SHAHID AHMAD & CO INTEGRAOINTERNATIONAL F DYour Global Advantage w vww.itegra-ilternational.net SACO IS A MEMBER FIRM OF INTEGRAOINTERNATIONAU, A GLOBAL ASSOCIATION OF INDEPENDENT ACCOUNTING FIRMS DEDICATED TO ADVISING BUSINESSES AROUND THE WORLD INDUS HERITAGE TRUST AUDIT OF FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 MS HID AHMA) D D INTEGRA,: INTERNATIONAI' Your Global Advantage 1A~~ kw i litee Ia- ifltel natiollahle SACO IS A NIENIBER FIRM OF INTEG`RAI N-VERN;XYIONA1!, A GLOBY?SOI,TO OF INDEPENDFN-1 ACCOUNT ING FIRMS DEDICATOI ADV ISING BUSINESSES AROUND TIHE WORLD Independent Auditor's Report to the Trustees Opinion We have audited the financial statements of Indus Heritage Trust ("The Trust") which comprise the statement of financial position as at June 30, 2018, and the statement of income and expenditure and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements give a true and fair view of the financial position of Indus Heritage Trust as at June 30, 2018 and its income and expenditure and its cash flows for the year then ended in accordance with approved accounting and reporting standards as applicable in Pakistan. Basis for Opinion We conducted our audit in accordance with the 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 entity in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants as adopted by the Institute of Chartered Accountants of Pakistan and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Governance for the Financial Statements The management is responsible for the preparation and fair presentation of the financial statements in accordance with the approved accounting and reporting standards as applicable in Pakistan and for such internal control as the management determines is necessary to enable the preparation of the financial statements that is free from material misstatement, whether due to fraud or error. In preparing the financial statements, Management is responsible for assessing the entity's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so. The Trust is responsible for overseeing the entity's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs as applicable in Pakistan will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. S HIA 1A I : D IrvA^D 0 INTEGRAC)INTERNATIONAlU Your Global Advantage SACO IS A NIEIBER FIRM OF INTEGILNglNTERNATIONAL, A GLOBAL ASSOCIATION OF INDEPENDENT ACCOUNTING FIRMS DEDICATED TO ADVISING BUSINESSES AROUND TIlE WORLD 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 entity's internal controls. * 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 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 entity'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 entity to cease to continue as a going concern. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal controls that we identify during our audit. The engagement partner on the audit resulting in this independent auditor's report is Mr. Najamuddin Shad. Shahid Ahmad & Co. Place: Islamabad Chartered Accountants Date: 24A -4 INDUS HERITAGE TRUST STATEMENT OF FINANCIAL POSITION AS AT JUNE 30, 2018 2018 2017 Note Rupees Rupees ASSETS Non - Current Assets Property, plant and equipment 4 4,486,436 1,186,141 Intangible assets 5 223,964 - 4,710,400 1,186,141 Current Assets Inventory 6 11,788,885 2,497,964 Advances, deposits and other receivables 7 1,765,191 1,860,123 Cash and bank balances 8 19,418,042 17,706,348 32,972,118 22,064,435 37,682,518 23,250,576 LIABILITIES Defered Grant 28,693,344 17,501,715 Accrued and other liabilities 9 3,035,444 2,616,778 31,728,788 20,118,493 REPRESENTED BY Fund balance 10 5,953,730 3,132,083 37,682,518 23,250,576 Contingencies and commitments 11 - The annexed notes I to 20 forms an integral part of these financial statements. CHAIRPERSON' TRUSTEE Page 1 of 10 INDUS HERITAGE TRUST STATEMENT OF INCOME AND EXPENDITURE FOR THE YEAR ENDED JUNE 30, 2018 2018 2017 Note Rupees Rupees Income Grants 12 78,283,586 68,231,208 Sales 13 3,943,875 1,306,586 Other income 14 870,279 12,504 83,097,740 69,550,298 Expenditure Program expenses Developing Artisanal Livelihoods in Rural Pakistan 15.1 (78,283,586) (68,231,208) Skills for Market Linkage 15.2 (1,856,015) - General and administration expenses 16 (136,492) (371,339) (80,276,093) (68,602,547) Surplus before taxation 2,821,647 947,751 Taxation SUPLUS