annual report june 2014 easing l indh sindhl · mr. naim farooqui mr. sohail khan ... dr. ziauddin...

Annual Report June 2014 SINDH EL ASINGAnnual Report June 2014 SINDH EL ASING

Annual Report June 2014 SINDH EL ASINGAnnual Report June 2014 SINDHEL ASING

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.

MissionTo provide lease finance and other productsand services, tailor made to suit therequirements 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.

1


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.

MissionTo provide lease finance and other productsand services, tailor made to suit therequirements 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.

1


Corporate Information

Board of Directors

Mr. Muhammad Bilal Sheikh

Mr. Naim Farooqui

Mr. Sohail Khan Rajput Syed Shahnawaz Nadir Shah Syed Saeed Reza

Chairman

Chief Executive

- Non-Executive Director

- Executive Director

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

Company Secretary

Mr. Rehan Anjum

Audit Committee Registered Office

Syed Shahnawaz Nadir Shah Mr. Muhammad Bilal SheikhSyed Saeed Reza

- Chairman - Member - Member

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

Banker Branch Offices

Sindh Bank Limited Naudero BranchRaza Shah MohallaV.I.P. RoadLarkanaAuditors

M/s. Jalis Ahmad & Co.Chartered Accountants121, Clifton Centre,Block-5Main Clifton RoadKarachi

-

-

Legal Advisor

Muhammad Nadeem Khan

Suit # 28-A, 2nd FloorFareed Chamber Abdullah Haroon Road Karachi

Hyderabad Branch

Web: www.sindhleasingltd.com

Plot No. 11Faraz Villas Housing SchemeTaluka QasimabadHyderabad

Table of Contents

Directors’ Report 05

Statement of Compliance with the Public Sector Companies (Corporate Governance) Rules, 2013 08

12

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

28Form of Proxy

Statement of Comprehensive Income

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

13

14

16

17

18

15

19

2 3


Corporate Information

Board of Directors

Mr. Muhammad Bilal Sheikh

Mr. Naim Farooqui

Mr. Sohail Khan Rajput Syed Shahnawaz Nadir Shah Syed Saeed Reza

Chairman

Chief Executive

- Non-Executive Director

- Executive Director

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

Company Secretary

Mr. Rehan Anjum

Audit Committee Registered Office

Syed Shahnawaz Nadir Shah Mr. Muhammad Bilal SheikhSyed Saeed Reza

- Chairman - Member - Member

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

Banker Branch Offices

Sindh Bank Limited Naudero BranchRaza Shah MohallaV.I.P. RoadLarkanaAuditors

M/s. Jalis Ahmad & Co.Chartered Accountants121, Clifton Centre,Block-5Main Clifton RoadKarachi

-

-

Legal Advisor

Muhammad Nadeem Khan

Suit # 28-A, 2nd FloorFareed Chamber Abdullah Haroon Road Karachi

Hyderabad Branch

Web: www.sindhleasingltd.com

Plot No. 11Faraz Villas Housing SchemeTaluka QasimabadHyderabad

Table of Contents

Directors’ Report 05

Statement of Compliance with the Public Sector Companies (Corporate Governance) Rules, 2013 08

12

Notice of Annual General Meeting 04


Balance Sheet

Profit and Loss Account

Cash Flow Statement

Statement of Changes in Equity

Notes to the Financial Statements

28Form of Proxy

Statement of Comprehensive Income

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

13

14

16

17

18

15

19

2 3


Notice of Annual General Meeting

st Notice is hereby given that the 1 Annual General Meeting of Sindh Leasing Company Limited (“Company”) will be held on Friday, October 31,

2014 at 11:45 a.m. at the Registered office of the Company, Third Floor, Imperial Court Building, Dr. Ziauddin Ahmed Road, Karachi, to

transact the following business:

1. To confirm the minutes of the Statutory meeting held on September 25, 2014.

2. To receive, consider and adopt the Audited Accounts of the Company for the year ended June 30, 2014, along with the Directors’ and

Auditor's Reports thereon.

3. To approve the appointment of external auditors of the Company for the year ending June 30, 2015 and fix their remuneration.

4. To elect seven (7) Directors of the Company as fixed by the Board of Directors in their meeting held on September 25, 2014 in

accordance with Section 178(1) of the Company Ordinance 1984, for a period of three years commencing from October 31, 2014.

Following are the retiring Directors who are eligible for re-election:

(1) Muhammad Bilal Sheikh

(2) Sohail Khan Rajput

(3) Syed Shahnawaz Nadir shah

(4) Syed Saeed Reza

(5) Naim Farooqui

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

By Order of the Board

Rehan Anjum

Company Secretary

Karachi: September 25, 2014

Directors’ Report

stOn behalf of the Board of Directors of Sindh Leasing Company Limited, it is my pleasure and honor to present the 1 annual audited financial statements for the year ended June 30, 2014. By the grace of almighty Allah, the Company achieved all of its milestones set for

commencement of business, including incorporation, obtaining license and writing of its first lease.

Principal Activity and Review of Business

thThe Company started its business operations successfully after receiving its commencement of business certificate on 27 March, 2014 and disbursed its first lease in the month of May, 2014. It has since successfully marketed itself and is gaining grounds with sound corporates and SMEs.

The Company is well-capitalized with an initial paid-up capital of Rs. 1 billion and has a sub-sovereign ownership with the Government of Sindh, currently being its sole owner.

Board of Directors

The Board of Directors of the Company comprises of five members. It is spearheaded by experienced bankers and professionals having vast banking and financial industry experience who would be the key guiding source for the Management.

The following are the first Directors under the Articles of Association of the Company:

1. Mr. Mohammad Bilal Sheikh, President, Sindh Bank Ltd.

2. Mr. Sohail Rajput, Secretary Finance, Government of Sindh

3. Syed Shahnawaz Nadir Shah, Chief Investment Specialist, Government of Sindh

4. Syed Saeed Reza, Ex-Executive Director, ORIX Leasing Pakistan Ltd.

5. Mr. Naim Farooqui, Chief Executive Officer, Sindh Leasing Company Limited

All the above directors will retire at the first Annual General Meeting and are eligible for re-election.

Major policies, procedures and control mechanisms have been laid down, documented and approved by the Board.

