Standard Chartered Modaraba

Half Yearly Report 2012

Standard Chartered Modaraba

modaraba.standardchartered.com



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Directors’ Review

Condensed Interim Balance Sheet

Modaraba Information

Condensed Interim Profit and Loss Account

Condensed Interim Cash Flow Statement

Condensed Interim Statement of Changes in Equity

Notes to the Condensed Interim Financial Information

Auditors’ Review Report

Shariah Advisor's Report

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Directors of Modaraba Company Legal Advisors

Registered and Head Office

Branch Offices

Company Secretary

Audit Committee

Auditors

Mr. Mohsin Ali Nathani Fazle Ghani Adocates

Chairman Izhar Law Associates

Sirajul Haque & Co.

Mr. Raheel Qamar Ahmad Orr Dignam & Co

Managing Director/ Chief Executive Mohsin Tayabali & Co

Liaquat Marchant Associates

Mr. Najam Siddiqi

Director

Mr. Salar Khan* Standard Chartered Bank

Director Main Building, I. I. Chundrigar Road

P. O. Box 5556, Karachi-74000

Mr. Khurram Shahzad Khan Phone: 32450000

Director

Mr. Shezad Arif

Director Standard Chartered Bank Building

Tufail Road, P. O. Box 6131

Lahore Cantt.

Mr. Muhammad Siddique Phone: (042) 36066277-80

Standard Chartered Bank Building

Mr. Najam Siddiqi 6-A, 2nd Floor, Union Arcade

Chairman F-7 Markaz, Islamabad

Phone: (051) 8432329-30

Mr. Salar Khan*

Member

Mr. Khurram Shahzad Khan

Member

Mr. Mohsin Ali Nathani

Chairman

Mr. Raheel Qamar Ahmad

Member

Mr. Salar Khan*

Member

Mufti Abdul Sattar Laghari

A.F. Ferguson & Co.

Chartered Accountants

Human Resource and Remuneration

Committee

Shariah Advisor

Modaraba Information

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Registrars & Share Registration OfficeFamco Associates (Private) LimitedState Life Building No. 1A, 1st Floor, I. I. Chundrigar Road, Karachi



Branch Offices

Company Secretary

Audit Committee

Auditors

Bankers/ Financial Institutions



Sirajul Haque & Co.




Mr. Najam Siddiqi

Director

Mr. Salar Khan Standard Chartered Bank




Director

Mr. Shezad Arif



Lahore Cantt.





Phone: (051) 8432329-30

Mr. Imran Sarwar

Member


Member


Chairman


Managing Director/ Chief Executive

Mr. Salar Khan*

Director

A.F. Ferguson & Co.


Standard Chartered Bank (Pakistan)

Limited

Bank Islami Pakistan Limited

Meezan Bank Limited


Committee (HR&R)



Branch Offices

Company Secretary

Audit Committee

Auditors

Bankers/ Financial Institutions



Sirajul Haque & Co.




Mr. Najam Siddiqi

Director

Mr. Salar Khan Standard Chartered Bank




Director

Mr. Shezad Arif



Lahore Cantt.





Phone: (051) 8432329-30

Mr. Imran Sarwar

Member


Member


Chairman


Managing Director/ Chief Executive

Mr. Salar Khan*

Director

A.F. Ferguson & Co.


Standard Chartered Bank (Pakistan) Limited

Bank Islami Pakistan Limited

Meezan Bank Limited


Committee (HR&R)

*Subject to Regulatory approval.




The Board of Directors of Standard Chartered Services of Pakistan (Private) Limited, the management company of Standard Chartered Modaraba is pleased to present the unaudited accounts for the six months period ended December 31, 2012.

The macroeconomic conditions weakened during 2012 despite improvement in current account deficit and workers’ remittances. CPI inflation softened to 6.9% by November 2012 – the lowest in the last 4 years which gave SBP space to cut policy rates by 250bps in H2-2012. However the same has increased again to 8.1% in January 2013.

Real GDP is expected to rise to 4% y/y in FY13 from 3.7% in FY12 while the current account has reflected a surplus after the release of USD 1.8bn in US aid money. There are improvements in business confidence and the KSE 100 index has rallied 49% in 2012, making it one of the world’s best-performing equity markets for the period. The security and political environment though has stabilised but still remains challenging.

However, concerns remain over the widening fiscal deficit and large external debt payments. External debt payments scheduled for FY13 total USD 6bn (2.5% of GDP), including nearly USD 3bn to the IMF. The official FX reserves declined to USD 8.9bn as of end 2012 from USD 12.8bn at end-2011. Concurrently, with a decline in net capital and financial flows, challenges on the balance of payments position are unlikely to subside.

