Annual Report June 2019 - Sindh Leasing Company Ltd. · Mr. Muhammad Aftab Alam - Chairman - Member - Member Third Floor, Imperial Court Building Dr. Ziauddin Ahmed Road, Karachi

Annual Report June 2019 SINDH EL ASING

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

prosperity.

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

financial solutions.

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Corporate Information

Board of Directors

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

- Executive Director

CFO & Company Secretary

Mr. Rehan Anjum

Audit Committee

Registered Office

Mr. Naim Farooqui

Mr. Muhammad Raja AbbasMr. Muhammad Aftab Alam

- Chairman - Member - Member

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

Banker

Sindh Bank Limited

Mr. Najam Ahmed ShahMr. Muhammad Bilal SheikhMr. Naim Farooqui

Chairman -

Chief Executive-

Auditors

BDO Ebrahim & Co.Chartered Accountants

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

Web: www.sindhleasingltd.com

Bank Islami Pakistan Limited

Mr. Muhammad Raja Abbas

Mr. Muhammad Aftab Alam

Mrs.Masooma Hussain

Mr. M. Shahid Murtuza

Mr. Naim Farooqui

Mr. Najam Ahmed Shah

Human Resource Committee

- Chairman - Member - Member

United Bank Limited

- Independent Non-Executive Director

Branch Offices

Larkana / Naudero BranchRaza Shah Mohalla, VIP Road,Larkana

Hyderabad Branch

Legal Advisor

Muhammad Nadeem Khan ndSuite # 28-A, 2 Floor

Fareed Chamber Abdullah Haroon Road Karachi

Plot No. 11Faraz Villas Housing SchemeTaluka QasimabadHyderabad

Islamabad Branch

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

Lahore Branch

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

NRSP Microfinance Bank

Mr. Muhammad Bilal Sheikh

Karachi SMCHS BranchPlot # 117-118 Shah Abdul Latif Educational TrustBlock A Sindhi Muslim Cooperative Society Karachi.

Mrs.Masooma Hussain - Member


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Table of Contents

Directors’ Report 05

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

21

Notice of Annual General Meeting 04

Auditors’ Report to the Members

Balance Sheet

Profit and Loss Account

Cash Flow Statement

Statement of Changes in Equity

Notes to the Financial Statements

55Form of Proxy

Statement of Comprehensive Income

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

22

24

26

27

28

25

29

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Notice is hereby given that the Sixth Annual General Meeting of Sindh Leasing Company Limited (“Company”) will be held on October 30, 2019 at 12.00 p.m. at the Registered office of the Company, Third Floor, Imperial Court Building, Dr. Ziauddin Ahmed Road, Karachi, to transact the following business:

Normal Business:

• To confirm the minutes of the Fifth Annual General Meeting held on October 20, 2018.

• To receive, consider and adopt the Audited Accounts of the Company for the year ended June 30, 2019, along with the Directors’ and Auditor's Reports thereon.

• Any other business with the permission of the Chair.

Special Business:

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

By Order of the Board

Rehan Anjum Company Secretary Karachi: September 13, 2019

Notice of the Sixth Annual General Meeting


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On behalf of the Board of Directors of Sindh Leasing Company Limited (SLCL, the Company), it is our pleasure to present the sixth Annual Audited Financial Statements for the year ended June 30, 2019.

Review of Business and Operation

The Company earned a gross revenue of Rs. 455.781 million during the year under review against a gross revenue of Rs. 280.193 million in the corresponding year. Total administrative expenses for the year amounted to Rs 207.965 million against Rs 177.874 million last year. Profit before tax and provision for the current year is Rs 245.005 million as compared to a profit of Rs 88.198 million of the corresponding year.

Growth in the company’s financials despite a fall in both our lease and loan portfolio and profit illustrates sound policies of management. Our Pre-tax loss for the year ended June 30, 2019 amounting to Rs.176.248 million represents a decrease of 334.88% over Rs. 88.198 million earned in the same period last year. Our loss is a result of provisioning of Rs 453.000 million on a prudent basis which were advanced against working capital & auto loans to a borrower/group under investigation by JIT/NAB resulting in arrests and blocking of their bank accounts which may lead to their default and suspension of markup thereon. SLCL expects to recover the amounts provided for by December 2019. Disbursement in the current year of both leases and loans amounted to Rs 1,280.229 million as compared to Rs 2,448.483 million last year.

Director’s Report

Operating Results

As at June 30, 2019

As at June 30, 2018

----------(PKR Million) ---------

3,500.000 3,500.0003,526.854 3,712.091

17.257 23.2742,702.254 2,678.383

Balance Sheet

Paid - up capital

Total equity

Fixed Assets

Net investment in finance leases

Auto and Working capital loans 310.555 689.555

Profit & Loss

For the year Ended June 30,

2019

For the year Ended June 30,

2018

Revenue –Net 452.971 266.073Administrative expenses 207.966 177.874Profit before provision & tax 245.005 88.198(Loss)/Profit after tax (185.237) 63.334(LPS)/ EPS

(0.53) 0.28

The Company has incurred a loss during the year therefore no amount has been transferred to the statutory reserve. An amount of Rs. 31.667 million had been transferred to revenue reserve during the last corresponding period.

As at June 30, 2019, the value of investments of provident fund and gratuity fund of the Company are Rs. 12.347 million and Rs. 6.812 million respectively.

Risk management

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

Credit Risk

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

Market Risk

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

Liquidity Risk

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

Operational Risk

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

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SLCL practices risk management customized to suit the level of complexity in its operations to assure risks accepted are well planned and managed to fit its risk appetite. During 2019 SLCL further enhanced its risk management system to strengthen controls over the company’s operations. Being a continuous process improvements to ensure effective management of credit, market liquidity and operational risks associated with the NBFC sector are always carried out by respective heads to stay abreast of all current developments and to be prepared for the challenges ahead.

Board of Directors

During the year under review Mr. Ali Murtaza Kazmi & Dr. Noor Alam handed in their resignations from the Board as Directors of the Company. The Board wishes to place on record its appreciation for their valuable insight and guidance which benefited SLCL multifold. The Board appointed Mr. Shahid Murtaza as Director of Sindh Leasing Company Limited in place of Mr. Ali Murtaza Kazmi and Mr. Najam Ahmed Shah has replaced Dr. Noor Alam as secretary finance GoS to fill in the respective casual vacancies.

Directors' Meeting

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

S.No Name of DirectorNo. of mee�ng(s) held during the Tenor in the year

Total no. of mee�ng(s) a�ended

1 Mr. Ali Murtaza Kazmi 1 0^2 Dr. Noor Alam 2 2^3 Mr. Muhammad Raja Abbas 5 1*4 Muhammad Bilal Sheikh 5 55 Mr. Muhammad A�ab Alam 5 56 Mr. M. Naimuddin Farooqui 5 4*7 Mrs. Masooma Hussain 5 4*8 Mr. Najam Ahmed Shah 3 39 Mr. Shahid Murtaza 3 2*

* Leave of absence was granted to Directors who could not a�end the Board mee�ng.** Directors who has appointed during the year.

Audit Committee’s Meetings

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

S.No Name of DirectorNo. of mee�ng(s) held

during the yearTotal no. of

mee�ng(s) a�ended

1 Mr. Muhammad A�ab Alam 4 42 Mr. Muhammad Raja Abbas 4 2*34

Mrs. Masooma HussainMr. M. Naim Farooqui

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2*2**

* Leave of absence was granted to Directors who could not a�end the mee�ng.** Member who was appointed during the year.

Pa�ern of Shareholding

The pa�ern of shareholding as at June 30, 2019 is as follows:

No. of shareholders

Shares held by

Shareholding No. of shares held

Percentage

From To

1 Government of Sindh

1 345,999,993 349,999,993 99.999998

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Directors 345,999,994 350,000,000 7 0.000002

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Total 350,000,000 100

Corporate and Financial Reporting Framework

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

1. The financial statements prepared by the management of Sindh Leasing Company Limited present fairly its state of affairs, the result of its operations, cash flows and changes in equity.

Resigned^


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2. Proper books of account of Sindh Leasing Company Limited have been maintained.

3. Appropriate accounting policies have been consistently applied in preparation of financial statements. Accounting estimates are based on reasonable and prudent judgment.

4. International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements.

5. The system of internal control is sound in design and has been effectively implemented and monitored.

6. There are no significant doubts upon the ability of Sindh Leasing Company Limited to continue as a going concern.

7. The appointment of Chairman and other members of Board and the terms of their appointment along with the Remuneration policy adopted are in the best interests of the Public Sector Company as well as in line with the best practices.

Key Operating and Financial Data

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

Internal Control and Compliance

Internal controls in place are adequate to enhance accuracy and reliability of financial reporting. Nonetheless improvement of these through periodic reviews and monitoring is of cardinal importance to convey accurate results and mitigation of risks. Furthermore the outsourcing of our internal audit function to Grant Thornton Anjum Rahman, Chartered Accountants who report directly to the Audit Committee strengthens our position as theirs is a completely neutral view on each testing, where their recommendations are regularly utilised to improve the on-going process of improvement.

Credit Rating

VIS Credit Rating Company Limited (VIS) has placed the entity ratings of Sindh Leasing Company Limited (SLCL) under ‘Rating Watch Developing’ status in view of the impending merger with Sindh Bank Limited (SBL). SLCL currently has entity ratings of ‘A+/A-1’ (Single A Plus/A-One). Previous rating action was announced on May 28, 2018.

Dividend

The Company has not declared any dividend for the year ended June 30, 2019.

Qualification in The Auditors Report

During the year, SLCL has made net provisions against lease & loans amounting to Rs. 421.252 million in compliance with applicable IFRS and NBFC regulation and also considering that the respective companies due to blocking of their accounts by orders of National Accountability Bureau (NAB) could default on their payment in the near future.

Our external auditors though accepting our treatment recommend that our provisioning should include all parties against whom legal proceedings have been initiated by the government agencies and have been mentioned in the JIT/NAB report amounting to an additional amount of Rs. 150.00 million. The reason/basis further includes that an impairment assessment and subjective evaluation of its financing portfolios should be carried out by the management after considering the factors in respect of adequacy of securities held, credit worthiness and financial condition of these parties and appropriate impairment against these balances should be maintained in the financial statements. As SLCL has not carried out such a subjective valuation under Regulation 25 of Non-Banking Finance Companies and Notified Entities Regulations, 2008 and has not carried out impairment review as required by International Financial Reporting Standard 9 – Financial Instruments despite presence of impairment indicators in the financing portfolios, they are not in a position to confirm valuation and recoverability of these balance thus resulting in their qualified opinion. Nonetheless these parties that are being included into the provisioning spectrum have clear ECIB reports and are normal operational companies.

Future Outlook

GDP growth during FY 2019 is predicted to decline significantly from 5.5 to 3.5 percent. Primary reason for this decline is the slow trend in the agriculture sector, contraction in Large Scale Manufacturing and stabilization measures taken to preserve macroeconomic stability such as measures to slowdown the growing external front and reducing the snowball effect on current account and fiscal deficits. The Board of Directors in their meeting held on June 17, 2019 decided to merge SLCL with Sindh Bank Limited (SBL) as advised by the GoS as a measure to assist SBL in bridging its shortfall to maintain minimum capital requirement.

Acknowledgements

On behalf of The Board of Directors we are pleased to place on record our acknowledgement of the support that our sponsors, the Government of Sindh (GoS) and our regulators SECP have provided.

