FINLEASE COMPANYLIMITED ANNUAL REPORT Report-June 2017_tcm18-36355.pdf2009. Prior to joining the...

FINLEASE COMPANY LIMITED

ANNUAL REPORT - YEAR ENDED JTJNE 30, 2017

FINLEASE COMPANYLIMITED

YEAR ENDED JUNE 30, 2017

CONTENTS PAGES

Introduction and Statutory Disclosures 2

Secretary’s certificate 3

Corporate governance report 4 — 13

Statement of compliance 14

Management discussion and analysis document 15 — 26

Statement of Management’s Responsibility for Financial Reporting 27

Independent auditor’s report 28 — 32

Statement of fmancial position 33

Statement of profit or loss and other comprehensive income 34

35Statement of changes in equity

36Statement of cash flows

Notes to the financial statements 37 — 78


INTRODUCTION AND STATUTORY DISCLOSURES - YEAR ENDED JUNE 30, 2017

Dear Shareholder

The Board of Directors is pleased to present the Annual Report of Finlease Company Limited (the“Company”) for the year ended June 30, 2017.

The fmancial statements on pages 33 to 78 have been prepared in accordance with InternationalFinancial Reporting Standards and in compliance with the requirements of the Mauritian CompaniesAct 2001, the Mauritian Banking Act 2004 and Guidelines and Guidance Notes issued by the Bank ofMauritius, in so far as the operations of the Company are concerned.

The shareholder agrees that in conformity with Section 221(4) of The Companies Act 2001 (“Act”),the Annual Report of the Company need not comply with the paragraphs (a), (d) and (e) of Section221(1) of the Act.

This report was approved by the Board of Directors on 26 SEP 2017

Director


SECRETARY’S CERTIFICATE - YEAR ENDED JUNE 30, 2017

I certify that, to the best of my knowledge and belief, the Company has filed with the Registrar ofCompanies all such returns as are required of the Company under the Mauritian Companies Act2001.

MCB egistry & Securities LtdSECRETARY

Date: 76 SEP 1017


CORPORATE GOVERNANCE REPORT — YEAR ENDED JUNE 30, 2017

COMPANY STRUCTURE AND COMMON DIRECTORS

Finlease Company Limited (the “Company”) is a wholly owned subsidiary of Fincorp InvestmentLtd (Fincorp). The MCB Group Limited (MCBG) owns 57% of the shares of Fincorp.

There are no conimon directors on the Boards of Finlease and Fincorp. Mr Jean Michel Ng Tseungis a common director of Finlease and MCBG.

SHAREHOLDERS HOLDING MORE THAN 5% OF THE COMPANY

The Company is wholly owned by Fincorp Investment Ltd.

DIVIDEND POLICY

The Company aims to provide its shareholder with ongoing returns in the form of stable dividends.The dividend cover over the past two years is as shown below.

Year Dividend cover (times)

2017 -

2016 1.042015 1.38

The Company’s ‘Articles of Association’ provides that the Board of the Company shall consist of aminimum of three and a maximum of ten directors.

Currently the Board consists of six directors, made up of one executive, two non-executive and threeindependent directors. They come from diverse business backgrounds and possess the necessaryknowledge, skills, objectivity, integrity, experience and commitment to make sound judgments on keyissues relevant to the business of the Company.

All directors are required to submit themselves for re-election every year.

DIRECTORS’ PROFILE

Bernard D’Hotman de Villiers — Independent Director- Chairman of the Board

Bernard holds a “Licence en Droit” delivered by the “Faculté de Droit de l’Université de la Reunion”.He was appointed notary in 1987 and has been practising as such ever since. Bernard has been theChairman of the Chamber of Notaries in 2003 and 2004. He also holds directorship positions in variousprivate companies.

Sow Man (Claude) Ali Yuk Shing — Independent Director

Claude holds practicing certificates from ACCA (UK), Financial Reporting Council and MauritiusInstitute of Public Accountants (MIPA) to act as a Public Accountant. He has a wide and extensiveexperience in all fields of the accountancy profession, mainly in auditing, accounting and businessconsulting and has acquired practical experience in the application of International Accounting Standards(LAS) and International Financial Reporting Standards (IFRS). He is the Managing Partner of CAYSAssociates which provides Audit, Accounting and Business Consulting Services.


CORPORATE GOVERNANCE REPORT — YEAR ENDED JUNE 30, 2017 (CONTINUED)

DIRECTORS’ PROFILE (Continued)

Alain Chamary — Managing Director (up to 31St August 2017)

Alain holds an ACIB/BSc Financial Services and an MBA in International Marketing from theUniversity of Surrey. He has been appointed as General Manager of Finlease Company Limited in July2009. Prior to joining the Company, he was Manager at the Port Louis branch of The MauritiusCommercial Bank Ltd since October 2004. Alain has worked for the MCB Group for the last 30 yearsand held various positions in different sectors such as Business Analyst in Financial ManagementSection, Senior Executive Officer in the International Division and BFCOI Seychelles.

Alain Law Mm — Non- Executive Director

Alain graduated in Economics with a BA (Honours) and is an Associate member of the Institute ofChartered Accountants in England and Wales (ICAEW). He also holds an MBA from CranfleldUniversity. Alain has been appointed as the ChiefExecutive Officer ofThe Mauritius Commercial BankLimited in April 2017. Prior to his current position, Alain was the Deputy Chief Executive Officer andHead of Retail SBU. He also launched leasing, factoring and private banking services and acted asProject Director for the Business Process Re-engineering exercise initiated with Accenture. Beforejoining the MCB, Alain was Senior Manager at De Chazal Du Mde’s consulting division. He is also anExecutive Director of the Board of The Mauritius Commercial Bank Ltd.

Francois Montocchio— Independent Director

Francois is a Fellow of the Association of International Accountants (UK). He occupied senior positionsin the Harel Mallac Group of. Companies until he was appointed Chief Executive Officer of HarelMallac & Co Ltd in 2005 up to his retirement in 2007. He remained a Board member until May 2010.He is a past Chairperson of The Mauritius Chemical and Fertiiser Industry Ltd, The Mount SugarEstates Company Ltd and Union Sugar Estates Ltd.

Directorship in other listed companies:

Mauritius Development Investment Trust Ltd

Jean-Michel Ng Tseung— Non- Executive Director

Jean-Michel graduated with a First Class Honours in Mathematics at the Imperial College of Scienceand Technology, London. He qualified as a Chartered Accountant at the London office of ArthurAndersen in 1990 and was made a Partner thereof in Mauritius in 1997, acting during his last 4 yearswith the firm as Head of Audit and Business Advisory division. Jean-Michel joined the MCB in July2003, coming from Ernst & Young. He has been appointed Chief Executive Officer of MCB InvestmentHolding Ltd in July 2015 and as director in August 2016. He is also a Non-Executive Director on theBoard of The Mauritius Commercial Bank Limited and MCB Group Limited.

Directorship in other listed companies:

MCB Group Limited



DIRECTORS’ PROFILE (Continued)

Raj Gungah — Managing Director (As from ?‘ September 2017)

Raj has been appointed as Managing Director of Finlease Company Limited on ~ September 2017. Hehas been working for MCB Group for the last 31 years and held various management positions withinRetail SBU for the last 8 years. Prior to joining the Company, he was Regional Manager of Port Louisregion since May 2015. Raj holds a Cffi from Chartered Institute of Bankers, a Professional DFSMfrom Institute of Financial Services, and a MDP from University of Stellenbosch. He is also a memberof MBA, Associate of Institute of Financial Services, and an IVTB-registered trainer at MCBDevelopment Centre.

DIRECTORS’ INTEREST AND DEALINGS IN SHARES

The Directors do not hold shares either directly or indirectly in the Company.

DIRECTORS’ REMUNERATION

The Directors’ fees and remuneration have not been disclosed due to the sensitive nature of theinformation.

STATEMENT OF REMUNERATION PHILOSOPHY

Previously directors’ remuneration was based on attendance at Board Meetings and sub-committees. Ata Board Meeting held in November 2011 a fixed fee policy was approved for the remuneration of non-executive and independent directors.

DIRECTORS’ SERVICE CONTRACTS

There are no service contracts between the Company and its directors.

BOARD ATTENDANCEAttendance for Board Meetings

Directors 29 June 10 March 19 December 4 October2017 2017 2016 2016

Bemard D’Hotman De Villiers Y Y [ Y YClaude Ah Yuk Shing Y Y Y YAlain Chamary Y Y Y YAlainLawMin Y Y N Y

Francois Montocchio Y N Y yJean Michel Ng Tseung Y Y N Y

RELATED PARTY TRANSACTIONS

Related Party Transactions are tabled by the Risk Management and Conduct Review Committeemeetings. Details of related party transactions are included in note 32 to the financial statements.



COMMITTEES

The Board resolved on 2 July 2010 to dissolve the Corporate Governance Committee and to take upCorporate Governance issues at the level of the Board.

There are currently two sub-committees of the Board, namely the Audit Committee and the RiskManagement and Conduct Review Committee.

On 27 April 2017, the Bank of Mauritius dispensed the Company from having a Nomination andRemuneration Committee and all matters relating to the nomination and remuneration of directors andsenior officers of the Company are taken at the level of the Board.

AUDIT COMMITTEE

Currently the members of the Audit Committee are Messrs Claude Ah Yuk Shing (Chairman), BernardD’Hotman de Villiers and Francois Montocchio. Four Audit Committees were held and attendance wasas per below:

Directors 17 August22 March 14 December 16 September 2016

2017 2016 2016

~ Claude Ah Yuk Shing Y Y Y Y~ Bernard D’Hotman De Villiers Y Y Y YFrancois Montocchio Y Y Y N

Role of the Audit Committee

The main roles and responsibilities of the Audit Committee include regular reviews and monitoring ofthe following:

• Effectiveness of the Company’s internal fmancial control and risk management systems.

• Effectiveness of the internal audit function which has a direct reporting line with the AuditCommittee.

• Independence of the external audit process and assessment of the external auditor’sperformance.

• Remuneration of external auditors and their supply of non-audit services.

• The Company’s systems for monitoring compliance with laws and regulations relevant tofmancial reporting and with its internal code of business conduct.

• Specific issues where the Audit Committee considers action or improvement is needed,making recommendations as to the steps to take.

• Annual financial statements to be submitted to the Board and to the Regulator.

The terms of reference of the Audit Committee have been approved by the Board and the Committeehas satisfied its responsibilities for the year.

FINLEASE COMPANY LIMITEDCORPORATE GOVERNANCE REPORT — YEAR ENDED JUNE 30, 2017 (CONTINUED)

RISK MANAGEMENT AND CONDUCT REVIEW COMMITTEE

The members of the Risk Management and Conduct Review Committee are. Messrs FrancoisMontocchio (Chairman), Claude Mi Yuk Shing and Bernard D’Hotman de Villiers. Attendance to theCommittee Meetings during the financial year was as follows:

Directors 22 March 14 4 October 17 August2017 December 2016 2016

2016Claude Ah Yuk Shing Y Y Y YBernard D’Hotman De Villiers Y Y Y YFrancois Montocchio Y Y Y N

Role of the Risk Management and Conduct Review Committee

The principal duties of the Committee consist in assisting the Board in setting up risk strategies and toassess and monitor the risk management process of the Company. The Committee shall also advise theBoard on risk issues and shall monitor the risk of the different portfolios against the set risk appetite.

The Committee is also responsible for monitoring and reviewing related party transactions, their termsand conditions, and ensuring the effectiveness of the established procedures and compliance to the Bankof Mauritius Guidelines.

SHAREHOLDER AGREEMENT AFFECTING THE GOVERNANCE OF THE COMPANYBY TIlE BOARD

There is currently no such agreement.

THIRT) PARTY MANAGEMENT AGREEMENT

There is a service level agreement between MCB Ltd and the Company for provision of technicalassistance.

MATERIAL CLAUSES OF THE CONSTITUTION

There are no clauses of the Memorandum and Articles of the Company deemed material enough forspecial disclosure.

AUDITOR’S FEES

The table below shows the fees paid to the statutory auditors for the last three fmancial years:

2017 2016 2015Rs Rs Rs

Statutory fees paid to:PricewaterhouseCoopers 585,000BDO & Co - 483,000 460,000

Fees for other services relating to:Internal Control Review 140,000 120,750 115,000Review Engagement forDividend Declaration 100,000



RISK GOVERNANCE AND INTERNAL CONTROLS

Risk Management

Being mindful of the risks faced by the Company in its day-to-day operations and activities, the Boardof the Company acknowledges its responsibility for maintaining a robust risk management and internalcontrol system and for reviewing its effectiveness on a regular basis.

In this respect, the Board ensures that the necessary structures, processes and methods for identifying,measuring and monitoring such risks are in place and integrated in the Company’s overall frameworkfor risk governance while ensuring that all laws, regulations and codes of business practice are adheredto. For the discharge of its duties, the Board is assisted by the Risk Management and Conduct ReviewCommittee, which enable it to properly formulate, review and approve policies on monitoring andmanaging risk exposures.

Management and the assurance process on risk management are delegated to management which isresponsible for the design and implementation of the risk management processes and day-to-daymanagement of risk.

The Company’s policy on risk management encompasses all significant business risks (includingphysical, operational, human resources, business continuity, fmancial, credit, market, compliance andreputational risks) which could influence the achievement of the Company’s objectives.

The risk management mechanisms in place include:

• A system for the ongoing identification and assessment of risk;• Development of strategies in respect of risk and definition of acceptable and non-acceptable

levels of risk;• The communication of risk management policies to all levels of the organisation as

appropriate, and methods to ensure commitment, of all relevant stakeholders, to the process;• The implementation of a system of internal control that closely aligns the control effort to the

nature and importance of the risk; and• Processes to reduce or mitigate identified risks and contain them within the levels of tolerance

Princinal risks faced by the~—-‘,—‘I..—~ ‘

Risks Description Examples of subjects covered by the

Company’s Management, Operations

Committee and Risk Management and

Conduct Review CommitteeCredit The risk of financial loss should • Core leasing system acquired to

borrowers or counterparties fail to fulfill ensure adequate processes withtheir financial or contractual obligations respect to credit origination, approvalto the Company as and when they fall due; and disbursement;credit risk typically includes counterparty • Large exposures approved by Creditrisk, settlement risk and concentration Risk Committee;risk, with the latter referring to the risk • Credit mandates;that the institution faces from the lack of • Concentration limits (industries,diversification of its lending portfolio due counterparties, asset classes,to the build-up of exposures to a corporate/retail);counterparty, industry, market or product • Status of actions in relation to Nonamongst others. performing loans

. Provisioning levels ofNPLs.



RISK GOVERNANCE AND INTERNAL CONTROLS (CONTINUED)

Principal risks faced by the Company (Continued)

Risks Description Examples of subjects covered by theCompany’s Management, OperationsCommittee and Risk Management and

Conduct Review CommitteeFunding Funding risk: The risk arising from not • Limits such as liquidity ratio, capitaland having sufficiently stable and diverse adequacy ratio, depositors’liquidity sources of funding or the funding concentration, lease to deposits ratio;risk structure being inefficient • Rolling monthly forecast cash-flows;

Liquidity risk: The risk that the • Matching of tenors of leases andCompany does not have sufficient deposits/liquidity gap;fmancial resources to meet its • Overdraft facilities available asobligations as they fall due or will have liquidity bufferto do so at an excessive cost.

Foreign The risk that an adverse movement in • Reviews of foreign currency assetscurrency foreign currency exchange gives rise to a and liabilities;risk loss. • The Company ensures that the value

of its foreign currency assets arematched by its foreign currencyliabilities.

Interest rate Interest Rate Risk is the risk arising from • Reviews of impact of a change inrisk fluctuations in interest rates. interest rate on the net interest income

of the Company;. Note that the interest bearing assets

and liabilities of the Company areheld to maturity and therefore thereare no changes in market value of itsfinancial instruments as a result offluctuations in market interest rates.