Directors' Meeting

During the period under review, three (3) meetings of the Board of Directors of Company were held and attendance was as follows:

S.No Name of Directors

No. of meeting(s) held

during the Tenor in the

year

meeting(s) attended

1 Mr. Muhammad Bilal Sheikh 3 32

Mr. Naim Farooqui

3 33 Mr. Sohail Rajput 3 2 4 Syed Shahnawaz Nadir shah 3 35

Syed Saeed Reza

3 3

Corporate and Financial Reporting Framework

Sindh Leasing Company Limited has complied with the requirements of the Public Sector Companies (Corporate Governance) Rules 2013 as practically applicable. In this connection, the compliance of relevant clauses of the rules is stated below:

• The financial statements present fairly the state of affairs of the Company, the result of its operations, cash flow and changes in equity;

• The Company has maintained proper books of accounts;

• The appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on rational and prudent judgment.

• International Accounting Standards, as applicable to Pakistan have been followed in preparation of financial statements;

Total no. of

4 5


Audit Committee’s Meetings

The Audit Committee was constituted in the last quarter of the financial year under review, hence no meetings were held during the year.

Pattern of Shareholding

No. of

Shareholders

Shareholding

From To

No. of Shares

HeldPercentage

1 1 99,999,995 99,999,995 99.999995

5 1 1 5 0.000005

6 Total 100,000,000 100

Auditors

On the recommendation of Audit Committee, the Board has proposed the appointment of Messrs. BDO Ebrahim & Co., Chartered Accountants, as auditors for the year ending June 30, 2015.

Operating Results and Business Overview

Balance SheetAs at June 30,

2014(PKR Million)

Paid-up capital 1,000.00Total equity 1,027.04Fixed Assets 34.09

Profit & LossFor the period

Ended June 30, 2014

Revenue 50.32Administrative expenses 10.55Profit before tax 39.77Profit after tax 27.04

Dividend

The Company has not declared any dividend for the year ended 30 June, 2014.

Performance Review

For the reporting period ending 30th June, 2014 (6 months), the Company’s performance remained satisfactory. The Company managed to successfully disburse Rs. 30 million for a sale and lease back transaction and has since then disbursed additional Rs. 40 million in various lease transactions. Apart from that, facilities of Rs. 89 million have also been approved pending disbursement and are in various stages of documentation. Inquiries have been received from prospective clients for which term sheets have been forwarded. If the current trend continues, the Company is expected to satisfactorily close the current financial year and achieve its stated targets.

To cater to the funding requirement in its formative stage, Sindh Bank Limited has approved a credit line of Rs. 900 million. However, the Company would also build relationship with other banks and financial institutions to have competitive and diversified funding sources.

Branch Expansion Plans for 2014-15

The Company launched its business operations successfully in Karachi, which is also where its Head-office is located. Naudero/Larkana and Hyderabad branch offices are also now operational which are generating inquiries from prospective clients.

The Company intends to open up further two branches in the province of Sindh at Nawabshah and Sukkur within this year. A branch office in Lahore shall also be opened by beginning of 2015.

Directors’ Report (Contd.)

Asset Portfolio

Sindh Leasing Company Limited is geared to offer leasing and working capital facilities to Consumer and Corporate/SME sectors with an aim to generate economic activity.

Staffing

Currently, the Company has employed 16 persons of which 2 are posted in Naudero/Larkana and 1 at Hyderabad branch. While recruiting the staff employed for the Company, top priority is being given to develop a team of highly motivated and qualified professionals who would not only have the right skills but would also have the passion to excel and achieve the objectives of the Company.

Company Infrastructure

During the first six months, the Company has invested in developing the infrastructure including selection of premises and its construction, and purchase of furniture. The IT equipment and core leasing software have been tendered and selected, though these are yet to be installed.

For security reasons, CCTV system has also been installed with the option of monitoring offsite through mobile application. Fire alarms and fighting system too have been installed.

Future Outlook

While, the future of the leasing industry is undergoing a somewhat uncertain time, management is aware of the challenges. It plans to capitalize on all future prospects that will enable it to increase profits.

The main focus in terms of portfolio is to target assets in the corporate business segment. The Company also plans to expand its geographical reach and diversify its portfolio.

Much would however depend on the private sector’s credit appetite under the prevailing political and economic condition of the country. It is hoped that the situation would settle down soon for a meaningful growth in the economy.

Acknowledgements

The Board extends its appreciation and acknowledges the support provided by Sindh Bank Limited to the Company in its formative stage without which the Company would not have been able to start its operations in a record time of less than 6 months. Acknowledgements are also due to its sole shareholder, the Government of Sindh, which has provided all the support including meeting of the financial requirements for the Company. We are grateful to the SECP which was exceptionally supportive in launching of the Company and expeditiously processed the Company’s application for setting up, incorporation, licensing and commencement of business.

Acknowledgements are also in order for the thin and lean staff without whose unwavering dedication and support the Company could not have achieved its launch.

Naim Farooqui Chief Executive OfficerSeptember 25, 2014


6 7


Audit Committee’s Meetings

The Audit Committee was constituted in the last quarter of the financial year under review, hence no meetings were held during the year.

Pattern of Shareholding

No. of

Shareholders

Shareholding

From To

No. of Shares

HeldPercentage

1 1 99,999,995 99,999,995 99.999995

5 1 1 5 0.000005

6 Total 100,000,000 100

Auditors

On the recommendation of Audit Committee, the Board has proposed the appointment of Messrs. BDO Ebrahim & Co., Chartered Accountants, as auditors for the year ending June 30, 2015.

Operating Results and Business Overview

Balance SheetAs at June 30,

2014(PKR Million)

Paid-up capital 1,000.00Total equity 1,027.04Fixed Assets 34.09

Profit & LossFor the period

Ended June 30, 2014

Revenue 50.32Administrative expenses 10.55Profit before tax 39.77Profit after tax 27.04

Dividend

The Company has not declared any dividend for the year ended 30 June, 2014.

Performance Review

For the reporting period ending 30th June, 2014 (6 months), the Company’s performance remained satisfactory. The Company managed to successfully disburse Rs. 30 million for a sale and lease back transaction and has since then disbursed additional Rs. 40 million in various lease transactions. Apart from that, facilities of Rs. 89 million have also been approved pending disbursement and are in various stages of documentation. Inquiries have been received from prospective clients for which term sheets have been forwarded. If the current trend continues, the Company is expected to satisfactorily close the current financial year and achieve its stated targets.

To cater to the funding requirement in its formative stage, Sindh Bank Limited has approved a credit line of Rs. 900 million. However, the Company would also build relationship with other banks and financial institutions to have competitive and diversified funding sources.

Branch Expansion Plans for 2014-15

The Company launched its business operations successfully in Karachi, which is also where its Head-office is located. Naudero/Larkana and Hyderabad branch offices are also now operational which are generating inquiries from prospective clients.