________________________ _________________________

Muhammad Naim Farooqui

Muhammad Shahid Murtaza

Director Director

Dated: September 13, 2019

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�رڈ آف ڈا��ز � �� ھ �� (�) � �٣٠ن �٢٠١٩ ا�م �� وا� �ل � � �� ہ (audited) ا�ؤ� � �� ے �

�ت � �� ۔

ور آ�� ہ �رو�را

� � ز� �ر �ل � �� آ�� (revenue) �455.781 رو� �� ل ا� �ت � � �� آ�� (revenue) 280.193 � �۔ �ل �

ز� �� اس ا�� ا�ا�ت �� ل � ١٧٧٫٨٧٤ � رو� � �� ٢٠٧٫٩٦٥ � رو� ر�۔ �� ل � ٨٨٫١٩٨ � رو� � � ا

�ل اس � �� ٢٤٥٫٠٠٥ � رو� ر�۔

ز ، ٣٠ �ن ٢٠١٩ � ا�م �� ل � � ا � � دو�ں � � اور �� ت � �رٹ �� و�د � � ��ت � ا�� ا�� ں � � �۔ �را

�ل �ن � �� ١٧٦٫٢٤٨ رو� ر� � �� ل اس �ت � ٨٨٫١٩٨ � رو� � آ�� ٣٣٤٫٨٨ � � � د� ر� �۔ �رے �ن � و� ا�� ر �� ہ�� اور �ڑ�ں � � د� �� وا�/�وپ � د� �� وا� ا�ا� � � � � � اور و �� ٤٥٣٫٠٠٠ � رو� � � � �� ور� ��(markup) ہ�د�ہ �� اور اس �ح � �رك اپ �� د� � و� � و ن� �ں � �� وپ � اس � آ� ٹ/� � � � � � ��ر � اور ا

ہاس ر� � و�ل � � � � � �۔ ��SLCL �� د� ٢٠١٩ � و

��دہ �ل � � (lease) اور �� ت دو�ں � � � ادا�ں � �� ١٬٢٨٠٫٢٢٩ � رو�ر� � � �� ل اس � �� ٢٬٤٤٨٫٤٨٣ � رو� �۔

ڈا��ز ر�رٹ


9

ن�ن � � � اس � �� ر� د�رى ذ�� ۔ � �ل � دورا

٣٠ �ن ٢٠١٩ � � � �او�� اور �� رى � �ر �� ١٢٫٣٤٧ رو� اور ٦٫٨١٢ � رو� �۔

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

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

�� ن � �ہ

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

�� م � � � � � �۔

�ر� � �ہ

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

دے۔

�� (liquidity)� �ہ��

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

آ�� (operational) � �ہ�� اور � �� آ�� ا �� ۔�� اور �د، �� اور و� � �رآ � �ہ ��

�� آ�� ں � � � � آ� � �� ہ �رو�رى �ہ � اس � �ورت � �� اس � �� ى اور اس � �� SLCL

��ا�م � � �۔۔ �ل ٢٠١٩ � �SLCL � � آ�� ا� � � �� ا� �ہ � � � �م � �� ا�� ۔�ے � � ا� �ى � ن� ا� � �رى �� (�NBFC �� )process � � ��، �ى � �� اور آ�� ات � � ��ا�م � � �� اور ا

ہ�� وا� ��دہ ��ں � آ�ہ ر� اور آ� وا� �� ر ر�۔ � � � � ��اہ �� و � �رآ

�رڈز آف ڈا��ز

ن� � � � � �� وا� �� ر �ت اور ر��، � � ےد� �۔ �رڈ ا ز� �ر �ل � �ب � �� اور ڈا� �ر �� ر �رڈ � ڈا��ز � ا� د

�SLCL � ��ہ �ا، � �ا� �� اس �ت � ر�رڈ � �� ۔۔ �رڈ � �ب �� ب � �� ر �ھ �� ڈا��ز � �

�� اور �ب � ا� �ہ � ڈا� �ر �� ى ��ت ��ہ �ھ �ر� � ا�ب �ر� آ��ں � ا�ب �� ۔

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ڈا��ز � ا�س

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

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

نا�ب �ا۔ ہڈا��ز � � �ل � دورا ** و

� � � ^

آڈٹ � � ا�س

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

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

ن�ا ** ر� � � ا�ب �ل � دورا


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� ر� � ر�ن

٣٠ �ن �٢٠١٩ � ر� � ر�ن درج ذ� �:

� اور �� ر�ر� � ڈ�� را ادا

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

١. �ھ �� ر �دہ �� د�و�ات (statements)آ�� ، � � اور � �� (equity)� رد و�ل � ��ت � �

�� ۔

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

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

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

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

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

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

� �۔

آ�� اور ��ت � ا� ا�اد و�ر

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

ا� آ�� اور �� ا�اد و�ر

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

ا�رو� �ا� اور ��

ن� �ى � � و� و� � ��ہ � �� اور اس � �ا� � � ہا �� ر�ر� � در� اور � �� ا�رو� �ا� � �� م ��د �۔ اس � �و �� د� �� ى ا� � �� در� �� اور �رو�ر � در� �ہ � � �ش � � �۔ �� ا�رو� آڈٹ � �م �ا� �� ا� ر�ن، �ر�ڈ ا�و

12


ن� �و� � ا� ن� � �ا� � � � ا� � ��ارا� را� �� اور ا � � �اہ را� آڈٹ � � ر�رٹ �� اور اس � � ا

�ى � � � �� ا�ل � �� ۔

��ٹ ر��

�� JCR-VISٹ ر� � � (JCR-VIS)� �ھ �� ھ � � � ا�م � � � � � ا� (entity)در� �ى � " ر� واچ �ڈ��" � � ر� �۔ �SLCL ��دہ ا� ر� ‘A+/A-1’ )ا� A-1/�A ( �۔ � ر� � ا�ن �٢٨ ٢٠١٨ � � �۔

��

� � �٣٠ن ٢٠١٩ � � �� وا� �ل � � � � �� ا�ن � � �۔

آڈٹ ر�رٹ � ا�

ن ��IFRS �SLCL �ا� اور �NBFCا� � � �� اور �� ٤٢١٫٢٥٢ � رو� � � � اور اس �ت � � � � ر� � �ل � دورا��ں �� د�ہ � � �۔�� ہ� �� ادا ن� ا�ؤ� � �ش � و� � و � � �ں �� ا�ب �رو � � � ا

ر�م � �� ف �� ن�م ��ں � �� وا� ا�دا ن� �� ر� � ا �رے �و� آڈ�ز، ا�� رے �� ر� �، ا

ن ا�ں � �� آ�ز � اور � � �م JIT/ NABر�رٹ � درج � اور ا� � � ا�� ١٥٠ � رو� � �� ۔ اس � و�/�د � �� ا ن� �� د�و� � درج �� اور اس � �� ر�� زو�، ��ٹ � ا� اور �� وا�ں � �� ر�ل اورا ن� �س د�ب �ا� �، ا

� �� (subjective)�ر ��ى �� ورت �۔ �SLCL � �رى �� ن �� ا�� وں � �� رى �رٹ ��ز � �ن � � اور � �� (subjective)�ر ��ى � � � اورر ا�� ر�ر� ا�رڈ٩ ۔ �� د�و�ات � �� اور �� ا� �ا� ٢٠٠٨ � � ٢٥ � �

ن��ں � � � �� وا� ر�م � ن� �ا�� را� �۔ اس � �و�د ا �رى � �رٹ ��ز � �ن � ا�روں � �و�د �ن � �ر ��ى � � �� ا

ن� �ل �م �� وا� � �� ۔ �� ECIB ر�رٹ � ا

��

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________________________ _________________________

�ر� : ١٣ �٢٠١٩


13

Financial Highlights

(Rs. in million)

2014 2015 2016 2017 2018 2019

Operational Results

Gross Revenues 50.32 100.62 125.63 224.16 280.19 455.78

Financial Charges 0.00 0.85 11.09 30.57 14.12 2.81

Gross Margin 50.32 70.25 114.54 193.59 266.07 452.97

Profit Before Taxation 39.77 46.38 52.03 56.85 75.04 (179.55)

Profit After Taxation 27.04 32.71 44.25 44.75 63.33 (185.24)

Balance Sheet

Net Investment in Lease 40.00 444.19 852.04 983.85 2,700.27 2,702.26

Shareholders' Equity 1,000.00 1,000.00 1,000.00 2,000.00 3,500.00 3,500.00

Total Liabilities 23.93 182.69 413.34 910.55 567.22 570.93

Total Assets 1,050.96 1,242.44 1,517.35 3,059.31 4,279.31 4,097.79

Equipments4%

Machinery44%

Vehicles52%

Year 2018-19

Equipment

Machinery

Vehicles

-200

-175

-150

-125

-100

-75

-50

-25

0

25

50

75

100

2014 2015 2016 2017 2018 2019

27.04 32.7144.25 44.75

63.33

-185.24

Rs. i

n m

illio

n

YEARS

Profit After Taxation

Category-wise Disbursements Rs. 2,448 Million

-200

-175

-150

-125

-100

-75

-50

-25

0

25

50

75

100

1 2 3 4 5 6

39.77 46.38 52.0356.8575.04

-179.55

Rs. i

n m

illio

n

YEARS

Profit Before Taxation

Category-wise Disbursements Rs. 1,338 Million

Equipments24%

Machinery68%

Vehicles8% Year 2017-18

Equipment

Machinery

Vehicles

0

500

1000

1500

2014 2015 2016 2017 2018 2019

40.00

444.19

852.04

983.85

2,700.27 2,702.26

Rs. i

n m

illio

n

YEARS

Net Investment in Lease Finance

50.32

100.62125.63

224.16

280.19

455.78

0.00 0.85 11.09 30.57

14.12 2.81 0

50

100

150

200

250

300

350

400

450

2014 2015 2016 2017 2018 2019

Rs. i

n m

illio

n

YEARS

Gross Income vs Financial Cost

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2014 2015 2016 2017 2018 2019

1,050.96 1,242.44 1,517.35

3,059.31

4,279.31 4,097.79

Rs. i

n m

illio

n

YEARS

Total Asset Base

0

500

1000

1500

2000

2500

2014 2015 2016 2017 2018 2019

1,000.00 1,000.00 1,000.00

2,000.00

3,500.00 3,500.00

Rs. i

n m

illio

n

YEARS

Shareholders Equity

14


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

Name of company: Sindh Leasing Company Limited

Name of the line ministry :Finance Ministry (GoS)

I. This statement presents the overview of the compliance with the Public Sector Companies (Corporate Governance) Rules, 2013 (hereinafter called “the Rules”) issued for the purpose of establishing a framework of good governance, whereby a public sector company is managed in compliance with the best practices of public sector governance.

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

S. No.

Provision of the RulesRule No.

Y N

Tick the relevant box

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

2(d) √

2.

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

Category NamesDate of

appointment

Independent Directors

1. Mr. Muhammad A�ab Alam

2. Mrs. Masooma Hussain

October 24, 2017

October 24, 2017

Execu�ve Directors

Mr. Mohammad Bilal Sheikh

October 24, 2017

Non-Execu�ve Directors

1. Mr. Najam Ahmed Shah

2. Mr. Naim Farooqui

3. Mr. Raja Muhammed Abbas

4. Muhammad Shahid Murtaza

December 03, 2018

October 24, 2017

April 27, 2018

December 03, 2018

3(2)

√

3.

