Half Yearly Report 2012
Standard Chartered Modaraba
modaraba.standardchartered.com 1
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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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Half Yearly Report 2012
Standard Chartered Modaraba
modaraba.standardchartered.com
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
Directors of Modaraba Company Legal Advisors
Registered and Head Office
Branch Offices
Company Secretary
Audit Committee
Auditors
Bankers/ Financial Institutions
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. Imran Sarwar
Member
Mr. Khurram Shahzad Khan
Member
Mr. Mohsin Ali Nathani
Chairman
Mr. Raheel Qamar Ahmad
Managing Director/ Chief Executive
Mr. Salar Khan*
Director
A.F. Ferguson & Co.
Chartered Accountants
Standard Chartered Bank (Pakistan)
Limited
Bank Islami Pakistan Limited
Meezan Bank Limited
Human Resource and Remuneration
Committee (HR&R)
Directors of Modaraba Company Legal Advisors
Registered and Head Office
Branch Offices
Company Secretary
Audit Committee
Auditors
Bankers/ Financial Institutions
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. Imran Sarwar
Member
Mr. Khurram Shahzad Khan
Member
Mr. Mohsin Ali Nathani
Chairman
Mr. Raheel Qamar Ahmad
Managing Director/ Chief Executive
Mr. Salar Khan*
Director
A.F. Ferguson & Co.
Chartered Accountants
Standard Chartered Bank (Pakistan) Limited
Bank Islami Pakistan Limited
Meezan Bank Limited
Human Resource and Remuneration
Committee (HR&R)
*Subject to Regulatory approval.
Half Yearly Report 2012
Standard Chartered Modaraba
modaraba.standardchartered.com 3
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
Half Yearly Report 2012
Standard Chartered Modaraba
modaraba.standardchartered.com 4
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
Half Yearly Report 2012
Standard Chartered Modaraba
modaraba.standardchartered.com
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
Half Yearly Report 2012
Standard Chartered Modaraba
modaraba.standardchartered.com
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
6
Half Yearly Report 2012
Standard Chartered Modaraba
modaraba.standardchartered.com
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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-------------- Rupees --------------
Mohsin Ali NathaniChairman
(Management Company) For Standard Chartered Services of Pakistan (Private) Limited
Chief ExecutiveRaheel Q Ahmad
Director
Half Yearly Report 2012
Standard Chartered Modaraba
modaraba.standardchartered.com
Condensed Interim Profit and Loss Account (Unaudited)For the half year and quarter ended 31,December 2012
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The annexed notes 1 to 20 form an integral part of this condensed interim financial information.
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,
Mohsin Ali NathaniChairman
(Management Company) For Standard Chartered Services of Pakistan (Private) Limited
Chief ExecutiveRaheel Q Ahmad
Director
Half Yearly Report 2012
Standard Chartered Modaraba
modaraba.standardchartered.com
Condensed Interim Cash Flow Statement (Unaudited)For the half year ended December 31, 2012
9
The annexed notes 1 to 20 form an integral part of this condensed interim financial information.
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,
Mohsin Ali NathaniChairman
(Management Company) For Standard Chartered Services of Pakistan (Private) Limited
Chief ExecutiveRaheel Q Ahmad
Director
Half Yearly Report 2012
Standard Chartered Modaraba
modaraba.standardchartered.com
Condensed Interim Statement of Changes in Equity (Unaudited)For the half year ended December 31, 2012
10
The annexed notes 1 to 20 form an integral part of this condensed interim financial information.
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
Mohsin Ali NathaniChairman
(Management Company) For Standard Chartered Services of Pakistan (Private) Limited
Chief ExecutiveRaheel Q Ahmad
Director
Half Yearly Report 2012
Standard Chartered Modaraba
modaraba.standardchartered.com
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
Half Yearly Report 2012
Standard Chartered Modaraba
modaraba.standardchartered.com 12
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
Half Yearly Report 2012
Standard Chartered Modaraba
modaraba.standardchartered.com
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:
Notes to the Condensed Interim Financial Information (Unaudited)For the half year 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
(Unaudited) (Audited)
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
(Unaudited) (Audited)
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
Half Yearly Report 2012
Standard Chartered Modaraba
modaraba.standardchartered.com
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:
Notes to the Condensed Interim Financial Information (Unaudited)For the half year ended December 31, 2012
14
(Unaudited) (Unaudited)
December 31, December 31, 2012 2011
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 ---------------
(Unaudited) (Unaudited)
December 31, December 31, 2012 2011
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 ---------------
Half Yearly Report 2012
Standard Chartered Modaraba
modaraba.standardchartered.com
(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 ---------------
Notes to the Condensed Interim Financial Information (Unaudited)For the half year ended December 31, 2012
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
Mohsin Ali NathaniChairman
(Management Company) For Standard Chartered Services of Pakistan (Private) Limited
Chief ExecutiveRaheel Q Ahmad
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.