Financial results are summarized as under:December 31, June 30,

2012 2012(PKR '000') (PKR '000')

Balance Sheet

Certificate capital 453,835

Total equity 960,694

Investment in Ijarah finance and Ijarah assets 4,419,914

Investments in Diminishing Musharika and Sukuks 1,159,141

Redeemable capital 3,163,448

Six Months ended Six Months endedDecember 31, December 31,

2012 2011(PKR '000') (PKR '000')

Profit and Loss

Revenue (net of Ijarah assets depreciation) 266,036

Financial charges 169,715

Provisions (net of reversals/recoveries) 13,454

Operating expenses 31,604

Profit before management fee 51,263

Net profit 45,214

During the period under review the Modaraba’s gross revenue increased by 27.93% mainly due to increase in portfolio as compared to the corresponding period of last year. Net profit increased by 5.96 million to Rs. 51.17 million as compared to Rs. 45.21 million. The portfolio of Ijarah finance, Sukuk investment and Diminishing Musharika finances stood at Rs. 5,552 million compared to Rs. 5,579 million as at June 30, 2012, showing a marginal decrease of 0.48% within six months period.

The asset portfolio has a good mix of multi-nationals, large and medium sized local corporates and selective SME relationships.

1. Economic Outlook

2. Financial Highlights

3. Review of Operations

453,835

932,443

4,296,181

1,255,987

3,793,444

340,328

230,135

12,392

39,785

58,015

51,169

Directors’ ReviewFor the half year ended December 31, 2012




Standard Chartered Modaraba has a well diversified asset portfolio comprising of Plant & Machinery, motor vehicles and equipment. The Modaraba’s sector wise exposure is closely monitored. During the period under review, Modaraba booked fresh disbursements to the tune of Rs. 1,251.99 million as compared to Rs. 1,129.39 million during the corresponding period last year.

Your Modaraba, while remaining cautious and prudent during the prevailing economic slow down, is focused to take benefit of good opportunities that add value to all stake holders. Our prudent and proactive risk management approach has always helped us to maintain a leading position in the Modaraba sector. We will continue to place emphasis on customer service with a focus on quality clients.

The Pakistan Credit Rating Agency Limited (PACRA) has maintained the ratings of your Modaraba as AA+ (Double A plus) and A1+ (A one plus) for long-term and short-term respectively. These ratings indicate low expectation of credit risk and very strong capacity for timely payment of financial commitments.

The following change has taken place in the board of directors since the last Directors’ report:

On account of his new assignment with Standard Chartered Group, Mr. Imran Sarwar decided to step down and has resigned from the office of Director and member of Audit Committee of Standard Chartered Services of Pakistan (Private) Limited. Mr. Salar Khan, Head of OCC Standard Chartered Bank (Pakistan) Limited has been appointed as Director and member of Audit Committee of Standard Chartered Services of Pakistan (Private) Limited in his place subject to regulatory approval.

The Board places on record its appreciation for the valuable services rendered by Mr. Imran Sarwar during his association with the company.

The Board appreciates the support of regulatory authorities, certificate-holders, customers and business partners and looks forward to their support in future.

The Board also acknowledges the commendable efforts of the staff members of Standard Chartered Modaraba without which the Modaraba’s success could not have been possible.

Mohsin Ali NathaniChairman

Karachi: February 18, 2013

4. Credit Rating

5. The Board of Directors

6. Acknowledgement

Directors’ ReviewFor the half year ended December 31, 2012




INDEPENDENT AUDITORS’ REPORT TO THE CERTIFICATE HOLDERS ON

REVIEW OF CONDENSED INTERIM FINANCIAL INFORMATION

Introduction

Scope of review

Conclusion

We have reviewed the accompanying condensed interim balance sheet of Standard Chartered Modaraba as of December 31, 2012 and the related condensed interim profit and loss account, condensed interim cash flow statement and condensed interim statement of changes in equity together with the notes forming part thereof (here-in-after referred to as the “condensed interim financial information”) for the half year ended December 31, 2012. The Modaraba Management Company [Standard Chartered Services of Pakistan (Private) Limited] is responsible for the preparation and presentation of this condensed interim financial information in accordance with approved accounting standards as applicable in Pakistan for interim financial reporting. Our responsibility is to express a conclusion on this condensed interim financial information based on our review. The figures of the condensed interim profit and loss account for the quarters ended December 31, 2011 and December 31, 2012 have not been reviewed as we are required to review only the cumulative figures for the half year ended December 31, 2012.

We conducted our review in accordance with the International Standard on Review Engagements 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’. A review of condensed interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim financial information as of and for the half year ended December 31, 2012 is not prepared, in all material respects, in accordance with approved accounting standards as applicable in Pakistan for interim financial reporting.

A.F. Fergusons & Co.Chartered AccountantsEngagement Partner: Rashid A. JaferDated: February 18, 2013Karachi

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Auditors’ Review ReportFor the half year ended December 31, 2012




I have conducted the Shariah review of Standard Chartered Modaraba managed by Standard Chartered Services of Pakistan (Private) Limited, Modaraba Management Company for the half year ended December 31, 2012 in accordance with the requirements of the Shariah Compliance and Shariah Audit Mechanism for Modarabas and report that except the observations as reported hereunder, in my opinion:

Standard Chartered Modaraba has introduced a mechanism which has strengthened the Shariah compliance, in letter and spirit and the systems, procedures and policies adopted by the Modaraba are in line with the Shariah principles.

