rehan Anjum CFO

Mr. Husnain Raza VP/ Head of Credit and Administration

Mr. Farrukh Husain VP/ Head of Information Technology

Mr. Sumair Ahsanullah Admin Incharge

Key Executives

Mr. Salman Hameed Ghazi VP/ Branch Manager Lahore

Mr. Amer Lodhi Head of liability

Ms. Sanam Nizar Ali Manager Compliance

Board of Directors

Mr. Muhammad Bilal Sheikh

Mr. Muhammad Aftab Alam

Mrs. Masooma Hussain

Mr. Naim Farooqui

Mr. Asif Jahangir

Mr. Ali Murtaza Kazmi

Mr. Raja Abbas

46



The details of significant related party transactions during the year and balances as at June 30, 2018 are as follows:

2018 2017

Nature of

Relation

Basis of

Relation

Transactions during the year

Prot on bank account and TDR 25,368,934 59,305,120

Sindh Bank Limited

Insurance services

3,934,261 1,356,677

Mark-up accrued

Government of Sindh

Other related

Wholly owned

subsidiary of

Government of

Sindh

30,078,425 27,501,710

Sindh Bank Limited Associated

Company

Common

Directorship 3,534,957 2,866,929

Long term loan

Government of SindhOther related

Wholly owned

subsidiary of

Government of

Sindh

500,000,000 250,000,000

Receipt of funds

Government of SindhOther related

Wholly owned

subsidiary of

Government of

Sindh

1,500,000,000 1,000,000,000

Sindh Bank Limited Associated

Company

Common

Directorship 12,594,423 82,498,269

Redemption of term deposit

Rent charges

Sindh Bank Limited 1,980,000 1,555,165

Salary to seconded staff

4,543,536 -

499,596 -

Others

Other related 1,027,834 -

Remuneration paid Chief Executive Ofcer Directorship 983,370,868 63,142,443

Remuneration paid Directors Directorship - 3,718,750

Remuneration paid Key Management Personnel Employees 20,751,569 15,859,586

Directors' meeting fees Director Directorship 1,350,000 750,000

Sindh Insurance

Company Limited

Sindh Bank Limited

Sindh Bank Limited

Sindh Modaraba

Management Limited

Sindh Nooriabad Power

Company

Common

Directorship

Associated

Company

Associated

Company

Common

Directorship

Associated

Company

Common

Directorship

Common

Directorship

Common

Directorship

Nature of transaction (Rupees)

Associated

Company

Common

Directorship

Associated

Company

Common

Directorship

Associated

Company

900,000,000 -


47


35.1 Year end balances Name of related parties

Bank balances Sindh Bank Limited 127,721,100 80,440,933

Rent payable Sindh Bank Limited 1,126,061 -

Prepaid insurance Sindh Insurance Company Limited 780,000 -

Lessee Sindh Nooriabad Power Company 796,526 2,225,132

Term Deposit Receipt Sindh Bank Limited - 900,000,000

Long term loan Government of Sindh - 500,000,000

Markup accrued on bank and

Term Deposit Receipt Sindh Bank Limited - 11,873,828

Markup accrued Sindh Bank Limited - 19,970,478

Short term borrowing Sindh Bank Limited - 82,498,269

35.2 The details of compensation paid to key management personnel are shown under the heading of "Remuneration of Chief Executive, Directors and Executive (note 34)". There are no transactions with key management personnel other than under their terms of employment.

35.3 All transactions with related parties have been carried out on commercial terms and conditions.

36. FINANCIAL RISK MANAGEMENT

36.1 Financial risk factors

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

- Credit risk

- Liquidity risk

- Market risk

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

36.2 Credit risk

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

36.2.1 Exposure to credit risk

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

Net investment in nance leases 2,678,383,336 1,373,833,918

Long term loans and advances 47,358,885 23,897,253

Long term deposits 432,600 488,600

Short term investments 453,959,611 900,000,000

Accrued markup 10,689,042 10,480,368

Loans and advances 647,649,089 444,669,002

Cash at bank 412,004,651 267,136,589

4,250,477,214 3,020,505,730

Note

2018 2017

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

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

Past due but not impaired:

up to 29 days

30 to 89 days

48



Past due and impaired

90 days to 1 year - -

1 year to 2 years - -

2 years to 3 years - -

more than 3 years - -

Impaired but not past due 10,884,770 4,004,759

Neither past due nor impaired 2,689,388,822 1,380,834,645

Less: General provision (21,890,256) (11,005,486)

Total amount 2,678,383,336 1,373,833,918

Note ---------------------Rupees---------------------

2018 2017

36.2.2 Concentration of credit risk

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

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

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

Percentage Gross amount2018 2018

% Rupees Sector

Health & pharmaceuticals 0.33% 8,185,000Individuals 1.51% 36,965,400Construction 17.86% 437,389,784Sugar 41.84% 1,024,398,552Transport 0.73% 17,982,000Textile 6.05% 148,044,375Service 9.80% 239,895,570Food 15.57% 381,113,825Miscellaneous 6.31% 154,508,826

100% 2,448,483,332

Financial assets2018

Percentage Gross amount2017 2017

% Rupees Sector

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

100% 1,100,595,903

Financial assets2017


49


36.3 Liquidity risk

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

Certicates of deposit 23,900,001 200,000 12,100,000 11,600,001

Trade and other payables 13,142,512 - 13,142,512 - -

43,265 - 43,265 - -

June 30, 2018 37,085,778 200,000 25,285,777 11,600,001 -

June 30, 2017 606,177,227 82,498,269 23,678,958 500,000,000 -

Financial liabilities Total

Over three

months to

one year

Up to three

months

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

June 30, 2018

Over one year

to ve years

Over ve

years

Markup accrued

36.4 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.