The Company intends to open up further two branches in the province of Sindh at Nawabshah and Sukkur within this year. A branch office in Lahore shall also be opened by beginning of 2015.


Asset Portfolio

Sindh Leasing Company Limited is geared to offer leasing and working capital facilities to Consumer and Corporate/SME sectors with an aim to generate economic activity.

Staffing

Currently, the Company has employed 16 persons of which 2 are posted in Naudero/Larkana and 1 at Hyderabad branch. While recruiting the staff employed for the Company, top priority is being given to develop a team of highly motivated and qualified professionals who would not only have the right skills but would also have the passion to excel and achieve the objectives of the Company.

Company Infrastructure

During the first six months, the Company has invested in developing the infrastructure including selection of premises and its construction, and purchase of furniture. The IT equipment and core leasing software have been tendered and selected, though these are yet to be installed.

For security reasons, CCTV system has also been installed with the option of monitoring offsite through mobile application. Fire alarms and fighting system too have been installed.

Future Outlook

While, the future of the leasing industry is undergoing a somewhat uncertain time, management is aware of the challenges. It plans to capitalize on all future prospects that will enable it to increase profits.

The main focus in terms of portfolio is to target assets in the corporate business segment. The Company also plans to expand its geographical reach and diversify its portfolio.

Much would however depend on the private sector’s credit appetite under the prevailing political and economic condition of the country. It is hoped that the situation would settle down soon for a meaningful growth in the economy.

Acknowledgements

The Board extends its appreciation and acknowledges the support provided by Sindh Bank Limited to the Company in its formative stage without which the Company would not have been able to start its operations in a record time of less than 6 months. Acknowledgements are also due to its sole shareholder, the Government of Sindh, which has provided all the support including meeting of the financial requirements for the Company. We are grateful to the SECP which was exceptionally supportive in launching of the Company and expeditiously processed the Company’s application for setting up, incorporation, licensing and commencement of business.

Acknowledgements are also in order for the thin and lean staff without whose unwavering dedication and support the Company could not have achieved its launch.

Naim Farooqui Chief Executive OfficerSeptember 25, 2014


6 7


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

Public Sector Companies

I. This statement is being presented to comply with the Public Sector Companies (Corporate Governance) Rules,

2013 (hereinafter called “the Rules’) issued for the purpose of establishing a framework of good governance, whereby a public

sector company is managed in compliance with the best practice of public sector governance.

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

S. No. Provision of the RulesRule No.

Y N

Tick the relevant box

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

2(d)

2.

The Board has the requisite percentage of independent directors.At present the board includes :

Category NamesDate of appointment

Independent Directors

Syed Saeed Reza October 12, 2013

Executive Directors Mr. Naim Farooqui October 12, 2013

Non-Executive Directors

1.Mr. Sohail Rajput 2.Syed Shahnawaz Nadir Shah 3.Mohammad Bilal Sheikh

October 12, 2013

3(2)

3.A casual occurring on the board was filled up by the directors within ninety days.

3(4)

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

3(5)

5.The appointing authorities have applied the fit and proper criteria given inthe Annexure in making nominations of the persons for election as boardmembers under the provisions of the Ordinance.

3(7)

6.The Chairman of the board is working separately from the Chief Executive of the Company.

4(1)

7. The Chairman has been elected from amongst the independent directors. 4(4)

8.The Board has evaluated the candidates for the position of the chiefexecutive on the basis of the fit and proper criteria as well as the guidelines specified by the commission.

5(2)

9.

(a) The company has prepared a “Code of Conduct” and has ensured that appropriate steps have been taken to disseminate it throughout thecompany along with its supporting policies and procedures, includingposting the same on the company’s website.

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

10.

The Board has established a system of sound internal control, to ensurecompliance with the fundamental principles of probity and propriety;objectivity, integrity and honesty; and relationship with the stakeholder, inthe manner prescribed in the Rules.

5(5)

11.

The Board has developed and enforced an appropriate conflict of interestpolicy to lay down circumstances or considerations when a person may be deemed to have actual or potential conflict of interests, and the procedurefor disclosing such interest.

5(5)(b) (ii)

12.The Board has developed and implemented a policy on anticorruption tominimize actual or perceived corruption in the company.

5(5)(b) (vi)

13.

(a) The Board has ensured equality of opportunity by establishing open and fair procedures for making appointments and for determining termsand conditions of service.

(b) A Committee has been formed to investigating deviations from the company’s code of conduct.

5(5)(c) (ii)

N/A

14.

The Board has ensured compliance with the law as well as the company’sinternal rules and procedures relating to public procurement, tenderregulations, and purchasing and technical standards, when dealing withsuppliers of goods and services, in accordance with the SPPRA Rules.

5(5)(c) (iii)

15.

The Board has developed a vision or mission statement, corporate strategy and significant policies of the company. A complete record of particulars of significant policies along with the dates on which they were approved oramended has been maintained.

5(6)

16.

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

5(8) N/A

17.

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

Written notices of the board meetings, along with agenda andworking papers, were circulated at least seven days before themeetings.

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

6(1)

6(2)

6(3)

18.

The Board has carried out performance evaluation of its members, including the chairman and chief executive, on the basis of a process, based onspecified criteria, developed by it. The board has also monitored andassessed the performance of senior management onannual/half/yearly/quarterly basis*.* Strike out whichever is not applicable

8 N/A

19.

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

9

Statement of Compliance with the (Corporate Governance) Rules, 2013 (Contd.)


8 9


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


I. This statement is being presented to comply with the Public Sector Companies (Corporate Governance) Rules,

2013 (hereinafter called “the Rules’) issued for the purpose of establishing a framework of good governance, whereby a public

sector company is managed in compliance with the best practice of public sector governance.

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

S. No. Provision of the RulesRule No.

Y N

Tick the relevant box

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

2(d)

2.

The Board has the requisite percentage of independent directors.At present the board includes :

Category NamesDate of appointment

Independent Directors

Syed Saeed Reza October 12, 2013

Executive Directors Mr. Naim Farooqui October 12, 2013

Non-Executive Directors

1.Mr. Sohail Rajput 2.Syed Shahnawaz Nadir Shah 3.Mohammad Bilal Sheikh

October 12, 2013

3(2)

3.A casual occurring on the board was filled up by the directors within ninety days.

3(4)

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

3(5)

5.The appointing authorities have applied the fit and proper criteria given inthe Annexure in making nominations of the persons for election as boardmembers under the provisions of the Ordinance.