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

3(5) √*

4.

The appoin�ng authori�es have applied the fit and proper criteria given in the Annexure in making nomina�ons of the persons for elec�on as board members under the provisions of the Act.

3(7) √

5.The chairman of the board is working separately from the chief execu�ve of the Company.

4(1) √

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

4(4) √

7.The Board has evaluated the candidates for the posi�on of the chief execu�ve on the basis of the fit and proper criteria as well as the guidelines specified by the commission.

5(2) √


15

8.

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

(b) The Board has ensured that appropriate steps have been taken to disseminate it throughout the company along with its suppor�ng policies and procedures, including pos�ng the same on the company’s website.(www.sindhleasingltd.com)

(c) The Board has set in place adequate systems and controls for the iden�fica�on and redressal of grievances arising from unethical prac�ces.

5(4) √

The Board has established a system of sound internal control,

9.to ensure compliance with the fundamental principles of probity and propriety; objec�vity, integrity and honesty; and rela�onship with the stakeholders, in the manner prescribed in the Rules.

5(5) √

10.

The Board has developed and enforced an appropriate conflict of interest policy to lay down circumstances or considera�ons when a person may be deemed to have actual or poten�al conflict of interests, and the procedure for disclosing such interest.

5(5)(b) (ii)

√

11.The Board has developed and implemented a policy on an�corrup�on to minimize actual or perceived corrup�on in the company.

5(5)(b)

(vi)√

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

5(5)(c)(ii)

√

13.

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

5(5)(c) (iii)

√

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

5(6)√

15.

The Board has developed significant policies of the company. A complete record of par�culars of significant policies along with the dates on which they were approved or amended, has been maintained.

5(7) √

16.

The Board has quan�fied the outlay of any ac�on in respect of any service delivered or goods sold by the Company as a public service obliga�on, and have submi�ed its request for appropriate compensa�on to the Government for considera�on.

5(8) N/A

17.The Board has ensured compliance with policy direc�onsrequirements received from the Government.

5(11) √

16


18.

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

(b) Wri�en no�ces of the board mee�ngs, along with agenda and working papers, were circulated at least seven days before the mee�ngs.

(c) The minutes of the mee�ngs were appropriately recorded and circulated.

6(1)

6(2)

6(3)

√

19.

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

8(2) √

20.

The Board has reviewed and approved the related party transac�ons placed before it a�er recommenda�ons of the audit commi�ee. A party wise record of transac�ons entered into with the related par�es during the year has been maintained.

9 √

21.

The Board has approved the profit and loss account for, and balance sheet as at the end of the first second and third quarter of the year as well as the financial year end, and has placed the annual financial statements on the company’s

10 √

website.

22.

All the Board members underwent an orienta�on course arranged by the company annually to apprise them of the material developments and informa�on as specified in the Rules.

11 √

23.

(a) The Board has formed the requisite commi�ee, as specified in the Rules.

(b) The Commi�ees were provided with wri�en term of reference defining their du�es, authority and composi�on.

(c) The minutes of the mee�ngs of the commi�ee were circulated to all the Board members.

(d) The commi�ees were chaired by the following non-execu�ve directors:

Commi�ee Number of Members

Name of Chair

Audit Commi�ee Three Raja Mohd. Abbas

Risk Management Commi�ee

Three Shahid Murtaza

Human Resources Commi�ee

Four Najam Ahmed Shah

Procurement Commi�ee

Three Raja Mohd. Abbas

Nomina�on Commi�ee

Four Shahid Murtaza

12 √

24.

The Board has approved appointment of Chief Financial Officer, Company Secretary and Chief Internal Auditor, by whatever name called, with their remunera�on and terms and condi�ons of employment, and as per their prescribed qualifica�ons.

13 √

√25.The Chief Financial Officer and the Company Secretary have requisite qualifica�on prescribed in the Rules.

14

26.The company has adopted Interna�onal Financial Repor�ng Standards no�fied by the Commission under clause sub-sec�on (1) of sec�on 225 of the Act.

16 √


17

27.

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

17 √

28.The directors, CEO and execu�ves, or their rela�ves, are not, directly or indirectly, concerned or interested in any contract or arrangement entered into by or on behalf of the company

18 √

except those disclosed to the company.

29.

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

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

19 √

30.The financial statements of the company were duly endorsed by the chief execu�ve and chief financial officer, before approval of the board.

20 √

31.

The Board has formed an audit commi�ee, with defined and wri�en terms of reference, and having the following members:

Name of member CategoryProfessional background

Mr. Mohammed A�ab Alam

Independent Chartered Accountant

Mr. Naim Farooqui Non-Execu�ve Banking

Mr. Raja Muhammad Abbas

Non-Execu�ve Bureaucrat

The Chief execu�ve and chairman of the Board are not members of the audit commi�ee.

21(1)and

21(2)

√

32.

(a) The chief financial officer, the chief internal auditor, and a representa�ve of the external auditors a�ended all mee�ngs of the audit commi�ee at which issues rela�ng to accounts and audit were discussed.

(b) The audit commi�ee met the external auditors, at least once a year, without the presence of the chief financial officer, the chief internal auditor and other execu�ves.(c) The audit commi�ee met the chief internal auditor and other members of the internal audit func�on, at least once a year, without the presence of chief financial officer and the external auditors.

21(3)√

33.

(a) The Board has set up an effec�ve internal audit func�on, which has an audit charter, duly approved by the audit commi�ee.(b) The chief internal auditor has requisite qualifica�on and experience prescribed in the Rules.(c) The internal audit reports have been provided to the external auditors for their review.

22 √

18


34. The external auditors of the company have confirmed that the firm and all its partners are in compliance with Interna�onal

23(4) √

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

23(5) √

Federa�on of Accountants (IFAC) guideline on Code of Ethics as applicable in Pakistan.

√ * Not applicable for Government Nominee Director.

MUHAMMAD NAIM FAROOQUI AND MUHAMMAD AFTAB ALAMDirector & Independent Director


19

Sr.

No.Rule/sub-rule no.

Reasons for non-complianceFuture course of

ac�on

1. Rule 12(2) All commi�ees of the Board has one independent

director, except for the Nomina�on Commi�ee (NC)

and Procurement Commi�ee. This is because during

the year Chairmen of these two commi�ees had also

become non-execu�ve director in our associated

companies, due to which they were no longer

independent directors.

The Company will

request the Board to

appoint an independent

director.

2. Rule 21(1) We have two independent directors on our Board.

Out of these two, one director is the Chairman of the

Board and other one is the member of the Audit

Commi�ee (AC). However, the chairman of the Board

was also a member of Audit Commi�ee.

In order to comply with

PSCG rules, the Board

has replaced the

Chairman of the AC with

Mr. Raja Mohd. Abbas

during the year.

3. Rule 21(1) Chairman of the Board (independent director) was

also the Chairman of Audit Commi�ee. Therefore,

Chairman of the AC was replaced by another director

(non-execu�ve). However, Chairman of Audit

Commi�ee should have been independent.

The Company will

request the Board to

appoint an independent

director as Chairman of

the Audit Commi�ee.

We confirm that all other material requirements envisaged in the Rules have been complied with except for the following, toward which reasonable progress is being made by the Company to seek compliance by the end of June 30, 2019:

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

MUHAMMAD NAIM FAROOQUI AND MUHAMMAD AFTAB ALAMDirector & Independent Director

20


S.No Reference Clause description

1. Rule 12(2) The Board committees are required to be chaired by Non-Executive

Directors and the Independent Directors in the Committees are required to

be not less than their proportionate strength. However, no Independent

Director was appointed as member of Audit Committee, Nomination and

Procurement Committee.

KARACHI

DATED:SEPTEMBER 11, 201 9 CHARTERED ACCOUNTANTS

2. Rule 21(1) The majority members of Audit Committee including its Chairman, is

required to be Independent Non-Executive Directors. However, the audit

committee has only one independent Non-Executive Director and a Non-

Executive Director is Chairman of the Audit Committee.

2. Rule 21(2) Chairman of the Board is required not to be member of Audit Committee.

However, Chairman of the Board was also a member of Audit Committee

during the year.

Engagement Partner: Raheel Shahnawaz

We have reviewed the enclosed Statement of Compliance with the best practices contained in Public Sector Companies (Corporate Governance) Rules 2013 (the Rules) for the year ended June 30, 2019 prepared by the Board of Directors of Sindh Leasing Company Limited to comply with the provisions of the Rules.

The responsibility for compliance with the Rules is that of the Board of Directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Company's compliance with the provisions of the Rules and report if it does not and to highlight any non-compliance with the requirements of the Rules. A review is limited primarily to inquiries of the Company's personnel and review of various documents prepared by the Company to comply with the Rules.

As a part of our audit of the financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board of Directors' statement on internal control covers all risks and controls or to form an opinion on the effectiveness of such internal controls, the Company's corporate governance procedures and risks.

The Rules requires the Company to place before the Audit Committee, and upon recommendation of the Audit Committee, place before the Board of Directors for their review and approval its related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm's length transactions and transactions which are not executed at arm's length price and recording proper justification for using such alternate pricing mechanism. We are only required and have ensured compliance of this requirement to the extent of the approval of the related party transactions by the Board of Directors upon recommendation of the Audit Committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arm's length price or not.

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


21

Auditors’ Report to the Members

Qualified Opinion

We have audited the financial statements of Sindh Leasing Company Limited (the Company), which comprise the statement of financial position as at June 30,2019, and profit and loss account, the statement of comprehensive income, the statement of cash flows and the statement of changes in equity for the year then ended June 30, 2019, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit.

Except for the effect of the matter described in the basis for qualified opinion section, in our opinion and to the best of our information and according to the explanations given to us, the statement of financial position, profit and loss account, statement of comprehensive income, the statement of cash flows and the statement of changes in equity together with the notes forming part thereof conform with the accounting and reporting standards as applicable in Pakistan and give the information required by the Companies Act, 2017 (XIX of 2017), in the manner so required and respectively give a true and fair view of the state of the Company's affairs as at June 30, 2019 and of the loss and other comprehensive loss, its cash flows and the changes in equity for the year ended.

Basis for Qualified Opinion

As explained in note 12.4 and 13.4 to the financial statements, the Company has outstanding balances receivable in respect of auto finance loans and lease financing amounting to Rs. 10.573 million and Rs. 163.549 million from certain parties as of June 30, 2019 which are subject to investigation, scrutiny or legal proceedings by Government agencies out of which an amount of Rs. 2.764 million has been received subsequent to the year end against lease financing. In view of ongoing investigations and legal proceedings by Government agencies against these parties, we understand that an impairment assessment and subjective evaluation of the aforementioned financing should be carried out by the management after considering the factors in respect of adequacy of securities held, credit worthiness and financial condition of these parties and appropriate impairment against these balances should be maintained in the financial statements. However, the Company has not performed impairment review and subjective evaluation of the aforementioned financing as required under Regulation 25 of Non-Banking Finance Companies and Notified Entities Regulations, 2008 despite presence of impairment indicators in the financing portfolios. The Company has not recorded any provision for impairment based on subjective evaluation of the borrowers. Accordingly, we are unable to confirm the valuation and recoverability of these balances in the financial statements.

