2 / 3 4 1 5 & ) + ) , - ) . / 0 1First Punjab Modaraba Half Yearly Accounts 2016 Page 1 Corporate...

(UN-AUDITED)

DECEMBER 31, 2016HALF YEARLY ACCOUNTS

First Punjab Modaraba

Half Yearly Accounts 2016 Page 1

Corporate Profile 2

Directors’ Report 3

Directors’ Report (Urdu) 4

Auditors’ Report to the Ceritificate Holders 5

Condensed Interim Balance Sheet 6

Condensed Interim Profit and Loss Account 7

Condensed Interim Statement of Comprehensive Income 8

Condensed Interim Cash Flow Statement 9

Condensed Interim Statement of Changes in Equity 10

Selected Notes to the Interim Financial Information 11-19

Contents



Corporate Profile

Board of DirectorsPunjab Modaraba Services (Pvt.) Ltd.

Khalid Siddiq Tirmizey Chairman Aamir Malik Chief ExecutiveKhawaja Farooq Saeed Director Nadeem Amir DirectorIjaz ur Rehman Qureshi Director Mahboob-ul-Hassan Director

Chief Financial Officer & Company Secretary

Mudassar Kaiser Pal

Audit Committee

Khawaja Farooq Saeed ChairmanNadeem Amir MemberIjaz ur Rehman Qureshi Member

Human Resource Committee

Mahboob-ul-Hassan ChairmanNadeem Amir MemberAamir Malik Member

Auditors of the Modaraba

Deloitte Yousaf AdilChartered Accountants

Auditors of the Management Company

Hameed Chaudhry & Co.Chartered Accountants

Bankers

The Bank of PunjabBank Alfalah Limited

Registrar

Hameed Majeed Associates (Pvt) Ltd.H.M. House, 7-Bank Square,The Mall,LahoreTel:(+92-42) 37235081-2

Registered Office

BOP Tower, 1st Floor, 10-B Block E-II, Main Boulevard, Gulberg III, Lahore.Postal Code No. 54600PABX: (+92-42) 35783676Fax: (+92-42) 35784068E-mail: [email protected]: www.punjabmodaraba.com.pk



Directors’ Report

The Board of Directors of Punjab Modaraba Services (Pvt.) Limited, the Management Company of First Punjab Modaraba (the Modaraba), is pleased to present the half yearly results of the Modaraba, together with Directors’ report, for half year ended December 31, 2016.

The economy of Pakistan achieved growth rate of 4.7 percent in FY16 and real GDP growth target for FY17 was set at 5.7 percent. The higher growth is expected to be driven by a rebound in agriculture, and an enhanced contribution from industry. According to the preliminary data, the real economic activities are expected to maintain their momentum. An uptick was already expected in inflation during FY17 and recent revival of global oil prices may lead to higher inflation. However, overall it is expected to remain within the target for the year. At the same time, achieving the annual fiscal deficit target of 3.8 percent of GDP would be challenging and will require additional fiscal consolidation efforts on the part of the government.

The Modaraba has remained successful in continuing its movement on growth trajectory, thereby achieving 20% growth in total assets and 13% increase in total revenues as compared to corresponding period. Simultaneously, the strict control over expenditure during the period has resulted in 7% reduction in total expenses. The results were evident in shape of operating profit of Rs.5.872 million during the period as against loss of Rs.9.379 million in the corresponding period. It is heartening to note that profit from core operations has been achieved after five years. The NPA recoveries, also contributed with reversal of provisions, to record profit before tax of Rs.9.974 million for the half year.

The Management is aggressively focusing on booking of fresh assets and development of new products and services, ultimately leading to diversification of income avenues. The setting up of a wholly owned subsidiary of the Modaraba as brokerage house is a significant event in this drive. The concerted efforts for recovery from NPAs, through litigation and / or out of court settlement, where possible, are being undertaken on side to side basis. The targeted growth of the Modaraba in coming years will be supplemented by capacity building in terms of human resource and technological infrastructure.

The Board duly acknowledges the continuous guidance and support extended by the Securities & Exchange Commission of Pakistan and expects to be its beneficiary in future as well.

For and on behalf of the Board of Directors

Lahore: February, 24 2017

Chief ExecutivePunjab Modaraba Services

( Private ) Limited



Introduction

We have reviewed the accompanying condensed interim balance sheet of First Punjab Modaraba (the Modaraba) as at December 31, 2016, the related condensed interim profit and loss account, condensed interim statement of comprehensive income, condensed interim cash flow statement, condensed interim statement of changes in equity, and notes to the accounts for the six months period then ended (here inafrer refer to as the “interim financial information”). Management Company [Punjab Modaraba Services (Private ) Limited] is responsible for the preparation and presentation of this 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 interim financial information based on our review. The figures of the condensed interim profit and loss account and condensed interim statement of comprehensive income for the quarters ended December 31, 2016 have not been reviewed, as we are required to review only the cumulative figures for the six months ended December 31, 2016.