Following were the major developments that took place during the period:

Departmental process flows and operating instructions have been framed for each of the product processes in line with Shariah requirements.

Standard Chartered Modaraba arranged a certificate course on Shariah compliance exclusively for its staff members conducted by the Center for Islamic Economics. Further, some of the staff members were also nominated for different trainings during the period.

The agreements entered into by the Modaraba are Shariah compliant and the financing agreements have been executed on the formats as approved by the Religious Board and the related conditions have been met.

To the best of my information and according to the explanations given to me, the business transactions undertaken by Standard Chartered Modaraba and other matters incidental thereto are in conformity with the Shariah requirements as well as the requirements of the Prospectus, Islamic Financial Accounting Standards as applicable in Pakistan and the Shariah Compliance and Shariah Audit Regulations for Modarabas.

Profit sharing ratios, profits relating to deposit raising product conform to the basis and principles of scheme approved by SECP religious board.

During the period, no earnings were realized from the sources or by means prohibited by Shariah. Accordingly, no amount was credited to charity account.

1. Standard Chartered Modaraba has its major portfolio of assets insured through commercial insurance companies.

2. The senior management and staff of Standard Chartered Modaraba are well intentioned and cooperative in observing Shariah compliance in its true spirit.

3. Standard Chartered Modaraba has no investment in shares.

1. It has been recommended that SCM insures its assets through Takaful.

In my opinion and best of my knowledge and information provided by Standard Chartered Modaraba management with relevant explanation, I am of the view that during the period overall business operations of the Modaraba are Shariah Compliant.

And Allah Taala knows Better & Perfect

Mufti Abdul Sattar LaghariDated: February 07, 2013

i.

ii.

a) Research and New Product Development:

b) Training and development:

iii.

iv.

v.

vi.

Observations

Recommendation

Conclusion

Shariah Advisor's ReportHalf Year ended December 31, 2012

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394,752,407

-

133,465,422

380,078,042

1,015,620

188,776,925

32,166,378

15,042,995

1,145,297,789

-

6,364,592

1,059,830,055

62,430

4,263,952,412

8,649,461

5,338,858,950

6,484,156,739

6,469,979

300,000,000

240,000,000

75,344,682

201,043,649

34,051,830

3,697,658,950

44,763,792

4,599,332,882

220,000,000

636,596,116

95,785,000

952,381,116

5,551,713,998

500,000,000

285,000,000

168,835,300

453,835,300

436,026,911

42,580,530

932,442,741

6,484,156,739

Condensed Interim Balance Sheet As at December , 201231

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The annexed notes 1 to 20 form an integral part of this condensed interim financial information.

(Unaudited) (Audited)

December 31, June 30,

Note 2012 2012

ASSETS

Current assets

Cash and bank balances

Term deposit receipts

Ijarah rentals receivable

Advances, deposits, prepayments and other receivables

Current portion of investment in Sukuk certificates

Current portion of Diminishing Musharika

Current portion of net investment in Ijarah finance

Taxation recoverable

Total current assets

Non-current assets

Loans and advances to employees

Long-term portion of investment in Sukuk certificates

Long-term portion of Diminishing Musharika

Long-term portion of net investment in Ijarah finance

Ijarah assets

Fixed assets in own use

Total non-current assets

TOTAL ASSETS

LIABILITIES AND EQUITY

Current liabilities

Musharika finance

Murabaha finance

Current maturity of Musharika term finance

Current maturity of security deposits

Creditors, accrued and other liabilities

Advance Ijarah rentals received

Current portion of redeemable capital

Unclaimed profit distribution

Total current liabilities

Non-current liabilities

Long-term portion of Musharika term finance

Long-term portion of security deposits

Long-term portion of redeemable capital

Total non-current liabilities

TOTAL LIABILITIES

CERTIFICATE HOLDERS' EQUITY

Authorised certificate capital

50,000,000 (June 30, 2012: 50,000,000) certificates of Rs 10 each

Certificate capital

Issued, subscribed and paid-up certificate capital

28,500,000 (June 30, 2012: 28,500,000) certificates of Rs 10 each

issued as fully paid in cash

16,883,530 (June 30, 2012: 16,883,530) bonus certificates of Rs 10 each

Reserves

Unappropriated profit

TOTAL LIABILITIES AND EQUITY

10,314,667

150,000,000

135,102,788

239,104,072

1,015,620

103,856,410

85,045,163

16,087,270

740,525,990

315,390

6,770,840

1,047,497,978

148,501

4,334,720,195

1,646,242

5,391,099,146

6,131,625,136

494,366,261

530,967,500

-

71,988,162

221,722,284

41,686,343

3,094,473,420

25,476,612

4,480,680,582

-

621,275,125

68,975,000

690,250,125

5,170,930,707

500,000,000

285,000,000

168,835,300

453,835,300

425,793,013

81,066,116

960,694,429

6,131,625,136

CONTINGENCIES AND COMMITMENTS

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(Management Company) For Standard Chartered Services of Pakistan (Private) Limited