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

Emphasis of Matter

We draw attention to;

1. Note 3.1 to the financial statements which inter-alia states that the Board of Directors of the Company in their meeting held on June 17, 2019 has passed resolution for merger of Sindh Leasing Company Limited with and into Sindh Bank Limited under the scheme of amalgamation through amalgamation agreement to be approved by the Government of Sindh, the sole shareholder of the Company in the Extra Ordinary General Meeting (EOGM) in order to meet the shortfall in capital adequacy requirement of Sindh Bank Limited (the Bank).

As a consequence of scheme of amalgamation, the Company is not expected to continue as a going concern. Sindh Bank Limited shall be taking over the business, functions, contracts, policies, proceedings, undertakings, assets and liabilities of the Company at specific date. Since there will be no change in operational activities of the Company pursuant to the scheme of amalgamation, no adjustments are expected to the carrying values of assets and liabilities.

2. These financial statements have been prepared on liquidation basis as stated in note 4.2 of the financial statements.

Our opinion is not modified in respect of these matters.

Information Other than the financial statements and Auditor’s Report Thereon

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

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

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

22


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

Responsibilities of Management and Board of Directors for financial statements

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

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

Auditor’s Responsibilities for the Audit of the financial statements

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

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

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

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

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

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

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

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

Report on Other Legal and Regulatory Requirements

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

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

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

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

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

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

Date: September 11, 2019

Place:Karachi

BDO Ibrahim & Co

Chartered Accountants


23

2019 2018

Note

ASSETS

Cash and bank balances 7 550,268,723 412,035,562

Accrued markup 11,841,426 10,689,042

Investments 8 490,991,772 453,959,611

Prepayments and other receivables 9 10,689,814 5,522,933

Intangible assets 10 1 8,318

Property and equipment 11 17,257,693 23,273,880

Deposits 432,600 432,600

Loans and advances 12 310,555,391 695,007,974

Net investment in finance leases 13 2,702,254,234 2,678,383,336

Taxation - net 14 3,493,613 -

TOTAL ASSETS 4,097,785,267 4,279,313,256

EQUITY AND LIABILITIES

CAPITAL AND RESERVES

Authorized share capital

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

Issued, subscribed and paid-up share capital 15 3,500,000,000 3,500,000,000

Reserves 16 26,854,093 212,091,271

3,526,854,093 3,712,091,271

LIABILITIES

Taxation - net 14 - 6,876,114

Accrued markup on certificates of deposits 17 360,635 43,265

Trade and other payables 18 32,071,622 28,651,130

Certificates of deposits 19 31,700,001 23,900,001

Security deposits against leases 20 506,798,916 507,751,475

570,931,174 567,221,985

TOTAL EQUITY AND LIABILITIES 4,097,785,267 4,279,313,256

CONTINGENCIES AND COMMITMENTS 21

The annexed notes from 1 to 36 form an integral part of these financial statements.

(Rupees)

350,000,000 (2018: 350,000,000) ordinary shares of Rs. 10/- each

BALANCE SHEETAS AT JUNE 30, 2019

___________ ___________________Director Director

24


2019 2018

Note

INCOMEIncome from finance leases, auto loans and

working capital loans 367,496,787 218,043,583 Return on investments and deposits 22 87,809,762 61,204,260 Other income 475,325 945,608

455,781,874 280,193,451 EXPENSES

Finance cost 23 (2,811,143) (14,120,926)Administrative expenses 24 (207,965,804) (177,874,448)

Operating profit 245,004,927 88,198,077 Reversal / (provision) of potential lease losses 13.1 21,890,256 (10,884,770)Provision against working capital loan 12.9 (443,500,000) (2,000,000)Provision against auto finance loans - net 12.8 (2,943,709) (275,948)(Loss) / profit for the year before taxation (179,548,526) 75,037,359 Taxation 25 (5,688,652) (11,703,685)(Loss) / profit for the year (185,237,178) 63,333,674 (Loss) / earnings per share - basic and diluted 26 (0.53) 0.28


(Rupees)

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2019



25

2019 2018

(Loss) / profit for the year (185,237,178) 63,333,674

Other comprehensive income - -

Total comprehensive (loss) / income for the year


(Rupees)

(185,237,178) 63,333,674

STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED JUNE 30, 2019


26


2019 2018

Note

CASH FLOW FROM OPERATING ACTIVITIES

(Loss) / profit for the year before taxation (179,548,526) 75,037,359

Adjustment for:

Depreciation 11 6,433,162 6,559,919

Amortization 10.1 8,317 482,265

Property and equipment written off - 2,866,664

(Reversal) / provision of potential lease losses (21,890,256) 10,884,770Provision against working capital loan 12.9 443,500,000 2,000,000

Provision against auto finance loan - net 12.8 2,943,709 275,948

Gain on disposal of property and equipment - (435,842)

Finance cost 2,811,143 14,120,926433,806,075 36,754,650

Operating profit before working capital changes 254,257,549 111,792,009

Movement in working capital

Increase in assets

Loans and advances (61,991,126) (228,717,667)

Deposits - 56,000

Prepayments and other receivables (5,166,882) 1,226,853Accrued markup (1,152,384) (208,674)

(68,310,392) (227,643,488)

Increase in liabilities

Trade and other payables 3,420,492 9,776,607

Cash generated from operations 189,367,649 (106,074,872)

Finance cost paid (2,493,774) (35,535,872)

Taxes paid (16,058,377) (9,279,706)

Increase in net investment in finance leases (1,980,642) (1,315,434,188)

Increase in security deposits against leases (952,559) 224,484,622

(21,485,352) (1,135,765,144)

Net cash generated from / (used in) operating activities 167,882,297 (1,241,840,017)

CASH FLOW FROM INVESTING ACTIVITIES

Additions to property and equipment 11 (416,975) (1,747,829)

Proceeds from sale of property and equipment - 1,010,500

Investments - net (37,032,161) 446,040,389

Net cash (used in) / generated from investing activities (37,449,136) 445,303,060

445,303,060

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from issue of certificates of deposits 7,800,000 23,900,001

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

Long term loan - (500,000,000)

Short term borrowings - (82,498,269)

Net cash generated from financing activities 7,800,000 941,401,732

Net increase in cash and cash equivalents 138,233,161 144,864,775

Cash and cash equivalents at beginning of the year 412,035,562 267,170,786

Cash and cash equivalents at end of the year 7 550,268,723 412,035,562-


(Rupees)

CASH FLOW STATEMENTFOR THE YEAR ENDED JUNE 30, 2019



27

Capital reserve Revenue reserve

Note

Balance as at July 1, 2017 2,000,000,000 66,266,811 82,490,786 2,148,757,597

Transaction with owner

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

Total comprehensive income for the year

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

Other comprehensive income - - - -

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

Transfer to statutory reserve 16.1 - 31,666,837 (31,666,837) -

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

Total comprehensive loss for the year

Loss for the year - - (185,237,178) (185,237,178)

Other comprehensive income - - - -

- - (185,237,178) (185,237,178)

Transfer to statutory reserve 16.1 - - - -

Balance as at June 30, 2019 3,500,000,000 97,933,648 (71,079,555) 3,526,854,093


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

Issued,

subscribed and

paid-up share

capital

TotalAccumulated

lossesStatutory reserve

STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED JUNE 30, 2019


28


FOR THE YEAR ENDED JUNE 30, 2019

NOTES TO THE FINANCIAL STATEMENTS

1. LEGAL STATUS AND NATURE OF BUSINESS

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

100% shares of the Company are owned by the Government of Sindh.

2. GEOGRAPHICAL LOCATION AND ADDRESSES OF BUSINESS UNITS

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

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

Housing Society, Karachi,

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

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

- F-11 Markaz, Islamabad, and

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

3. SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING THE FINANCIAL POSITION AND PERFORMANCE OF THE COMPANY

3.1 During the year, the State Bank of Pakistan directed vide its letter no. OSED /SEU-16/056(01)/04624/2019 dated February 27, 2019 to Sindh Bank Limited (the Bank) and letter no. BPRD/BA&CP/649/2996/2019 dated February 7, 2019 to the Secretary Finance (Government of Sindh) to meet the shortfall in capital adequacy requirement of the Bank as required under Banking Companies Ordinance 1962 (the Ordinance).

"In pursuance of the above letter, the Board of Directors of the Company in their meeting held on June 17, 2019 has passed resolution for merger of Sindh Leasing Company Limited with and into Sindh Bank Limited under the scheme of amalgamation through amalgamation agreement to be approved by the Government of Sindh, the sole shareholder of the Company in the Extra Ordinary General Meeting (EOGM).

Further, the Board of Directors of the Sindh Bank Limited in their meeting held on June 17, 2019 has also passed resolution for merger of the Bank with the Company.

The Government of Sindh vide its letter no: FD(Res-II)5(6)2017 dated June 26, 2019 responded to the letter of Sindh Bank Limited ref. SNDB/FIN-1200/2019 issued on June 9, 2019 that following decisions have been taken by the Provincial Cabinet in its meeting held on June 12, 2019 in order to meet capital requirement of the Bank.

Amount in

(Rupees)

130,000,000

240,000,000

300,000,000

800,000,000

Issue of unsecured Term Finance Certificates for Tier - 1 Capital

Cash equity injection

Issue of unsecured Term Finance Certificates for Tier - 2 Capital

Equity injection by the merger of Sindh Leasing Company Limited

As further detailed in the aforementioned letter, that Government of Sindh shall inject Rs. 3.7 billion additional equity into Sindh Bank Limited at this stage (within the current financial year), rather than to subscribe to the TFCs and remaining equity / TFCs amounting to Rs. 8 billion shall be issued in the next financial year, of which at least Rs. 4.5 billion shall be issued by December 31, 2019 and remaining by June 30, 2020.

Subsequently, the finance department of Government of Sindh vide its letter no. FD(RES-II)5(6)/2017 directed to the Accountant General Sindh to release the funds amounting to Rs. 3.7 billion out of the budgetary allocation of Rs. 3.7 billion in favor of Fund Management House, Finance Department, Government of Sindh on account of Equity injection of Sindh Bank Limited during the current financial year 2018-19.

The Company bearing license no. NBFC-/LES-1/2014, being a wholly owned subsidiary of the Government of Sindh has initiated steps to be merged /amalgamated with and into Sindh Bank Limited under Section 48 of the Banking Companies Ordinance, 1962 (the Ordinance) subject to all necessary regulatory and corporate approvals, including the approval of the Securities and Exchange Commission of Pakistan (SECP) under Rule 7(2)(c) of the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 ("NBFC Rules") under the scheme of amalgamation.


29



"The Company has filed an application vide letter dated June 20, 2019 to the Securities and Exchange Commission of Pakistan (SECP) under Rule 7(2) of part 'c' of the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 for the approval of the merger of Sindh Leasing Company Limited with and into Sindh Bank Limited which is pending approval from Securities and Exchange Commission of Pakistan (SECP).

In pursuance of above letter, the Securities and Exchange Commission of Pakistan (SECP) vide its letter no. SC/NBFC131/SLCL/2019/447 dated July 24, 2019 required the Company to provide an explanation of potential impact of adverse developments on account of Mr. Bilal Sheikh, Director of Sindh Bank Limited and CEO of the Company and Mr. Tariq Ahsan, the President of the Bank, being arrested by NAB on the proposed merger of the Company into the Bank.