Operational The risk of loss or costs resulting from • 4-eyes principle applicable torisk human factors, inadequate or failed operational processes

internal processes and systems or • Business Continuity Planexternal events. It includes fraud and • Compliance officer (joining thecriminal activity, project risk, business Company in October)continuity, information and IT risk, etc. • Internal audits

• Insurance coverInformation The risk of accidental or intentional • Information Risk Management inrisk unauthorised use, modification, place

disclosure or destruction ofinformation resources which wouldcompromise the confidentiality,integrity or availability of information

1



RISK GOVERNANCE AND INTERNAL CONTROLS (CONTINUED)

Integration of internal control and risk management

The system of internal control, which is embedded in all key operations, provides reasonable rather thanabsolute assurance that the Company’s business objectives will be achieved within the risk tolerancelevels defmed by the Board. The effectiveness of the internal control systems (including fmancial,operational, compliance and risk management) are normally reviewed quarterly by the Committee andthe review covers all internal control systems.

Assurance on the effectiveness of the risk management process

Regular management reporting, which provides a balanced assessment of key risks and controls, is animportant component of board assurance.

Internal Control

The Company’s internal control framework seeks to ensure the reliability of financial reporting,operations and systems whilst guaranteeing compliance with internal established policies andprocedures as well as with laws, regulations, and codes of business practice in order to protect theCompany’s assets and reputation. The Board is assisted in its responsibilities by the Audit Committeewhich oversees the effectiveness of the Company’s internal control systems. Processes are in place tomonitor the effectiveness of internal control, identify and report any significant issues, and ensure thattimely and appropriate corrective actions are taken. In carrying out its duties, the Audit Committeereceives regular reports from the Internal Audit function which is outsourced to the Internal Audit BUof MCB Ltd through a Service Level Agreement.

The Committee holds frequent meetings with the Managing Director and the Head of Internal Audit. Inaddition, it receives reports from the Company’s external auditor and has separate sessions with thelatter without Management being present. As such, through the internal control in place, the auditreports, the reviews by Management and the regular reporting from the Chairperson of the AuditCommittee, the Board gains assurance that the Company’s internal control systems are adequate andeffective.

The Internal Audit BU of MCB Ltd ensures that the quality of internal audit services provided toFinlease Company Limited is aligned with recognised best practices. The Internal Audit BU leverageson a systematic and disciplined approach, notably through the use of well-focused audit work programsand computer aided audit techniques to evaluate the effectiveness of the internal control systems of theCompany. It is worthwhile to note that the Institute of Internal Auditors requires each internal auditfunction to have an external quality assessment conducted at least once every five years. This exercisehas been carried out in 2009 and 2013 respectively, by an internationally recognised auditing firm whichconfirmed the Internal Audit BU’s compliance with the International Standards for the ProfessionalPractice of Internal Audit issued by the above mentioned institute.

SHARE OPTION PLAN

No such scheme currently exists within the Company.

IMPORTANT EVENTS - Timetable

Some of the key milestones are as follows:

. Annual Meeting of Shareholder — December 2017



POLITICAL DONATIONS

No donations were made by the Company during the period under review.

CHARITABLE DONATIONS

Rs20,000 was given to charitable associations by the Company during the year.

CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility contributions are made to the MCB Forward Foundation, the entity setup within the MCB Group for these very purposes and contributions made during the year amounted toRsl,201,333.

CARBON REDUCTION REPORTING

The Company is fostering on green attitude in-house by closely monitoring its energy consumption withthe introducing of LED lights. The online filing method is also contributing to the on-going reductionin our environmental footprint.

STAKEHOLDER’S RELATIONS AND COMMUNICATION

The Board aims to properly understand the information needs of all stakeholders and places greatimportance on an open and meaningful dialogue with all those involved with the Company. TheCompany’s website is used to provide relevant information. Open lines of communication aremaintained to ensure transparency and optimal disclosure. All Board members are requested to attendAnnual General Meeting, to which all shareholders are invited.

CODE OF ETifiCS

The Company is committed to the highest standards of integrity and ethical conduct in dealing with allits stakeholders. The MCB Group has adopted a Code of Ethics which is applicable to all its employeesand directors and which is published on the website of the Company.

HEALTH AND ENVIRONMENT SAFETY

The Company has applied social, safety, health and environmental policies and practices of the MCBGroup that in all material respects comply with existing legislative and regulatory frameworks.



STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The Directors acknowledge their responsibilities for:

• adequate accounting records and maintenance of effective internal control systems;• the preparation of financial statements which fairly present the state of affairs of the Company

as at the end of the financial year and the results of its operations and cash flows for that periodand which comply with International Financial Reporting Standards (IFRS);

• the selection of appropriate accounting policies supported by reasonable and prudentjudgements.

• the preparation of the financial statements on a going concern basis.

The Directors also acknowledge that they do not have the power to amend the financial statements afterissue.

The Directors report that:

• adequate accounting records and an effective system of internal controls and risk managementhave been maintained;

• appropriate accounting policies supported by reasonable and prudent judgements andestimates have been used consistently;

• IFRS have been followed, and any material departure has been disclosed, quantified andexplained in the financial statements; and

• the financial statements have been prepared on a going concern basis.• the Company complies with the requirements of the Code of Corporate Governance in all

material aspects except for sections 2(2.2.3), 2 (2.8.2), 2 (2.10), 3 (3.5), and (3.9.l)(b).

For and on behalf of the Board of Directors:

Director

Date: 26 SEP 2017


STATEMENT OF COMPLIANCE(Section 75 (3) of the Financial Reporting Act)

Name of PIE: FINLEASE COMPANY LIMITED

Reporting Period: 1~ July 2016 — 30th June 2017

We, the Directors ofFinlease Company Limited, confirm that to the best of our knowledge that FinleaseCompany Limited has materially complied with the Code of Corporate Governance except for sections2(2.2.3), 2 (2.8.2), 2 (2.10), 3 (3.5), and (3.9.l)(b).

The reasons for non-compliance to the above are as follows:

• The Board does not consider it practical to have at least two executive directors as membersof the Board given the small size of the Company’s operation.

• Details of remuneration paid to each director have not been disclosed due to the sensitivenature of the information

• No board appraisal was conducted for the year under review. The Directors have beenappointed in light of their expertise and skills and feel that the composition of the board isefficient in monitoring the affairs of the Company.

• All corporate governance matters are taken up at Board level as such the Company does nothave a separate Corporate Governance committee.

• The Chairman of the Board is also a member of the audit committee due to the relativelysmall size of the Company.

Signed for and on behalf o ~. Board of Directors:

4A1Chairman F’

26 SEP 2017 -

Date:


MANAGEMENT DISCUSSION AND ANALYSIS DOCUMENT — YEAR ENDED JUNE 30,2017

CAUTIONARY NOTE TO THE READER

This Management Discussion Analysis can include forward-looking statements and the risk exists thatforecast projections and other postulations contained therein might not materialise and that actual resultsmay vary materially from plans and expectations. Hence the reader should stand cautioned not to placeundue reliance on such statements. The Board of Finlease Company Limited does not undertake toupdate any forward-looking statement from time to time upon becoming aware that the actual results ofthe Company shall be different from those projected.

1 Financial Review

(a) Performance against objectives

OBJECTIVES FOR PERFORMANCE EN OBJECTIVES FORFY2016/2017 FY2016/2017 2017/2018

OPERATING INCOMEAn expected growth of 7.0% A growth of 13.2% has been Owing to the cut throatwas anticipated against the recorded for the year. This competition which is forcing usbackdrop of challenging performance is mainly explained to compress our margins weeconomic environment, by a compensation fee received are expecting a growth of 7.0%

from State Investment for this coming year.Corporation in respect of claimsfor funds not disbursed under theprevious LEM schemes.

NON INTEREST EXPENSESA growth of 26.0% was expected An increase of 34.6% in non- We are expecting a fall of 7.0%in line with an enhancement in interest expenses was noted as a for FY18 as a result of increasedthe information technology result of: operational efficiency and moreplatform • higher impairment costs robust risk management

amounting to Rs42.8m policies.compared to Rs17.lm lastyear. The Company has seenits NPL ratio increasing overthe last 12 months and

. higher depreciation andamortisation chargesamounting to Rs 121 .4m forthe FY 2017/20 18 comparedto Rs109.3m in 2016/2017.This is due to the full yearamortisation of our coreleasing system for the firsttime during the reportingyear as well as higherdepreciation charges forassets under operatingleases.


MANAGEMENT DISCUSSION AND ANALYSIS DOCUMENT — YEAR ENDED JUNE 30,2017 (CONTINUED)

1 Financial Review (Continued)

(a) Performance against objectives (Continued)

OBJECTIVES FOR PERFORMANCE IN OBJECTIVES FOR

FY2016/2017 FY2016/2017 2017/2018

COST TO INCOME RATIO

Cost to income ratio was Our cost to income ratio stood at We expect the cost to income toexpected to improve to reach 81.8% compared to 68.8% in improve to 62.0% for FY18.67.7%. FY16. This increase is mainly

driven by higher impairmentcharges for the year.

LEASE PORTFOLIO

A growth of 11.0% in lease Our portfolio reached Growth of 7.0% is expected inportfolio in view of continued Rs4,391.3m, a slight increase of lease portfolio in view of thestrategy to leverage on existing 0.9% compared to FY16. This is more proactive stance of ourcustomer base. reflective of the morose sales and marketing team.

economic environment wheregrowth in credit was subdued.

DEPOSITS GROWTHThe Company anticipated a With the suspension of the The Company will continue togrowth of 21.0% in deposits to different Government backed leverage on retail deposits tosustain business growth. leasing schemes, the Company finance its lease portfolio

has reverted to the traditional growth. We are expecting adeposits to raise funds. As a growth of 11.0% in deposits toresult, the portfolio has risen by sustain business growth.only 10.5%, when comparedwith the anticipated growth rate,but in line with lower leasingportfolio growth.

RETURN ON EQUITY (ROE)An expected ROE of 19.5% in ROE stands at 11.7% as result of An expected ROE of 15.3%line with rise in profitability, fall in profit by Rs5.9m.RETURN ON AVERAGEASSETS (ROA)ROA was expected to reach ROA stands at 0.9% due to the ROA is expected to reach 1.4%1.3%. fall in profit level.PORTFOLIO QUALITYTo maintain asset quality and Impairment charges increased We expect to improve assetminimise impairment charge significantly as a result of a quality through reinforcement

deterioration in asset quality, of our recovery process.NPL rate increased from 2.6% to3.2%.

CAPITAL MANAGEMENT

To maintain capital above Our capital adequacy stands at Management expects capitalregulatory requirement 11.6% adequacy levels to be steady.


MANAGEMENT DISCUSSION AND ANALYSIS DOCUMENT — YEAR ENDED JTJNE 30,2017 (CONTINUED)


(a) Performance against objectives (Continued)

Analysis of results

Tkreeyears summary 2017 2016 2015

Rs’m Rs’m Rs’m

Total assets 4,990.0 4,793.1 4,568.2Total lease portfolio 4,391.3 4,351.5 4,100.9Cash and cash equivalents 284.0 139.5 266.4Deposits with fmancialinstitutions 220.8 212.6 107.3

Total deposits 3,802.0 3,440.3 2,980.9Total borrowings 562.3 787.2 1,085.8Shareholder’s loan 105.6 102.6 56.4Capital and Reserves 392.8 346.9 345.1Profit before Tax 50.6 66.1 90.7

The financial year 2016/17 has proven to be a difficult one on many fronts.

Total Assets increased by a marginal 4.1%. Total lease portfolio (including operating leases which areincluded under “Plant and Equipment”) increased by Rs3 9.8m whilst liquid assets grew by Rs 1 52.7m.The growth in our balance sheet has been fmanced by the growth in the Company’s deposit baseamounting to Rs361.7m, which also financed the repayment of the Company’s borrowings (down by28.6%), reflecting our renewed reliance on traditional deposits to raise funds instead of the borrowingsfrom the State Investment Corporation under the Lease Equipment and Modemisation Scheme (LEMS).

After having recorded a sustained growth over the past few years, net profit after tax declined by 11.4%compared to last year, to reach Rs45.9m. The significant drop in profits is explained mainly by the highimpairment charges as well as depreciationlamortisation charges as further explained in the previous“Peiformance against objectives’ section.




(b) Financial Ratios and data on credit

Net Interest Income analysis

Interest Income has decreased by 2.4% to stand at Rs297.3m. The drop is mainly attributable to interestsuspended during the year of Rs7.Om resulting from the higher level of non-performing leases recordedduring the year. Total Interest expense also decreased by 1.8%.

As a result, Net Interest Income decreased from Rs94.4m to Rs90.8m as compared to last financial year.

Non-interest income

2017 2016 2015Rs’m Rs’m Rs’m

155.1 134.1 110.310.0 7.5 8.5

6.7

Net income from operating lease (up by 15.7%) reflects increase in the operating lease portfolio of theCompany by 26.9%. Other operating income has witnessed an exceptional increase this year as a resultof one off compensation from SIC of Rs14.Om, of which RslO.lm has been recognised this year. Thusexcluding this exceptional item ofRslO.lm, non-interest income has increased by 17.3%.

2017 2016 2015Rs’m Rs’m Rs’m

12.9 16.1 13.9284.4 288.6 270.2297.3 304.7 284.1

Interest incomeCash and cash equivalentsDeposits with financial institutionsNet lease receivablesTotal

Interest expenseDeposits from customersBorrowingsShareholder’s LoanTotal

Net interest income

181.3 181.4 159.118.9 25.5 27.6

6.4 3.4 1.7206.6 210.3 188.4

90.7 94.4 95.7

Operating lease incomeProcessing feesOther operating incomeTotal

22.1 9.4187.2 151.0 125.5




(b) Financial Ratios and data on credit (Continued)

Net impairment loss on fmancial assets2017 2016 2015Rs’m Rs’m Rs’m

Net impainnent loss on fmancial assets 42.8 17.1 7.0

The significant increase in impainnent is mainly attributable to the deterioration in asset qualityexperienced in the last 18 months.

Operating expenses2017 2016 2015

Rs’m Rs’m Rs’m

Personnel expenses 28.6 25.3 22.3Loss on disposal of assets 7.4 2.9 2.4

Depreciation and amortisation 121.4 109.3 84.1Other expensesTotal

27.2 14.3 14.8184.6 151.8 123.6

(c) Asset type analysis

Increase in operating expenses is mainly attributable to:• higher depreciation charges on assets under operating leases. We have witnessed an important

growth in operating leases during the year;• higher amortisation charges and licence fees relating to the full year use of the core leasing

system this year;• Other expenses increased significantly as a result of higher management fees (including rental

expenses) payable to MCB Ltd for services rendered to the Company as well as provisions madeon some reconciling items.

For the year under review, the fmancing of vehicles in general still represents the lion share of ourportfolio, increasing from 6 1.1% to 67.0%. The exposure of the other asset classes changed marginally.

The main assets being fmanced, in % terms are depicted in the table on the following page:




(c) Asset type analysis (Continued)% % %

Portfolio Portfolio PortfolioAsset Category 2017 2016 2015

Cars 57.0 51.6 51.6Industrial equipment 20.0 26.0 23.4Civil Engineering Equipment 5.0 4.2 6.4Buses, vans, lorries 10.0 9.5 6.9Computers 2.0 2.3 2.9Others 6.0 6.4 8.8

(d) Credit Exposure

In terms of industry financing, our overall exposure remained stable. We have however noted a decreasein the Manufacturing and Services sectors as well as a decrease in the Construction sector.