Chief ExecutiveRaheel Q Ahmad

Director




Condensed Interim Profit and Loss Account (Unaudited)For the half year and quarter ended 31,December 2012

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2012 2011 2012 2011

Ijarah finance income 2,428,104 14,707,213 1,076,923 6,242,707

Ijarah rentals earned 993,759,034 737,996,008 506,756,771 377,868,440

Income on Diminishing Musharika transactions 80,324,529 34,701,943 41,391,563 17,761,550

Income on deposits with bank 8,376,214 14,960,283 4,834,910 12,329,307

1,084,887,881 802,365,447 554,060,167 414,202,004

Financial charges (230,135,333) (169,744,615) (117,177,416) (92,013,977)

Depreciation on assets under Ijarah arrangements (766,793,955) (545,174,384) (390,073,201) (277,987,726)

87,958,593 87,446,448 46,809,550 44,200,301

Provision in respect of Ijarah finances - net (12,614,548) (1,422,985) (9,180,482) -

Reversal of provision / provision in respect of 121,036 (12,500,000) 121,036 (6,250,000)

Diminishing Musharika

Reversal of provision in respect of Sukuk certificates 101,562 468,750 50,781 234,375

75,566,643 73,992,213 37,800,885 38,184,676

Other income 22,233,626 8,844,938 19,351,558 6,393,558

Administrative and operating expenses (39,784,974) (31,573,943) (20,857,461) (18,372,772)

58,015,295 51,263,208 36,294,982 26,205,462

Modaraba management company fee (5,801,530) (5,126,321) (3,629,499) (2,620,546)

Provision for Workers' Welfare Fund 13 (1,044,275) (922,738) (653,309) (471,699)

Profit before taxation 51,169,490 45,214,149 32,012,174 23,113,217

Taxation 14 - - - -

Profit after taxation 51,169,490 45,214,149 32,012,174 23,113,217

Other comprehensive income for the period - - - -

Total comprehensive income for the period 51,169,490 45,214,149 32,012,174 23,113,217

Earnings per certificate - basic and diluted 1.13 1.00 0.71 0.51

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

December 31,Note

Quarter endedHalf year ended

December 31,




Director




Condensed Interim Cash Flow Statement (Unaudited)For the half year ended December 31, 2012

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2012 2011

CASH FLOWS FROM OPERATING ACTIVITIES

Profit for the period before taxation 51,169,490 45,214,149

Adjustment for non-cash and other items:

Depreciation on fixed assets in own use 477,474 628,532

Depreciation on fixed assets under Ijarah arrangements 766,793,955 545,174,384

Profit on disposal of assets under Ijarah arrangements (16,975,670) (4,343,692)

Provision in respect of Ijarah finances 12,614,548 1,422,985

Reversal of provision in respect of Sukuk certificates (101,562) (468,750)

Reversal of provision / provision in respect of Diminishing Musharika (121,036) 12,500,000

Income on deposits with bank (8,376,214) (14,960,283)

Profit on:

- Redeemable capital 169,638,105 152,932,390

- Murabaha finances 25,426,895 -

- Musharika finances 20,750,171 7,310,572

Provision for Workers' Welfare Fund 1,044,275 922,738

971,170,941 701,118,876

1,022,340,431 746,333,025

(Increase) / decrease in assets

Advances, deposits, prepayments and other receivables (139,834,481) 57,783,952

Ijarah rentals receivable (10,977,182) (35,896,491)

Diminishing Musharika (97,131,556) (95,772,758)

Purchase of assets under Ijarah arrangements (959,522,962) (1,073,803,209)

Proceeds from disposal of assets under Ijarah arrangements 280,472,460 98,182,423

Investment in Ijarah finance - net 52,964,856 148,320,742

Loans and advances to employees 315,390 174,249

(873,713,475) (901,011,092)

Increase / (decrease) in liabilities

Creditors, accrued and other liabilities (17,373,308) 19,714,172

Advance Ijarah rentals received (7,634,513) (34,007,711)

Security deposits 18,677,511 73,426,787

(6,330,310) 59,133,248

142,296,646 (95,544,819)

Profit received / (paid) on

- Redeemable capital (188,625,272) (109,458,144)

- Murabaha finances (7,050,149) -

- Musharika finances (23,445,077) (12,582,196)

Taxes paid - (695)

(219,120,498) (122,041,035)

Net cash used in operating activities (76,823,852) (217,585,854)

CASH FLOWS FROM INVESTING ACTIVITIES

Receipt against investment 507,810 2,343,750

Fixed capital expenditure (7,480,693) (255,100)