FOR THE YEAR 2,821,647 947,751 The annexed notes 1 to 20 forms an integral part of these financial statements. CHAIRPERSON TRUSTEE Page 2 of 10 INDUS HERITAGE TRUST CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2018 2018 2017 Rupees Rupees CASH FLOWS FROM OPERATING ACTIVITIES Surplus/(Deficit) for the year 2,821,647 947,751 Adjustment for non cash items: Depreciation 1,287,503 1,061,857 Amortization 34,456 - 4,143,606 2,009,608 Changes in Working Capital (Increase) /Decrease in Current Assets Inventory (9,290,921) (266,307) Advances, deposits and other receivables 94,932 1,098,139 Increase / (Decrease) in Current Liablities Accrued and other liabilities 418,666 (303,626) (8,777,323) 528,206 (4,633,717) 2,537,814 CASH FLOW FROM INVESTING ACTIVITIES Property, Plant & Equipment (4,587,798) (221,115) INTANGIBLE ASSETS (258,420) - (4,846,218) (221,115) CASH FLOW FROM FINANCING ACTIVITIES Increase in Deffered Grant 11,191,628 12,110,196 11,191,628 12,110,196 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENS 1,711,694 14,426,895 CASH AND CASH EQUIVALENT AT THE BEGINNING OF THE YEAR 17,706,348 3,279,453 CASH AND CASH EQUIVALENT AT THE END OF THE YEAR 19,418,042 17,706,348 The annexed notes 1 to 20 forms an integral part of these financial statements. CHAIRPERSON TRUSTEE Page 3 of 10 INDUS HERITAGE TRUST NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 1 LEGAL STATUS AND OBJECTS Indus Heritage Trust , a Not-For-Profit entity is registered as a Trust on August 21, 2005 under the Trust Act 1882. The Head office of the Trust is situated at House 4, Habibi Street, Banigala, Islamabad. The main objects of the Trust are to revitalize Pakistan's cultural heritage and reviving Pakistan's mutli cultural identity by launching and supporting a movement at grass root level including improvement in the livelihood opportunities for rural artisans. 2 BASIS OF PREPARATION 2.1 Statement of Complaince These financial statements have been prepared at the entity level incorporating all projects funded by (donors) in accordance with approved accounting standards, as applicable in Pakistan. Approved Accounting Standards comprise of Accounting and Reporting Standards for Small-Sized Entities (SSEs) issued by The Institute of Chartered Accountants of Pakistan. 2.2 Accounting Convention These financial statements have been prepared under the historical cost convention except as otherwise stated in the respective Policies and Notes given hereunder. 3 SUMMERY OF SIGNIFICANT ACCOUNTING POLICIES 3.1 Fixed capital expenditure Fixed Assets are stated at cost less accumulated depreciation. Depreciation on all fixed assets is charged on straight line method at the rate specified in note 4. Depericiation on additions is charged from date of puchase till year end. Maintenance and normal repair are charged to income as and when incurred. Major renewals and improvements are capitalized and the assets so replaced, if any, are retired. Gains and losses on deletion of assets are included in current year's income. 3.2 Intangible assets Intangible assets are stated at cost less accumulated amortization. Amortization on all intangible assets is charged on straight line method at the rate specified in note 5. Amortization on additions is charged from date of puchase till year end. 3.3 Provisions Provisions are recognized when the entity has a present legal or conservative obligation as a result of past events and it is probable that outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the account of the obligation can be made. Page 4 of 10 INDUS HERITAGE TRUST NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 3.4 Receivables Receivables are recognized at nominal amount, which is the fair value of the consideration to be received in future. Balances considered bad and irrecoverable are written off when identified. 3.5 Payables These are initially carried at their fair value, subsequent to initial recognition, these are stated at at their amortized cost 3.6 Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. 3.7 Income recognition Grant income is measured at fair value of the consideration and recognized when it is probable that the economic benefits and the associated cost incurred or to be incurred can be measured reliably. Any unspent grant is considered as deferred grant. Income from sales is recognised when the goods are delivered and the payment against those goods is received. Interest on bank deposits is recognised on time proportion basis by reference to the principal outstanding and the applicable rate of return. 