Subsequently, the Company vide its letter SLCL/056/2019 dated July 25, 2019 in pursuance of above letter by SECP responded that Mr. Bilal Sheikh’s tenure from the post of the Company ended on July 11, 2019 and letter to this effect had already been submitted to SECP and the Board of Directors of the Company in its meeting held on June 17, 2019 have decided to appoint Mr. Rehan Anjum as the CEO of the Company. The Company further responded that Mr. Tariq Ahsan’s tenure as the President of the Bank ended on July 11, 2019 and temporary charge of President / CEO was given to Mr. Saeed Jamal Tariq, FCA by the Board of Directors of the Bank till the appointment of a regular President / CEO of the Bank and submitted his FTP to SBP for clearance. Accordingly, the Company foresee no impact of the above adverse development on the proposed merger of the Company into the Bank as the positions of CEO of both the Company and the Bank were filed through due process and the business of the Company and the Bank are being conducted as usual.

Further, the SECP vided its letter No. SC/NBFC131/SLCL/2019/456 dated August 1, 2019 informed the Company that the department is in process of performing in its own due diligence in the matter of pre-merger approval for proposed merger of Sindh Leasing Company Limited with and into Sindh Bank Limited. In view of circumstances of the matter, any decision would be subject to outcome of the due diligence and it shall be communicated accordingly.

The Proposed Merger, entails the merger / amalgamation of the entire undertaking of Sindh Leasing Company Limited (including all its assets, liabilities, rights and obligations etc.) with and into Sindh Bank Limited which is also owned by the Government of Sindh subjective to the fulfillment of the requirements mentioned in Companies Act, 2017.

Upon the merger, the Company shall stand dissolved without winding up and the license issued to the Company under Non-Banking Finance Companies and Notified Entities Rules, 2003 (NBFC Rules, 2003) by the Securities and Exchange Commission of Pakistan (SECP) shall stand cancelled. Thereafter, the business and operations of the Company shall be carried out by the Bank. Since there will be no change in operational activities of the Company pursuant to scheme of amalgamation, no adjustments are expected to the carrying amounts of assets and liabilities.

In consideration of the Proposed Merger, it is intended that 350,000,000 (Three Hundred Fifty Million) ordinary shares of the Bank shall be issued to Government of Sindh (being the sole shareholder of the Company, including through its nominees) based on a swap ratio of 1 (one) share of the Bank for every 1 (one) share of the Company held by the Government of Sindh (including through its nominees).

3.2 The Company has outstanding balances receivable in respect of lease financing, working capital loans and auto finance loans amounting to Rs. 163.549 million and Rs. 10.573 million from certain parties as of June 30, 2019 which are subject to investigation, scrutiny or legal proceedings by Government agencies out of which an amount of Rs. 2.764 million has been received subsequent to the year end against lease financing.

3.3 During the year, the total leases / loans disbursed by the Company amounting to Rs. 1,280.230 million. Out of these disbursements, major disbursements of amounting to Rs. 1,045.287 million were made to following industries:

-Construction

-Sugar

-Service

-Food

3.4 During the year, the Company has made provision in respect of working capital loan amounting to Rs. 450.000 million against Larr Sugar Mills Limited, Naudero Sugar Mills (Private) Limited and Chamber Sugar Mills (Private) Limited on account of ongoing legal and regulatory proceedings against those parties. The management is of view that amount may not be recoverable in future as a result provision has been maintained in the financial statements.

3.5 During the year, management has reversed general provision against lease losses and auto finance loans amounting to Rs. 21.890 million and Rs. 0.357 million respectively as per decision of the Board of Directors of the Company in their meeting held on June 17, 2019.

3.6 During the year investments sold / matured of amounting to Rs. 513.429 million in respect of TDRs and T-Bills.

4. BASIS OF PREPARATION

4.1 Statement of compliance

30


These financial statements have been prepared in accordance with the accounting and reporting standards as applicable in Pakistan. The accounting and reporting standards applicable in Pakistan comprise of :

- International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as notified under the Companies Act, 2017;

- Provisions of and directives issued under the Companies Act, 2017 along with Part VIIIA of the repealed Companies Ordinance, 1984;

- Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003 (the NBFC Rules), Non-Banking Finance Companies and Notified Entities Regulations, 2008 (the NBFC Regulations).

Where provisions of and directives issued under the Companies Act, 2017, Part VIIIA of the repealed Companies Ordinance, 1984, the NBFC Rules and the NBFC Regulations differ from the IFRS Standards, the provisions of and directives issued under the Companies Act, 2017, Part VIIIA of the repealed Companies Ordinance, 1984, the NBFC Rules and the NBFC Regulations have been followed.

4.2 Basis of measurement

These financial statements has been prepared on liquidation basis of accounting in which assets have been carried at realisable value and liabilities as amounts payable. (Since there will be no change in operational activities of the Company pursuant to scheme of amalgamation, no adjustments are expected to the carrying amounts of assets and liabilities).

4.3 Functional and presentation currency

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

5 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS TO PUBLISHED APPROVED ACCOUNTING STANDARDS

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

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



March 01, 2018

IFRS 9

July 01, 2018

IFRS 9

July 01, 2018

IFRS 7

July 01, 2018

Effective date

(annual periods

beginning on or

after)

Conceptual Framework for Financial Reporting 2018 - Original Issue

Financial Instruments- finalised version, incorporating

requirements for classification and measurement,

impairment, general hedge accounting and derecognition

Financial Instruments - reissue to incorporate a hedge

accounting chapterand permit the early applicationof

the requirements for presentingin other comprehensive

income the 'own credit' gains or losseson financial

liabilities designated under the fair valueoption without

early applying the other requirements of IFRS 9

Financial Instruments: Disclosures- additional hedge

accounting disclosures(and consequential amendments)

resultingfrom the introductionof the hedge accounting

chapter in IFRS 9


31

IAS 39

July 01, 2018

IAS 40

Effective date

(annual periods

beginning on or

after)

Financial Instruments:Recognition and Measurements-

amendments to permit an entity to elect to continue to

apply the hedge accounting requirements in IAS 39 for a

fair value hedge of the interest rate exposure of a portion

of a portfolio of financial assets or financial liabilities

when IFRS 9 is applied, and to extend the fair value

option to certaincontracts that meet the 'own use'scope

exception

Investment Property- amendments to clarify transfers of

property to, or from, investment property



5.2 Amendments that are effective in current year and not relevant to the Company

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

IFRS 2

IFRS 4

IFRS 5

July 01, 2018

IFRS 8

IFRS 15 Original issue July 01, 2018

IFRS 15 Clarifications to IFRS 15 July 01, 2018

Annual Improvements to IFRSs (2014 – 2016) Cycle:

IFRS 1

Amendments regarding the interaction of IFRS 4 and

Share-based Payment - amendments to clarify the

classificationand measurement of share-based payment

transactions

Insurance Contracts - amendments regarding the

interaction of IFRS 4 and IFRS 9

Additional hedge accounting disclosures (and

consequential amendments) resulting from the

introduction of the hedge accounting chapter in IFRS 9

First-time Adoption of International Financial Reporting

Standards

Other than the amendments to standards mentioned above, there are certain annual improvements made to IFRS that became effective during the year:

IAS 28 Investments in Associates and Joint Ventures

5.3 Amendments not yet effective

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

Amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38,IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32 to update these pronouncements with regard to references to and quotes from the framework or to indicate where they refer to different version of the Conceptual Framework.

January 01,

2018

January 01,

2018

January 01,

2018

January 01,

2018

January 01,

2018

January 01,

2018

January 01,

2018

32


IFRS 3

January 01, 2019

IFRS 8

January 01, 2019

IFRS 9

IAS 1

January 01, 2020

IAS 8

January 01, 2020

IAS 19

January 01, 2019

IAS 17

January 01, 2019

IAS 28

January 01, 2019

Amendments regarding prepayment features with

negative compensation and modifications of financial

Financial Instruments - amendments regarding

prepayment features with negative compensation

and modifications of financial liabilities

Business Combinations - amendments to clarify the

definition of a business

Presentation of Financial Statements- amendments

regarding the definition of materiality

Employee benefits - amendments regarding plan

amendments, curtailments or settlements

Amendments regardingplan amendments,curtailments

or settlements

Investments in Associates and Joint Ventures -

amendments regarding long-term interests in associates

Accounting Policies,Changes in AccountingEstimates

and Errors - amendments regarding the definition of

The annual improvements to IFRSs that are effective from the dates mentioned below against respective standards:

Annual improvements to IFRSs (2015 – 2017) Cycle:

IFRS 3 Business Combinations

IFRS 11 Joint Arrangements

IAS 12 Income Taxes

IAS 23

IFRS 16

Borrowing Costs

Leases

Effective date

(annual

periods

beginning on

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

Standards or interpretations not yet effective

The effects of IFRS 16 -Leases are still being assessed, as these new standards may have a significant effect on the Company’s future financial statements.

The following new standards and interpretations have been issued by the International Accounting Standards Board (IASB), which have not been adopted locally by the Securities and Exchange Commission of Pakistan (SECP):

liabilities



January 01, 2020

January 01, 2019

January 01, 2019

January 01, 2019

January 01, 2019

January 01, 2019


33

IFRS 1 First Time Adoption of International Financial Reporting Standards

IFRS 14 Regulatory Deferral Accounts

IFRS 17 Insurance Contracts

The Company expects that the adoption of the other amendments and interpretations of the standards will not have any material impact and therefore will not affect the Company's financial statements in the period of initial application.

6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented unless or otherwise stated.

6.1 Property and equipment

Owned assets

These are stated at cost less accumulated depreciation and impairment, if any. Depreciation is charged to income over the useful life of the asset on a systematic basis, by applying the straight line method at the rates specified in note 11 to the financial statements. In respect of additions and disposal of assets during the year, depreciation is charged from the date of acquisition and up to the date preceding the disposal respectively.

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

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

Capital work-in-progress

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

6.2 Intangibles

These are stated at cost less accumulated amortization and impairment, if any. Amortization is charged to income over the useful life of the asset on a systematic basis by applying the straight line method.

The cost of intangible asset comprises of its purchase price and any directly attributable expenditure incurred in preparing the asset for its intended use.

6.3 Impairment of non financial assets

The carrying amount of assets is reviewed at each reporting date for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. If such an indication exists, and where the carrying value exceeds the estimated recoverable amount, assets are written down to their recoverable amount. The resulting impairment loss is recognised in the profit or loss.

6.4 Financial Instruments

All financial assets and liabilities are recognized at the time when the Company becomes a party to the contractual provisions of the instrument. All financial assets are derecognized at the time when the Company losses control of the contractual rights that comprise the financial assets. All financial liabilities are derecognized at the time when they are extinguished, i.e. when the obligation specified in the contract is discharged, cancelled or expires.

IFRS 9 'Financial Instruments' was issued on July 24, 2017. This standard is adopted locally by the Securities and Exchange Commission of Pakistan and is effective for accounting periods beginning on or after July 1, 2018. A number of other new standards are effective from July 1, 2018 but they do not have a material effect on the Company's financial statements.

IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement.

The details of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below.

6.4.1 Classification and measurement of financial assets and financial liabilities

IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities. However, it eliminates the previous IAS 39 categories for financial assets of held to maturity, loans and receivables and available for sale.



34


The adoption of IFRS 9 has not had a significant effect on the Company’s accounting policies related to financial liabilities. The impact of IFRS 9 on the classification and measurement of financial assets is set out below.

Under IFRS 9, on initial recognition, a financial asset is classified as measured at: amortised cost; fair value through other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or fair value through profit and loss (FVTPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

- it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

- it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

A financial asset is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition.