Scope of Review

We conducted our review in accordance with International Standards on Review Engagements-2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A review of 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.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information as of and for the six months ended December 31, 2016 is not prepared in all material respects, in accordance with the approved accoounting standards as applicable in Pakistan for interim financial reporting.

Other MatterThe interim financial information for the six months ended December 31, 2015 and financial statement for the year ended June 30, 2016, were reviewed and audited respectively by another firm of chartered accountants who, through their review report dated Feburary 22, 2016 and audit report dated September 22, 2016, expressed and unqualified and opinion respectively thereon.

Deloitte Yousaf AdilChartered Accountants

Engagement Partner: Rana M. Usman Khan

Auditors’ Report to the Ceritificate Holderson the Review of Interim Financial Information

Lahore: February 24, 2017



Condensed Interim Balance SheetAs at 31 December 2016 Note Un-Audited Audited 31 December 30 JuneASSETS 2016 2016 Rupees RupeesNon current assets

Tangible fixed assets 5 Ijarah assets 207,172,521 208,430,264 Assets in own use 736,153 620,381 Intangible assets 6 9,300,000 9,300,000 Long term investments available for sale 7 10,308,698 10,308,698 Long term musharikah investment - secured 445,794,709 280,156,728 Long term morabaha investment - secured 8 3,942,703 30,290,198 Long term assets 503,444 503,444 Deferred tax asset 53,433,460 48,144,066 731,191,688 587,753,779 Current assets

Short term morabaha investment - secured 9 248,517,244 235,794,376 Current maturity of long term investment 10 319,872,888 221,682,357 Advances, deposits, prepayments and other receivables 63,775,908 50,518,134 Lease rental receivable 309,522,133 297,635,711 Tax refundable 3,657,064 3,912,447 Cash and bank balances 45,553,748 30,064,994 990,898,985 839,608,019

TOTAL ASSETS 1,722,090,673 1,427,361,798

EQUITY AND LIABILITIES

Capital and reserves Certificate capital 340,200,000 340,200,000 Reserves (161,880,703) (158,467,527) 178,319,297 181,732,473 Non current liabilities Security deposits 6,540,347 7,718,900 Long term musharikah finance-secured 11 1,060,000,000 955,925,494 1,066,540,347 963,644,394 Current liabilities Current maturity of long term liabilities 127,668,097 132,787,066 Deferred morabaha income 3,649,198 7,563,165 Redeemable capital - participatory and unsecured 300,000,000 100,000,000 Profit payable 12 17,611,322 13,551,308 Trade and other payables 12,293,642 12,538,666 Unclaimed profit 15,436,667 14,331,073 Provision for taxation 572,103 1,213,653 477,231,029 281,984,931 Contingencies and commitments 13 TOTAL EQUITY AND LIABILITIES 1,722,090,673 1,427,361,798

The attached notes 1 to 23 form an integral part of this condensed interim financial information.


( Private ) Limited

DirectorPunjab Modaraba Services

( Private ) Limited


( Private ) Limited



Condensed Interim Profit and Loss Account (Un-Audited)For the six months ended 31 December 2016


( Private ) Limited


( Private ) Limited


( Private ) Limited

2016 2015 Three month from Three month from

July to October to July to October to Note December December December December ............................................. (Rupees) .............................................

Income Ijarah rentals 40,584,001 19,699,615 46,275,697 23,604,674

Profit on morabaha investment 4,163,848 2,025,193 8,751,005 4,238,348

Profit on musharikah investment 29,740,901 16,770,717 11,513,779 6,620,762

Gain on disposal of fixed assets 56,748 - 65,117 65,117

Other income 3,402,055 2,329,413 1,851,551 1,209,924

77,947,553 40,824,938 68,457,149 35,738,825

Expenses Operating expenses 14 12,756,132 7,222,979 10,330,776 6,003,861

Depreciation of Ijarah assets 22,219,735 10,499,490 41,404,415 19,925,673

Finance cost 15 37,099,057 19,379,796 26,101,629 13,790,478

72,074,924 37,102,265 77,836,820 39,720,012

Operating profit/(loss) before provision 5,872,629 3,722,673 (9,379,671) (3,981,187)

Reversal for morabaha investment (1,100,004) (670,000) - -

Reversal for impairment of ĳarah assets - - (15,475,998) (5,692,404)