3.8 Inventory Inventory is carried at the lower of cost and net realisable value. Cost is determined using the first-in, first-out method. The cost of finished goods and work-in-progress comprises raw materials, direct labour, other direct costs and related overheads. 3.9 Foreign currency translation Foreign currency transaction are converted into Pak Rupees at the rate of exchange advised by the State Bank of Pakistan prevailing on the date of receip of grant. Exchange gains or losses are included in income currently. 3.10 Functional and presentation currency These financial statements are presented in Pak Rupee, which is the Trust's functional and presentation currency. 2018 2017 Note Rupees Rupees 4 PROPERTY, PLANT ANDEQUIPMENT At cost-less-accumulated depreciation 4.1 4,486,436 1,186,141 Page 5 of 10 INDUS HERITAGE TRUST NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 4.1 Property, plant and equipment COST DEPRECIATION AatAs at WDV as at Description July 01, Additions (Deletions) As at June Rate July 01, For the year Deletion / As at June June 30, 2017 0 30,2018 2017 y Adjustment 30, 2018 2018 --- ------ - u- ----------------- Rupees -------------------------------- Computer & IT Equipmer 2,689,942 1,297,893 - 3,987,835 33% 2,012,247 756,839 - 2,769,086 1,218,749 Office Equipment 136,372 2,188,484 - 2,324,856 25% 86,784 189,363 - 276,147 2,048,709 Furniture and fixtures 824,950 1,101,421 - 1,926,371 25% 366,092 341,302 - 707,394 1,218,977 Vehicles * - - - - 25% - - - - - 2018 3,651,264 4,587,798 - 8,239,062 2,465,123 1,287,503 - 3,752,626 4,486,436 2017 3,430,154 221,115 - 3,651,269 1,403,270 1,061,857 - 2,465,128 1,186,141 5 INTANGIBLE ASSETS COST AMORTIZATION As at As at WDV as at Description As at June Rate July 01, A io (DDeletion / As at June s (Deletions) aJuly 01, For the year nAdjustment 30,2018 2018 2017 30, 2018 2017 --------------------------- Rupees ------------------------------------- Rupees ------------------------------------ Accounting Software - 258,420 - 258,420 20% - 34,456 - 34,456 223,964 2018 - 258,420 - 258,4 2 0 - 34,456 - 34, 456 223,964 2017 - - - - - - - Page 6 of 10 INDUS HERITAGE TRUST NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 2018 2017 Note Rupees Rupees 6 INVENTORY Finished goods inventory 5,032,709 1,763,494 Work in progress 4,486,994 - Raw materials 2,269,182 734,470 11,788,885 2,497,964 7 ADVANCES, DEPOSITS & OTHER RECEIVABLES Other Advances 845,226 999,705 Receivable from Indus Heritage Trust 7.1 295,418 295,418 Security deposits - Office premises 189,547 565,000 Receivables against advances 7.2 435,000 - 1,765,191 1,860,123 7.1 Payment made by Indus Heritage Trust to Project 'Developing Artisanal Livelihoods in Rural Pakistan' subsequent to the year end. 7.2 Advances issued for the mobilization of Project 'Skills for Market Linkage'. 2018 2017 Note Rupees Rupees 8 CASH AND BANK BALANCES Cash in hand 8.1 142,361 95,775 Cash at bank 8.2 19,275,681 17,610,573 19,418,042 17,706,348 8.1 Cash in hand Developing Artisanal Livelihoods in Rural Pakistan 106,586 95,775 Skills for Market Linkage 35,775 - 142,361 95,775 8.2 Cash at bank: Local currency (Pak Rupees) Al-Baraka Bank-Current 11,490,632 14,178,000 Al-Baraka Bank-Current 40,729 368,618 Mobilink Bank-Saving 8.1.1 3,706,846 1,323,760 Mobilink Bank-Current 8.1.2 1,592,001 - UBL Bank-Current 8.1.3 1,651,870 - UBL Bank-Current (9,448) - Foreign currency (US Dollar) Al-Baraka Bank-Current 8.1.4 803,052 1,740,195 19,275,681 17,610,573 8.1.1 This carries interest at 6% (2017: 6%). This account is used to deposit local sale proceeds. 