3(7)

6.The Chairman of the board is working separately from the Chief Executive of the Company.

4(1)

7. The Chairman has been elected from amongst the independent directors. 4(4)

8.The Board has evaluated the candidates for the position of the chiefexecutive on the basis of the fit and proper criteria as well as the guidelines specified by the commission.

5(2)

9.

(a) The company has prepared a “Code of Conduct” and has ensured that appropriate steps have been taken to disseminate it throughout thecompany along with its supporting policies and procedures, includingposting the same on the company’s website.

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

10.

The Board has established a system of sound internal control, to ensurecompliance with the fundamental principles of probity and propriety;objectivity, integrity and honesty; and relationship with the stakeholder, inthe manner prescribed in the Rules.

5(5)

11.

The Board has developed and enforced an appropriate conflict of interestpolicy to lay down circumstances or considerations when a person may be deemed to have actual or potential conflict of interests, and the procedurefor disclosing such interest.

5(5)(b) (ii)

12.The Board has developed and implemented a policy on anticorruption tominimize actual or perceived corruption in the company.

5(5)(b) (vi)

13.

(a) The Board has ensured equality of opportunity by establishing open and fair procedures for making appointments and for determining termsand conditions of service.

(b) A Committee has been formed to investigating deviations from the company’s code of conduct.

5(5)(c) (ii)

N/A

14.

The Board has ensured compliance with the law as well as the company’sinternal rules and procedures relating to public procurement, tenderregulations, and purchasing and technical standards, when dealing withsuppliers of goods and services, in accordance with the SPPRA Rules.

5(5)(c) (iii)

15.

The Board has developed a vision or mission statement, corporate strategy and significant policies of the company. A complete record of particulars of significant policies along with the dates on which they were approved oramended has been maintained.

5(6)

16.

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

5(8) N/A

17.

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

Written notices of the board meetings, along with agenda andworking papers, were circulated at least seven days before themeetings.

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

6(1)

6(2)

6(3)

18.

The Board has carried out performance evaluation of its members, including the chairman and chief executive, on the basis of a process, based onspecified criteria, developed by it. The board has also monitored andassessed the performance of senior management onannual/half/yearly/quarterly basis*.* Strike out whichever is not applicable

8 N/A

19.

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

9



8 9


22.

(a) The Board has formed the requisite committee, as specified in theRules.

(b) The Committees were provided with written term of reference definingtheir duties, authority and composition.

(c) The minutes of the meetings of the committee were circulated to all the board members.

(d) The committees were chaired by the following non-executive directors:

Committee Number of Members

Name of Chair

Audit Committee ThreeSyed Shahnawaz Nadir Shah

Risk Management Committee

Human Resources Committee

Procurement Committee

Nomination Committee

12

23.The Board has approved appointment of Chief Financial Officer, CompanySecretary and Chief Internal Auditor, with their remuneration and terms and conditions of employment, and as per their prescribed qualification.

13/14

24.The company has adopted International Financial Reporting Standardsnotified by the Commission under clause (i) of sub-section (3) of section234 of the Ordinance.

16

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

17

26.The directors, CEO and executives do not hold any interest in the shares of the company other than that disclosed in the pattern of shareholding.

18

27.A formal and transaction procedure for fixing the remuneration packages of individual directors has been set in place. The annual report of the company contains criteria and details of remuneration of each director.

19 N/A

20.

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 thecompany’s website. Monthly accounts were also prepared and circulatedamongst the board members.

10

21All the board members underwent an orientation course arranged by thecompany to apprise them of the material developments and information asspecified in the Rules.

11



29. Syed Saeed Reza Independent Leasing Specialist

Syed Shahnawaz Nadir Shah

Non- Executive Investment Specialist

Mohammad Bilal Sheikh

Banker

21

The Chief Executive and Chairman of the Board are not members of the audit committee.

30.The Board has set up an effective internal audit function, which has anaudit charter, duly approved by the committee, and which worked inaccordance with the applicable standards.

22

31.The Company has appointed its external auditors in line with therequirements envisaged under the Rules. 23

32.The external auditors of the company have confirmed that the firm and allits partners are in compliance with International Federation of Accountants(IFAC) guideline on Code of Ethics as applicable in Pakistan.

23(4)

33.

The external auditors have not been appointed to provide non-audit services and the auditors have confirmed that they have observedapplicable guideline issued by IFAC in this regard.

23(5)

34.The Company has complied with all the corporate and financial reportingrequirements of the Rules.

28.The financial statements of the company were duly endorsed by the chiefexecutive and chief financial officer, before approval of the board.

20

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

Name of member CategoryProfessional background”

NAIM FAROOQUI

CHIEF EXECUTIVE OFFICER



Non- Executive

10 11


We have reviewed the Statement of Compliance with the public Sector Companies (Corporate Governance) Rules, 2013 (Schedule

II) for the year ended June 30, 2014 prepared by the Board of Directors of M/s. Sindh Leasing Company Limited to comply with the

provisions of the Rules.

Based on our review, nothing has come to our attention, except the following non compliances of Rule/ sub rule 3(5), 4(4) , 5(4), 5(5),

5(5)(b)(ii)&(vi) and 11as mentioned in annexed Schedule II, which causes us to believe that the Statement of Compliance does not

appropriately reflect the Company’s compliance, in all material aspects with the Public Sector Companies (Corporate Governance)

Rules, 2013, as applicable to the Company for the year ended June 30, 2014.

Review Report to the Members on Statementof Compliance with the Public Sector Companies(Corporate Government) Rules, 2013

Date: October 10, 2014

Place: Karachi

Jalis Ahmad & Co

Chartered AccountantsEngagement person Mr. Iqbal Yousuf


We have audited the annexed Balance Sheet of Sindh Leasing Company Limited, (the company) as at June 30, 2014 and the related Income Statement, Statement of Comprehensive Income, Cash Flow Statement and Statement of Changes in Equity together with the notes forming part thereof, for the period then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit;

It is the responsibility of the company’s management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit;

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies used and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that:-

a) in our opinion, proper books of accounts have been kept by the company as required by the Companies Ordinance, 1984;

b) in our opinion-

i) the Balance Sheet and Income Statement together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies consistently applied;

ii) the expenditure incurred during the period was for the purpose of the company’s business; and

iii) the business conducted, investments made and the expenditure incurred during the period were in accordance with the objects of the company;

c) In our opinion and to the best of our information and according to the explanations given to us, the Balance Sheet, Income Statement, Statement of Comprehensive Income, Cash Flow Statement and Statement of Changes in Equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the company’s affairs as at June 30, 2014 and of the profit, its comprehensive income its cash flows and changes in equity for the period then ended; and

d) In our opinion no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980).