The following accounting policies apply to the subsequent measurement of financial assets:

Financial assets at

FVTPL

Financial assets at

amortised cost

Debt investments at

FVOCI

Equity investments at

FVOCI

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.

These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses (see (ii) below). Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss.

These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.

The following table and the accompanying notes below explain the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Company’s financial assets as at July 1, 2018.




35

NoteOriginal classification

under IAS 39

New

classification

under IFRS 9

Original

carrying amount

under IAS 39

New carrying

amount under

IFRS 9

(a) Loans and receivables Amortised cost 412,004,651 412,004,651



(a) Loans and receivables Amortised cost 2,678,383,336 2,678,383,336

(a) Loans and receivables Amortised cost 432,600 432,600

(a) Loans and receivables Amortised cost 10,689,042 10,689,042 Accrued markup

Net investment in finance

leasesDeposits

Financial assets

Bank balances

Loans and advances

Investments

(a) These financial assets classified as 'loans and receivables' have been classified as amortised cost.

6.4.2 Impairment of financial assets

The impairment model under IFRS 9 requires the recognition of impairment based on expected credit losses and replaces the incurred loss concept under IAS 39. The impairment model applies to financial assets classified at amortised cost. The Company has recorded provisions as per Schedule X, Regulation 25 of Non-Banking Finance Companies and Notified Entities Regulations, 2008 as the requirement of local laws prevails over the requirements of IFRS 9.

6.4.3 Financial liabilities

Financial liabilities are recognised at the time when the Company becomes a party to the contractual provisions of the instruments. These are initially recognised at fair values and subsequent stated at amortised cost. Financial liabilities are derecognised when they are extinguished i.e., when the obligation specified in the contract is discharged, cancelled , or expires. Any gain or loss on derecognition is taken to profit or loss in the current year.

6.4.4 Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received. On derecognition of a financial asset measured at amortized cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss.

6.4.5 Derecognition of financial liabilities

The Company derecognizes financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

6.4.6 Transition

The Company has used the exemption not to restate comparative periods as a result comparative periods have not generally been restated. Differences, if any, in the carrying amounts of financial assets resulting from the adoption of IFRS 9 are recognized in net assets attributable to unit holders as at July 1, 2018. Accordingly, the comparative information does not reflect the requirements of IFRS 9, but rather those of IAS 39.

6.5 Net investment in finance leases

Leases in which the Company transfers substantially all the risks and rewards incidental to the ownership of an asset to the lessees are classified as finance leases. A receivable is recognized at an amount equal to the present value of the minimum lease payments under the lease agreement, including guaranteed residual value and unamortized initial direct cost which are included in the financial statements as "net investment in finance leases".

6.6 Provision against non performing leases and other loans

Provision against non performing leases and other loans is maintained at a level which, in the judgment of management, is adequate to provide for losses on lease portfolio and other loan portfolio which can be reasonably anticipated.

Calculating provision against non performing leases and other loans is subject to numerous judgments and estimates. In evaluating the adequacy of provision, management considers various factors, including the requirements of Schedule X and Regulation 25 of the Non



36


Banking Finance Companies and Notified Entities Regulations, 2008 (NBFCs Regulations, 2008). The subjective evaluation for risk assessment is made on the basis of adequacy of security inclusive of its realizable value , cashflow of the borrower or lessee, operations in the account and records covering advances and credit worthiness of the borrower and lessee.

The provision is increased by additional charge to income and is decreased by charge offs, net of recoveries. Lease and other loan receivables are charged off, when in the opinion of management, the likelihood of any future collection is believed to be minimal.

6.7 Long term loans and advances

Long term loans and advances are initially recognized at cost being the fair value of consideration received together with the associated transaction costs. Subsequently, these are carried at amortized cost using the effective interest rate method. Transaction costs relating to long term loans and advances are being amortized over the period of agreement.

6.8 Certificates of Deposit

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

6.9 Taxation

Tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss account except to the extent that it relates to items recognized directly in equity or in other comprehensive income, in which case it is recognized in equity or other comprehensive income.

6.9.1 Current

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

6.9.2 Deferred

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

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

6.10 Employees benefits

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

a) Defined benefit plan (Gratuity Fund)

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

b) Defined contribution plan (Provident Fund)

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

6.11 Revenue recognition

6.11.1 Finance lease

The Company follows the finance lease method in accounting for recognition of finance lease. The total unearned finance income i.e. the excess of aggregate installment contract receivables plus residual value over the cost of the leased asset is deferred and then amortized over the term of the lease, so as to produce a systematic return on the net investment in finance leases.

Processing, front end and commitment fees and commission are recognized on accrual basis.

Late payment charges are recognized as income when realized.




37

6.11.2 Income on non-performing lease and loan receivables

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

6.11.3 Interest income

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

6.11.4 Return on investment

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

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

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

6.12 Offsetting

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

6.13 Repossessed leased assets

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

6.14 Provisions

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

6.15 Cash and bank balances

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

6.16 Cash and cash equivalents

Cash and cash equivalents comprises of cash balances and bank deposits. For the purpose of cash flow statements, cash and cash equivalents carried in the balance sheet comprises of cash in hand, balance with bank in daily product accounts and stamp papers in hand. Cash and cash equivalents also includes investment to be matured with in 90 days.

6.17 Transactions with related parties

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

6.18 Earnings per share

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

6.19 Proposed dividend and transfer between reserves

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

6.20 Significant accounting judgments and critical accounting estimates / assumptions

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which forms the basis of making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.



38


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

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

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

b) Provision against non performing leases and other loans

Calculating provision against non performing leases and other loans is subject to numerous judgments and estimates as explained in note 6.6 of these financial statements.

c) Recognition of taxation and deferred tax

The Company takes into account relevant provisions of the prevailing income tax laws while providing for current and deferred taxes as explained in note 6.9 of this financial statements.

2019 2018

Note Rupees Rupees

7. CASH AND BANK BALANCES

Cash and other equivalent

Cash in hand 37,490 30,911

Cash at bank

Current accounts 36,588 1,111,016

Saving accounts 7.1 550,194,645 410,893,635

550,231,233 412,004,651

550,268,723 412,035,562

7.1 These represent daily product accounts (saving accounts) maintained with several banks carrying mark-up at the rate of 5.00% to 11% (June 30, 2018: 5.00% to 9.15%) per annum receivable on monthly basis.

8. INVESTMENTS

At amortised cost

Government Securities - Market Treasury Bills 8.1 6,991,772 3,959,611

Term deposit receipts 8.2 484,000,000 450,000,000490,991,772 453,959,611

8.1

Market Treasury Bills 8.1.1 6,991,772 3,959,611

Government Securities

8.1.1 This carries interest at the rate of 10.30% per annum and has maturity date of July 04, 2019. The market value of investment in Market Treasury Bills as at June 30, 2019 amounted to Rs. 6.959 million.

8.1.2 As per the Regulations14(4)(i) of the NBFC Regulations, 2008 the Company is required to invest at least 15% of its outstanding funds raised through issue of Certificates of Investments in the Government Securities. As at June 30, 2019 the Company had 20.06% of its funds raised through Certificates of Investments invested in Market Treasury Bills.

8.2 Term deposit receipts

NRSP Microfinance Bank Limited 8.2.1 484,000,000 450,000,000

8.2.1 This represents investment made by the Company in Term Deposit Receipts for a period of one year and having a maturity date of July 15, 2019. This carries mark-up at the rate of 11.75% (June 30, 2018: 8.50%) per annum.




39

2019 2018

Note Rupees Rupees

9. PREPAYMENTS AND OTHER RECEIVABLES

537,868 851,526

2,596,823 3,763,955

897,763 907,452 9.1 & 9.2 6,657,360 -

10,689,814 5,522,933

Prepaid insurance

Prepaid rent

Prepaid membership fee

Other receivables

9.1 This includes receivable from Sindh Leasing Company Limited (Employees Gratuity Fund) and Sindh Leasing Company Limited (Employees Provident Fund) amounting to Rs. 0.955 million and Rs. 0.715 million respectively.

9.2 This includes receivable from Government of Sindh amounting to Rs. 4.962 million in respect of stamp duty and CDC charges paid during the year by the Company.

10. INTANGIBLE ASSETS

Software licenses 10.1 1 8,318

10.1 Net carrying value basis

Opening balance 8,318 490,583

Additions during the year - -

8,318 490,583

Amortization during the year (8,317) (482,265)Net book value at the end of the year 1 8,318

Gross carrying value basis

Cost 1,446,941 1,446,941

Accumulated amortization (1,446,940) (1,438,623)Net book value 1 8,318

Amortization rate (% per annum) 33.33 33.33



40


11. PROPERTY AND EQUIPMENT

Year ended June 30, 2019

Net carrying value basis

Opening net book value (NBV) 12,392,212 2,556,498 1,577,654 305,479 6,442,037 23,273,880

Additions - at cost 48,750 368,225 - 416,975

Depreciation charge (2,011,425) (421,876) (1,624,317) (209,110) (2,166,435) (6,433,162)

Closing net book value 10,429,537 2,134,622 321,562 96,369 4,275,602 17,257,693


Cost 20,065,495 4,218,759 8,314,931 3,163,010 10,832,175 46,594,370

Accumulated depreciation (9,635,958) (2,084,137) (7,993,369) (3,066,642) (6,556,573) (29,336,678)

Net book value (Refer note 11.1) 10,429,537 2,134,622 321,562 96,368 4,275,602 17,257,692

Year ended June 30, 2018

Net carrying value basis

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

Additions - at cost 1,525,279 77,050 61,000 84,500 - 1,747,829

Disposals (NBV) - - - - (574,658) (574,658)

Adjustments (2,866,664) - - - - (2,866,664)

Depreciation charge (1,887,174) (417,128) (1,579,113) (614,315) (2,062,189) (6,559,919)

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


Cost 20,016,745 4,218,759 7,946,706 3,163,010 10,832,175 46,177,395

Accumulated depreciation (7,624,533) (1,662,261) (6,369,052) (2,857,531) (4,390,138) (22,903,515)

Net book value (Refer note 11.1) 12,392,212 2,556,498 1,577,654 305,479 6,442,037 23,273,880

Depreciation rate % per annum 10 10 20 33.33 20

Description

Leasehold

improvements

Furniture and

fixtures

Electrical

equipments

Computer

equipmentsVehicles Total

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

2019 2018Note Rupees Rupees

12. LOANS AND ADVANCES

Secured - considered good

Loans to employees 12.1 & 12.2 17,480,585 12,329,779

Auto finance loan 12.3 & 12.4 37,595,204 35,385,851

Working capital loans 12.5 189,816,602 654,149,089

244,892,391 701,864,719

Secured - considered doubtful

Auto finance loan 3,300,454 -

Working capital loans 450,000,000 -

Provision against auto finance loans (3,300,454) (356,745)

Provision against working capital loans (450,000,000) (6,500,000)

- (6,856,745)

11.1 The cost of fully depreciated assets which are still in use as at June 30, 2019 is Rs. 2.911 million and written down value is nil (2018:

Rs. 2.073 million and written down value is nil).