Income on deposits with bank 7,236,725 9,643,201

Net cash generated from investing activities 263,842 11,731,851

CASH FLOWS FROM FINANCING ACTIVITIES

Redeemable capital less repayments 629,995,530 721,793,523

Murabaha finances less repayments (230,967,500) -

Musharaka finances less repayments 460,000,000 -

Profit paid to certificate holders (60,133,998) (74,401,054)

Net cash generated from financing activities 798,894,032 647,392,469

Increase in cash and cash equivalents 722,334,022 441,538,466

Cash and cash equivalents at the beginning of period (334,051,594) (364,150,447)

Cash and cash equivalents at the end of the period 15 388,282,428 77,388,019

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

Half year ended

December 31,




Director




Condensed Interim Statement of Changes in Equity (Unaudited)For the half year ended December 31, 2012

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Reserves

Balance as at June 30, 2011 453,835,300 55,384,700 350,226,030 405,610,730 78,623,575 938,069,605

Profit distribution for the year ended

June 30, 2011 @ Rs 1.725 per certificate - - - - (78,286,589) (78,286,589)

Total comprehensive income for the half

year ended December 31, 2011 - - - - 45,214,149 45,214,149

Transfer to statutory reserve - - 9,042,830 9,042,830 (9,042,830) -

Balance as at December 31, 2011 453,835,300 55,384,700 359,268,860 414,653,560 36,508,305 904,997,165

Balance as at June 30, 2012 453,835,300 55,384,700 370,408,313 425,793,013 81,066,116 960,694,429

Profit distribution for the year ended

June 30, 2012 @ Rs 1.75 per certificate - - - - (79,421,178) (79,421,178)

Total comprehensive income for the half

year ended December 31, 2012 - - - - 51,169,490 51,169,490

Transfer to statutory reserve - - 10,233,898 10,233,898 (10,233,898) -

Balance as at December 31, 2012 453,835,300 55,384,700 380,642,211 436,026,911 42,580,530 932,442,741

Total

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

Premium on

modaraba

certificates

Statutory

reserveSub-total

Certificate

capital

Unappropriated

profit




Director




Notes to the Condensed Interim Financial Information (Unaudited)

1 STATUS AND NATURE OF BUSINESS

2 BASIS OF PREPARATION

2.1 Statement of compliance

a)

2.3 New and amended standards and interpretations that are not yet effective

Standard Chartered Modaraba (the Modaraba) was formed under the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 and the Rules framed thereunder and is managed by Standard Chartered Services of Pakistan (Private) Limited. The Management Company is a wholly owned subsidiary of Standard Chartered Bank (Pakistan) Limited. The address of its registered office is Standard Chartered Bank Building, I. I. Chundrigar Road, Karachi, Pakistan.

The Modaraba is a perpetual modaraba and is primarily engaged in leasing of plant, machinery, motor vehicles (both commercial and private), computer equipment, etc. The Modaraba may also invest in commercial and industrial ventures suitable for the Modaraba. The Modaraba is listed on the Karachi and Lahore Stock Exchanges.

This condensed interim financial information has been prepared in accordance with approved accounting standards as applicable in Pakistan for interim financial reporting. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board and Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants of Pakistan as are notified under the Companies Ordinance, 1984, the requirements of the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980, Modaraba Companies and Modaraba Rules, 1981 and the directives issued by the Securities and Exchange Commission of Pakistan (SECP). Wherever the requirements of the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980, Modaraba Companies and Modaraba Rules, 1981 and the directives issued by SECP differ with the requirements of IFRSs or IFAS, the requirements of the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980, Modaraba Companies and Modaraba Rules, 1981 or the directives issued by the SECP prevail.

The disclosures made in this condensed interim financial information have, however, been limited based on the requirements of International Accounting Standard 34; 'Interim Financial Reporting'. This condensed interim financial information does not include all the information and disclosures required in a full set of financial statements and should be read in conjunction with the annual published financial statements of the Modaraba for the year ended June 30, 2012.

This condensed interim financial information is unaudited. However, a review has been performed by the statutory auditors in accordance with the requirements of the Code of Corporate Governance.

b) During the year ended June 30, 2008, Islamic Financial Accounting Standard 2 'Ijarah' issued by the Institute of Chartered Accountants of Pakistan which was notified by the Securities and Exchange Commission of Pakistan vide an SRO 431(1)/2007 dated May 5, 2007 was adopted. Under the above IFAS 2, the ‘Ijarah’ transactions are accounted for in the following manner:

- Muj`ir (lessors) shall present the assets subject to Ijarah in their balance sheet according to the nature of the asset, distinguished from the assets in own use.

- Costs, including depreciation on the assets given on Ijarah, incurred in earning the Ijarah income shall be recognised as an expense.

- Ijarah income shall be recognised in income on an accrual basis as and when the rental becomes due, unless another systematic basis is more representative of the time pattern in which the benefit of the use derived from the leased asset is diminished.

