First Prudential Modaraba First Prudential Modaraba CORPORATE INFORMATION

Board of Directors of Prudential Capital Management Ltd.

Mr. Asad Iqbal Siddiqui Chairman Mr. Muhammad Asif Director Mr. Fazal M. Mughal Director Mr. Ataullah Khan Director Dr. Muhammad Hussain Director VISION STATEMENT To play a leading role in the Modaraba Sector by providing Sharia based Islamic modes of financing COMPANY SECRETARY STOCK EXCHANGE Mr. Muhammad Musharraf Khan First Prudential Modaraba is managed by through quality service at competitive rates, Prudential Capital Management Ltd. and is AUDIT COMMITTEE listed on Karachi, Lahore and Islamabad meeting religious and social obligations and delivering Mr. Fazal M. Mughal Chairman Stock Exchanges. Daily quotation of the Mr. Muhammad Asif Member company’s stock can be obtained from higher returns to the certificates holders. Mr. Ataullah Khan Member leading newspapers, listed under modarabas. AUDITORS M.Yousuf Adil Saleem & Co. PUBLIC INFORMATION Chartered Accountants Financial analysts, Stock, broker , interested investors and financial media desiring MISSION STATEMENT LEGAL ADVISORS information about First Prudential Modaraba Mohammad Zubair Quraishy should contact Syed Imran Ali (Chief Our mission is to create and maintain a progressive S. Tauqir Hassan & Co. Finanacial Officer) Mehersons Estate, 1st Floor, Block No. 1, Talpur Road, P.O. Box Mansoor Ahmed Khan 621, Karachi-74000 position in the modaraba sector in Pakistan Farooq Akhtar Tel: PABX 32429632-4 Fax:32420015 E-mail: [email protected] and endeavour to promote interest-free BANKERS RBS Bank CERTIFICATE HOLDERS INFORMATION economy in the country. Standard Chartered Bank Enquiries concerning lost Modaraba Faysal Bank Ltd. certificates, dividend payment, change of Habib Bank Ltd. address, verification of transfer deeds and MCB Bank certificate transfer should be directed to the This will be achieved through quality services Emirates Global Islamic Bank Ltd. Registrar of First Prudential Modaraba i.e. Atlas Bank Ltd. Shares & Corporate Services (Pvt) Ltd. using innovative shariah compliant products, Mehersons Estate, Block E, Talpur Road, MANAGEMENT COMPANY Karachi-74000 financial discipline and good corporate Prudential Capital Management Limited Tel: PABX 32429632-4 Fax: 32420015 E-mail: [email protected] governance with high levels of professional REGISTERED OFFICE Office No. 54, Ground Floor, KARACHI OFFICE and ethical standards being maintained Beverly Centre, 56-G, Blue Area, Mehersons Estate, 1st Floor, Block No. 1, at all times. Islamabad. Talpur Road, P.O. Box 621, Karachi-74000 Tel: 2825343 Fax: 2814000 Tel: PABX 32429632-4 Fax:32420015 E-mail: [email protected] E-mail: [email protected]

1 2 First Prudential Modaraba First Prudential Modaraba DIRECTOR’S REPORT Observations of External Auditors: The Board of Directors of Prudential Capital Management Limited, Manager of First Prudential Modaraba are pleased to present the 21st Annual Report of First Prudential Modaraba together with audited accounts, During the year Modaraba has successfully managed to resolve most of the observations and qualifications auditor and directors report for the period ended June 30, 2010 before the certificate holders. made by the retiring auditors. However the amount outstanding on account of Prudential Securities Limited (PSL) is still recoverable. Modaraba has logged claim with Karachi Stock Exchange (KSE) and the Management is confident to recover full amount as the Modaraba holds charge on the room at KSE as a KEY FINANCIAL HIGHLIGHTS: security against the outstanding amounts. Further the impairment in value of investment in shares of PSL has been valued as per their last audited accounts. 2010 2009 The case filed against the Ex. Managing Director is still under hearing therefore, an amount of Rs. 1.799 Total Income from Operations 116,314,609 million is still outstanding. The Management is however, confident that the outcome of this case will be Operating Expenses 70.422.567 in favor of the Modaraba. Profit/(loss) for the period (103,259,798) Unrealized gain/(loss) During the year under review the company has purchased a membership card on the Lahore Stock on re-measurement of investment (86,160,153) Exchange along with a room for Rs. 22.33 million. The Management has applied for obtaining necessary Net profit /(loss) (103,717,599) regulatory approvals. Earning Per Certificate – Rs. (1.19)

REVIEW OF OPERATIONS: Corporate Governance:

The period under review saw the continuation in the economic pressures and adverse security environment The Board has adopted Code of Corporate Governance for listed companies issued by the Securities and and remained one of the most difficult periods for the Country due to un-certain political conditions coupled Exchange Commission of Pakistan and implemented in wherever applicable during the year. with further deteriorating law and order situation. Our economic wizards failed to keep the inflationary pressures under control which has resulted in the considerable rise in the cost of production and eventually recession in the economic growth. During the year, the much required foreign direct investment kept at Statement on Corporate and Financial Reporting Framework: the side lines owing to uncertainty and ongoing army operations in the tribal belt. In the absence of any positive economic development and lack of incentives for business growth, the capital markets too remained 1. The Financial Statements prepared by the Management of the Modaraba, present fairly its state of under pressure throughout the year. affairs, the result of its operation, cash flow and change in equity.