Reversal for musharikah investment (3,002,000) (3,002,000) (2,000,000) (224,111)

Other Provision / (Reversal) - - - -

4,102,004 3,672,000 17,475,998 5,916,515

Operating profit after provisionand impairment 9,974,633 7,394,673 8,096,327 1,935,328

Modaraba Company’s management fee - - - -

9,974,633 7,394,673 8,096,327 1,935,328

Taxation 16 3,622,191 1,439,696 1,753,578 732,859

Profit for the period 13,596,824 8,834,369 9,849,905 2,668,187

Earnings per certificate - basic and diluted 0.40 0.26 0.29 0.08




Condensed Interim Statement of Comprehensive Income(Un-Audited)For the six months ended 31 December 2016


( Private ) Limited


( Private ) Limited


( Private ) Limited

2016 2015 Three month from Three month from

July to October to July to October to Note December December December December ............................................. (Rupees) .............................................

Income for the period 13,596,824 8,834,369 9,849,905 2,668,187 Gain on revaluation ofavailable for sale investments - - 492,599 - Total comprehensive incomefor the period 13,596,824 8,834,369 10,342,504 2,668,187 The attached notes 1 to 23 form an integral part of this condensed interim financial information.



Condensed Interim Cash Flow Statement (Un-Audited)For the period ended 31 December 2016 Note 31 December 31 December

2016 2015

Rupees Rupees

Cash flow from Operating activities

Cash generated from operations 17 27,454,316 59,027,255

Profit paid on certificates of musharikah (4,799,315) (3,510,959)

Profit paid on musharikah finances (28,239,728) (24,528,817)

Taxes paid (2,053,370) -

(35,092,413) (28,039,776)

Net cash (used in) / generated from operating activities (7,638,097) 30,987,479

Cash flow from investing activities

Musharikah investment (264,757,499) (188,135,795)

Purchase of fixed assets in own use (285,750) (172,000)

Net cash used in from investing activities (265,043,249) (188,307,795)

Cash flow from financing activities

Musharikah finances 104,074,506 78,704,579

Morabaha - -

Redeemable capital 200,000,000 -

Profit distributed among the certificate holders (15,904,406) (14,058,834)

Net cash generated from financing activities 288,170,100 64,645,745

Net increase in cash and cash equivalents 15,488,754 (92,674,571)

Cash and cash equivalents at the beginning of the period 30,064,994 111,910,154

Cash and cash equivalents at the end of the period 45,553,748 19,235,583



( Private ) Limited


( Private ) Limited


( Private ) Limited



Condensed Statement of Changes in Equity (Un-Audited)For the six months ended 31 December 2016

Certificate Statutory Accumulated Total Capital Reserves loss Rupees Rupees Rupees Rupees Balance as at July 1, 2015 340,200,000 198,613,109 (368,096,223) 170,716,886 Profit for the period - - 9,849,905 9,849,905 Other comprehensive incomefor the period - - 492,599 492,599 Transactions with owners Final dividend for the year ended June 30, 2015 at Rs. 0.5 per certificate - - (17,010,000) (17,010,000) Balance as at December 31, 2015 340,200,000 198,613,109 (374,763,719) 164,049,390 Balance as at July 1, 2016 340,200,000 204,119,707 (362,587,234) 181,732,473 Profit for the period - - 13,596,824 13,596,824 Transactions with owners Final dividend for the year ended June 30, 2016 at Rs. 0.5 per certificate - - (17,010,000) (17,010,000) Balance as at December 31, 2016 340,200,000 204,119,707 (366,000,410) 178,319,297 The attached notes 1 to 23 form an integral part of this condensed interim financial information.


( Private ) Limited


( Private ) Limited


( Private ) Limited



Notes to the Condensed Interim Financial Information(Un-Audited)For the six months ended 31 December 2016 1 Status and nature of business

First Punjab Modaraba (the Modaraba) was formed under the Modaraba Companies and

Modaraba (Floatation and Control) Ordinance, 1980 and rules framed thereunder and is managed by Punjab Modaraba Services (Private) Limited (wholly owned subsidiary of The Bank of Punjab), a company incorporated in Pakistan. The registered office of the Modaraba is situated at 1st Floor, BOP Tower,10-B, Block-E-II, Gulberg III, Lahore. The Modaraba commenced its operations from 23rd December 1992. The Modaraba is listed on Pakistan Stock Exchange.

The Modaraba is a perpetual, multi purpose and multi dimensional modaraba and is primarily engaged in the business of ĳarah, musharika and morabaha financing, equity investment and other related business in accordance with the injunctions of Islam.

2 Basis of preparation

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.