SECP, vide its letter No. SC/ M/ RW/ SCM /2009 dated March 9, 2009, allowed that in case of Modarabas, IFAS 2 shall be applied for Ijarah transactions executed on or after July 1, 2008. Accordingly, the Modaraba has accounted for leasing transactions executed before July 01, 2008 as finance leases and has treated the leasing transactions executed on or after July 01, 2008 in accordance with the requirements of IFAS 2.

2.2 Standards, interpretations and amendments to published approved accounting standards that are effective in the current period

The following standards and amendments to existing standards have been published and are mandatory for the Modaraba's accounting period beginning on or after July 1, 2012:

- Amendments to IAS 1, 'Presentation of financial statements' (effective July 1, 2012). The main change resulting from these amendments is a requirement for entities to group items presented in 'other comprehensive income' (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI. The adoption of this amendment did not have any impact on the Modaraba's condensed interim financial information as, currently, no items are presented in other comprehensive income.

- Amendment to IFRS 7, 'Financial instruments: Disclosures' (effective January 1, 2013). The amendment includes new disclosures to facilitate comparison between those entities that prepare financial statements in accordance with IFRSs to those that prepare financial statements in accordance with US GAAP. The adoption of this amendment did not have any impact on the Modaraba's condensed interim financial information.

There are other amendments to the standards and new interpretations that are mandatory for accounting periods beginning on or after July 1, 2012 but are considered not to be relevant or do not have any significant effect on the Modaraba's operations and are, therefore, not detailed in this condensed interim financial information.

There are other new and amended standards and interpretations that are mandatory for the Modaraba's accounting periods beginning on or after July 1, 2013 but are considered not to be relevant or do not have any material effect on the Modaraba's operations and are, therefore, not detailed in this condensed interim financial information.

For the half year ended December 31, 2012

11




Notes to the Condensed Interim Financial Information (Unaudited)For the half year ended December 31, 2012

2.4 Critical accounting estimates and judgments

2.5 Accounting convention

2.6 Functional and presentation currency

3 SIGNIFICANT ACCOUNTING POLICIES

The basis and methods used for critical accounting estimates and judgments adopted in this condensed interim financial information are the same as those applied in the preparation of the annual financial statements of the Modaraba for the year ended June 30, 2012.

This condensed interim financial information has been prepared under the historical cost convention.

This condensed interim financial information is presented in Pakistani Rupee which is the Modaraba's functional and presentation currency.

The accounting policies applied for the preparation of this condensed interim financial information are the same as those applied in the preparation of the annual published financial statements of the Modaraba for the year ended June 30, 2012.

4.1 This includes a balance of Rs 42.081 million (June 30, 2012: Rs 6.262 million) held with the Standard Chartered Bank (Pakistan) Limited (a related party). The savings accounts carry expected profit rates ranging between 6% and 9% (June 30, 2012: 6%) per annum. The Modaraba ensures that these balances are adequate enough to ensure compliance of the Modaraba at all times with the requirements of the guidelines issued by the Securities and Exchange Commission of Pakistan (SECP) with respect to the maintenance of prescribed liquidity against the Certificates of Musharika issued by the Modaraba.

(Unaudited) (Audited)Note December 31, June 30,

2012 20124 CASH AND BANK BALANCES

Balances with banks- in current accounts 285,140 4,032,396- in savings accounts 4.1 394,446,197 6,262,212

Cash in hand 21,070 20,059394,752,407 10,314,667

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

(Unaudited) (Audited)Note December 31, June 30,

2012 20125 IJARAH RENTALS RECEIVABLE

Ijara rentals receivable - considered good 162,215,349 140,023,523Less: Allowance for potential Ijarah losses (15,090,033) (2,475,485)Less: Profit held in suspense (13,659,894) (2,445,250)

133,465,422 135,102,788

6 INVESTMENT IN SUKUK CERTIFICATES

Held to maturity

Investment in Sukuk Certificates 59,225,265 59,733,075Less: Provision in respect of Sukuk certificates (51,845,053) (51,946,615)

7,380,212 7,786,460Less: Current portion of investment in Sukuk Certificates (1,015,620) (1,015,620)

6,364,592 6,770,840

7 DIMINISHING MUSHARIKA

- Staff

Housing finance 41,645,873 39,800,642Others 1,340,403 -

42,986,276 39,800,642

- Other Customers

Housing finance 264,825,802 213,621,600Others 965,673,866 922,932,146Less: Provision in respect of Diminishing Musharika (24,878,964) (25,000,000)

1,205,620,704 1,111,553,746

1,248,606,980 1,151,354,388Less: current portion of Diminishing Musharika (188,776,925) (103,856,410)

1,059,830,055 1,047,497,978

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

8 NET INVESTMENT IN IJARAH FINANCE

Ijarah contracts commencing prior to July 1, 2008 - accounted 8.1 32,228,808 85,193,664for as finance leases