The exposure in % terms by industry is summarized as follows:

Sector 2017 2016 2015% % %

Manufacturing 19.6 23.1 20.9Personal & Professional 17.4 15.9 18.4Traders 19.1 17.9 16.5Services 8.4 12.9 9.6Agriculture 7.0 7.0 7.8Construction 7.8 8.8 12.3Tourism 5.5 4.6 5.3Transport 6.8 4.6 4.7Others 8.4 5.2 4.5


MANAGEMENT DISCUSSION AND ANALYSIS DOCUMENT — YEAR ENDED JUNE 30, 2017 (CONTINUED)


(e) Credit Quality

TotalRs’OOO Rs’OOO Rs’OOO Rs’OOO

2016Total LeasesNon Performing LeasesAs a % of LeasesTotal ProvisionsAs a % of LeasesAs a % ofNPLs

301,059 1,010,174 193,58936,438 1,706 -

12.1% 0.2% -

2,609 13,342 1,4280.9% 1.3% 0.7%

7.16% 782.1% -

190,920 152,455 698,238 38,435 119,555 84,950 83,700 685,244614 40,118 5,008 1,660 - - - 10,479

0.3% 26.3% 0.7% 4.3% - - - 1.5%1,104 6,544 11,698 504 590 422 416 11,3490.6% 4.3% 1.7% 1.3% 0.5% 0.5% 0.5% 1.7%

179.8% 16.3% 233.6% 30.4% 108.3%

37,705 83,42! 255,402 3,934,847

- 7,188 - 103,21!- 8.6% - 2.6%

188 1,898 3,05! 55,1430.5% 2.3% 1.4%

26.4% 53.4%

2015Total LeasesNon Performing Leases

As a % of LeasesTotal ProvisionsAs a % of LeasesAs a % ofNPL’s

331,175 957,692 195,80010,864 629 180

3.3% 0.1% 0.1%4,254 8,390 1,4071.3% 0.9% 0.7%

39.1% 1,333% 782.0%

135,673 126,548 599,593 25,540 57,160 89,143 48,795 642,2283,145 19,150 8,122 9,745 - - - 4,3542.3% 15.1% 1.3% 38.2% - - - 0.7%

992 6,012 5,174 574 275 443 242 6,1790.7% 4.7% 0.9% 2.2% 0.5% 0.5% 0.5% 1.0%

31.5% 31.4% 63.7% 5.9% 141.9%

96,077 77,766 301,709 3,684,8995,725 4,488 66,402

- 7.4% 1.5% 1.8%959 1,373 3,321 39,595

1.0% 1.8% 1.1% 1.1%24.0% 74.0% 59.6%

(i) Sector-wise analysis of credit qualityAgriculture Manufac- Tourism

2017Total LeasesNon Performing LeasesAs a % of LeasesTotal ProvisionsAs a% of LeasesAs a% ofNPL’s

turing

Rs’OOO Rs’OOO Rs’OOO

298,512 862,656 209,21527,437 14,807 2,233

9.2% 1.7% 1.1%6,529 17,964 3,3062.2% 2.1% 1.6%

23.8% 121.3% 148.1%

Transport Consiru Traders ICT Financial lnfrastr Freeport Personal Professional Media Othersction services ucture

Rs’OOO Rs’OOO Rs’OOO Rs’OOO Rs’OOO Rs’OOO Rs’OOO Rs’OOO

201,33! 150,527 711,446 33,89! 149,397 64,756 56,697 744,692

5,783 8,034 38,665 2,235 2,715 - - 18,350

2.9% 5.3% 5.4% 6.6% 1.8% - - 2.5%

3,606 7,804 21,786 1,303 2,058 631 553 15,62!

1.8% 5.2% 3.1% 3.8% 1.4% 1.0% 1.0% 2.1%

62.4% 97.1% 56.3% 58.3% 75.8% 85.1%

2,725 83,733 311,192 3,880,770

- 73 5,107 125,439

- 0.1% 1.6% 3.2%

27 889 5,951 88,028

1.0% 1.1% 1.9% 2.3%

- 1,217% 116.5% 70.2%

Note: Some % figures are above 100% since the provision figures relate to collective impairment.




(e) Credit Quality (Continued)

(i) Sector-wise analysis of credit quality (Continued)

Given the challenging economic situation, the level of non-performing leases has increased fromRs103.2m to Rs125.4m. Total provisions (both specific and portfolio) increased from MUR55.lm toMUR 88.Om, representing 2.3% (2016: 1.4%) of our total portfolio and 70.2% (2016: 53.4%) of non-performing leases.

(ii) Restructured Leases

There have been 13 restructured leases during the year amounting to Rs8 .Om. 81% of this amount relatesto a single client, for whom we have carried out impainnent assessment and deemed that existingcollaterals sufficiently cover the amounts owed to the Company, thereby not requiring any specificimpairment charge. Moreover, repayment plan has been respected accordingly by client.

(iii) Credit Impairment

An analysis of credit impairment provisions for the year is given in the table below.

Specific Portfolio TotalImpairment Impairment Impairment

Rs’m Rstm Rs’m

Opening Balance- 1July16 17.5 37.6 55.1Provisions for the year 32.7 0.2 32.9Closingbalance-301une2017 50.2 37.8 88.0

A general risk reserve of Rs19.7m (2016: Rs19.7m) has been set aside as an appropriation of retainedearnings to cater for future potential losses in line with the Bank of Mauritius Guideline on CreditImpairment Measurement and Income Recognition.

Collective Portfolio provisions amounted to Rs37.8m (2016: Rs37.6m) have been computed in line withthe Bank of Mauritius Guideline on Credit Impairment Measurement and Income Recognition whichprescribes that the percentage of loan loss provision to aggregate amount of loans in the entire portfolioshall be no less than 1 per cent.




(e) Credit Quality (Continued)

(iv) Capital structure

As a non-bank deposit taking institution, the Company is required to comply with the following:

a. Maintain a minimum capital adequacy ratio of 10%. The ratio as at 30th June 2017 was 11.6%(2016: 10.5%).

b. Maintain liquid assets equivalent to not less than 10% of deposit liabilities. The statement ofliquid funds and deposits for the week ended 30 June 2017 showed liquid assets to deposits ratioof 14.7% (2016: 11.6%).

In addition to complying strictly with the above, the Company has maintained a minimum capitalrequirement of Rs200m and transferred to a Reserve Account each year an amount equal to not lessthan 15% of the net profit until the balance in the Reserve account is equal to the amount paid as statedcapital. Statutory appropriations of retained earnings for the year ended 30 June 2017 amount to Rs6.9m(2016: Rs7.8m).

The capital adequacy ratio is computed as follows:Rs’000

Total Capital 491,057Risk Weighted Assets (“RWA”) 4,237,095Capital adequacy ratio (Total Capital! RWA) 11.6%

Further details of the total capital and risk weighted assets are shown below:Rs’OOO

Tier 1Paid up capital 200,000Statutory Reserve 86,144Retained earnings 87,027Intangible assets (30,078)

Total Tier 1 Capital 343,093

Rs’OOOTier 2General & portfolio Provision 52,964Subordinated debt 95,000Total Tier 2 Capital 147,964

Total Capital (Tier 1 + Tier 2) 491,057


MANAGEMENT DISCUSSION AND ANALYSIS DOCUMENT — YEAR ENDED JIJNE 30,2017 (CONTINUED)


(v) Capital structureRisk Weighted

Risk Weighted assets (“RWA”) Amount Weight amount

Rs’OOO % Rs’OOOClaims on or guaranteed by Government of Mauritius 21,458 0% -

Claims on, or claims guaranteed or accepted orendorsed by, banks licensed under the Banking Act2004 664,000 20% 132,800

Investments in Finance leases <=Rs 5.0 million 730,049 75% 547,537Investments in operating leases <=Rs 5.0 million 19,005 75% 14,255Other leases including corporates 3,480,360 100% 3,480,360Other assets 62,143 100% 62,143

4,977,015 4,237,095

2 Risk Management policies and controls

The Risk Management and Conduct Review Committee, under the stewardship of the Board ofDirectors, is responsible for risk management, the procedures in place within the organisation and thedefinition of the overall strategy for risk tolerance.

Please refer to Coiporate Governance Reportforfurther information on risk management and internalcontrol system.

Credit Risk

Credit Risk is defmed as ‘the risk of loss arising from the non-peiformance by a customei~ client orcounteiparty in any of its obligations towards the Company’.

The Company has wefl-defmed approval and authority limits for lease facilities, as well as policies oncredit concentration. Regular debtors meetings are also held to monitor and control default customers.

Interest Rate Risk

Interest Rate Risk is the risk arising from fluctuations in interest rates.

For interest bearing assets and liabilities, the Company’s income and operating cash flows are mostlyindependent of changes in market interest rates as the implicit interest rates on leases and interest ratesoffered to depositors are mostly fixed.



2 Risk Management policies and controls (Continued)

Liquidity Risk

Liquidity Risk is defmed as ‘the risk that~ at any time, the Company does not have sufficient realisablefinancial assets to meet its financial obligations as theyfall due’.

Management monitors rolling forecasts of the Company’s liquidity reserve on the basis of expected cashflow and does not foresee any major liquidity risk over the next two years. For the year ended June 30,2017, the Company has complied with the liquidity ratio as per Bank of Mauritius requirements for thedeposit-taking licence. The liquidity ratio was 14.7% (2016: 11.6%) as at 30 June 2017.

Operational Risk

Operational risk is defmed as ‘the risk of loss resulting from inadequate or failed internal processes,people and systems orfrom external events’.

The Board ofDirectors has set up the Audit Committee which overlooks the efficiency and effectivenessof the internal control system. The Internal Auditors also report directly to the Audit Committee on theirfindings and recommendations. Furthermore, the Company is also certified ISO 9001:2008 and regularsurveillance visits are carried out to ensure the effectiveness of established procedures.

3 Concentration of risk policies

In accordance with the Bank of Mauritius Guideline on Credit Concentration Risk, the Company issubject to credit exposure limits:

• credit exposure to any single customer shall not exceed 25 per cent of the Company’s capitalbase;

• credit exposure to any group of closely-related customers shall not exceed 40 per cent of theCompany’s capital base; and

• aggregate large credit exposures to all customers and groups of closely related customersshall not exceed 800 per cent of the Company’s Capital Base.

The Company has further implemented a policy on credit concentration risk which falls under themandate of the Risk Management and Conduct Review Committee. Management is required to:

• develop prudent rules and limits for granting credit to a single customer and its relatedparties, to industry sectors and financial counterparties;

• develop and implement information systems and procedures and techniques that accuratelyand continually identify, measure and monitor credit concentration risk in the Company’sportfolio;

• conduct, at least every year, stress tests of its major credit risk concentrations and reviewresults of those tests to identify and respond to potential changes in market conditions.



3 Concentration of risk policies (Continued)

Policies and practices for credit concentration are governed by the Guideline on CreditConcentration limits.

The 6 most significant exposures as at June 30, 2017 are as follows:

Customer Category Net exposure % of Capital base Regulatory LimitRs’OOO % %

Group 174,273 35.5 402 Group 137,391 28.0 403 Group 159,202 32.4 404 Single entity 104,070 21.2 255 Group 91,699 18.7 406 Group 88,401 18.0 40

4 Related party transactions policies and practices

The Company adheres to the Guideline on Related Party Transactions issued by the Bank of Mauritiusand effective as from January 2009. The company has policies and procedures in place to review andapprove exposure to related parties and ensure that market terms and conditions are applied. The RiskManagement and Conduct Review Committee oversees that the policies and procedures are beingfollowed.

The Company has respected the regulatory limit as set out in the Guideline. Credit exposure to relatedparties, at June 30, 2017, amounts to Rs75.2m, i.e. 21.9% (2016: 21.9%) of our Tier 1 capital ofRs343.lm.

The 6 most significant exposures with related parties as at June 30, 2017 are as follows:

Related Party Net exposure %of Tier 1 CapitalRs’OOO %

1 40,205 11.7%2 13,225 3.9%3 10,011 2.9%4 3,629 1.1%5 2,450 0.7%6 1,274 0.4%

5 Statement of Corporate Governance practices

The Board of Directors and the management of the Company are fully aware of their roles andresponsibilities with regard to enhancing good corporate governance in line with the guidelines set outby the Bank of Mauritius under cover of their letter BSD 307 dated 2~ April 2001.

As a non-bank deposit-taking institution, every action is taken to ensure that the standards of corporategovernance as laid down by the Bank of Mauritius are adhered to in particular that our business is runwith integrity and with due respect to all its stakeholders’ interest and welfare.


STATEMENT OF MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

The Company’s financial statements for the operations in Mauritius presented in this annual report havebeen prepared by management, which is responsible for their integrity, consistency, objectivity andreliability. International Financial Reporting Standards as well as the applicable requirements of theMauritian Banking Act 2004 and the guidelines issued thereunder, have been applied and managementhas exercised its judgement and made best estimates where deemed necessary.

The Company has designed and maintained its accounting systems, related internal controls andsupporting procedures, to provide reasonable assurance that financial records are complete and accurateand that assets are safeguarded against loss from unauthorised use or disposal. These supportingprocedures include careful selection and training of qualified staff, the implementation of organisationand governance structures providing a well-defined division of responsibilities, authorisation levels,and accountability for performance, and the communication of the Company’s policies, proceduresmanual and guidelines of the Bank of Mauritius throughout the Company.

The Company’s Board of Directors, acting in part through the Audit Committee and the RiskManagement and Conduct Review Committee, which comprise independent directors, overseesmanagement’s responsibility for financial reporting, internal controls, assessment and control of majorrisk areas, and assessment of significant and related party transactions.

The Company’s Internal Auditor, who has full and free access to the Audit Committee, conducts a well-designed program of internal audits in coordination with the external auditors. In addition, theCompany’s compliance function maintains policies, procedures and programs directed at ensuringcompliance with regulatory requirements.

Pursuant to the provisions of the Mauritian Banking Act 2004, the Bank of Mauritius makes suchexamination and inquiry into the operations and affairs of the Company as it deems necessary.

The Company’s external auditors, Messrs PricewaterhouseCoopers, have full and free access to theBoard of Directors and its committees to discuss the audit and matters arising therefrom, such as theirobservations on the f. ~ financial reporting and the adequacy of internal controls.

Chainnan Director

Date: 6 SEP 2017

pwc

IndependentAuditor’s Report

To the Shareholder ofFinlease Company Limited

Report on the Audit of the Financial StatementsOur OpinionIn our opinion, the financial statements give a true and fair view of the financial position of FinleaseCompany Limited (the “Company”) as at 30 June 2017, and of its financial performance and its cashflows for the year then ended in accordance with International Financial Reporting Standards and incompliance with the Mauritian Companies Act 2001.

What we have auditedThe financial statements of Finlease Company Limited set out on pages 33 to 78 comprise:

• the statement of financial position as at 30 June 2017;

• the statement of profit or loss and other comprehensive income for the year then ended;• the statement of changes in equity for the year then ended;• the statement of cash flows for the year then ended; and• the notes, comprising significant accounting policies and other explanatory information.

Certain required disclosures have been presented elsewhere in the management discussion andanalysis document, rather than in the notes to the financial statements. These disclosures are cross-referenced from the financial statements and are identified as audited.

Basisfor OpinionWe conducted our audit in accordance with International Standards on Auditing (ISAs). Ourresponsibilities under those standards are further described in the “Auditor’s Responsibilities for theAudit of the Financial Statements” section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour opinion.

IndependenceWe are independent of the Company in accordance with the International Ethics Standards Board forAccountants’ Code of Ethics for Professional Accountants (IESBA Code). We have fulfilled our otherethical responsibilities in accordance with the IESBA Code.

PricewaterhouseCoopers, 18 CyberCity, Ebène, Réduit 72201, Republic ofMauritiusT: +230 404 5000, F:+23o 404 5088/89, www.pwc.com/muBusiness Registration Number Fo700053o

PricewaterhooseCoopers is a meeter fmr of PricewaterhouseCoopers Internabonal Limited, each member hrm of which is a separate legal entity.

pwc


To the Shareholder ofFinlease Company Limited (Continued)

Report on the Audit of the Financial Statements (Continued)Other InformationThe directors are responsible for the other information. The other information comprises theintroduction and statutory disclosures, the secretary’s certificate, the corporate governance report, thestatement of compliance, the management discussion and analysis document and the statement ofmanagement’s responsibility for financial reporting but does not include the financial statements andour auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not expressany form of assurance conclusion thereon. Our reporting responsibilities regarding the corporategovernance report is dealt with in the “Report on Other Legal and Regulatory Requirements” section ofthis report.

In connection with our audit of the financial statements, our responsibility is to read the otherinformation identified above and, in doing so, consider whether the other information is materiallyinconsistent with the financial statements or our knowledge obtained in the audit, or otherwiseappears to be materially misstated.