This condensed interim financial information is un-audited. This interim financial information of the Modaraba for the period ended 31 December 2016 has been prepared in accordance with the requirements of the International Accounting Standard (IAS) - 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 30 June 2016.

This condensed interim financial information is being submitted to the certificate holders as required under the Rule 10 of Modaraba Companies and Modaraba Rules, 1981.

The comparative balance sheet presented in this condensed interim financial information as at 31 December 2016 has been extracted from the audited financial statements of the Modaraba for the year ended 30 June 2016, whereas the comparative profit and loss account and statement of comprehensive income, cash flow statement and statement of changes in equity have been extracted from the condensed interim financial information for the period ended 31 December 2015.

3 Accounting policies

The accounting policies and methods of computation adopted for the preparation of this condensed interim financial information are the same as those applied in the preparation of the financial statements of the Modaraba for the preceding year ended 30 June 2016.

4 Significant accounting estimates and judgements

The preparation of this condensed interim financial information requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgements made by management in applying the Modaraba’s accounting policies and the key sources of estimation were the same as those that were applied to the financial statements for year ended 30 June 2016.



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Note 31 December 30 June 2016 2016 (Un-Audited) (Audited) Rupees Rupees6 In-tangible assets

Trading rights entitlement certificate and other assets 6.1 35,648,757 35,648,757 Less: Impairment (26,648,757) (26,648,757) 9,000,000 9,000,000 Software Almanac 1,295,000 1,295,000 Less: Amortization (1,295,000) (1,295,000) - - Work in progress 6.2 300,000 300,000 9,300,000 9,300,000

6.1 This includes Trading Rights Entitlement Certificate (TREC) received against membership card pursuant to demutualization of the Lahore Stock Exchange (LSE). The management had charged impairment against TREC and Room at LSE Financial Services Limited keeping in view their fair value.

The management intended to use the TREC for its brokerage business and had accordingly applied to LSE for registration as broker. The permission has been granted by Securities and Exchange Commission of Pakistan subject to the condition to form a wholly owned subsidiary to undertake brokerage business. The management has initiated the process of obtaining necessary approvals for formation of wholly owned subsidiary.

6.2 This includes advance paid by Modaraba against purchase of software.

Note 31 December 30 June 2016 2016 (Un-Audited) (Audited) Rupees Rupees

7 Long term investment available for sale 7.1 10,308,698 10,308,698

7.1 This represents 843,975 shares of LSE Financial Services Limited (formerly Lahore Stock

Exchange Limited).



31 December 30 June 2016 2016 (Un-Audited) (Audited) Rupees Rupees8 Long term morabaha investment - secured Long term morabaha investment 54,224,546 74,585,056 Add: Unearned morabaha income 3,649,198 7,563,170 57,873,744 82,148,226 Less: Current maturity (45,131,041) (43,058,028) 12,742,703 39,090,198 Less: Provision for doubtful morabaha investment (8,800,000) (8,800,000)

Total long term morabaha investment net 3,942,703 30,290,198

9 Short term Morabaha investment-secured Short term morabaha Investment 484,611,878 472,989,107 Add: Unearned morabaha income - - 484,611,878 472,989,107 Less: Provision for doubtful finances (236,094,634) (237,194,731)

248,517,244 235,794,376

10 Current maturity of long term investment Morabaha investment 45,131,041 43,058,028 Less: Provision Against Current Maturity of long term investment - - 45,131,041 43,058,028 Musharikah investment 283,451,373 190,333,855 Less: Provision against Musharika Investment (8,709,526) (11,709,526) 274,741,847 178,624,329

319,872,888 221,682,357

11 Long term Musharikah finances - secured

During the period the Modaraba has availed musharikah finance facilities from The Bank of Punjab having approved limits of Rs.1,060 million (June 30, 2016: Rs.1,060 million). These facilities are secured by way of first pari passu charge over present and future fixed assets of Modaraba for amount of Rs. 860 million and first pari passu charge over present and future current assets of Modaraba for an amount of Rs. 1,040 million. The estimated share of profit payable on musharikah facilities is 6.50% (June 30, 2016: 6.50%).