JALIS AHMAD & CO.CHARTERED ACCOUNTANTS

PHONE: 35873934, 3537 41 25-26 121-CLIFTON CENTRE,Fax: (92-21) 5873891 BLOCK-5, MAIN CLIFTON ROAD,Grams: “JALISCO” KARACHI-75600 (PAKISTAN)

E-mail: [email protected]


Place: Karachi

Jalis Ahmad & Co


12 13


We have reviewed the Statement of Compliance with the public Sector Companies (Corporate Governance) Rules, 2013 (Schedule

II) for the year ended June 30, 2014 prepared by the Board of Directors of M/s. Sindh Leasing Company Limited to comply with the

provisions of the Rules.

Based on our review, nothing has come to our attention, except the following non compliances of Rule/ sub rule 3(5), 4(4) , 5(4), 5(5),

5(5)(b)(ii)&(vi) and 11as mentioned in annexed Schedule II, which causes us to believe that the Statement of Compliance does not

appropriately reflect the Company’s compliance, in all material aspects with the Public Sector Companies (Corporate Governance)

Rules, 2013, as applicable to the Company for the year ended June 30, 2014.

Review Report to the Members on Statementof Compliance with the Public Sector Companies(Corporate Government) Rules, 2013


Place: Karachi

Jalis Ahmad & Co



We have audited the annexed Balance Sheet of Sindh Leasing Company Limited, (the company) as at June 30, 2014 and the related Income Statement, Statement of Comprehensive Income, Cash Flow Statement and Statement of Changes in Equity together with the notes forming part thereof, for the period then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit;

It is the responsibility of the company’s management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit;

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies used and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that:-

a) in our opinion, proper books of accounts have been kept by the company as required by the Companies Ordinance, 1984;

b) in our opinion-

i) the Balance Sheet and Income Statement together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies consistently applied;

ii) the expenditure incurred during the period was for the purpose of the company’s business; and

iii) the business conducted, investments made and the expenditure incurred during the period were in accordance with the objects of the company;

c) In our opinion and to the best of our information and according to the explanations given to us, the Balance Sheet, Income Statement, Statement of Comprehensive Income, Cash Flow Statement and Statement of Changes in Equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the company’s affairs as at June 30, 2014 and of the profit, its comprehensive income its cash flows and changes in equity for the period then ended; and

d) In our opinion no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980).

JALIS AHMAD & CO.CHARTERED ACCOUNTANTS

PHONE: 35873934, 3537 41 25-26 121-CLIFTON CENTRE,Fax: (92-21) 5873891 BLOCK-5, MAIN CLIFTON ROAD,Grams: “JALISCO” KARACHI-75600 (PAKISTAN)

E-mail: [email protected]


Place: Karachi

Jalis Ahmad & Co


12 13


BALANCE SHEETAS AT JUNE 30, 2014

Note 2014

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

ASSETS

Non-current assets

Property, plant and equipments 5 34,096,369

Net investment in finance lease 6 22,503,331

56,599,700

Current assets

Short term investment 7 900,000,000

Accrued markup 739,726

Current maturity of non-current asset 6 7,185,787

Advances and prepayments 8 4,413,983

Stamp papers in hand 16,830

Cash and bank balance 9 82,012,465

994,368,791

TOTAL ASSETS 1,050,968,491

EQUITY AND LIABILITIES

Authorized share capital 1,000,000,000

Issued, subscribed and paid-up share capital 10 1,000,000,000Issued, subscribed and paid-up share capital 10 1,000,000,000

Reserve 11 27,039,959

Total equity 1,027,039,959

NON CURRENT LIABILITIES

Long term security deposit against lease 12 4,850,000

Deferred tax liability 13 2,686,953

7,536,953

CURRENT LIABILITIES

Accrued and other liabilities 14 16,263,768

Provision for taxation - net 15 127,811

16,391,579

COMMITMENTS 16

TOTAL EQUITY AND LIABILITIES 1,050,968,491

The annexed notes from 1 to 25 form an integral part of these financial statements.

___________ ___________________Chairman Chief Executive

PROFIT AND LOSS ACCOUNT

Note 2014

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

INCOME

Income from finance lease 634,487

Return earned on investment and deposit 17 49,684,583

Other income 5,500

49,690,083

50,324,570

EXPENSES

Administrative expenses 18 10,555,361

Profit before taxation 39,769,209

Taxation

- Current 10,042,297

- Deferred 2,686,953

18 (12,729,250)

Profit after taxation 27,039,959

Earnings per share - Basic and diluted (Rupee) 20 0.27 Earnings per share - Basic and diluted (Rupee) 20 0.27


FOR THE PERIOD FROM DECEMBER 16, 2013 TO JUNE 30, 2014


14 15


BALANCE SHEETAS AT JUNE 30, 2014

Note 2014

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

ASSETS

Non-current assets

Property, plant and equipments 5 34,096,369

Net investment in finance lease 6 22,503,331

56,599,700

Current assets

Short term investment 7 900,000,000

Accrued markup 739,726

Current maturity of non-current asset 6 7,185,787

Advances and prepayments 8 4,413,983

Stamp papers in hand 16,830

Cash and bank balance 9 82,012,465

994,368,791

TOTAL ASSETS 1,050,968,491

EQUITY AND LIABILITIES

Authorized share capital 1,000,000,000

Issued, subscribed and paid-up share capital 10 1,000,000,000Issued, subscribed and paid-up share capital 10 1,000,000,000

Reserve 11 27,039,959

Total equity 1,027,039,959

NON CURRENT LIABILITIES

Long term security deposit against lease 12 4,850,000

Deferred tax liability 13 2,686,953

7,536,953

CURRENT LIABILITIES

Accrued and other liabilities 14 16,263,768

Provision for taxation - net 15 127,811

16,391,579

COMMITMENTS 16

TOTAL EQUITY AND LIABILITIES 1,050,968,491



PROFIT AND LOSS ACCOUNT

Note 2014

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

INCOME

Income from finance lease 634,487

Return earned on investment and deposit 17 49,684,583

Other income 5,500

49,690,083

50,324,570

EXPENSES

Administrative expenses 18 10,555,361


Taxation

- Current 10,042,297

- Deferred 2,686,953

18 (12,729,250)

Profit after taxation 27,039,959

Earnings per share - Basic and diluted (Rupee) 20 0.27 Earnings per share - Basic and diluted (Rupee) 20 0.27