If, based on the work we have performed on the other information, we conclude that there is a materialmisstatement of this other information, we are required to report that fact. We have nothing to reportin this regard.

Responsibilities of the Directors for the Financial StatementsThe directors are responsible for the preparation and fair presentation of the financial statements inaccordance with International Financial Reporting Standards and in compliance with the MauritianCompanies Act 2001, the Mauritian Banking Act 2004 and regulations and guidelines of the Bank ofMauritius, and for such internal control as the directors determine is necessary to enable thepreparation of financial statements that are free from material misstatement, whether due to fraud orerror.

In preparing the financial statements, the directors are responsible for assessing the Company’s abilityto continue as a going concern, disclosing, as applicable, matters related to going concern and usingthe going concern basis of accounting unless the directors either intend to liquidate the Company or tocease operations, or have no realistic alternative but to do so.

The directors are responsible for overseeing the financial reporting process.

pwc



Report on the Audit of the Financial Statements (Continued)Auditor’s Responsibilitiesfor the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the financial statements as a wholeare free from material misstatement, whether due to fraud or error, and to issue an auditor’s reportthat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guaranteethat an audit conducted in accordance with ISAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material if, individually or inthe aggregate, they could reasonably be expected to influence the economic decisions of users taken onthe basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintainprofessional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The risk of notdetecting 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 overrideof internal control.

• Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions 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’sreport 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 ofour auditor’s report. However, future events or conditions may cause the Company to cease tocontinue as a going concern.

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

pwc

IndependentAuditor~s Report


Report on the Audit of the Financial Statements (Continued)Auditor’s Responsibilities for the Audit of the Financial Statements (Continued)We communicate with the directors regarding, among other matters, the planned scope and timing ofthe audit and significant audit findings, including any significant deficiencies in internal control thatwe identi~~ during our audit.

Report on Other Legal and Regulatory RequirementsMauritian Companies Act 2001

The Mauritian Companies Act 2001 requires that in carrying out our audit we consider and report toyou on the following matters. We confirm that:

(a) we have no relationship with or interests in the Company other than in our capacity as auditor anddealings in the ordinary course of business;

(b) we have obtained all the information and explanations we have required; and(c) in our opinion, proper accounting records have been kept by the Company as far as appears from

our examination of those records.

Mauritian Banking Act 2004

The Mauritian Banking Act 2004 requires that in carrying out our audit we consider and report to youon the following matters. We confirm that:

(a) in our opinion, the financial statements have been prepared on a basis consistent with that of thepreceding year and are complete, fair and properly drawn up and comply with the MauritianBanking Act 2004 and regulations and guidelines of the Bank of Mauritius; and

(b) the explanations or information called for or given to us by the officers or agents of the Companywere satisfactory.

Mauritian Financial Reporting Act 2004

The directors are responsible for preparing the corporate governance report. Our responsibility is toreport on the extent of compliance with the Code of Corporate Governance (the “Code”) as disclosed inthe corporate governance report on pages 4 to 13 and on whether the disclosure is consistent with therequirements of the Code.

In our opinion, the disclosure in the corporate governance report on pages 4 to 13 is consistent withthe requirements of the Code.

pwc



Other MatterThis report, including the opinion, has been prepared for and only for the Company’s shareholder inaccordance with Section 205 of the Mauritian Companies Act 2001 and for no other purpose. We donot, in giving this opinion, accept or assume responsibility for any other purpose or to any otherperson to whom this report is shown or into whose hands it may come save where expressly agreed byour prior consent in writing.

PricewaterhouseCoopers Beesoo, licensed by FRC

26 September 2017


STATEMENT OF FINANCIAL POSITION AS AT JUNE 30, 2017

ASSETSCash and cash equivalentsDeposits with financial institutionsNet lease receivablesPlant and equipmentIntangible assetsCurrent tax assetsOther assetsTotal assets

LIABILITIESDeposits from customersBorrowingsShareholders loanCurrent tax liabilitiesDeferred tax liabilitiesProposed dividendsOther liabilitiesTotal liabilities

SHAREHOLDER’S EQUITYShare capitalGeneral risk reserveStatutory reserveRetained earningsTotal equity

Total equity and liabifities

15161718192920

266,433,450107,315,274

3,645,303,619456,164,393

5,783,1462,868,844

84,290,6824,568,159,408

Notes

30101112131814

2015Rs

2017Rs

284,000,203220,802,804

3,792,741,571600,288,46230,077,916

62,143,1834,990,054q139

2016Rs

139,506,742212,641,365

3,879,704,918472,696,227

33,833,735

54,729,3914,793,112,378

3,801,998,230 3,440,297,205 2,980,873,749562,294,258 787,158,118 1,085,771,865105,571,251 102,584,115 56,392,671

296,181 2,414,423 -

21,903,197 24,648,328 19,503,684- 50,000,000 55,000,000

105,161,754 39,112,929 25,544,7534,597,224,871 4,446,215,118 4,223,086,722

200,000,000 200,000,000 200,000,00019,657,776 19,657,776 14,642,00086,144,034 79,254,260 71,480,57487,027,458 47,985,224 58,950,112

392,829,268 346,897,260 345,072,686

4,990,054,139 4,793,112,378 4,568,159,408

21

These financial statements have been approved for issue26 SEP 2017 and signed on its behalf by:

Direcr

by the Board of Directors on

The notes on pages 37 to 78 form an integral part of these fmancial statements.


STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME - YEARENDEDJUNE3O,2017

Operating lease incomeProcessing feesOther operating income

Operating income

Net impairment of financial assets 24Personnel expenses 25Loss on disposal of assets 26Depreciation and amortisation 12 & 13Other expenses 27

Profit before exceptional itemExceptional itemProfit before taxIncome tax expense _____________________________________________

Profit for the year

Other comprehensive incomeTotal comprehensive incomefor the year

Interest incomeInterest expenseNet interest income

Notes

22

23

2017 2016 2015Rs Rs Rs

297,296,204 304,667,846 284,146,003(206,549,800) (210,264,400) (188,363,529)

90,746,404 94,403,446 95,782.474

155,115,678 134,147,957 110,278,7239,995,888 7,500,878 8,554,930

22,080,864 9,413,833 6,659,708187,192,430 151,062,668 125,493,361

277,938,834 245,466,114 221,275,835

(42,792,687) (17,145,232) (7,049,775)(28,567,013) (25,290,621) (22,253,674)(7,439,117) (2,873,391) (2,376,197)

(121,365,188) (109,284,098) (84,066,629)(27,178,417) (14,311,436) (14,798,291)

50,596,412 76,561,336 90,731,269- (10,466,817) -

50,596,412 66,094,519 90,731,269(4,664,404) (14,269,945) (14,832,838)

45,932,008 51,824,574 75,898,431

45,932,008 51,824,574 75,898,431

28

18

The notes on pages 37 to 78 form an integral part of these financial statements.


STATEMENT OF CHANGES IN EQUITY -~ YEAR ENDED, JUNE 30, 2017

Balance at July 1, 2014Profit and total comprehensive income for the yearTransactions wit/i owner oft/ic company:- Dividends

Statutory appropriations of retained earningsBalance at June 30, 2015

Balance at July 1, 2015Profit and total comprehensive income for the yearTransactions with owner oft/ic Company:- Dividends 29

Statutory appropriations of retained earnings

Balance at June 30, 2016

Balance at July 1, 2016Profit and total comprehensive income for the yearTransactions wit/i owner oft/ic Company:- Dividends

Statutory appropriations of retained earningsBalance at June 30, 2017

Rs Rs

(55,000,000)(16,026,765)58,950,112

15% of the profit after tax is transferred to the Statutory Reserve in compliance with the requirements of the Mauritian Banking Act 2004.

The General Risk Reserve consists of amounts set aside in respect of impairment of the lease portfolio, in addition to the specific and portfolio provision.

Note Share General risk Statutory Retainedcapital reserve reserve earnings

Rs Rs

200,000,000 10,000,000 60,095,809 54,078,446- - - 75,898,431

29

TotalRs

324,174,25575,898,431

(55,000,000)

345.072,686

- 4,642,000 11,384,765200,000,000 14,642,000 71,480,574

200,000,000 14,642,000 71,480,574 58,950,112 345,072,686- - - 51,824,574 51,824,574

- - - (50,000,000) (50,000,000)

- 5,015,776 7,773,686 (12,789,462) -

200,000,000 19,657,776 79,254,260 47,985,224 346,897,260

200,000~000 19,657,776 79,254,260 47,985,224 346,897,260- - - 45,932,008 45,932,008

- - 6,889,774 (6,889,774) -

200,000,000 19,657,776 86,144,034 87,027,458 392,829,268

29

The notes on pages 37 to 78 form an integral part of these financial statements.

Notes 2017

Rs.

Profit before tax

Adjustments for:

Loss/(profit) on disposal of plant and equipment

Loss on disposal of repossessed leased assets

Amortisation

Depreciation

Write off ofplant and equipment

Net impairment of financial assets

Increase in interest receivable

Increase/(Decrease) in interest payable

(Jncrease)!Decrease in other assets

Increase/(Decrease) in other liabilities

Changes in operating assets and liabilities:

- net increase/(decrease) in investment in leases

- net increase in deposits

Cash generated from operations

Tax paid

Tax refund

Net cash generated from! (used in) operating activities

Cash flows from investing activities

Deposits with financial institutions

Proceeds from financial institutions

Proceeds from sale of repossessed leased assets

Proceeds from sale of plant and equipment

Purchase of intangible assets

Purchase of plant and equipment

Net cash used in investing activities

Cash flows from financing activities

Dividends paid

Payments on long term borrowings

Proceeds from long term borrowings

Proceeds from shareholders loan

Payments from short term borrowings

Proceeds from short term borrowings

Net cash (used in)/generated from fmancing activities

Increase/(decrease) in cash and cash equivalents

Movement in cash and cash equivalents

At July 1,

Increase! (Decrease)

At June 30, 30

26 1,203,656

26 6,235,461

13 4,000,602

12 117,364,586


STATEMENT OF CASH FLOWS - YEAR ENDED, JUNE 30, 2017

2016

Rs.

2015

Rs.

50,596,412 66,094,519 90,731,269

(44,378)

2.917,769

6,400,957

102,883,141

10,466,817

17,145,232

(5,326,091)

(3,808,556)

17,704,391

13,568,173

(251,546,530)

459,423,456

435,878,900

(6,305,781)

2,463,747

432,036,866

24 42,792,687

(8,161,439)

2,987,136

(30,916,701)

66,048,825

44,170,660

361,701,025

658,022,910

18 (9,527,777)

18 -

648,495,133

(1,290,202)

3.666,399

1,414,300

82,652,329

7,049,775

(3,026,026)

1,653,176

(41,975,949)

(4,513,533)

(381,021,669)

179,257,337

(65,402,794)

(17,155,795)

(82,558,589)

13

12

- (100,000,000) -

- - 150,000,000

17,267,447 8,939,131 8,826,087

39,444,073 39,432,767 51,127,890

(244,783) (34,451,546) (2,112,091)

(285,604,550) (169,270,181) (265,992,242)

(229,137,813) (255,349,829) (58,150,356)

(50,000,000) (55,000,000) (55,000,000)

(266,493,141) (266,276,130) (234,830,761)

41,629,282 118,493,639 480,169,925

- 50,000,000 -

450,000,000 (150,000,000) -

(450,000,000) - 150,000,000

(274,863,859) (302,782,491) 340,339,164

144,493,461 (126,095,454) 199,630,219

139,506,742 265,602,196 65,971,977

144,493,461 (126,095,454) 199,630,219

284,000,203 139,506,742 265,602,196

The notes on pages 37 to 78 form an integral part of these fmancial statements.


NOTES TO THE FINANCIAL STATEMENTS - YEAR ENDED JUNE 30, 2017

REPORflNG ENTITY

Finlease Company Limited (the “Company”) is a limited liability company domiciled and incorporatedin Mauritius in August 1994. The activities of the Company consist mainly in providing leases forequipment and motor vehicles and deposit taking.

The address of its registered office is 9-15 Sir William Newton Street, Port-Louis.

These fmancial statements will be submitted for consideration and approval at the forthcoming AnnualMeeting of the shareholder of the Company.

2. BASIS OF ACCOUNTNG

The Company’s fmancial statements have been prepared in accordance with International FinancialReporting Standards and in compliance with the requirements of the Mauritian Companies Act 2001,Mauritian Banking Act 2004 and Guidelines and Guidance Notes issued by the Bank of Mauritius, inso far as the operations of the Company are concerned.

3. FUNCTIONAL AND PRESENTATION CURRENCY

The fmancial statements are presented in Mauritian Rupees (Rs) which is the Company’s functionalcurrency.

4. BASIS OF MEASUREMENT

The fmancial statements have been prepared on a historical cost basis.

(a) New and amended standards adopted by the Company

No new standards, amendments and interpretations to standards that became effective for annual periodsbeginningl January 2017 have a material impact on the Company’s financial statements.

(b) New and amended standards not yet adopted by the Company

Certain new accounting standard and interpretations have been published that are not mandatory for 30June 2017 reporting periods and have not been early adopted by the Company. None of these is expectedto have a significant impact on the fmancial statements, expect for the standard set out below:


NOTES TO THE FINANCIAL STATEMENTS - YEAR ENDED JUNE 30, 2017(CONTINUED)

4. BASIS OF MEASUREMENT (Continued)

(b) New and amended standards not yet adopted by the company (Continuec~)

(i) IFRS 9 Financial Instruments (effective as from 1 January 2018)

IFRS 9 Financial Instruments (“IFRS 9”) addresses the classification, measurement and derecognitionof financial assets and liabilities, introduces new rules for hedge accounting and a new impairmentmodel for financial assets. It replaces the guidance in lAS 39 that relates to the classification andmeasurement of financial instruments.

It replaces the guidance in lAS 39 that relates to the classification and measurement of fmancialinstruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primarymeasurement categories for fmancial assets: amortised cost, fair value through other comprehensiveincome and fair value through profit or loss. The basis of classification depends on the entity’s businessmodel and the contractual cash flow characteristics of the financial asset. Investments in equityinstruments are required to be measured at fair value through profit or loss with the irrevocable optionat inception to present changes in fair value in other comprehensive income and not recycling.

The new impairment model, under IFRS 9, requires the recognition of impairment provisions based onexpected credit losses (ECL) rather than only incurred credit losses as is the case under lAS 39. Itapplies to fmancial assets classified at amortised cost, debt instruments measured at FVOCI, contractassets under IFRS 15 Revenue from Contracts with Customers, lease receivables, lease commitmentsand certain fmancial guarantee contracts.

The classification and measurement and impairment requirements are applied retrospectively byadjusting the opening statement of financial position at the date of initial application, with norequirement to restate comparative periods.

The Company is not expecting any significant impact on its statement of financial position except forthe effect of applying the impairment requirements of IFRS 9. The directors are currently assessing theimpact of IFRS 9 for the Company’s fmancial statements.



5. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied to all the years presented in the financialstatements and have been applied consistently by the Company.

(a) Foreign currency translation

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates at thedates of the transactions. Foreign exchange gains and losses resulting from the settlement of suchtransactions and from the translation of monetary assets and liabilities denominated in foreigncurrencies at year end exchange rates are generally recognised in profit or loss.

Non-monetary items that are measured at fair value in a foreign currency are translated using theexchange rates at the date when the fair value was determined. Translation differences on assets andliabilities carried at fair value are reported as part of the fair value gain or loss.

(b) Financial assets

(i) Classification and measurement

Financial assets are recognised in the Company’s statement of financial position when the Companyhas become party to the contractual provisions of the financial instrument.

The Company classifies its fmancial assets, consisting mainly of cash and cash equivalents, fixeddeposits, leases and other assets as loans and receivables. The Company does not have any financialassets classified in the other lAS 39 categories of financial assets.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that arenot quoted in an active market other than:

a. those that the Company intends to sell immediately or in the short term, which are classified asheld for trading, and those that the Company upon initial recognition designates as at fair valuethrough profit or loss;

b. those that the Company upon initial recognition designates as available-for-sale and;c. those for which the holder may not recover substantially all of its initial investment, other than

because of credit deterioration.