Less: Current portion of net investment in Ijarah finance (32,166,378) (85,045,163)62,430 148,501

Ijarah contracts commencing on or after July 1, 2008 - accounted for under IFAS 2 4,267,083,665 4,337,851,448

Less: Impairment against ijarah assets (3,131,253) (3,131,253)4,263,952,412 4,334,720,195




8.2 The following additions to and disposals of Ijarah assets have been made during the period ended December 31, 2012:

9.1 The following additions to and disposals of operating fixed assets have been made during the period ended December 31, 2012:


13

8.1

Minimum Ijarah payments receivable 13,677,985 64,790 13,742,775 43,253,957 158,847 43,412,804

Add: Residual value 18,920,202 - 18,920,202 45,011,610 - 45,011,610

Gross: investment in Ijarah finance 32,598,187 64,790 32,662,977 88,265,567 158,847 88,424,414

Less: Unearned finance income 313,377 2,360 315,737 3,220,404 10,346 3,230,750

Mark-up held in Suspense 118,432 - 118,432 - - -

32,166,378 62,430 32,228,808 85,045,163 148,501 85,193,664

Later than one

and less than

five years

TotalNot later than

one year

Later than

one

and less than

five years

TotalNot later than

one year

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

As at December 31, 2012 (Unaudited) As at June 30, 2012 (Audited)

(Unaudited) (Unaudited)December 31, December 31,

2012 2011

IJARAH ASSETS

Additions at cost during the period

- Plant, machinery and equipment 395,217,148 387,674,437- Motor vehicles 564,305,814 686,128,772

959,522,962 1,073,803,209

Disposals at cost during the period- Plant, machinery and equipment 322,382,810 86,962,261

- Motor vehicles 247,924,769 143,950,570570,307,579 230,912,831


December 31, June 30, 2012 2012

9 FIXED ASSETS IN OWN USE

Operating fixed assets 9.1 1,646,686 1,646,242Capital work-in-progress 9.2 7,002,775 -

8,649,461 1,646,242

(Unaudited) (Unaudited)

December 31, December 31, 2012 2011

Additions at cost during the period - Computers / equipment 45,000 255,100- Motor vehicles 353,500 -

- Computer software 79,418477,918 255,100

Disposals at cost during the period - -

9.2


December 31, June 30, 10 MUSHARIKA FINANCE 2012 2012

Musharika with:- an associated undertaking - secured 10.1 6,469,979 494,366,261

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

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

This pertains to advance given against purchase of computer software.

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

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

10.1

11 MUSHARIKA TERM FINANCE

12 CONTINGENCIES AND COMMITMENTS

12.1

The total facility for musharika finance available from Standard Chartered Bank (Pakistan) Limited amounts to Rs 800 million (June 30, 2012: Rs 800 million). The estimated share of profit payable on this facility is Re 0.3083 (June 30, 2012: Re 0.3536 to Re 0.3982) per rupee one thousand per day. The facility is secured against hypothecation over the moveable leased out assets of the Modaraba.

A facility for musharika finance was obtained from Standard Chartered Bank (Pakistan) Limited amounting to Rs 1,000 million to be availed in two tranches of Rs 500 million each. After realisation of each tranche, repayment will be made in 25 equal monthly instalments. The first tranche amounting to Rs 500 million has been disbursed and two monthly repayments have already been made as per the terms of the arrangement. The estimated share of profit payable on this facility is Re 0.2636 per rupee one thousand per day. The facility is secured by way of first pari passu charge over the fixed assets of the Modaraba.

An agreement was executed between Haleeb Foods Limited and a consortium of financial institutions. As per the terms of the agreement, Meezan Bank Limited had to provide Inland Usance L/C facility of Rs 96.12 million to Haleeb Foods Limited on behalf of all the participating




institutions for procurement of packaging material from TetraPak. The Modaraba's limit in this respect is Rs 5.402 million on the basis of pro rata share. The Modaraba’s outstanding balance of this facility is Rs 4.001 million as at December 31, 2012. The facility will expire on June 30, 2013.

Another agreement was signed between Haleeb Foods Limited and the consortium of financial institutions. As per the terms of the agreement, Meezan Bank Limited had to provide working capital facilities to the tune of Rs 425 million to Haleeb Foods Limited. SCM’s share out of the additional working capital line was Rs 23.885 million which was to be provided in the shape of LC / Ijarah finance. LCs were established by Meezan Bank Limited on behalf of the consortium and the outstanding balance of the Modaraba’s share against LCs was Rs 16.684 million as at December 31, 2012.

The Modaraba has issued letters of comfort to Habib Bank Limited equal to an amount of Rs 1.572 million on behalf of Big Bird Foods (Private) Limited and to Habib Metro Bank Limited for an amount of Rs 24 million on behalf of Ahmed Oriental Textile Mills Limited.

The Finance Act, 2008 introduced an amendment to the Workers' Welfare Fund Ordinance, 1971 (WWF Ordinance) due to which the Modaraba became liable to pay contribution to Workers' Welfare Fund (WWF) at the higher of the profit before taxation as per the financial statements or the return of income.