14 15


2014

-----Rupees -----

Profit for the period 27,039,959

Other comprehensive income -

Total comprehensive income for the period 27,039,959


STATEMENT OF COMPREHENSIVE INCOMEFOR THE PERIOD FROM DECEMBER 16, 2013 TO JUNE 30, 2014


CASH FLOW STATEMENTFOR THE PERIOD FROM DECEMBER 16, 2013 TO JUNE 30, 2014

2014

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

CASH FLOW FROM OPERATING ACTIVITIES


Adjustment for:

- Depreciation 445,723

- Provision for provident fund and gratuity fund 553,756

999,479

Operating profit before working capital changes 40,768,688

Movement in working capital

(Increase) / decrease in operating assets

- Short term investment (900,000,000)

- Advances and prepayments (4,413,983)

- Accrued mark-up (739,726)

- Investment in finance leases (29,689,118)

- Stamp papers in hand (16,830)

Increase / (decrease) in operating liabilities

- Accrued and other liabilities 15,710,012

- Long term security deposit against lease 4,850,000

(914,299,645)

Cash utlised from operations (873,530,957)

Taxes paid (9,914,486)

Net cash utlised from operating activities (883,445,443)Net cash utlised from operating activities (883,445,443)

CASH FLOW FROM INVESTING ACTIVITIES

Capital expenditure (34,542,092)

Net cash utilised from investing activities (34,542,092)

(34,542,092)

CASH FLOW FROM FINANCING ACTIVITIES

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

Net cash generated from financing activities 1,000,000,000

Net increase in cash and cash equivalents 82,012,465

Cash and cash equivalents at end of the period 82,012,465

(0)



16 17


STATEMENT OF CHANGES IN EQUITY

Issue of share capital 1,000,000,000 - - 1,000,000,000

Total comprehensive income for the period - - 27,039,959 27,039,959

Transfer to statutory reserve - 5,407,992 (5,407,992) -

Balance as at 30 June 2014 1,000,000,000 5,407,992 21,631,967 1,027,039,959



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

Issued,

subscribed and

paid-up share

capital Total

Un- appropriated

profit

Statutory

reserve

Reserves


1. LEGAL STATUS AND NATURE OF BUSINESS

2. BASIS OF PREPARATION

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Sindh Leasing Company Limited (the Company) was incorporated in Pakistan on December 16, 2013 as an unlisted public Company under the Companies Ordinance, 1984. The Company was granted licence on January 24, 2014 to carry out leasing business as a Non-Banking Finance Company (NBFC) under the Non-Banking Finance Companies (Established and Regulations) Rules, 2003. The

rdregistered office of the Company is situated at 3 Floor, Imperial Court Building, Dr. Ziauddin Ahmad Road, Karachi.

1.1 These are the first financial statements of the company and prepared for a period of less than twelve months. Hence no comparative information is given.

2.1 Statement of Compliance

These financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by International Accounting Standards Board (IASB) as are notified under the Companies Ordinance 1984, the Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003 (the NBFC Rules), the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (the NBFC Regulations) and the directives issued by the Securities and Exchange Commission of Pakistan (SECP). In case the requirements differ, the provisions of and directives issued under the NBFC Rules, the NBFC Regulations and the directives issued by SECP shall prevail.

2.2 Basis of Measurement

These financial statements have been prepared under historical cost convention except for certain financial assets and financial liabilities which have been stated at their fair values, cost or amortized cost.

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

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 period presented unless or otherwise stated.

3.1 Property, Plant 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 5 to the financial statements. In respect of additions and disposal of assets during the period, depreciation is charged from the date of acquisition and up to the date preceding the disposal respectively.

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

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

Capital work-in-progress

These are stated at cost less accumulated impairment losses, if any and represent expenditure in connection with specific assets incurred during the construction period. These are transferred to specific assets as and when assets are available for use / sale.

3.2 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.

3.3 Net investment in finance leases

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

3.4 Provision against non performing leases

Provision against non performing leases is maintained at a level which, in the judgment of management, is adequate to provide for

FOR THE YEAR ENDED JUNE 30, 2014

NOTES TO THE FINANCIAL STATEMENTS

18 19


STATEMENT OF CHANGES IN EQUITY

Issue of share capital 1,000,000,000 - - 1,000,000,000

Total comprehensive income for the period - - 27,039,959 27,039,959

Transfer to statutory reserve - 5,407,992 (5,407,992) -

Balance as at 30 June 2014 1,000,000,000 5,407,992 21,631,967 1,027,039,959



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

Issued,

subscribed and

paid-up share

capital Total

Un- appropriated

profit

Statutory

reserve

Reserves


1. LEGAL STATUS AND NATURE OF BUSINESS

2. BASIS OF PREPARATION

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Sindh Leasing Company Limited (the Company) was incorporated in Pakistan on December 16, 2013 as an unlisted public Company under the Companies Ordinance, 1984. The Company was granted licence on January 24, 2014 to carry out leasing business as a Non-Banking Finance Company (NBFC) under the Non-Banking Finance Companies (Established and Regulations) Rules, 2003. The

rdregistered office of the Company is situated at 3 Floor, Imperial Court Building, Dr. Ziauddin Ahmad Road, Karachi.

1.1 These are the first financial statements of the company and prepared for a period of less than twelve months. Hence no comparative information is given.

2.1 Statement of Compliance

These financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by International Accounting Standards Board (IASB) as are notified under the Companies Ordinance 1984, the Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003 (the NBFC Rules), the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (the NBFC Regulations) and the directives issued by the Securities and Exchange Commission of Pakistan (SECP). In case the requirements differ, the provisions of and directives issued under the NBFC Rules, the NBFC Regulations and the directives issued by SECP shall prevail.

2.2 Basis of Measurement

These financial statements have been prepared under historical cost convention except for certain financial assets and financial liabilities which have been stated at their fair values, cost or amortized cost.

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

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 period presented unless or otherwise stated.

3.1 Property, Plant 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 5 to the financial statements. In respect of additions and disposal of assets during the period, depreciation is charged from the date of acquisition and up to the date preceding the disposal respectively.

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

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

Capital work-in-progress

These are stated at cost less accumulated impairment losses, if any and represent expenditure in connection with specific assets incurred during the construction period. These are transferred to specific assets as and when assets are available for use / sale.

3.2 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.

3.3 Net investment in finance leases

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

3.4 Provision against non performing leases

Provision against non performing leases is maintained at a level which, in the judgment of management, is adequate to provide for



18 19


losses on lease portfolio which can be reasonably anticipated. The provision is increased by additional charge to income and is decreased by charge offs, net of recoveries.