This classification depends on the purpose for which the fmancial assets were acquired. Managementdetermines the classification of its financial assets at initial recognition and re-evaluates this designationat the end of every reporting period.

Loans and receivables are initially recognised at fair value — which is the cash consideration to originateor purchase the loan including any transaction costs — and measured subsequently at amortised costusing the effective interest method.



5. SIGNIFICANT ACCOUNTING POLICIES (Continued)

(b) Financial assets (Continued)

(ii) Recognition and derecognition offinancial assets

Regular purchases or sales of financial assets are recognised on the trade date on which the Companycommits to purchase or sell the asset. The Company’s loans and receivables are initially recognised atfair value - which is the cash consideration to originate or purchase the loan - plus transaction costs.They are derecognised when the rights to receive cash flows from the fmancial assets have expired orhave been transferred and the Company has transferred substantially all risk and rewards of ownership.

(iii) Impairment offinancial assets (~ca1Tied at ainortised cost)

The Company assesses at the end of each reporting period whether there is objective evidence that afinancial asset or group of financial assets is impaired. A financial asset or a group of financial assetsis impaired and impairment losses are incurred if, and only if, there is objective evidence of impairmentas a result of one or more events that occurred after the initial recognition of the asset (a “loss event”)and that loss event (or events) has an impact on the estimated future cash flows of the financial asset orgroup of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencingsignificant financial difficulty, default or delinquency in interest or principal payments, the probabilitythat they will enter bankruptcy or other financial reorganisation, and where observable data indicatethat there is a measurable decrease in the estimated future cash flows, such as changes in arrears oreconomic conditions that correlate with defaults.

The criteria that the Company uses to determine that there is objective evidence of an impairment lossinclude:

• Significant financial difficulty of the issuer or the obliger;• a breach of contract, such as a default or delinquency in interest or principal payments;• Significant cash flow or financial difficulties experienced by the borrower (for example, equity

ratio, net income percentage of sales);• Breach of lease agreements or conditions;• The lender for economic or legal reasons relating to the borrower’s financial difficulty, granting

to the borrower a concession that the lender would not otherwise consider;• Initiation of bankruptcy proceedings by the borrower;• Deterioration of the borrower’s competitive position;• Deterioration in the value of collateral; and• Observable data indicating that there is a reasonable decrease in the estimated future cash flows

from a portfolio of financial assets since the initial recognition of those assets, although thedecrease cannot yet be identified with the individual financial assets in the portfolio, including:

- Adverse change in the payment status of borrowers in the portfolio; and- Natural or local economic conditions that correlate with defaults in the assets of that portfolio.

For loans and receivables category, the amount of the loss is measured as the difference between theasset’s carrying amount and the present value of estimated future cash flows (excluding future creditlosses that have not been incurred) discounted at the financial asset’s original effective interest rate. Thecarrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss.

l


NOTES TO TIlE FINANCIAL STATEMENTS - YEAR ENDED JUNE 30, 2017(CONTINUED)

5. SIGNIFICANT ACCOUNTiNG POLICIES (Continued)

(bY) Financial assets (Continued)

(‘iii,) Impairment offinancial assets (carried at amortised cost,) (Continued)

Leases to customers

The Company first assesses whether objective evidence of impairment exists individually for financialassets that are individually significant, and individually or collectively for fmancial assets that are notindividually significant. If the Company determines that no objective evidence of impainnent existsfor an individually assessed fmancial asset, whether significant or not, it includes the asset in a groupof fmancial assets with similar credit risk characteristics and collectively assesses them for impainnent.Assets that are individually assessed for impainnent and for which an impairment loss is or continuesto be recognised are not included in a collective assessment of impairment.

An allowance for impairment is established if there is objective evidence that the Company will not beable to collect the amount due according to the original contractual terms of the lease. The amount ofimpairment loss on loans and receivables, comprising mainly of fmancial leases to customers carried atamortised cost is the difference between the asset’s carrying amount and the present value of estimatedfuture cash flows (excluding future credit losses that have not been incurred) discounted at the fmancialasset’s original effective interest rate. The carrying amount of the asset is reduced through the use ofan allowance account and the amount of the loss is recognised in the statement of profit or loss andother comprehensive income.

The calculation of present value of the estimated future cash flows of a collateralised fmancial assetreflects the cash flows that may result from foreclosure less costs for obtaining or selling the collateral,whether or not foreclosure is probable.

For the purposes of a collective evaluation of impairment, fmancial assets are grouped on the basis ofsimilar credit risk characteristics (e.g. by sector). Those characteristics are relevant to the estimation offuture cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amountsdue according to the contractual terms of the assets being evaluated.

Future cash flows in a group of fmancial assets that are collectively evaluated for impairment areestimated on the basis of the contractual cash flows of the assets in the group and historical lossexperience for assets with credit risk characteristics similar to those in the group. Historical lossexperience is adjusted on the basis of current observable data to reflect the effects of current conditionsthat did not affect the period on which the historical loss experience is based and to remove the effectsof conditions in the historical period that do not currently exist.

Under the Company of Mauritius Guideline on Credit Impairment Measurement and IncomeRecognition, collective impairment provision shall not be less than one percent of aggregate amount ofportfolio assessed leases except if dispensed by the Bank of Mauritius.

When a lease is uncollectible, it is written off against the related provision for lease impairment. Suchleases are written off after all the necessary procedures have been completed and the amount of the losshas been determined. Subsequent recoveries of amounts previously written off decrease the amount ofthe provision for leases impairment in the statement of comprehensive income.




(b) Financial assets (Continued)

(iii) Impairment offinancial assets (carried at amortised cost) (Continued,)

Leases to customers (Continued,)

The Bank of Mauritius Guideline on Credit Impairment Measurement and Income Recognition,effective as from lS~ July 2016, also directs fmancial institutions to stand guided by the followingminimum requirements with regards to classification and assessment of credit impairment:

Classified Credits Specific Provisioning Requirement

(i) Sub-standard Credit 20 per cent of (outstanding amount of credit less anynet realisable value of applicable collateral)

Credit that is currently performing but hasweaknesses that throw doubt on the customer’sability to comply with the terms and conditionsof the credit, may warrant to be classified as substandard. However, when it is impaired and ispast due between 90 and 180 days, it must, as aminimum, be classified as sub-standard.

(ii) Doubtful Credit 50 per cent of (outstanding amount of credit less anynet realisable value of applicable collateral)

Credit that is not in arrears or in arrears for lessthan 180 days, but has weaknesses that makecollection in full highly improbable, may warrantto be classified as doubtful. However, when it isimpaired and is past due for a period exceeding180 days but less than one year, it must, as aminimum, be classified as doubtful.

(iii) Loss 100 per cent of (outstanding amount of credit lessany net realisable value of applicable collateral)

Credit classified as loss and uncollectiblealthough there may be some salvage or recoveryvalue of security available. Such credit shouldnot be kept on the books of the fmancialinstitution for the reason that there might be somerecoveries in the long term. An impaired creditthat is past due in excess of a year, must beclassified as loss.

Statutory and other regulatory loan loss reserve requirements that exceed the amounts to be providedunder lAS 39 are dealt with in the general risk reserve as an appropriation of retained earnings.




(c) Cash and cash equivalents

Cash and cash equivalents are items which are readily convertible to known amounts of cash and whichare subject to an insignificant risk of changes in value.

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cashon hand, deposits held at call with financial institutions, and bank overdrafts. Bank overdrafts are shownwithin borrowings in the statement of financial position.

(d) Leases

Operating leases — Company acting as the Lessor

Assets leased out under operating leases are included in plant and equipment in the statement offinancial position.

A lease is classified as an operating lease if it does not transfer substantially all the risks and rewardsincidental to ownership.

Assets classified as operating leases are depreciated over their useful lives on a basis consistent withsimilar fixed assets.

Finance leases — (‘ompany acting as the Lessor

(i) Recognition and initial measurement

Assets held under finance leases are derecognised, and a receivable is recognised in the statement offinancial position at an amount equal to the net investment in the lease.

Under a fmance lease, substantially all the risks and rewards incidental to legal ownership aretransferred by the Company, and thus the lease payment receivable is treated by the Company asrepayment of principal and interest income to reimburse and reward the lessor for its investment andservices.

Initial direct costs such as commissions, legal fees and internal costs that are incremental and directlyattributable to negotiating and arranging a lease, but excluding general overheads, are included in theinitial measurement of the finance lease receivable and reduce the amount of income recognised overthe lease term. The interest rate implicit in the lease is defmed in such a way that the initial direct costsare included automatically in the finance lease receivable; there is no need to add them separately.

(ii) Subsequent measurement

The recognition of interest income shall be based on a pattern reflecting a constant periodic rate ofreturn on the lessor’s net investment in the fmance lease.

The Company aims to allocate interest income over the lease term on a systematic and rational basis.This income allocation is based on a pattern reflecting a constant periodic return on the Company’sfinance lease receivable.




(d) Leases (Continued)

Finance leases — Company acting as the Lessor (Continued)

(‘ii,) Subsequent measurement (Continued)

Lease repayments relating to the period, excluding cost for services, are applied against the grossinvestment in the lease to reduce both the principal and the unearned fmance income.

Estimated unguaranteed residual values used in computing the Company’s gross investment in a leaseare reviewed regularly. If there has been a reduction in the estimated unguaranteed residual value, theincome allocation over the lease is revised any reduction in respect of amounts accrued is recognisedimmediately.

Repossessed assets

Assets repossessed from non-performing clients pending disposals are stated at their net realizablevalue.

(e) Plant and equipment

(‘0 Recognition and measurement

Items of plant and equipment are measured at cost less accumulated depreciation and any accumulatedimpairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset.

If significant parts of an item ofplant and equipment have different useful lives, then they are accountedfor as separate items (major components) of equipment.

Any gain or loss on disposal of an item of plant and equipment (calculated as the difference betweenthe net proceeds from disposal and the carrying amount of the item) is recognised in the statement ofprofit or loss and other comprehensive income.

When the carrying amount of an asset is greater than its estimated recoverable amount, it is writtendown immediately to its recoverable amount.

(ii) Subsequent costs

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, asappropriate, only when it is probable that future economic benefits associated with the item will flowto the Company and the cost of the item can be measured reliably. The carrying amount of anycomponent accounted for as a separate asset is derecognised when replaced. All other repairs andmaintenance are charged to profit or loss during the reporting period in which they are incurred.




(e) Plant and equipment (Continued)

(iii) Depreciation

Depreciation is calculated to write off the cost of items of equipment less their estimated residual valuesusing the straight-line method over their estimated useful lives, and is recognised in profit or loss.

The estimated useful lives of significant equipment are as follows:

Office equipment 5 yearsComputer equipment 3 yearsFurniture & Fittings 5 yearsMotor vehicles 5 — 7 yearsPlant and equipment 3 — 7 years

Depreciation methods, useful lives and residual values are reviewed at the end of each reporting periodand adjusted if appropriate.

(iv) Assets under operating leases

Assets under operating leases are depreciated over their expected useful lives net of any residual value.

i~f? Intangible assets

Software

Acquired computer software licences are capitalised on the basis of costs incurred to acquire and bringto use the specific software. These costs are amortised over their estimated useful lives of 3 to 10 years.

Costs associated with maintaining soffivare programmes are recognised as an expense as incurred.Development costs that are directly attributable to the design and testing of identifiable and uniquesoftware products controlled by the group are recognised as intangible assets when the following criteriaare met:

• it is technically feasible to complete the software so that it will be available for use;• management intends to complete the software and use or sell it;• there is an ability to use or sell the software;• it can be demonstrated how the software will generate probable future economic benefits;• adequate technical, fmancial and other resources to complete the development and to use or sell

the software are available, and• the expenditure attributable to the software during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software include employee costs and anappropriate portion of relevant overheads. Other development expenditure that does not meet thesecriteria are recognised as an expense and are not recognised as an asset in a subsequent year.

Capitalised development costs are recorded as intangible assets and amortised from the point at whichthe asset is ready for use. Amortisation methods, useful lives and residual values are reviewed at eachreporting date and adjusted if appropriate.




(g) Impairment ofnon-financial assets

Assets that have an indefmite useful life are not subject to amortisation and are tested annually forimpairment. Assets that are subject to amortisation are reviewed for impairment whenever events orchanges in circumstances indicate that the carrying amount may not be recoverable. An impairment lossis recognised in profit or loss for the amount by which the asset’s carrying amount exceeds itsrecoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell andvalue in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for whichthere are separately identifiable cash flows (cash generating units).

Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairmentat the end of each reporting period.

(Ii) Income tax

(i) Cul7ent tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enactedat the end of the reporting period. The directors periodically evaluate positions taken in tax returns withrespect to situations in which applicable tax regulation is subject to interpretation. It establishesprovisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

(ii) Deferred tax

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assetsand liabilities for fmancial reporting purposes and the amounts used for taxation purposes. Deferred taxis not recognised for temporary differences on the initial recognition of assets and liabilities in atransaction that is not a business combination and that affects neither accounting nor taxable profit orloss.

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporarydifferences to the extent that it is probable that future taxable profits will be available against whichthey can be used. Deferred tax assets are reviewed at the end of each reporting period and are reducedto the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences whenthey reverse, using tax rates enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current taxliabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity,or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis ortheir tax assets and liabilities will be realised simultaneously.




(7i) Income tax (Continued)

(iii) Other tax exposures

In line with the defmition within the Income Tax Act 1995, Corporate Social Responsibility (CSR) isregarded as a tax and is therefore subsumed with the income tax shown within profit or loss and theincome tax liability on the statement of fmancial position.

The Corporate Social Responsibility (CSR) charge for the current period is measured at the amountexpected to be paid to the Mauritian Tax Authorities.

The Company is subject to the Advanced Payment System (APS) whereby it pays income tax on aquarterly basis.

(i) Financial liabilities

Financial liabilities carried at amortised cost consist mainly of deposits from customers, borrowings,shareholder’s loan and other liabilities. All fmancial liabilities are recognised initially at fair value andin the case of borrowings, net of transaction costs incurred.

They are subsequently stated at amortised cost; using the effective interest method. Gains and lossesare recognised in profit or loss when the liabilities are derecognised as well through the effective interestrate method (Em) amortisation process.

Financial liabilities are derecognised only when the obligation is discharged, cancelled or expired.

~) Deposits from customers

Deposits are received from individual and corporate clients. Deposits are repayable and derecognisedon demand or when the deposits come to maturity.

Deposits are initially measured at fair value and subsequently measured at amortised cost using theeffective interest rate method.

(k) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings aresubsequently carried at amortised cost; any difference between the proceeds (net of transaction costs)and the redemption value is recognised in profit or loss over the period of the borrowings using theeffective interest method.

Borrowing costs are recognised in the statement of profit or loss and other comprehensive income inthe period in which they occur.




~) Provisions

Provisions, including legal claims are recognised when: the Company has a present legal or constructiveobligation as a result of past events; it is probable that an outflow of resources will be required to settlethe obligation; and the amount has been reliably estimated. Provisions are not recognised for futureoperating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required insettlement is determined by considering the class of obligations as a whole. A provision is recognisedeven if the likelihood of an outflow with respect to any one item included in the same class of obligationsmay be small.

Provisions are measured at the present value of the expenditures expected to be required to settle theobligation using a pre-tax rate that reflects current market assessments of the time value of money andthe risks specific to the obligation. The increase in the provision due to passage of time is recognised asinterest expense.

~n~) Share Capital and Equity Reserves

Ordinary shares are classified as equity. As at 30 June 2017, the Company has Rs200 million as sharecapital, which is the minimum stated capital required as per Section 20(1) of the Mauritian Banicing Act2004.

The reserves recorded in equity in the Company’s statement of fmancial position include:

• Statutory reserve which represents 15% of the profit for the year which is transferred inaccordance with Section 21(1) of the Mauritian Banking Act 2004; and

• General Risk Reserve which comprises of amounts set aside to meet the Prudential Norms setout by the Bank of Mauritius Guideline on Credit Impairment Measurement and IncomeRecognition.

(ii) Dividends

Dividend distribution to the Company’s shareholder is recognised as a liability in the Company’sfinancial statements in the period in which the dividends are approved by the Company’s shareholder.