36.4.1 Interest rate risk

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

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

2018 2017

Fixed rate instruments

Financial assets

3,959,611 -

Term deposit receipts 8.15 7.15 450,000,000 900,000,000

Bank balances 5 to 9.15 4 to 9.15 410,893,635 267,025,573

Loans to employees 2 to 5 5 12,329,779 15,870,584 877,183,025 1,182,896,157

Variable rate instruments

Financial assets

8.21 to 13.03 9.15 to 16.91 2,700,273,592 1,384,839,404

9.49 to 12.06 9.15 to 16.91 35,385,851 8,107,466

9.21 to 9.67 9.05 to 9.50 647,649,089 444,669,002 3,383,308,532 1,837,615,872

Financial liabilities

Short term running nance - KIBOR + 1.00 - 82,498,269

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

Certicates of deposit 6.2 to 8.5 - 23,900,001 -

23,900,001 582,498,269

Auto nance loan

Effective rate

(In percent)

Carrying amount

Loans and advances

Government Securities -

Market Treasury Bills

Net investment in nance lease

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

2018 2017

50



36.4.2 Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the year end, profit would have increased / (decreased) by Rs. 33.594 million (2017: Rs. 12.551 million). The analysis assumes that all other variables remain constant.

36.4.3 Foreign exchange risk

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

36.4.4 Other price risk

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

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

A 10% increase / decrease in redemption prices at year end would have increased / decreased the Company’s profit in case of investments classified as ‘at fair value through profit and loss’ by Rs. Nil (2017: Rs. Nil).

36.5 Fair value of financial instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Underlying the definition of fair value is the presumption that the Company is a going concern and there is no intention or requirement to curtail materially the scale of its operations or to undertake a transaction on adverse terms.

A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis.

IFRS 13 'Fair Value Measurement' requires the Company to classify fair value measurements and fair value hierarchy that reflects the significance of the inputs used in making the measurements of fair value hierarchy has the following levels:

- Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities

- Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset either directly that is, derived from prices.

- Level 3: Inputs for the asset or liability that are not based on observable market data ( that is unadjusted) inputs.

Transfer between levels of the fair value hierarchy are recognised at the end of the reporting period during which the changes have occurred.

As of June 30, 2018, none of the financial instruments of the Company are carried at fair value.

The carrying values of all other financial assets and liabilities reflected in the financial statements approximate their fair values.


51


36.6 Financial instruments by category

Loans and receivables

2,678,383,336 1,373,833,918

47,358,885 23,897,253

432,600 488,600

453,959,611 900,000,000

10,689,042 10,480,368

Loans and advances 647,649,089 444,669,002

412,035,562 267,170,786

4,250,508,125 3,020,539,927 Financial liabilities

- 500,000,000

13,142,512 2,220,747

43,265 21,458,211

- 82,498,269

23,900,001 -

37,085,778 606,177,227

Markup accrued

Short-term borrowings

Certicates of deposit

Net investment in nance leases

Long term loans and advances

Trade and other payables

Long term loan

Long term deposits

Short term investments

Cash and bank balances

Accrued markup

June 2018 June 2017

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

37. 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.

38. DEFINED CONTRIBUTION PLAN

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

38.1 The Trustees have intimated that the size of the Fund at year end was Rs. 19.556 million (2017: Rs. 8.902 million).

38.2 As intimated by the Trustees, the cost of the investments made at year end was Rs.19.177 million (2017: Rs. 8.902 million) which is equal to 100% of the total fund size. The fair value of the investments was Rs. 19.177 million (2017: Rs. 8.902 million) at that date. The category wise break up of investment as per section 218 of the Companies Act, 2017 is given below:

Rupees Percentage Rupees Percentage

Term Deposit Receipt 19,177,856 100% 6,639,006 75%

19,177,856 100% 6,639,006 75%

2018 2017

39. NUMBER OF EMPLOYEES

The total number of employees as at year end were 20 (2017: 21) and the average number of employees during the year was 20 (2017: 21).

40. CORRESPONDING FIGURES

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

41. DATE OF AUTHORIZATION FOR ISSUE

These financial statements were authorized for issue by the Board of directors on August 15, 2018

42. GENERAL

Figures have been rounded off to the nearest rupee unless otherwise stated.


___________


53

I/We __________________________________________________________________________________________________________

of ____________________________________________________________________________________________________________

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

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

th as my/our Proxy in my/our absence to attend and vote for me/us and on my/our behalf at the 5 Annual General Meeting of the

company to be held on October 18, 2018, at its registered ofce in Karachi.

Signed this__________________________________ day of __________________________________, 2017

ordinary shares hereby appoint _____________________________________________________________________________________

of ______________________________________________ or failing him/her _______________________________________________

in the presence of ______________________________________________________________________________________________

Form of Proxy

Folio No.

Signatureon Rs. 5/-Revenue Stamp

WITNESSES:

1. Signature:

2. Signature:

Note:

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

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

not be treated as valid.

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

Name:

Address:

CNIC No:

Passport No:

Name:

Address:

CNIC No:

Passport No:


55

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