Calculating provision against non performing leases is subject to numerous judgments and estimates. In evaluating the adequacy of provision, management considers various factors, including the requirements of the NBFC Regulations, the nature and characteristics of the obligor, current economic conditions, credit concentrations or deterioration in pledged collateral, historical loss experience and delinquencies. Lease receivables are charged off, when in the opinion of management, the likelihood of any future collection is believed to be minimal.

3.5 Loans and advances

These are stated at cost, which is the fair value of consideration given, less provision for doubtful receivables.

3.6 Investments

The management determines the appropriate classification of its investments in accordance with the requirements of International Accounting Standard 39; Financial Instruments: Recognition and Measurement (IAS 39) at the time of initial recognition.

All purchase and sale of investments that require delivery within the time frame established by regulation or market convention are recognized at the trade date, which is the date the Company commits to purchase or sell the investment.

3.7 Impairment of non financial assets

The carrying amount of assets are viewed at each balance sheet date to determine whether there is any indication of impairment. If such indication exists then the asset's recoverable amount is estimated. Where the carrying value exceeds the estimated recoverable amount, assets are written down to their recoverable amount. The resulting impairment loss is taken to profit and loss account.

3.8 Taxation

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

3.8.1 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.

3.8.2 Deferred

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

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

3.9 Revenue recognition

3.9.1 Finance leases

The Company follows the 'effective interest 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.

3.9.2 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.

3.9.3 Interest income

Interest income is recognized using effective interest method.



3.9.4 Return on investment

Profit on bank account is recognized on time proportion basis on the effective interest method.

3.10 Financial instruments

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

3.11 Offsetting

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

3.12 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.

3.13 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.

3.14 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.

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

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

4. ACCOUNTING ESTIMATES AND JUDGEMENTS

Note

Determining the residual values and useful lives of tangible fixes assets 3.1 & 5

Provision against non performing leases 3.3,3.4 & 6

Recognition of taxation and deferred tax 3.8 & 15

5. PROPERTY, PLANT AND EQUIPMENTS

COST ACCUMULATED DEPRECIATION

- 3,856,628 3,856,628 - 18,994 18,994 3,837,634 10%

- 7,345,990 7,345,990 - 80504 80,504 7,265,486 20%

- 513,738 513,738 - 9,871 9,871 503,867 33.33%

Vehicles - 4,398,270 4,398,270 - 205,090 205,090 4,193,180 20%

- 18,427,466 18,427,466 - 131,264 131,264 18,296,202 10%- -

- 34,542,092 34,542,092 - 445,723 445,723 34,096,369

2014

As at 16 December

2013

Computer equipments

Rate %

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

As at 30 June 2014

Book valueas at

30 June 2014

As at 16 December

2013

Charge for the period / (on disposal)

Additions / (disposals)

As at 30 June 2014

Furniture and fixtures

Electrical equipments

Leasehold improvements



20 21


2014

6. NET INVESTMENT IN FINANCE LEASES

Lease rentals receivable 30,945,740Add: Residual value of leased assets 4,850,000Gross investment in finance leases 35,795,740

Less: Unearned finance lease income (6,106,622)Net investment in finance leases 29,689,118Less: Current maturity of net investment in finance leases (7,185,787)

22,503,331

6.1 Details of investment in finance lease

Less than one year

One to five years 7,185,787 7,185,787

28,609,953 22,503,331- 35,795,740 29,689,118 -

GROSS INVESTMENT IN

FINANCE LEASE

NET INVESTMENT IN

FINANCE LEASE

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

-------------2014---------------

6.2 The lease executed by the Company is for a term of 3 years. Security deposit is 16.67% of the cost of leased assets at the time of disbursement. The Company requires the lessee to insure the leased asset in favour of the Company. Additional surcharge is charged on delayed rentals. The return implicit in the lease is 16%.

NOTE

7. SHORT TERM INVESTMENTS

Term deposit reciepts 7.1 900,000,000

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

7.1 The amount invested in Sindh Bank Limited in term deposits reciepts, carrying markup of 10% per annum and the date of maturity is December 31, 2014.

8. ADVANCES AND PREPAYMENTS

8.1 499,998

3,614,385

299,600

4,413,983

Loan to staff

Prepaid rent and insurance

Security deposit

8.1 Loan to staff

This represents the amount of interest free house furnishing loan to Chief Executive Officer Rs. 600,000 for the period of three years which is payable in 36 equal installments.

2014

Note

9. CASH AND BANK BALANCE

Cash at bank

- Saving account 9.1 82,012,465

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

9.1 This represents Daily product Account (saving account) maintained with the Sindh Bank Limited carrying mark-up at the rate of 9.5% per annum receivable on monthly basis.



10. ISSUED, SUBSCRIBED AND PAID-UP SHARE CAPITAL

1,000,000,000100,000,000

Ordinary shares of Rs. 10

each fully paid in cash

(Number of shares)

2014

10.1 The Government of Sindh, held 99,999,995 shares as at 30 June 2014. The remaining shares are held by the directors of the Sindh Leasing Company Limited in nominee capacity.

11. RESERVES

Capital reserve

11.1 5,407,992

Revenue reserve

21,631,967

27,039,959

- Statutory reserve

- Un-appropriated profit

11.1 This represents reserve created in compliance with Non-Banking Finance companies and notified entities regulation 2008 (the Regulations). In accordance with the regulations, the Company is required to transfer 20% of its profit after tax to a statutory reserve. In order to comply with this requirement, the Company has transferred an amount of Rs.5.41 million to the statutory reserve.

12. LONG TERM SECURITY DEPOSIT AGAINST LEASE 4,850,000

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.

13.

2,988,544

(83,500)

(218,091)

2,686,953

14. PAYABLE AND OTHER LIABILITIES

Payable to vendors 14.1 15,396,299

Provident and gratuity fund 854,482

EOBI payable 12,987

16,263,768

DEFERRED TAX LIABILITY

Difference in net book value of net investment in finance lease

Difference of accounting book value and tax base of Property plant and equipment

Difference of accounting base and tax base of gratuity

14.1 This includes amounts payable to different vendors against the renovation and purchase of new office building, equipments, furnitures and fixtures.