(o) Offsettingfinancial instruments

Financial assets and liabilities are offset and the net amount presented in the statement of fmancialposition when, and only when, the Company has a legal right to set off the amounts and intends eitherto settle on a net basis or realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted under IFRS, or for gains andlosses arising from a group of similar transactions.




(o) Revenue recognition

Finance lease income is recognised over the term of the lease using the net investment method, whichreflects a constant periodic rate ofretum on the net investment amount outstanding on the fmance leases.

Operating lease income is recognised over the term of the lease using the straight line method.

(q) Interest income and expense

Interest income is recognised using the effective interest method, taking account of the principaloutstanding and the effective rate over the period to maturity, when it is determined that such incomewill accrue to the Company.

The effective interest method is a method of calculating the amortised cost of a financial asset or afinancial liability and of allocating the interest income or interest expense over the relevant period. Theeffective interest rate is the rate that exactly discounts estimated future cash payments or receiptsthrough the expected life of the financial instrument or, when appropriate, a shorter period to the netcarrying amount of the fmancial asset or financial liability. When calculating the effective interest rate,the Company estimates cash flows considering all contractual terms of the financial instrument (forexample, prepayment options) but does not consider future credit losses.

The calculation includes all fees and points paid or received between parties to the contract that are anintegral part of the effective interest rate, transaction costs and all other premiums or discounts.

Once a financial asset or a group of similar financial assets has been written down as a result of animpairment loss, interest income is recognised using the rate of interest used to discount the future cashflows for the purpose of measuring the impairment loss.

(r) Processing fees

Processing fees are generally recognised on an accrual basis when the service has been provided. Leasecommitment fees for leases that are likely to be drawn down are deferred (together with related directcosts) and recognised as an adjustment to the effective interest rate on the lease.

(s) Employee benefits

(i) Pension benefits

The Company provides retirement benefits for its employees through a defined contribution plan whichis funded by contributions from the Company. Under the defined contribution plan, the Company hasno legal or constructive obligation to contribute further to what has been contributed into the fund asdefined in the rules of the scheme. Pension contributions are charged to the statement of comprehensiveincome in the year to which they relate. The Company has an obligation under the current labour lawsto pay a severance allowance on retirement of its employees and is allowed to deduct from thisseverance allowance up to five times the amount of any annual pension granted at retirement age fromthe said fund.




(s) Employee benefits (Continued)

(z) Pension benefits (Continued,)

The present value of the severance allowance payable under the Employment Rights Act 2008 iscalculated annually by independent actuaries using the projected unit credit method. The present valueof the severance allowance is determined by the estimated future cash outflows using a discount rate byreference to current interest rates and the yield on bonds and treasury bills and recent corporatedebenture issues. Where the present value of the severance allowance payable on retirement is greaterthan five years of pension payable under the pension plan, the additional severance allowance payableis recognised as a liability and disclosed as unfunded obligations under retirement benefits obligations.

(ii) State pension plan

Contributions to the National Pension Scheme are recognised in profit or loss in the period in whichthey fall due.

(I) Comparatives

Except when a standard or an interpretation permits or requires otherwise, all amounts are reported ordisclosed with comparative information. Where lAS 8 applies, comparative figures have been adjustedto conform with changes in presentation in the current year.

6. USE OF JUDGEMENTS AND ESTIMATES

In preparing the fmancial statements, the directors have made judgements, estimates and assumptionsthat affect the application of accounting policies and the reported amounts of assets, liabilities, incomeand expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates arerecognised prospectively.

(i) Judgements

In preparing the financial statements, the directors had to consider whether the significant risks andrewards of ownership are transferred to the lessees in determining whether the leases should beclassified as fmance or operating lease. The Board of Directors makes use of the guidance as set out inlAS 17 leases to classify leases between fmance and operating leases.



6. USE OF JUDGEMENTS AND ESTIMATES (Continued)

(ii) Assumption and estimation uncertainties

• Impairment losses on leases

The Company reviews its lease portfolio to assess impairment at least on a quarterly basis. Indetermining whether an impairment loss should be recorded in profit or loss, the Company makesjudgements as to whether there is any observable data indicating that there is a measurable decrease inthe estimated future cash flows from a portfolio of leases before the decrease can be identified with anindividual lease in that portfolio. This evidence may include observable data indicating that there hasbeen an adverse change in the payment status of lessees, or national or local economic conditions thatcorrelate with defaults on assets in the group.

The directors use estimates based on historical loss experience for assets with credit risk characteristicsand objective evidence of impairment similar to those in the portfolio when scheduling its future cashflows. The methodology and assumptions used for estimating both the amount and timing of futurecash flows are reviewed regularly to reduce any differences between loss estimates and actual lossexperienced.

To determine the amount of impairment losses on impaired leases, the directors take into account therecoverable amount of collaterals for impaired leases as determined by professional valuers. Impairedleases relate to leases that have instalments due for more than 3 months and that have been consideredin the specific provision for impairment losses on finance leases.

The directors estimate that a 0.1% change in lease loss rate will lead to a change in impairment ofRs 3.1 m (2016— Rs 4.Om). Management believes that a 0.1% shift in loss rate is adequate to determinethe sensitivity of impairment as a result of a change in loss rate.

• Asset lives, residual values and depreciation policies

Plant and equipment are depreciated over their useful lives taking into account residual values. Theactual lives of the assets and residual values are assessed annually and may vary depending on a numberof factors (maintenance, future market conditions, projected disposal values, etc.)

The directors make estimated based on historical experience and use best judgement to assess the usefullives of assets and to forecast the expected residual values of the assets at the end of their expecteduseful lives.

7. FINANCIAL RISK MANAGEMENT

Financial Risk Factors

The Company’s activities expose it to a variety of fmancial risks, including:

- Credit risk;— Interest rate risk;- Liquidity risk; and- Currency risk.

A description of the significant risk factors is given below together with the risk management policiesapplicable.



7. FINANCIAL RISK MANAGEMENT (Continued)

(a) Credit Risk

Credit risk is the risk of fmancial loss to the Company if a customer or counterparty to a fmancialinstrument fails to meet its contractual obligations, and arises principally from the Company’s trade andlease receivables. The amounts presented in the statement of fmancial position are net of allowancesfor impairment, estimated by management based on prior experience and the current economicenvironment.

The Company has policies in place to ensure that leases are granted to customers with appropriate credithistory. The Company has policies that limit the amount of credit exposure to any one financial position.

The Company has no significant concentration of credit risk, with exposure spread over a large numberof counterparties and customers.

Lease facilities to customers are monitored and the Company has policies in place to identify defaultsand recover amounts due. Leases granted are also effectively secured as the rights to the leased assetsrevert to the lessor in the event of default. The maximum exposure to credit risk at the reporting date isthe fair value of the receivables. Specific provision and portfolio provision comply with requirementsof the Bank of Mauritius.

(i) Impairment assessment

The main considerations for impairment assessment include whether any payments of principal orinterest is overdue by more than 90 days or there are any known difficulties in the cash flows ofcounterparties or infringements of original terms of contract.

The Company carries out both specific and collective impairment assessments.

SpecifIc assessment

The Company determines the allowances appropriate for each specifically identified lease on anindividual basis. Items considered when determining allowance amounts include the ability of thecounterparty to meet any repayment plans, availability of future cash flows, the net realisable value ofcollateral and the timing of the expected cash flows. Impairment losses are evaluated at each quarterend.

The Company has complied with the requirements laid out by the Bank of Mauritius Guideline onCredit Impairment Measurement and Income Recognition in making its specific assessment.

Collective assessment

Allowances are assessed collectively for losses on leases where there is not yet objective evidence ofindividual impairment. Impairment losses are estimated by taking into consideration the followinginformation amongst others: historical losses on the portfolio and current economic conditions.

The portfolio provision for credit losses in respect of fmance leases is 1% of the exposure in leases,excluding those leases individually impaired.



7 FINANCIAL RISK MANAGEMENT (Continued)

(a) Credit Risk (Continued)

(ii) Analysis of credit quality

Leases are summarised as follows:2017 2016 2015

Rs Rs RsNeitherpast due nor impaired 3,669,378,265 3,760,516,129 3,507,815,217Past due but not impaired 85,953,249 71,120,760 110,681,546Impaired 125,438,549 103,210,668 66,402,074Gross 3,880,770,063 3,934,847,557 3,684,898,837Less allowance for impairmentPortfolio allowance (37,841,233) (37,643,000) (30,891,610)Individual allowance (50,187,259) (17,499,638) (8,703,608)Net lease receivables 3,792,741,571 3,879,704,919 3,645,303,619

Leases past due but not impaired

These are leases where contractual payments are past due but the Company believes that impairment isnot appropriate on the basis of the level of security/collateral available and] or the stage of collection ofamounts owed to the Company.

Gross amount of leases that were past due but not impaired were as follows:

2017 2016 2015Rs Rs Rs

LeasesUp to 3 months 35,618,004 21,757,249 24,576,706Over 3 months and up to 6 months 29,586,647 33,219,473 53,475,621Over 6 months and up to 1 year 6,399,180 9,563,915 32,629,219Over 1 year 14,349,418 6,580,123 -

Total 85,953,249 71,120,760 110,679,546

Impaired leases

Impaired leases are those leases for which the Company determines that it is probable that it will beunable to collect all principal and interest due according to the contractual terms of the leaseagreement(s).

The table below shows the gross amount of non-performing leases.

2017 2016 2015Rs Rs Rs

LeasesGross Amount 125,438,549 103,210,668 66,402,073Individual allowance 50,187,258 17,499,638 8,703,608





(ii) Analysis of credit quality (Continued)

Write-offpolicy

The Company writes off a lease balance (and any related allowances for impairment losses) when theCompany’s management determines that the leases are uncollectible. This determination is reachedafter considering information such as the occurrence of significant changes in the borrower/issuer’sfmancial position such that the borrower/issuer can no longer pay the obligation, or that proceeds fromcollateral will not be sufficient to pay back the entire exposure. For smaller leases, charge off decisionsgenerally are based on a product specific past due status.

The Company also holds fixed and floating charges on assets for exposures. For the vast majority ofleases, the underlying collateral is the leased asset itself, i.e. theleased equipment and vehicles. Thelease facilities are effectively secured as the rights to the leased asset revert to the lessor in the event ofdefault.

Estimates of fair value are based on the value of collateral assessed at the time of borrowing, andgenerally are updated every year when a lease is individually assessed as impaired.

Finance leases restructured

The table below shows the carrying amount for restructured leases:

Finance leases 8,014,470

The Company has complied with the requirements of the Bank of Mauritius Guideline on CreditImpairment Measurement and Income Recognition for the treatment of its restructured facilities.

Repossessed assets

Collaterals on finance leases repossessed during the year were as follows:

VehiclesEquipment ______________________________________________

2017Rs

2016Rs

2015Rs

274,605

2017 2016 2015Rs Rs Rs

11,340,000 10,935,000 10,100,000

11,340,000 10,935,000 10,100,000

These repossessed collaterals are sold to third parties to recover the investment in the leases.



7 FINANCIAL RISK MANAGEMENT (CONTINUED)


(iii) Maximum exposure to credit risk before collateral and other credit enhancements

The following table presents the maximum exposure at 30 June 2017, 2016 and 2015 to credit risk onfinancial instruments in the statement of fmancial position, before taking account of any collateral heldor other credit enhancements after allowance for impairment and netting where appropriate.

Maximum exposure2017 2016 2015

Rs Rs Rs

Cash and cash equivalents 284,000,203 139,506,742 266,433,450Deposits with Financial Institutions 220,802,804 212,641,365 107,315,274Lease Receivables 3,792,741,571 3,879,704,918 3,645,303,619Other assets 45,522,805 54,729,391 84,290,682

4,343,067,383 4,286,582,416 4,103,343,025

For financial assets recognised in the statement of financial position, the exposure to credit risk equalstheir carrying amount. Other assets exclude prepayments and VAT receivable amounting toRs.16,620,378 (2016 and 2015: nil).

Credit risk from balances with banics and financial institutions is considered negligible, since thecounterparty is The Mauritius Commercial Bank, which is a reputable bank with high quality externalcredit rating.

(iv) Concentration of Credit Risk

Please refer to Section 3 on page 25 and tables on page 64-66.

(b) Interest rate risk

Interest rate risk is the risk that a movement in interest rates will have a significant adverse effect onthe financial condition of the Company. This is controlled by ensuring that there are no mismatches orgaps in amounts of fmancial assets and fmancial liabilities.

The principal source of funding of the Company is from fixed deposits by the public, whereby themajority of same bears fixed interest rate. On the other hand, the majority of leases granted by theCompany are also at fixed rate hence ensuring a constant differential. Very few contracts are on variableterms. Therefore the Company is not significantly exposed to interest rate risk.

(c) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associatedwith its financial liabilities that are settled by delivery of cash or another financial asset.

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, theavailability of funding and the ability to close out market positions.



7 FINANCIAL RISK MANAGEMENT (CONTINUED)

(c) Liquidity risk (Continued)

Management monitors rolling forecasts of the company’s liquidity reserve on the basis of expected cashflow and does not foresee any major liquidity risk over the next two years.

The tables on the next pages present the cash flows payable by the Company under fmancial liabilitiesby remaining contractual maturities at the end of the reporting period.

The amounts disclosed in the tables are the contractual undiscounted cash flows of all fmancialliabilities and fmancial assets.

The objective of liquidity management is to ensure that funds are available or there is assurance of theavailability of funds, to honour the Company’s cash flow commitments as they fall due, including offbalance sheet outflow commitments in a timely and cost effective manner.

Liquid assets equivalent to not less than 10 per cent of deposit liabilities are maintained at all times.This is monitored continually and a weekly return of liquid assets and deposits is submitted to the Bankof Mauritius. The Company has complied with this requirement at 30 June 2017.


NOTES TO THE FINANCIAL STATEMENTS - YEAR ENDED JUNE 30, 2017 (CONTINUED)



At 30 June 2017AssetsCash and cash equivalentsDeposits with financial institutionsNet Lease ReceivablesOther assetsTotal assets

LiabilitiesDeposits from customersBorrowingsShareholder’s LoanOther liabilitiesTotal liabifitiesNet liquidity gap

Up to 1Month

Rs

284,000,203

132,176,31645,522,805

461,699,324

259,794,385 381,969,296

6—12 1—3months years

Rs Rs

Over3 years Total

Rs Rs

- 284,000,203245,887,500

4,368,578,44745,522,805

4.943,988,955

1—3 3—6months months

Rs Rs

- 186,150,000703,027,739 2,118,837,779

59,737,500772,772,932

259,794,385 381,969,296 703,027,739 2,304,987,779 832,510,432

215,318,071 92,767,708 153,573,496 314,620,790 918,133,496 2,607,235,692 4,301,649,25322,890,853 67,854,246 66,193,583 107,373,385 292,126,987 25,755,404 582,194,458

- - 1,662,500 - 19,367,671 128,729,555 149,759,726105,161,754 - - - - - 105,161,754343,370,678 160,621,954 221,429,579 421,994,175 1,229,628,154 2,761,720,651 5,138,765,191118,328,646 99,172,431 160,539,717 281,033,564 1,075,359,625 (1,929,210,219) (194,776,236)


NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2017 (CONTINUED)



279,434,198 370,650,963 695,588,292 1,894,682,744 1,297,754,920

160,885,340 110,165,443 103,932,526 326,918,275 1,301,046,754 1,437,348,867 3,440,297,20523,719,243 69,379,173 66,581,434 110,095,697 449,968,705 101,791,446 821,535,698

- - 2,268,288 - 19,367,671 128,729,555 150,365,51487,664,216 - - - - 87,664,216

272,268,799 179,544,616 172,782,248 437,013,972 1,770,383,130 1,667,869,868 4,499,862,63352,182,365 99,889,582 197,858,715 258,574,320 124,299,614 (370,114,948) 362,689,648

Up to 1Month

At3OJune2Ol6 RsAssets

1—3months

Rs

279,434,198

3—6months

Rs

370,650,963

139,506,742

130,215,03154,729,391

324,451,164

Cash and cash equivalentsDeposits with financial institutionsNet Lease ReceivablesOther assetsTotal assets

LiabilitiesDeposits from customersBorrowingsShareholder’s LoanOther liabilitiesTotal liabilitiesNet liquidity gap

6— 12months

Rs

695,588,292

1—3years

Rs

121,912,3291,772,770,415

Over3 years

Rs

117,532,4111,180,222,509

TotalRs

139,506,742239,444,740

4,428,871,40854,729,391

4,862,552,281


NOTES TO THE FINANCIAL STATEMENTS - YEAR ENDED JUNE 30, 2017 (CONTINUED)



At3OJune2Ol5AssetsCash and cash equivalentsDeposits with financial institutionsNet Lease ReceivablesOther assetsTotal assets

LiabilitiesDeposits from customersBorrowingsShareholder’s LoanOther liabilitiesTotal liabilities

266,433,450

132,712,08084,290,682

483,436,212

TotalRs

266,433,450127,000,000

4,157,099,40284,290,682

4,634,823,534

Uptol 1—3 3—6 6—12 1—3 OverMonth months months months years 3 years

Rs Rs Rs Rs Rs Rs

- - - - 127,000,000255,238,524 350,161,957 651,309,800 1,984,542,195 783,134,846

255,238,524 350,161,957 651,309,800 1,984,542,195 910,134,846

291,517,549 410,304,143 273,000,408 530,687,049 1,270,630,625 204,733,976 2,980,873,750179,007,738 71,849,125 68,544,478 109,845,755 469,701,235 232,802,375 1,131,750,706

- - 1,455,616 1,061,267 11,027,158 58,313,664 71,857,70566,140,755 - - - - - 66,140,755

536,666,042 482,153,268 343,000,502 641,594,071 1,751,359,018 495,850,015 4,250,622,915(53,229,830) (226,914,744) 7,161,455 9,715,729 233,183,177 414,284,831 384,200,619Net liquidity gap




(d) Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuatebecause of changes in foreign exchange rates. The Company is exposed to foreign currency risk as itdoes hold fmancial assets or financial liabilities that are denominated in foreign currency.