8.1.2 This account is used to disburse payments to artisans under project RANG. 8.1.3 This account is used to deposit intenational sale proceeds under project RANG. 8.1.4 Balance 2018: USD 6,597@121.73, 2017: USD 16,597@104.85 Page 7 of 10 INDUS HERITAGE TRUST NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 2018 2017 Note Rupees Rupees 9 ACCRUED AND OTHER LIABILITIES Expenses Payable 1,049,440 295,418 Payable to Trustees 9.1 1,219,167 - Audit fee payable 304,000 233,000 Exchange gain/loss (unrealized) 111,357 5,809 WHT-Salaries Advance tax deducted 350,730 1,336,725 Withholding sales tax 750 173,236 Rent payable - 572,590 3,035,444 2,616,778 9.1 This represent loan given by the Trustees for the mobilization cost of the project 'Skills for Market Linkage' 2018 2017 Note Rupees Rupees 10 GENERAL FUND Opening balance 3,132,083 2,184,332 Surplus/(Deficit) for the year 2,821,647 947,751 5,953,730 3,132,083 11 CONTINGENCIES AND COMMITMENTS There are no contingencies and commitments at the balance sheet date. 12 GRANTS Developing Artisanal Livelihoods in Rural Pakistan 12.1 78,283,586 68,231,208 Skills for Market Linkage 12.2 - - 78,283,586 68,231,208 12.1 Project 'Developing Artisanal Livelihoods in Rural Pakistan' grant is funded by Japan Social Development Fund and is administered by the World Bank. Grant received during the FY 2017-18 is USD 815,999.62 (FY 2016-17 USD: 786,711). Grant received as per the World Bank during the FY 2017-18 is USD 816,139.62 (FY 2016-17 USD: 768,711). Grant in excess of expenditure is reported as deferred grant. 12.2 Project 'Skills for Market Linkage' is funded by Punjab Skills Development Fund. This project started in April 2018. No funding is received from the donor as at June 30, 2018. 2018 2017 13 SALES Note Rupees Rupees 13.1 Gross Profit Sales 3,943,875 1,306,586 Cost of Sales 2,151,354 - 1,792,521 1,306,586 13.2 Sales Local sales 2,290,765 1,306,586 International sales 1,653,110 - 3,943,875 1,306,586 Page 8 of 10 INDUS HERITAGE TRUST NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 2018 2017 Note Rupees Rupees 14 OTHER INCOME Exchange gain 7,809 12,504 Profit on bank deposit 102,577 - Other income 759,893 - 870,279 12,504 15 PROGRAM EXPENSES 15.1 Developing Artisanal Livelihoods in Rural Pakistan Project salaries 28,673,251 18,266,494 Consultant's fee/ services 8,257,249 19,118,638 Office rent 3,416,966 7,087,670 Traveling and vehicle running expense 7,540,393 5,013,385 Workshops 15.1.1 9,723,542 12,552,801 Depreciation 1,273,208 1,061,857 Amortization 34,456 - Repair & maintenance 2,883,490 261,932 Sample development - 951,608 Exhibition/ meetings 2,033,964 - Communication 598,041 427,562 Fuel 533,643 199,018 Utilities 541,410 310,906 Auditor's remuneration 1,285,350 198,000 Office Supplies 828,515 566,812 Printing & stationery 816,300 742,622 Advertisement 857,875 188,011 Postage & courier 943,000 68,740 Bank charges 34,501 30,840 Insurance 15.1.2 5,764,643 31,505 Website expense 200,000 - Legal and professional charges 221,900 33,920 Auditor's remuneration 204,000 - Misc. expenses 174,550 200,402 Security Expenses 1,443,339 918,485 78,283,586 68,231,208 15.1.1 Workshops Skill Assesment Workshop 451,043 38,120 Home Workshop 6,275,662 8,060,542 Sample Development Workshop 1,908,895 3,838,878 Capacity Building Workshop 971,198 562,932 Institution Building Workshop 116,744 52,329 9,723,542 12,552,801 Page 9 of 10 INDUS HERITAGE TRUST NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 2018 2017 Note Rupees Rupees 15.2 Skills for Market Linkage Project salaries 1,122,499 - Traveling and vehicle running expense 45,622 - Office rent 123,370 - Office supplies 179,405 - Office equipment 28,315 - Training material 125,500 - Bank charges 6,776 - Repair & maintenance 1,500 - Printing & stationery 139,836 - Legal & professional fee 68,897 - Depreciation 14,295 - 1,856,015 - 16 GENERAL AND ADMINISTRATION EXPENSES Salaries 35,000 336,339 Audit fee 100,000 35,000 Bank charges 1,492 - 136,492 371,339 17 TAXATION The Trust was granted approval under rule 212 of Income Tax Rules 2002 in terms of section 2 (36) of Income Tax Ordinance 2001. The management of Trust also obtained certification from Pakistan Center for Philanthropy in this regard. Therefore, provision for current taxation has not been provided for in these financial statements. 18 NUMBER OF EMPLOYEES 2018 2017 IHT permanent employees 5 5 Project 'Developing Artisanal Livelihoods in Rural Pakistan' 55 52 Project 'Skills for Market Linkage' 20 - 19 DATE OF AUTHORIZATION FOR ISSUE These financial statements were authorized for issue on2 8 JAN 201y the Management Board of Indus Heritage Trust. 20 GENERAL - Figures have been rounded off to the nearest rupee. - Figures of the previous year have been rearranged, wherever necessary, for the purpose of comparison. CHAIRPERSON RUSTEE Page 10 of 10