Unsecured - considered good

Advance against import of machinery 62,015,000 -

Advance against vehicle 3,648,000 -

65,663,000 -

310,555,391 695,007,974

12.6

12.7

12.9

12.8




41

12.1 Loans to employees

2019 2018 2019 2018 2019 2018

Rupees Rupees Rupees Rupees Rupees Rupees

12,137,861 14,895,032 191,918 975,552 12,329,779 15,870,584

16,717,138 387,000 315,207 343,820 17,032,345 730,820

(11,509,209) (3,144,171) (372,330) (1,127,454) (11,881,539) (4,271,625)

17,345,790 12,137,861 134,795 191,918 17,480,585 12,329,779

Total

Balance at the

beginning of the yearDisbursements made

during the year

Balance received

during the year

Balance at the end of

the year

Executives Non Executives

12.2 These represent house loans and car loans provided to the executives and other employees of the Company as per the Company policy. House loans are repayable in a maximum of 300 monthly installments and carry mark-up at the rate of 5 percent per annum. Car loans are repayable in 60 monthly installments and are interest free.

12.3 This represents vehicle financing facility provided to customers on markup basis. The mark-up on these loans ranging from 13.43% to 15.92% (2018: 9.16% to 12.45%) per annum. These loans are repayable within a period of 3 to 5 years (2018: 3 to 5 years) and are secured against first exclusive charge by way of hypothecation of the motor vehicles and personal guarantee of the customers.

12.4 This includes an amount of Rs. 10.573 million receivable from Bandhi Sugar Mills (Private) Limited against auto finance loan which is subject to investigation, scrutiny or legal proceedings by Government agencies.

12.5 This represents working capital loan facility provided to customers on markup basis. The mark-up on these loans ranging from 13.95% to 15.00% (June 30, 2018: 9.04% to 10.30%) per annum. These finances are repayable within a period of one year and are secured against ranking charge by way of hypothecation on fixed assets, unregistered hypothecation charge over stock and receivables, equitable mortgage over properties, personal guarantee, corporate guarantee and post dated cheques from the customers.

12.6 This represents advance given to Pak Elektron Limited for the import of machinery to be financed under lease.

12.7 This represents advance given to supplier for the purchase of vehicle of the employee as per Company policy.

12.8 This represents provision made against Chamber Sugar Mills (Private) Limited and reversal of general provision recorded on the auto finance loan portfolio in prior year at the rate of 1% of the outstanding balance. The movement of provision is as follows:

2019 2018

Rupees Rupees

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

Provision made during the year 3,300,454 275,948

Reversal made during the year (356,745) -Balance at end of the year 3,300,454 356,745

12.9 During the year, the Company has made a provision against working capital loan amounting to Rs. 450.000 million in respect of Larr Sugar Mills Limited, Naudero Sugar Mills (Private) Limited, and Chamber Sugar Mills (Private) Limited on the account of ongoing litigations and legal proceedings against these parties by government agencies. In prior year, general provision recorded on the working capital loan at the rate of 1% of the balance. During the year, the Company has reversed the provision as per the decicion of Board of Directors in their meeting held on April 25, 2019. The movement of provision is as follows:

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

Provision made during the year 450,000,000 2,000,000

Reversal made during the year (6,500,000) -

443,500,000 2,000,000Balance at end of the year 450,000,000 6,500,000



42


12.10 Chief Executive Officer and Non Executive directors of the Company have not taken any loans and advances from the Company.


13. NET INVESTMENT IN FINANCE LEASES

Lease rentals receivable 2,769,262,539 2,643,680,220

Add: Residual value of leased assets 506,798,916 507,751,475

Gross investment in finance leases 3,276,061,455 3,151,431,695

Less: Unearned finance lease income (573,807,221) (451,158,103)

Net investment in finance leases 2,702,254,234 2,700,273,592

Provision for potential lease losses 13.1 - (21,890,256)

2,702,254,234 2,678,383,336

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

(Reversal) / provision made during the year (21,890,256) 10,884,770Balance at end of the year - 21,890,256

13.2 Details of investment in finance lease

2019 2018 2019 2018

Rupees Rupees Rupees Rupees

Less then one year

One to five years

Gross investments in

finance lease finance lease

Net investments in

1,121,962,483 908,730,874

2,154,098,972 2,242,700,821

3,276,061,455 3,151,431,695

768,335,092 628,396,749

1,933,919,142 2,071,876,843

2,702,254,234 2,700,273,592

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

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

13.4 As at June 30, 2019, the Company has outstanding lease financing amounting to Rs. 163.549 million and securtiy deposits held against leased assets amouting to Rs. 93.410 million against leases made to certain parties which are subject to investigation, scrutiny or legal proceedings by Government agencies out of which an amount of Rs. 2.764 million has been received subsequent to the year end.

2019 2018

Note Rupees Rupees

14. TAXATION - NET

Advance income tax 64,769,394 50,845,942

Less: Provision for taxation (61,275,781) (57,722,056)

3,493,613 (6,876,114)

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

Tax assessment/

Years Tax provision tax return

Rupees Rupees2018 12,756,351 12,756,351

2017 11,429,921 10,377,255

2016 11,306,103 11,970,418




43

15.

2019 2018

350,000,000 350,000,000

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

16. RESERVES

Capital reserve

16.1 97,933,648 97,933,648

Revenue reserve

(71,079,555) 114,157,623

26,854,093 212,091,271

ISSUED, SUBSCRIBED AND PAID-UP

SHARE CAPITAL

(Number of shares)

Ordinary shares of Rs. 10

each fully paid in cash

Statutory reserve

(Accumulated loss) / Un-appropriated profit

15.1 The Government of Sindh held 349,999,993 shares of the Company as at June 30, 2019. The remaining shares are held by the Directors of the Sindh Leasing Company Limited in nominee capacity.

16.1 This represents reserve created in compliance with Non-Banking Finance Companies and Notified Entities Regulation, 2008 (NBFC Regulations). In accordance with NBFC Regulations, the Company is required to transfer atleast 20% of its profit after tax to a statutory reserve. During the year, the Company has incurred a loss therefore, no amount has been transferred to the statutory reserve. In prior year, the Company transferred an amount of Rs. 31.666 million, representing 50% of profit after tax to the statutory reserve.

2019 2018

Note Rupees Rupees

17. ACCRUED MARKUP ON CERTIFICATE OF DEPOSITS

Markup accrued on:

Certificates of deposit 360,635 43,265

18. TRADE AND OTHER PAYABLES

Payable to vendors 616,877 753,550

Withholding tax payable 79,679 298,040

Advance from customers 12,647,369 13,210,578

Accrued expenses 15,787,427 10,775,395

Gratuity payable 18.1 - 2,000,000

Others 2,940,270 1,613,567

32,071,622 28,651,130

18.1 Movement of provision for gratuity is as follows:

Balance as at July 01, 2018 2,000,000 35,921

Net charge for the year 5,407,369 6,895,682

7,407,369 6,931,603

Payments made during the year (7,407,369) (4,931,603)

Balance as at June 30, 2019 - 2,000,000

19. CERTIFICATES OF DEPOSIT

(Unsecured)

Certificates of deposit 19.1 31,700,001 23,900,001

19.1 These represent certificates of deposit issued by the Company for periods ranging from 3 months to 3 years and carry mark-up at rates ranging from 6.2% to 11% per annum.

20.

Lease deposits 20.1 506,798,916 507,751,475

SECURITY DEPOSITS AGAINST LEASES



44


20.1 These represent deposit received from lessee under finance lease and are adjustable against the residual value of the asset leased at the expiry of respective lease term.

21. CONTINGENCIES AND COMMITMENTS

21.1 Contingencies

Letter of guarantee issued on behalf of a client as at the balance sheet was Nil (2018: Rs. 177.483 million).

21.2 Commitments

Finance lease contracts committed but not executed at the balance sheet date amounted to Rs. 127.244 million (2018: Rs. 419.42 million).

2019 2018

Note Rupees Rupees

22. RETURN ON INVESTMENTS AND DEPOSITS

Interest / markup on:Term deposit receipts 39,410,418 21,217,808Saving accounts 47,721,929 39,977,929Treasury bills 677,415 8,523

87,809,762 61,204,260

23. FINANCE COST

Mark up on certificate of deposits 2,698,700 13,944,862

Bank charges 112,443 176,064

2,811,143 14,120,926

24. ADMINISTRATIVE EXPENSES

Salaries and benefits 24.1 62,201,893 41,139,103

Directors' remuneration 28 112,130,940 99,720,868

Rent, rates and taxes 6,937,133 5,838,740

Communication and utility expenses 2,288,498 2,276,624

Travelling and conveyance 7,388,291 5,792,976

Repair and maintenance 1,195,721 1,343,024

Insurance expense 24.2 1,749,446 2,043,850

Auditors' remuneration 24.3 546,000 231,000

Advertising expense 134,843 234,618

Depreciation 6,433,162 6,559,919

Amortization 8,317 482,265

Legal and professional charges 2,191,882 1,738,387

Fees and subscription 1,255,916 7,453,543

Printing and stationary 535,051 474,730

Security expense 1,456,481 1,594,941

Others 1,512,230 976,860

207,965,804 177,901,448

24.1 This includes an amount of Rs. 5.407 million (2018: Rs. 6.896 million) in respect of employees’ retirement benefits. Furthermore, it includes an amount of Rs. 6.138 million in respect of salaries to staff contracted at Sindh Bank Limited.

24.2 The Company has obtained insurance coverage from Sindh Insurance Company Limited rated "A+" by Pakistan Credit Rating Agency (an agency registered with the Commission) against any losses that may be incurred as a result of employee's fraud or gross negligence. The sum insured against insurance policy amounting to Rs. 3.850 million (2018: Rs. 3.850 million).

2019 2018

Note Rupees Rupees

24.3 Auditors' remuneration

Statutory audit 267,000 179,000

Special audit 267,000 -

Out of pocket expenses 12,000 25,000

546,000 204,000




45

2019 2018

Note Rupees Rupees25. TAXATION

Current 25.1 5,688,652 12,756,351

Prior - (1,052,666)

5,688,652 11,703,685

25.1 The income tax for the year ended June 30, 2019 has been charged at the rate applicable as per the provision of Income Tax Ordinance, 2001 (the Ordinance).

25.2 The numerical reconciliation between average tax rate and the applicable tax rate has not been presented during the year in these financial statements due to the Minimun Tax on the revenue of the Company as a result of Section 113 "Minimum tax" of the Income Tax Ordinance, 2001.

26 (LOSS) / EARNINGS PER SHARE - BASIC AND DILUTED

(Loss) / profit for the year - Rupees (185,237,178) 63,333,674

Weighted average number of ordinary shares 350,000,000 226,712,329

(Loss) / earnings per share - basic and diluted - Rupee (0.53) 0.28

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

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

Long term loanCertificates of

deposit

Balance as at July 1, 2018 - 23,900,001 23,900,001

Certificates of deposit

Issued / rollover during the year - 19,400,000 19,400,000

Encashed / matured during the year - (11,600,000) (11,600,000)

7,800,000 7,800,000

Balance as at June 30, 2019 - 31,700,001 31,700,001

Description

Liabilities

Total

Chief

Executive Directors Executives Total

Fee - 1,400,000 - 1,400,000

Managerial remuneration 99,207,195 - 20,331,803 119,538,998Perquisites and allowances 3,160,104 - 1,825,791 4,985,895Retirement benefit 8,363,641 - 1,780,451 10,144,092

110,730,940 1,400,000 23,938,045 136,068,985

Number of persons 1 6 6 13

RupeesJune 30, 2019

28. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES

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



46


Chief

Executive Directors Executives Total

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

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

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

Retirement benefits 11,699,774 3,217,769 14,917,543

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

Number of persons 1 6 6 13

Rupees

June 30, 2018

Director's remuneration represents fee paid to non executive directors for attending board and sub-committee meetings.