The Company’s foreign currency profile is as follows:2017

EURO GBP USDRs Rs Rs

AssetsBank balances 6,195,356 1,805 6,791,142Net lease receivables 145,689,434 - 251,051,502

151,884,790 1,805 257,842,644LiabifitiesOther liabilities - - 464,507Borrowings 152,453,143 - 246,196,400

152,453,143 - 246,660,907

2016Assets EURO GBP USD

Rs Rs Rs

Bank balances 4,609,074 3,677 -

Net lease receivables 215,113,110 - 306,171,364219,722,184 3,677 306,171,364

LiabilitiesOther liabilities 6,645,108 776 1,545,356Borrowings 221,603,923 - 306,153,832

228,249,031 776 307,699,188

2015Assets EURO GBP USD

Rs Rs Rs

Bankbalances - 2,583 4,166,039Net lease receivables 204,192,063 - 329,304,229

204,192,063 2,583 333,470,268LiabilitiesOther liabilities 587,510 719 429,818Borrowings 214,982,799 - 344,993,841

215,570,309 719 345,423,659

A 3% fluctuation in the exchange rate of EURO/GBP/USD against the rupee will have an impact ofRs.318k (2016: Rs.302k, 2015: Rs.700k) on the results of the Company. The Company borrows inforeign currency to grant foreign currency facilities. The risk of currency mismatch is thus notsignificant.



8 CAPITAL MANAGEMENT

The Company’s objectives when managing capital are:

- to comply with the capital requirements set by the Bank of Mauritius, which includemaintaining a minimum capital requirement of Rs.200m and respecting the required CapitalAdequacy Ratio (CAR) of 10%,

- to safeguard the Company’s ability to continue as a going concern so that it can continue toprovide returns for its shareholder and benefits for other stakeholders; and

- to maintain a strong capital base to support the development of its business.

In order to maintain the capital structure, the Company may adjust the amount of dividends paid toshareholders. There were no changes in the Company’s approach to capital risk management during theyear. The CAR of the Company at 30 June 2017 was 11.7% (2016: 10.5%).

The capital adequacy ratio is computed as follows:Rs’OOO

Total Capital 491,057Risk Weighted Assets (“RWA”) 4,237,095Capital adequacy ratio (Total Capital! RWA) 11.6%

Further details of the total capital and risk weighted assets are shown below:Rs’OOO

Tier 1Paid up capital 200,000Statutory Reserve 86,144Retained earnings 87,027Intangible assets (30,078)

Total Tier 1 Capital 343,093

Rs’000Tier 2General & portfolio Provision 52,964Subordinated debt 95,000Total Tier 2 Capital 147,964Total Capital (Tier 1 + Tier 2) 491,057

Risk WeightedRisk Weighted assets (“RWA”) Amount Weight amount

Rs’OOO % Rs’OOOClaims on or guaranteed by Government of Mauritius 21,458 0% -

Claims on, or claims guaranteed or accepted orendorsed by, banks licensed under the Banking Act2004 664,000 20% 132,800

Investments in Finance leases <Rs 5.0 million 730,049 75% 547,537Investments in operating leases <=Rs 5.0 million 19,005 75% 14,255Other leases including corporates 3,480,360 100% 3,480,360Other assets 62,143 100% 62,143

4,977,015 4,237,095



9 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The following table summarises the carrying amount and fair values of those fmancial assets andfmancial liabilities not presented in the statement of fmancial position at fair values:

2017 2017 2016 2016 2015 2015Carrying Fair Carrying Fair Carrying Fair

value value value value value valueRs’OOO Rs’OOO Rs’OOO Rs’OOO Rs’OOO Rs’OOO

Financial assetsCash and cash equivalents 284,000 284,000 139,507 139,507 266,433 266,433Deposits with fmancialinstitutions 220,802 220,802 212,641 212,641 107,315 107,315Net Lease Receivables 3,792,741 3,792,741 3,879,705 3,879,704 3,645,304 3,645,304Other assets 45,523 45,523 54,729 54,729 84,291 84,291Financial liabilitiesDeposits from customers 3,801,998 3,801,998 3,440,297 3,440,297 2,980,8742,980,874Borrowings 562,294 562,294 787,158 787,158 1,085,772 1,085,772Shareholder’s loan 105,571 105,571 102,584 102,584 56,393 56,393Other liabilities 105,162 105,162 87,664 87,664 66,141 66,141

(i) Cash and cash equivalents

Cash and cash equivalents comprise of balances with The Mauritius Commercial Bank. The estimatedfair value of fixed interest bearing balances is based on discounted cash flows using prevailing moneymarket interest rates for debts with similar credit risk and remaining maturity.

(ii) Net Lease Receivables

These are leases which are net of impairment losses. The estimated fair values of leases to customersrepresent the discounted amount of estimated future cash flows expected to be received. Expected cashflows are discounted at current market rates to determine fair value.

(iii) Deposits from customers, borrowings and shareholder’s loan

For the purpose of estimating fair value, deposits by customers are grouped by remaining contractualmaturity. Fair values are estimated using discounted cash flows, applying current rates offered fordeposits of similar remaining maturities. The fair value of a deposit repayable on demand isapproximated by its carrying value.

(iv) Other fmancial assets and fmancial liabilities

Other assets and other liabilities are repayable on demand. Their fair values are therefore consideredas being equal to their carrying value. Fair values are therefore considered as being equal to theircarrying value.

FINLEASE COMPANY LIMITED Page 63


10. DEPOSITS WITH FINANCIAL 2017INSTITUTIONS Rs.

At June 30, 220,802,804

2016 2015Rs. Rs.

212,641,365 107,315,274

The above consists of a deposits with the Mauritius Commercial Bank which carry interest rates of 3.45%-4.75% p.a (2016: 3.90-4.75% p.a, 2015: 3.6%-5%p.a) and have maturity dates of 11 February 2019, 11 May2010 and 11 May 2021.

11. NET LEASE RECEIVABLES

(a) Gross investment in finance leasesNot later than 1 yearLater than 1 year and not later than 5 yearsLater than 5 years

Unearned future finance incomeon finance leases

(b) Rental receivablesRental receivables on finance and operating leases

Less allowances for credit impairment- Portfolio provision- Specific provisionNet lease receivables

(c) Remaining term to maturity

Up to 3 monthsOver 3 months and up to 6 monthsOver 6 months and up to 12 monthsOver 1 year and up to 5 yearsOver 5 years

Portfolio provisionAt July 1,Provision for the yearAt June 30,

Specific provisionAtJuly 1,Provision for the yearWritten offAt June 30,

2017Rs.

1,476,967,7362,834,463,499

57,147,2124,368,578,447

(566,715,642)3,801,862,805

2016 2015Rs. Rs.

1,495,076,891 1,397,960,9092,893,553,916 2,696,704,499

40,240,601 62,433,9934,428,871,408 4,157,099,401

(561,321,248) (528,757,563)3,867,550,160 3,628,341,838

(d) Allowance for credit impairment

78,907,258 67,297,396 56,556,9993,880,770,063 3,934,847,556 3,684,898,837

(37,841,233) (37,643,000) (30,891,610)(50,187,259) (17,499,638) (8,703,608)

3,792,741,571 3,879,704,918 3,645,303,619

2017 2016 2015Rs. Rs. Rs.

217,660,601 352,737,655 325,416,373423,759,147 305,306,593 288,018,188587,104,098 582,497,864 540,345,964

2,520,215,977 2,589,320,482 2,415,915,37453,122,982 37,687,566 58,645,939

3,801,862,805 3,867,550,160 3,628,341,838

2017 2016 2015Rs. Rs. Rs.

37,643,000 30,891,610 27,773,932198,233 6,751,390 3,117,678

37,841,233 37,643,000 30,891,610

17,499,638 8,703,608 5,334,34032,687,621 10,393,842 3,932,097

- (1,597,812) (562,829)50,187,259 17,499,638 8,703,608

88,028,492 55,142,638 39,595,218Total allowances for credit impairment



11 NET LEASE RECEIVABLES (CONTINUED)

(e) Allowance for credit impairment by industry sectors 2017Specific Portfolio Total Gross amount ofGross Non allowances allowances allowances leases net of total

amount Performing for credit for credit for credit allowances for creditof leases Leases impairment impairment impairment impairment

Rs.’OOO Rs)000 Rs.’OOO Rs.’OOO Rs.’OOO Rs)000

Agriculture and fishing 298,512 27,437 3,618 2,911 6,529 291,983Manufacturingofwhich EPZ 862,656 14,807 9,552 8,412 17,964 844,692Tourism 209,215 2,233 1,266 2,040 3,306 205,909Transport 201,331 5,783 1,643 1,963 3,606 197,725Construction 150,527 8,034 6,336 1,468 7,804 142,723Traders 711,446 38,665 14,849 6,937 21,786 689,660lnformation,Communicatiofl and Technology 33,891 2,235 973 330 1,303 32,588Financial and business services 149,397 2,715 601 1,457 2,058 147,339Infrastructure 64,756 - - 631 631 64,125Freeport Enterprise Certificate Holders 56,697 - - 553 56,144Personal 744,692 18,350 8,360 7,261 15,621 729,071Professional 2,725 - - 27 27 2,698Media entertainment and recreational activities 83,733 73 73 816 889 82,844Others 311,192 5,107 2,917 3,034 5,951 305,241

3,880,770 125,439 50,188 37,840 88,028 3,792,742




(e) Allowance for credit impairment by industry sectors (Continued) 2016Specific Portfolio Total

Gross Non allowances allowances allowances Gross amount of leasesamount Performing for credit for credit for credit net of total allowances

of leases Leases impairment impairment impairment for credit impairmentRs.’OOO Rs.’OOO Rs.’OOO Rs.’OOO Rs.’OOO p~.’0~o

Agriculture and fishing 301,059 36,438 - 2,609 2,609 298,450Manufacturingofwhich EPZ 1,010,174 1,706 3,407 9,935 13,342 996,832Tourism 193,589 - - 1,428 1,428 192,161Transport 190,920 614 175 929 1,104 189,816Construction 152,455 40,118 3,400 3,144 6,544 145,911Traders 698,238 5,008 4,270 7,428 11,698 686,540Information,COflunUflicatiOn and Technology 38,435 1,660 50 454 504 37,931Financial and business services 119,555 - - 590 590 118,965Infrastructure 84,950 - - 422 422 84,528Freeport Enterprise Certificate Holders 83,700 - - 416 416 83,284Personal 685,244 10,479 4,718 6,631 11,349 673,895Professional 37,705 - - 188 188 37,517Media entertainment and recreational activities 83,421 7,188 935 963 1,898 81,523Others 255,402 - 545 2,506 3,051 252,351

3~934,847 103,211 17,500 37,643 55,143 3,879,704




(e) Allowance for credit impairment by industry sectors (Continued) 2015Specific Portfolio Total

Gross Non allowances allowances allowances Gross amount of leasesamount Performing for credit for credit for credit net of total allowances

of leases Leases impairment impairment impairment for credit impairmentRs.’OOO Rs.’OOO Rs.’OOO Rs.’OOO Rs.’OOO Rs.’OOO

Agriculture and fishing 331,175 10,864 447 3,807 4,254 326,921Manufacturingofwhich EPZ 957,692 629 250 8,140 8,390 949,302Tourism 195,800 180 50 1,357 1,407 194,393Transport 135,673 3,145 354 638 992 134,681Construction 126,548 19,150 3,035 2,977 6,012 120,536Traders 599,593 8,122 2,250 2,924 5,174 594,419Infonnation,CoflltnUflicatiofl and Technology 25,540 ~ - 574 24,966Financial and business services 57,160 - - 275 275 56,885Infrastructure 89,143 - - 4~~3 443 88,700Freeport Enterprise Certificate Holders 48,795 - - 242 242 48,553Personal 642,228 4,354 779 5,400 6,179 636,049Professional 96,077 - - 959 95,118Media entertainment and recreational activities 77,766 5,725 682 691 1,373 76,393Others 301,709 4,488 856 2,465 3,321 298,388

3,684,899 66,402 8,703 30,892 39,595 3,645,304



12. PLANT AND EQUIPMENT

(a) 2017COST

Computer Office Furniture &Equipment Equipment Fittings

Rs. Rs. Rs.

Assets under operating leasesMotor Motor Plant and

Vehicles Vehicles Equipment TotalRs. Rs. Rs.

DEPRECIATION

___________ (342,610) 342,6106,116,324 2,969,531 3,447,358

At July 1, 2016AdditionsDisposalsReclassificationAt June 30, 2017

6,000,624115,700

3,308,1493,992

2,080,9251,023,823

- 444,789,245302,109 247,504,926

- (79,453,777)

AtJuly 1, 2016Charge for the yearDisposal adjustmentsReclassificationAt June 30, 2017

NET BOOK VALUE

254,539,00436,654,000

(20,253,763)

710,717,947285,604,550(99,707,540)

302,109 612,840,394 270,939,241 896,614,957

5,867,823 2,768,950 1,857,519 - 140,719,462 86,807,967 238,021,72175,628 119,978 362,962 34,929 82,974,511 33,796,578 117,364,586

- - (44,753,564) (14,306,248) (59,059,812)

5,943,451 2,888,928 2,220,481 34,929 178,940,409 106,298,297 296,326,495

At June 30, 2017 172,873 80,603 1,226,877 267,180 433,899,985 164,640,944 600,288,462

FINLEASE COMPANY LIMITEDPage 68


12. PLANT AND EQUIPMENT (CONTINUED)

(a) 2016 ___

COST

At July 1,2015AdditionsDisposalsAssets written off (note 28)At June 30, 2016 ___________

DEPRECIATION

AtJuly 1,2015Charge for the yearDisposal adjustmentsAssets written off (note 28)At June 30, 2016 ____________

NET BOOK VALUE

ComputerEquipment

Rs.

5,881,249119,375

Furniture &Fittings

Rs.

OfficeEquipment

Rs.

2,919,918388,232

MotorVehicles

Assets under operating leasesMotor

Vehic1e~Rs.

Plant andEquipment

Rs.

6,000,624 3,308,150

TotalRs.