31 December 30 June 2016 2016 (Un-Audited) (Audited) Rupees Rupees12 Profit Payable

Musharikah Finance 15,294,636 13,178,461 Redeemable Capital 2,316,686 372,847

17,611,322 13,551,308



13 Contingencies and commitments

13.1 Contingencies

There are no significant changes in contingent liabilities since the last published financial statements as at June 30, 2016

13.2 Commitments

Musharikah commitments that have been approved, but not disbursed as on balance sheet date, amount to Rs. 82.264 million. (June 30, 2016:Rs. 33.813 million)

31 December 31 December 2016 2015 (Un-Audited) (Un-Audited) Rupees Rupees14 Operating expenses Salaries and benefits 8,755,190 6,471,101 Traveling and conveyance 55,540 92,732 Legal and professional 355,000 346,717 Printing and stationary 211,717 477,421 Insurance 64,683 177,598 Fee and subscription 568,256 223,923 Auditor’s remuneration 229,500 175,000 Repair and maintenance 157,024 181,482 Vehicle running and maintenance 669,677 576,841 Power and utilities - 1,272 Entertainment expenses 181,744 125,019 Advertisement 350,712 314,340 Telephone and postage 263,751 292,168 Corporate expenses 297,518 275,905 Rent rates and taxes 75,000 85,560 Miscellaneous expenses 350,841 193,630 Depreciation-own asset 169,979 320,067

12,756,132 10,330,77615 Finance cost

Financial charges on musharikah 30,278,022 22,816,469

Financial charges on redeemable capital 6,743,154 3,276,714

Bank charges 77,881 8,446

37,099,057 26,101,629



16 Taxation Current Tax

- Current period (1,667,203) (1,376,376) Deferred - Relating to origination and reversal of temporary differences 5,289,394 3,129,954

3,622,191 1,753,578

31 December 31 December 2016 2015 (Un-Audited) (Un-Audited) Rupees Rupees 17 Cash flow from operating activities

Profit for the period 9,974,633 8,096,327

Adjustments for:

Depreciation of ĳarah assets 22,219,725 41,404,415

Depreciation of assets in own use 169,978 320,067

Gain/loss on sale of assets Ijarah assets (56,748) (65,117)

Provision/(Reversal) against doubtful

morabaha investment 1,100,004 -

Provision/(Reversal) against ĳarah assets - (15,475,998)

Provision/(Reversal) against musharikah investment 3,002,000 (2,000,000)

Other provisions - -

Profit on musharikah/morabaha finances 30,278,022 22,816,469

Profit on certificates of musharikah 6,821,035 3,276,714

63,534,016 50,276,550

Operating profit before working capital changes 73,508,649 58,372,877

Working capital changes (Increase)/decrease in operating assets:

Morabaha investment 6,537,643 19,621,680 Purchase of Ijarah assets (30,580,090) (2,090,000) Proceeds from transfer of Ijarah assets 9,674,856 3,815,374 Long term deposits - - Advances, deposits, prepayments and other receivables (25,144,196) (14,570,378) (39,511,787) 6,670,232 Increase/(decrease) in operating liabilities: Security deposits refunded (6,297,522) (2,321,018) Trade and other payables (245,024) (3,694,836) (6,542,546) (6,015,854) (46,054,333) 654,378

Cash generated from operations 27,454,316 59,027,255



31 December 30 June 2016 2016 (Un-Audited) (Audited) Rupees Rupees18 Transactions with related parties

18.1 Balance outstanding at the end of period

18.1.1 The Bank of Punjab (Holding company of Modaraba’s Management Company) Musharikah finances 1,060,000,000 955,925,494 Profit payable on musharikah finances 15,294,636 13,178,461 Certificates of musharikah 300,000,000 100,000,000 Profit payable on certificates of musharikah 2,316,686 372,847 18.1.2 Punjab Modaraba Services (Private) Limited Management Fee - 1,715,835

July to July to December December 2016 2015 (Un-Audited) (Un-Audited) Rupees Rupees

18.2 Transaction during the period 18.2.1 The Bank of Punjab (Holding company of

Modaraba’s Management Company) Bank Charges 77,881 8,446 Profit charged on finances 30,278,022 22,816,469 Profit charged on certificates of Musharikah 6,743,154 3,276,714 19 Fair value of financial instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an

orderly transaction between market participants at the measurement date.

At reporting date, the Modaraba does not hold any financial instruments which are required to be measured under any valuation method and which falls under any of the levels in the prescribed hierarchy.

The carrying amounts of all the financial instruments reflected in these financial statements approximate their fair value.




( Private ) Limited


( Private ) Limited


( Private ) Limited

20 Financial risk management

The Modaraba’s financial risk management objectives and policies are consistent with that disclosed in the financial statements as at and for the year ended 30 June 2016.

21 Date of authorization

This unaudited interim financial information for the period ended 31 December 2016 was

authorized for issue by the Board of Directors of the Management Company on 24 February 2017.

22 General

Corresponding figures have been rearranged or reclassified wherever necessary for the purpose

of comparison and better presentation.

23 General

Figures have been rounded off to the nearest rupee.



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