During the year ended June 30, 2012, the Honourable Lahore High Court (LHC) in a Constitutional Petition relating to the amendment brought in the WWF Ordinance, 1971 through the Finance Act, 2006, and the Finance Act, 2008, has declared the said amendments as unlawful and unconstitutional. However, the Modaraba, as a matter of abundant caution, has decided to retain the provision for WWF amounting to Rs 8.621 million (including Rs 1.044 million for the current period) in this condensed interim financial information. Provision for WWF has been netted off against taxation recoverable.

As per the Second Schedule to the Income Tax Ordinance, 2001, the income of a non-trading modaraba is exempt from income tax provided that it distributes at least 90% of its profits to its certificate holders for the year after making appropriation for statutory reserves. The Modaraba intends to continue to avail this exemption by distributing 90% of its profits to its certificate holders after making appropriation to statutory reserves for the year ending June 30, 2013. Accordingly, no provision in respect of current and deferred taxation has been made in this condensed interim financial information.

Cash and cash equivalents included in the cash flow statement comprise of the following balance sheet amounts:

12.2

12.3

13 PROVISION FOR WORKERS' WELFARE FUND

14 TAXATION

15 CASH AND CASH EQUIVALENTS

16 RELATED PARTY TRANSACTIONS

The related parties of the Modaraba include the management company, staff retirement funds, directors and key management personnel and Standard Chartered Bank (Pakistan) Limited. Transactions with related parties other than remuneration and benefits to key management personnel (which are employed by the management company) under the terms of their employment are as follows:


14



Cash and bank balances 394,752,407 2,843,778Term deposit receipts - 150,000,000Musharika finance (6,469,979) (75,455,759)

388,282,428 77,388,019

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



Standard Chartered Bank (Pakistan) Limited - Holding Company Profit on Musharika finance 20,750,171 7,310,572

Profit on deposit account 356,175 2,720,653Bank charges and commission 14,320,158 9,471,803Charge for reimbursement of miscellaneous expenses 1,997,754 1,865,388

Staff retirement benefits funds

Contribution to the staff provident fund 1,084,586 740,088Contribution to the staff gratuity fund 903,458 616,498

Standard Chartered Services of Pakistan (Private) Limited - Management Company

Management fee 5,801,530 5,076,321

Other related parties

Reimbursement of salaries and benefits - 1,899,506

Key management personnel remuneration

Salaries and benefits 17,073,734 12,470,505Contribution to the staff provident fund 531,114 359,194Contribution to the staff gratuity fund 442,422 299,204

Number of persons 8 5

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




(Unaudited) (Audited)December 31, June 30,

2012 2012

Standard Chartered Bank (Pakistan) Limited - Holding Company Advances, deposits, prepayments and other receivables 7,413,894 -

Creditors, accrued and other liabilities 5,315,266 7,858,565

Standard Chartered Services of Pakistan (Private) Limited - Management Company

Management fee payable 7,632,122 11,441,203

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


The Modaraba enters into transactions with related parties for borrowings under Musharika finances and other general banking services. These transactions are based on a transfer pricing policy under which all transactions are carried out on agreed terms. The balances with related parties other than balances that have been disclosed in the respective notes are as follows:

15




Director

17 SEGMENT INFORMATION

18 CORRESPONDING FIGURES

19 DATE OF AUTHORISATION

20 GENERAL

As per IFRS 8: "Operating Segments", operating segments are reported in a manner consistent with the internal reporting used by the chief operating decision-maker. The Chief Executive Officer of the Management Company has been identified as the chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments.

The Chief Executive Officer is responsible for the Modaraba’s entire product portfolio and considers the business to have a single operating segment. The Modaraba’s asset allocation decisions are based on a single integrated investment strategy and the Modaraba’s performance is evaluated on an overall basis.

The internal reporting provided to the Chief Executive Officer for the Modaraba’s assets, liabilities and performance is prepared on a consistent basis with the measurement and recognition principles of approved accounting standards as applicable in Pakistan.

The Modaraba is domiciled in Pakistan. All of the Modaraba’s income is from investments in entities incorporated in Pakistan.

The Modaraba has a diversified product portfolio whereby resources have been allocated.

The Modaraba also has a diversified certificate holder population. As at December 31, 2012, there were only three (June 30, 2012: three) certificate holders who each held more than 10% of the Modaraba’s certificate capital. Their holdings were 10%, 10% and 10.95% (June 30, 2012: 10%, 10% and 11.24%) respectively.

Corresponding figures have been rearranged or reclassified wherever necessary for the purpose of comparison and better presentation. There were no major reclassifications in this condensed interim financial information during the current period.

This condensed interim financial information was authorised for issue on February 18, 2013 by the Board of Directors of the Management Company.

Figures have been rounded off to the nearest rupee.

Standard Chartered Modaraba

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