5,814,75753,066

2,642,705126,245

5,867,823 2,768,950

2,007,508 - 412,769,052 256,965,086 680,542,81373,417 - 138,153,393 30,535,764 169,270,181

- - (91,610,686) (21,644,199) (113,254,885)- - (14,522,514) (11,317,647) (25,840,161)

2,080,925 - 444,789,245 254,539,004 710,717,948

1,761,224 - 132,710,905 81,448,829 224,378,42096,295 - 67,060,914 35,546,621 102,883,141

- - (60,038,959) (13,827,537) (73,866,496)- - 986,602 (16,359,946) (15,373,344)

1,857,519 - 140,719,462 86,807,967 238,021,721

223,406 - 304,069,783 167,731,037 472,696,227At June 30, 2016 132,801 539,200

FINLEASE COMPANY LIMITEDPage 69


12. PLANT AND EQUIPMENT (CONTINUED)

(b) ~Qi~COST

At July 1,2014AdditionsDisposalsAt June 30, 2015

DEPRECIATION

AtJuly 1, 2014Charge for the yearDisposal adjustmentsAt June 30, 2015

NET BOOK VALUE

Computer Office Furniture &Equipment Equipment

Rs. Rs.

5,831,571 2,880,36449,678 39,554

5,881,249 2,919,918

MotorAssets under operating leases

Motor Plant and

5,787,44927,308

2,516,390126,315

5,814,757 2,642,705

Fittings Vehicles Vehicles Equipment TotalRs. Rs. Rs. Rs.

1,754,991 - 353,810,575 163,272,659 527,550,160252,517 - 156,289,097 109,361,396 265,992,242

- - (97,330,620) (15,668,969) (112,999,589)2,007,508 - 412,769,052 256,965,086 680,542,813

1,643,497 - 126,588,144 68,352,512 204,887,992117,727 - 56,058,889 26,322,090 82,652,329

- - (49,936,128) (13,225,773) (63,161,901)1,761,224 132,710,905 81,448,829 224,378,420

246,284 - 280,058,147 175,516,257 456,164,393At June 30, 2015 66,492 277,213



13. INTANGIBLE ASSETS

COSTAtJuIy 1,AdditionsAt June 30,

AMORTISATIONAt July 1,Charge for the yearAt June 30,

Computer Software2017 2016 2015Rs. Rs. Rs.

63,699,618 29,248,072 27,135,981244,783 34,451,546 2,112,091

63,944,401 63,699,618 29,248,072

29,865,883 23,464,926 22,050,6264,000,602 6,400,957 1,414,300

33,866,485 29,865,883 23,464,926

NET BOOK VALUEAt June 30,

14. OTHER ASSETS

Rental income and interest receivableAssets repossessed pending disposalsOther receivables and prepaymentsconsists of:

Fees and Residual Value ReceivableRental AccruedInsurance RefundableOther Receivables

Amount receivable from group companies:-Holding company

15. DEPOSITS FROM CUSTOMERS

Time deposits with remaining term to maturityRetail customersWithin 3 monthsOver 3 up to 6 monthsOver 6 up to 12 monthsOver 1 up to 5 years

30,077,916 33,833,735 5,783,146

2017 2016 2015Rs. Rs. Rs.

5,646,966 5,960,3832,564,054 8,976,498 10,362,967

59,579,129 40,105,927 42,967,332

19,165,909 26,1 72,2 7] 32,572, 6406,473,775 5,646,965 5,960,3823,602,281 2,417,273 2,760,692

30,337,164 5,869,418 1,673,618

- 25,000,00062,143,183 54,729,391 84,290,682

2017 2016 2015Rs. Rs. Rs.

256,876,986 268,415,854 379,682,394150,249,737 93,399,901 190,306,378278,293,081 271,845,235 445,630,372

2,309,043,184 2,029,182,723 1,346,480,0862,994,462,988 2,662,843,713 2,362,099,230

50,261,590 16,502,780 333,491,519- 17,650,719 85,070,644

25,056,610 54,892,548 84,566,389732,217,042 688,407,445 115,645,967807,535,242 777,453,492 618,774,519

3,801,998,230 3,440,297,205 2,980,873,749

Corporate customersWithin 3 monthsOver 3 up to 6 monthsOver 6 up to 12 monthsOver 1 up to 5 years

The above consists of deposits bearing interest at the rates of 2.75 % - 7.50% per annum (2016: 2.75% -

9%,2015: 3% - 9% per annum).

Deposits are denominated in rupees.



Borrowings comprise:CurrentBank overdraftBank loansOther loans

Non-currentBank loansOther loans

Borrowings can be analysed as follows:Within one yearOne to two yearsAfter two years to five years

SHAREHOLDER’S LOAN

At June 30,

2017 2016 2015Rs. Rs. Rs.

- - 831,25468,674,912 60,836,117 193,697,187

179,466,153 192,301,445 215,564,323248,141,065 253,137,562 410,092,764

146,175,346 182,266,093 136,687,597167,977,847 351,754,463 538,991,504314,153,193 534,020,556 675,679,101

562,294,258 787,158,118 1,085,771,865

2017 2016 2015Rs. Rs. Rs.

248,141,065 253,137,562 410,092,764200,902,884 241,053,558 228,700,060113,250,309 292,966,998 446,979,041562,294,258 787,158,118 1,085,771,865

2017 2016 2015Rs. Rs. Rs.

105,571,251 102,584,115 56,392,671

Shareholder’s loans from Fincorp Investment Ltd consists of Rs25m granted in December 2011 and Rs25mgranted in June 2015 and RsSOm granted in June 2016 and they all have a term of 10 years as from grant date.The interest rate on the shareholder’s loans shall be the Mauritius Commercial Bank Ltd’s prime lending rate(currently at 6.9% per annum). Interest is payable yearly. At any time before the fifth anniversary of therespective loans, the parties shall have an option to convert the capital amount due on the loans into new shares orto the facilities for further periods of 10 years. The shareholder’s loans are subordinated loans and quali~’ as Tier2 capital. The loans may be redeemed before maturity only at the option of Finlease and with the prior approvalof the Bank of Mauritius.

16. BORROWINGS

(a) Bank and other loans

(b) The rates of interest on borrowings range from 4.25% to 4.75%, 0.90% to 3.27% and 0.75% to 3.194% p.a onthe borrowings denominated in MUR, USD and EURO respectively. (2016: 0.75% to 5% and 2015: .75% to 5%p.a).

(c) Borrowings are denominated in Mauritian rupees, Euro and US dollar. The currency risk profile isprovided in note 7(d)

(d) Other loans consists of loans from State Investment Corporation Limited obtained in order to financeleasing facilities granted under the different Leasing Equipment Modernisation Schemes.

17. SHAREHOLDER’S LOAN



18. INCOME TAX 2017 2016 2015Rs. Rs. Rs.

(a) Current tax on the adjusted profit for theyear at 17% (2015/2014:15%) 7,409,535 9,125,301 8,461,309Deferred tax (note 19) (2,745,131) 5,144,644 6,371,529

4,664,404 14,269,945 14,832,838

The tax on the company’s profit before tax differs from the theoretical amount that would arise usingthe basic tax rate of the company as follows:

2017 2016 2015Rs. Rs. Rs.

Profit before tax 50,596,412 66,094,519 90,731,269

Tax calculated at a rate of 17 % (2016: 15%, 2015: 15%) 8,601,390 9,914,178 13,609,690Tax effect on:Expenses not deductible for tax purposes 1,174,291 4,362,424 1,223,148Income not subject to tax (5,111,277) (6,657) -

4,664,404 14,269,945 14,832,838

2017 2016 2015

(b) Current tax Iiability/ (asse~1 Rs. Rs. Rs.At July 1, 2,414,423 (2,868,844) 5,825,642Charge for the year 7,409,535 9,125,301 8,461,309Tax refund - 2,463,747Tax paid (9,527,777) (6,305,781) (17,155,795)At June 30, 296,181 2,414,423 (2,868,844)

19. DEFERRED INCOME TAXES

Deferred income taxes are calculated on all temporary differences under the liability method at 17%.(2016 and 2015: 15%).

(a) The movement on the deferred income tax account is as follows:2017 2016 2015Rs. Rs. Rs.

At July 1, 24,648,328 19,503,684 13,132,155Statement of profit or loss and othercomprehensive income charge/(credit) (note 18) (2,745,131) 5,144,644 6,371,529At June 30, 21,903,197 24,648,328 19,503,684

(b) There is a legally enforceable right to offset current tax assets and liabilities and deferred income taxassets and liabilities when the deferred income taxes relate to the same fiscal authority.The following amounts are shown in the balance sheet:

2017 2016 2015Rs. Rs. Rs.

Deferred tax liabilitiesTemporary Differences onDepreciation and Impairment 21,903,197 24,648,328 19,503,684



20. OTHER LIABILITIES 2017 2016 2015Rs. Rs. Rs.

Other payables and accruals 100,813,559 37,103,814 23,317,886consists ofRegDuty Payable to Government 8,811,783 11,111,623 1,310,019Amounts payable to car distributors 38,442,658 - -

Advances receivedfrom customers 14,112,347 - -

Accruals 9,871,955 5,193,792 4,669,034Others 29,574,816 20,798,400 17,338,832Amounts due to group companies:-Entities under common control 1,336,305 1,554,057-Holding company 4,348,195 672,810 672,810

105,161,754 39,112,929 25,544,753

21. SHARE CAPITAL 2017 2016 2015Rs. Rs. Rs.

Authorised25,000,000 of ordinary 250,000,000 250,000,000 250,000,000

Issued and fully paidAt July 1 and June 30, 200,000,000 200,000,000 200,000,000

Issued share capital consists of 20,000,000 (2016/2015: 20,000,000) ordinary shares of Rs.10 each.

22. NET INTEREST INCOME 2017 2016 2015Rs. Rs. R~s.

Interest incomePlacements with financial institutions 12,945,653 16,074,029 13,938,602Finance leases 284,350,551 288,593,817 270,207,401

297,296,204 304,667,846 284,146,003

Interest expenseDeposits 181,273,399 181,398,251 159,100,749Borrowings from financial institutions 25,276,401 28,866,149 29,262,780

206,549,800 210,264,400 188,363,529

Net interest income 90,746,404 94,403,446 95,782,474

23. OTHER OPERATING INCOME 2017 2016 2015Rs. Rs. Rs.

Penalty Fees and Interest 12,120,551 8,682,926 6,309,263.Other Operating Income (123,811) 730,907 350,445Refund from State Investment Corporation 10,084,124 - -

22,080,864 9,413,833 6,659,708



24. NET IMPAIRMENT OF FINANCIALASSETS

Allowances for credit impairment- Specific- Portfolio

2017 2016 2015Rs. Rs. Rs.

41,635,669 10,393,842 3,932,0971,157,018 6,751,390 3,117,678

42,792,687 17,145,232 7,049,775

The difference in the movement in the balance sheet against the profit and loss charge for specific impairmentrelates to the release of provisions amounting to Rs 8,948,048 on disposal of repossessed assets.

The difference in the movement in the balance sheet against the profit and loss charge for portfolio impairmentrelates to an additional impairment ofMUR958,785 on other receivables.

25. PERSONNEL EXPENSES 2017 2016 2015Rs. Rs. Rs.

26. LOSS ON DISPOSAL OF ASSETS 2017 2016 2015Rs. Rs. Rs.

6,235,4611,203,6567,439,117

4,603,8201,384,8183,431,853

585,000240,000

4,888,4223,849,4858,195,019

27,178,417

2,917,769(44,378)

2,873,391

2,015,7361,087,0862,559,477

483,000120,750

3,210,3052,160,3422,674,740

14,311,436

3,666,399(1,290,202)2,376,197

1,144,9312,136,5373,712,603

460,000115,000

1,559,6614,599,1021,070,457

14,798,291

28. EXCEPTIONAL ITEM 2017 2016 2015

Personnel expensesWages and salariesSocial security obligationsContribution to pension costs

24,585,598 21,614,388 18,784,4981,088,935 709,739 574,7252,892,480 2,966,494 2,894,451

28,567,013 25,290,621 22,253,674

Loss on disposal of repossessed leasesLoss! (Profit) on disposal of owned assets

27. OTHER EXPENSES

Management FeeMarketing and AdvertisingLicences and Software CostAudit Fees to Statutory AuditorNon-Audit Fees to Statutory AuditorProfessional FeesOther Operating ExpensesMiscellaneous Expenses

2017 2016 2015Rs. Rs. Rs.

Equipment written off - 10,466,817 -



29. PROPOSED DIVIDENDS 2017 2016 2015Rs. Rs. Rs.

Final ordinary dividend payable(2016: R2.50 per share, 2015: Rs,2.75 per share) - 50,000,000 55,000,000

- 50,000,000 55,000,000

30. CASH AND CASH EQUIVALENTS 2017 2016 2015Rs. Rs. Rs.

Bank balances 284,000,203 139,506,742 266,433,450Bank overdraft - - (831,254)

284,000,203 139,506,742 265,602,196

31. COMMITMENTS FOR FUTURE LEASES

At June 30, 2017, the Company had commitments amounting to Rs 370,367,601 in respect of future leases (2016:Rs.767,336,740 and 2015: Rs.1,173,000,000).



32. RELATED PARTY TRANSACTIONS

2017Holding companyEntities under common controlDirectors and close family membersEnterprises in which directors havesignificant influence



6,344,3629,193,726

900,000

6,146,281 860,000

(a) The following transactions were carried out by the Company with related parties.Reimbursable Interest Interest Rental

Rent Expenses Income Expense IncomeRs. Rs. Rs. Rs. Rs.

765,105 4,603,820 12,945,653- 401,750

371,937

672,810 * - 3,401,718 -

- 1,342,926 16,074,029 10,392,834 -

- - 196,309 275,000 -

- - 7,435,818 215,000 1,699,618

672,8101,554,057 9,192,027

67,460

1,653,1768,205,943

- 10,589,166 3,283,062



32. RELATED PARTY TRANSACTIONS (CONTINUED)

2017Holding company -

Entities under common control - -

Directors and close family members - -

Enterprises in which directors havesignificant influence -

2016Holding companyEntities under common controlDirectors and close family membersEnterprises in which directors havesignificant influence ____________________

2015Holding companyEntities under common control -

Directors and close family members - -

Enterprises in which directors havesignificant influence _______________________

(b) Key management personnel compensation:

Salaries and short-term employee benefits _____________________________

(c) Facilities with the related parties represents about 2 1.9% of Tier 1. None of the credit facilities to related parties were non-performing.Amounts due to parties are unsecured. No guarantees have been given by the Company.

Outstanding balances in respect of related party transactions at the end of the reporting period were as follows:Dividends Amount Amount Loan DepositPayable Receivable Payable Due Balance

Rs. Rs. Rs. Rs. Rs.

Finance LeaseReceivables

Rs.

Deposit andBank

BalancesRs.

105,571,251214,850,258

102,584,115243,107,210

381,639,547 - 504,803,00718,036,986 4,526,737 -

20,176,712 70,648,910 -

765,1054,597,783

Rs. Rs.- 672,810- 2,019,133

25,000,000 672,810- 3,039,584

Rs.Rs.50,000,000

55,000,000

Rs. Rs.

360,985,732- 18,036,986

Rs.

2,368,580352,148,107

20,179,068 86,666,385

56,392,671330,384,784 373,748,724

623,426

123,452,400

2017 2016 2015Rs. Rs. Rs.

4,334,317 4,813,679 4,465,027


NOTES TO THE FINANCIAL STATEMENTS - YEAR ENDED JENE 30,2017

Page 78

33. OPERATING LEASESFuture minimum lease payments under non-cancellableoperating leases may be analysed as follows:Not later than 1 yearLater than 1 year and not later than 5 yearsLater than 5 years

2017 2016 2015

157,009,288 126,810,968 103,986,642310,829,891 247,575,481 338,372,504

5,001,580 4,377,504 13,873,431472,840,759 378,763,953 456,232,577

34. HOLDING AND ULTIMATE HOLDING COMPANIESThe directors regard Fincorp Investment Ltd as the holding company and MCB Group Limited as the ultimate holding company. Both companies areincorporated in Mauritius.

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