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

The remuneration of Chief Executive has been approved in 23rd Board meeting of the Company held on October 18, 2018.

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

29. RELATED PARTY TRANSACTIONS

The Company has a related party relationship with its Associated Companies / Undertakings, Government of Sindh, staff retirement funds, key management personnel and other related parties.

Associated Companies / Other related parties

Sindh Insurance Company Limited

Sindh Leasing Company Limited - Employees Gratuity Fund

Sindh Leasing Company Limited - Employees Provident Fund

Sindh Bank Limited

Sindh Microfinance Bank Limited

Sindh Modaraba Management Limited

Sindh Engro Coal Mining Limited

Shaheed Zulfiqar Ali Bhutto Law College

Pioneer Cement Limited

Sindh Nooriabad Company Limited

Haleeb Foods Limited

Key Executives

Mr. Muhammad Bilal Sheikh CEO

Mr. Rehan Anjum CFO

Mr. Farrukh Husain VP/ Head of Information Technology

Mr. Sumair Ahsanullah Admin Incharge

Mr. Salman Hameed Ghazi VP/ Branch Manager Lahore

Mr. Amer Lodhi Head of liability

Ms. Sanam Nizar Ali Manager Compliance




47

Board of Directors

Mr. Muhammad Bilal Sheikh

Mr. Najam Ahmed Shah

Mr. Muhammad Aftab Alam

Mrs. Masooma Hussian

Mr. Naim Farooqui

Mr. Muhammad Shahid Murtaza

Mr. Muhammad Raja Abbas

The details of significant related party transactions during the year and balances as at June 30, 2019 are as follows:

Nature of

Relation Basis of Relation

Transactions during the year

Profit on bank account and TDRSindh Bank Limited 15,147,753 25,368,934

Insurance services

1,266,218 3,934,261

Mark-up accruedGovernment of Sindh Other related Wholly owned

subsidiary of

Government of

Sindh - 30,078,425

Sindh Bank Limited Associated

Company

Common

Directorship - 3,534,957

Long term loan repaidGovernment of Sindh Other related Wholly owned

subsidiary of

Government of

Sindh - 500,000,000

Receipt of fundsGovernment of Sindh Other related Wholly owned

subsidiary of

Government of

Sindh - 1,500,000,000

Sindh Bank Limited Associated

Company

Common

Directorship - 12,594,423

Redemption of term deposits

- 900,000,000

Rent charges

Sindh Bank Limited

3,340,965 1,980,000

Sindh Insurance Company

Limited

Sindh Bank Limited

Common

DirectorshipAssociated

Company

Associated

CompanyCommon

Directorship

Nature of transaction (Rupees)

2019 2018

Associated

Company

Common

Directorship

Associated

Company

Common

Directorship



48


2019 2018Nature of

Relation Basis of Relation

6,138,204 4,543,536

558,780 499,596

16,850 -

1,070,476 1,027,834

1,190,168 488,784 Chief Executive

Officer Directorship 110,730,940 98,370,868 Key Management

Personnel Employees 21,491,198 20,751,569Director Directorship 2,400,000 1,350,000

Other related 14,994,887 12,594,423

29.1 Year end balances Name of related parties

Bank balances Sindh Bank Limited 236,194,331 127,721,100Rent payable Sindh Bank Limited - 780,000Prepaid insurance Sindh Insurance Company Limited 431,820 796,526Lessee Sindh Nooriabad Power Company 171,223 1,126,061Retirement benefit funds 1,669,819 2,000,000 Staff provident

and gratuity fund

Associated

Company

Common

Directorship

Associated

Company

Staff provident

and gratuity fund

Other related

Other related

Common

Directorship

Salary to seconded staff

NADRA Online Verification charges

Others

Remuneration paid

Remuneration paidDirectors' meeting feesRetirement benefits

Sindh Bank Limited

Sindh Modaraba Management

Limited

Sindh Nooriabad Power

CompanyShaheed Zulfiqar Ali Bhutto

Law College

Sindh Insurance Company

LimitedAssociated

CompanyCommon

Directorship

Common

Directorship

Common

Directorship

(Rupees)Nature of transaction

29.2 The details of compensation paid to key management personnel are shown under the heading of "Remuneration of Chief Executive, Directors and Executive (note 28)". There are no transactions with key management personnel except under their terms of employment.

29.3 All transactions with related parties have been carried out at commercial terms and conditions.

30. FINANCIAL RISK MANAGEMENT

30.1 Financial risk factors

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

- Credit risk

- Liquidity risk

- Market risk

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

30.2 Credit risk

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




49


30.2.1 Exposure to credit risk

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

Cash at bank 7 550,231,233 412,004,651

Accrued markup 11,841,426 10,689,042

Investments 8 484,000,000 450,000,000

Deposits 432,600 432,600

Loans and advances 12 227,411,806 689,534,940

Net investment in finance leases 13 2,702,254,234 2,678,383,336

Other receivables 9.1 & 9.2 6,657,360 -

3,982,828,659 4,241,044,569

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

Past due but not impaired:

up to 29 days - -

30 to 89 days - -

2019 2018

Rupees Rupees

Past due and impaired

90 days to 1 year - -

1 year to 2 years - -

2 years to 3 years - -

more than 3 years - -

Neither past due nor impaired 2,702,254,234 2,700,273,592

Less: General provision - (21,890,256)Total amount 2,702,254,234 2,678,383,336

30.2.2 Concentration of credit risk

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

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

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

Percentage Gross amount2019 2019

% Rupees Sector

Health & pharmaceuticals 2.06% 77,184,000Individuals 3.02% 112,838,900Construction 11.54% 430,883,500Sugar 29.37% 1,096,038,602Transport 5.23% 195,212,333Textile 4.28% 160,029,509Service 11.87% 442,932,840Food 5.49% 204,963,825Miscellaneous 27.14% 1,010,871,384

100% 3,730,954,893

2019



50


Percentage Gross amount2018 2018

% Rupees Sector

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

100% 2,448,483,332

2018

Certificates of deposit 31,700,001 200,000 15,900,000 15,600,001

Trade and other payables 19,344,574 - 19,344,574 - -

360,635 - 360,635 - -

June 30, 2019 51,405,210 200,000 35,605,209 15,600,001 -

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

Financial liabilities Total months to one

year

Up to three

months

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

Over one year

to five yearsOver five years

Markup accrued

Over three

2019

30.3 Liquidity risk

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

30.4 Market risk

Market risk is the risk that changes in market price, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposure within acceptable parameters, while optimizing the return.

Market risk comprise of three types of risk : interest rate risk, currency risk and other price risk, such as equity risk.

30.4.1 Interest rate risk

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




51

Rupees RupeesFixed rate instrumentsFinancial assets

6,991,772 3,959,611

Term deposit receipts 484,000,000 450,000,000

Bank balancesLoans to employees

8.1510.30

8.156.60

5 to 9.15 5 to 9.152 to 5 2 to 5

Variable rate instruments

Financial assets8.15 to 17.14 8.21 to 2,702,254,234 2,700,273,592 9.95 to 15.00 9.49 to 37,595,204 35,385,851 13.85 to 15 9.21 to 9.67 189,816,602 654,149,089

2,929,666,040 3,389,808,532

Financial liabilities

Certificates of deposits 6.2 to 11 6.2 to 8.5 31,700,001 23,900,001

Carrying amount

2019 2018 2019 2018

Working capital loan

Government Securities - Market

Treasury Bills

Net investment in finance lease

(In percent)

Auto finance loan

Effective rate

550,194,645 410,893,635 17,480,585 12,329,779 1,058,667,002 877,183,025

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

30.4.2 Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the year end, profit would have increased / (decreased) by Rs. 29.615 million (2018: Rs. 33.594 million). The analysis assumes that all other variables remain constant.

30.4.3 Foreign exchange risk

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

30.4.4 Other price risk

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

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

A 10% increase / decrease in redemption prices at year end would have increased / decreased the Company’s profit in case of investments classified as ‘at fair value through profit and loss’ by Rs. Nil (2018: Rs. Nil).

30.5 Fair value of financial instruments

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

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

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

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

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

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



52


2019 2018

Rupees Rupees

30.6 Financial instruments by category

Financial assetsFinancial asset at amortised cost 550,231,233 412,004,651

11,841,426 10,689,042 490,991,772 453,959,611 432,600 432,600 227,411,806 689,534,940

2,702,254,234 2,678,383,336 6,657,360 - 3,989,820,431 4,245,004,180

Financial liabilitiesFinancial liabilities at amortised cost 360,635 43,265

19,344,574 13,142,512 31,700,001 23,900,001 51,405,210 37,085,778

Net investment in finance leasesLoans and advances

Other receivables

Accrued markup on certificates of deposits

Certificates of depositsTrade and other payables

DepositsInvestments

Bank balancesAccrued markup

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

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

As of June 30, 2019, none of the financial instruments of the Company were carried at fair value.

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

31. CAPITAL RISK MANAGEMENT

The objective of the Company when managing capital is to safeguard its ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders, and to maintain a strong capital base to support the sustained development of its business.

The Company manages its capital structure by monitoring return on net assets and makes adjustments to it in the light of changes in economic conditions. The Company is in compliance with the minimum capital requirement of NBFC Regulations.

32. DEFINED CONTRIBUTION PLAN

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

32.1 The Trustees have intimated that the size of the Fund at year end was Rs. 34.914 million (2018: Rs. 19.556 million).

32.2 As intimated by the Trustees, the cost of the investments made at the year end was Rs. 33.927 million (2018: Rs. 19.177 million) which is equal to 97.17% of the total fund size. The fair value of the investments was Rs. 34.693 million (2018: Rs. 19.177 million) at that date. The category wise break up of investment as per section 218 of the Companies Act, 2017 is given below:

Rupees Percentage Rupees Percentage

Term Finance Certificates 11,581,576 34.14% 19,177,856 100%

Bank balance 22,345,774 65.86%

33,927,350 100% 19,177,856 100%

2019 2018

33. NUMBER OF EMPLOYEES

The total number of employees as at period end were 19 (2018: 20) and the average number of employees during the period was 19 (2018: 20).

34. CORRESPONDING FIGURES

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




53

35. DATE OF AUTHORIZATION FOR ISSUE

This financial statements were authorized for issue by the Board of directors on September 13,2019

36. GENERAL

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




54


I/We __________________________________________________________________________________________________________

of ____________________________________________________________________________________________________________

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

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

th as my/our Proxy in my/our absence to attend and vote for me/us and on my/our behalf at the 6 Annual General Meeting of the

company to be held on October 30, 2019, at 12:00 noon at its registered office in Karachi.

Signed this__________________________________ day of __________________________________, 2019

ordinary shares hereby appoint _____________________________________________________________________________________

of ______________________________________________ or failing him/her _______________________________________________

in the presence of ______________________________________________________________________________________________

Form of Proxy

Folio No.

Signatureon Rs. 5/-Revenue Stamp

WITNESSES:

1. Signature:

2. Signature:

Note:

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

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

not be treated as valid.

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

Name:

Address:

CNIC No:

Passport No:

Name:

Address:

CNIC No:

Passport No:


55

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56


Documents

Annual Report June 2019 - Sindh Leasing Company Ltd. · Mr. Muhammad Aftab Alam - Chairman - Member - Member Third Floor, Imperial Court Building Dr. Ziauddin Ahmed Road, Karachi