15. PROVISION FOR TAXATION

Provision for taxation 10,042,297

Less: Advance income tax 9,914,486

127,811

16. COMMITMENTS.

16.1. Finance lease contracts committed but not executed at the balance sheet date amounted to Rs. 200 million.

16.2. Company has obtained short term running finance facility from Sindh Bank Limited amounting to Rs. 900 million. This is secured against lien on 1 year term deposit accounts for Rs. 900 million with Sindh Bank limited and charge over present and future recievables of the company for Rs. 300 million that is at 25% margin over the facility amount. The short term running finance facility carries mark-up at the rate of 13% payable quarterly in arrears. Company did not utilized any amount during the period.

2014

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



22 23


17. MARK-UP EARNED ON INVESTMENTS

From financial assets

Term Deposit Reciepts 44,876,712

Daily product account 4,807,871

49,684,583

18. ADMINISTRATIVE AND OPERATING EXPENSES

Salaries and benefits 7,417,019

Provident fund and Gratuity fund 553,756

Directors fees' 120,000

Rent, rates and taxes 607,097

Communication and utility expenses 39,250

Travelling and conveyance 115,461

Bank charges 638

Office and computer accessories supplies 135,395

Insurance expense 19,296

Auditor’s remuneration 60,000

Advertising expense 245,689

Depreciation 445,723

Legal and professional charges 99,255

Printing and stationary 44,461

Brokerage for premises 229,600

Other operating expenses 422,721

10,555,361

18.1 Auditor s remuneration'

Audit fee 50,000

Out of pocket expenses 10,000

60,000

2014

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

19. INCOME TAX EXPENSE

19.1 The income tax for the year 2014 has been charged at the rate applicable as per the provision of Income Tax Ordinance, 2001 (the Ordinance).

20. EARNING PER SHARE - BASIC AND DILUTED

Profit after tax - Rupees 27,039,959

Weighted average number of ordinary shares 100,000,000

Earning per share - basic and diluted - Rupee 0.27

There is no dilution effect on the basic earning per share as the Company has no convertible, dilutive potential ordinary shares outstanding as at 30 June 2014.



21. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES

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

Chief

Executive Directors Executives Total

Fee - 120,000 - 120,000Managerial remuneration 3,036,366 - 525,551 3,561,917Perquisites and allowances 2,073,636 - 470,283 2,543,919Reimbursable expenses 396,880 - 31,680 428,560Retirement benefit 553,756 - - 553,756

6,060,638 120,000 1,027,514 7,208,152

Number of persons 1 3 3 7

Rupees

2014

22. RELATED PARTY TRANSACTIONS

The Company has a related party relationship with its Associated Company, staff retirement funds and key management personnel.

The details of significant related party transactions and balances as at 30 June 2014 are as follows:

Associated

Company

Other related

party

Key management

personnel

Directors

TRANSACTIONS DURING THE PERIOD

Profit on Term deposit 44,876,712 - - -

Profit on Daily product account 4,807,871 - - -

Remuneration paid - - 6,534,406 -

Retirement benefits - - 553,746 -

Directors' meeting fees 120,000

BALANCES

Term deposit receipt 900,000,000 - - -

Daily product account 82,012,465 - - -

Accrued Mark-up on term deposit receipt 739,726 - -

-----------------------December 16, 2013 To June 30, 2014 -----------------

Preliminary expenses have been paid by Government of Sindh which are not to be paid back / refunded as per arrangement.

23.1 Financial risk factors

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

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.

23.2 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.

23. FINANCIAL RISK MANAGEMENT

- Credit risk

- Liquidity risk

- Market risk

3,391,150Payment made on behalf of Sindh Insurance CompanyLimited & Sindh Modaraba Management Company Limitedand same has been reimbursed

-

-----------------------As at June 30, 2014 -----------------



24 25


23.2.1 Exposure to credit risk

Net Total

investment in

finance leases

Past due but not impaired:

- up to 29 days - -

- 30 to 89 days - -

Past due and impaired

- 90 days to 1 year - -

- 1 year to 2 years - -

- 2 years to 3 years - -

- more than 3 years - -

Impaired but not past due - -

Neither past due nor impaired 29,689,118 29,689,118

Total amount 29,689,118 29,689,118

June 30, 2014

23.2.2 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.

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

Percentage

2014 2014Sector

Transport 100% 29,689,118

100% 29,689,118

Financial assets

Gross amount

--- Rupees ---

23.3 Liquidity risk

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

Trade and other payables 16,263,768 16,263,763 - - -

Deferred tax liability 2,686,953 - - - 2,686,853

18,950,721 16,263,763 - - 2,686,853

30 June 2014

Financial liabilities TotalUp to three

months

Over three

months to

one year

Over one year

to five yearsOver five years

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

23.4 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.



23.4.1 Interest rate risk

Interest rate risk arises from the effects of fluctuations in the prevailing levels of markets interest rates on the fair value of financial assets and liabilities and future cash flows. The Company’s exposure to fair value interest rate risk is limited as it hold significant fixed interest based financial instruments. So there is no exposure to interest rate risk.

23.4.3 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.

23.4.4 Equity price risk

There is no investment in equity securities so there is no risk that the value of a security or portfolio of securities will decline in future.

23.5 Fair value of financial instruments

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties at an arms length transaction other than in a forced or liquidation sale. The carrying values of all financial assets and liabilities reflected in the financial statements approximate their fair values.

Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: Fair value measurements using inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).

As at 30 June 2014, the Company held the following financial instruments measured at fair value:

Level 1 Level 2 Level 3 Total

Equity securities - - - -

Debt securities - - 900,000,000 900,000,000

- - 900,000,000 900,000,000

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

24. CAPITAL RISK MANAGEMENT

25. NUMBER OF EMPLOYEES

26. DATE OF AUTHORIZATION FOR ISSUE

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

The Company manages its capital structure by monitoring return on net assets and makes adjustments to it in the light of changes in economic conditions. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend paid to its shareholders or issue new shares. The Company is in compliance with the minimum capital requirement of NBFC Regulations 2008.

The total number of employees as at year end were 14.

These financial statements were authorized for issue by the Board of directors on September 25, 2014.




26 27


I/We __________________________________________________________________________________________________________

of ____________________________________________________________________________________________________________

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

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

st as my/our Proxy in my/our absence to attend and vote for me/us and on my/our behalf at the 1 Annual General Meeting of the

company to be held on October 31, 2014, at its registered office in Karachi.

Signed this__________________________________ day of __________________________________, 2014

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 office of the Company, as soon as possible

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

not be treated as valid.

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

Name:

Address:

CNIC No:

Passport No:

Name:

Address:

CNIC No:

Passport No:

28

annual report june 2014 easing l indh sindhl · mr. naim farooqui mr. sohail khan ... dr. ziauddin...

Documents