Despite all that, your Modaraba has performed well and managed to post a net profit of Rs. 33.29 million 2. Proper books of accounts of the Modaraba have been maintained. as against a loss of Rs. 103.7 million during the last year. Keeping in view the adverse economic indicators, your management adopted strict credit policies and conservative approach for fresh disbursement. Similarly, 3. Appropriate accounting policies have been consistently applied in preparations of Financial Statements trading in the stock market was done on a very calculated manner, thus earning a net income of Rs. 5.18 and accounting estimates are based on reasonable and prudent judgment. million in 2010 as against a loss of Rs. 95.2 million in the year 2009. Your Modaraba has also earned Rs. 30.832 million on deposit accounts maintained with different banks and Islamic Financial Institutions. 4. International Accounting Standards, as applicable in Pakistan have been followed in preparation of During the year, Modaraba had to create fresh suspension/provisioning on account of Ijarah portfolio and Financial Statements and any departure there from has been adequately disclosed. other receivables amounting to Rs. 19.72 million and Rs. 4.46 million respectively. However, your management is of the view that most of these accounts are not willful defaulters and Modaraba is pursuing 5. The system of Internal Control is sound in design and has been effectively implemented and monitored. them actively and is fully geared up to recover these amounts. Moreover, your management has recovered Rs. 22.46 million during the year from the non- performing portfolio. An amount of Rs. 9.9 million is 6. There have been no significant doubts upon the Modaraba’s ability to continue as a going concern. appearing as investment in property which relates to an office premises added as a result of merger with second Prudential Modaraba. Our management does not intend to keep this property however; the disposal 7. There has been no material departure from the best practices of Corporate Governance, as detailed of property will be done on realization of a better market price. in the listing regulations.

I am pleased to announce that your Modaraba has adopted Islamic Financial Accounting Standard IFAS- 8. Key operating and financial data of last six years in a summarized form is annexed. 1 “Murabaha and IFAS-2 “Ijarah”. Modaraba has accordingly changed its accounting policy for revenue recognition and associated assets in relation to disbursement of Murabaha Finance with effect from July 9. During the year 12 meetings of the Board of Directors were held. Attendance of each director was as 01, 2009. Adoption of above mentioned new standards will have no material impact on the Modaraba's follows: financial statements except disclosure relating to future lease rentals. Name of Director Number of Meeting Attended. The Management Company has decided to forego their management fee this year as no dividend was declared last year due to losses and to pass on the maximum profit to the certificate holders of the 1. Mr. Asad Iqbal Siddiqui 11 Modaraba. As a result of making a profit of Rs. 33.29 million, the Board of Directors has approved 3% 2. Mr. Muhammad Asif 11 cash dividend for Modaraba certificate holders. 3. Mr. Fazal M. Mughal 12 4. Mr. Attaullah Khan 12 5. Dr. Muhammad Hussain 05

10. The Statement of pattern of certificate holders of the Modaraba as at 30th June 2010 as per code of corporate governance is annexed.

3 4 First Prudential Modaraba First Prudential Modaraba

Future Outlook: Summary of key Operating and Financial data of the The financial year 2010-11 is not expected to bring any respite from the already adverse economic situation Modaraba for last six years. in the country. The recent flooding in the country has devastated the agriculture crops, displaced our Year ended June 30 farmers and ruined their land. The effect of these floods will be more visible in the future. The management is keeping a vigilant eye on the economic front but at the same time exploring opportunities to do sound ...... Rupees in million...... and secure business based on principles of good credit. The management is cautiously monitoring its investment portfolio to maximize the returns while adopting the timely decision making techniques to minimize the risks associated with the capital markets. Year 2010 2009 2008 2007 2006 2005

Recoveries of the outstanding amounts will remain a high priority for the management during the current Paid up Capital 872.177 872.177 872.177 872.177 872.177 872.177 financial year. With the self sufficient in funds and better liquidity, we are looking forward to explore more Statutory Reserve 120.245 113.586 113.586 99.077 88.199 84.224 profitable avenues for employment of funds. Certificate Holders’ Equity 505.487 472.061 601.944 585.343 530.021 533.995 Certificate 87.217 87.217 87.217 87.217 87.217 87.217 Current Liabilities 44.548 80.296 90.196 49.750 35.963 50.059 Merger / Amalgamation: Non-Current Assets 139.590 166.056 249.227 317.754 378.662 362.815 Current Assets 429.511 415.671 504.377 403.681 274.141 268.391 In view of the recent developments including change of management in Al-Zamin Leasing Modaraba, Profit/(Loss) before taxation 33.292 (103.717) 41.788 55.519 21.259 43.197 since merged with and into Invest Capital Investment Bank Limited, our Board has decided to discontinue Taxation (0.457) 0.457 0.332 1.128 0.364 0.160 the option of merger with Al-Zamin Leasing Modaraba. Consequently, the Memorandum of Understanding Earing/(Loss) per Certificate (Rs.) 0.38 (1.19) 0.48 0.62 0.24 0.49 dated August 11, 2009 singed with them stands terminated with immediate effect. However, your management is now exploring further options of mergers and amalgamations in order to ensure consistent, positive and profitable outlook of your Modaraba.

Acknowledgement:

The Board of Directors express their thanks for the continuous guidance and support extended by the Registrar Modaraba and other officials of Securities and Exchange Commission of Pakistan. The Board is also thankful to its Certificate Holders for reposing their confidence in the Management of the Modaraba and also appreciates the hard work and dedication of the staff of the Modaraba.

For & on behalf of the Board of Directors of Prudential Capital Management Limited, Managers First Prudential Modaraba Karachi. August 31, 2010

Chairman

5 6 First Prudential Modaraba First Prudential Modaraba

STATEMENT OF COMPLIANCE WITH BEST PRACTICES OF 13. The directors’ report of the Modaraba for this year has been prepared in compliance with the THE CODE OF CORPORATE GOVERNANCE requirements of the Code and fully describes the salient matters required to be disclosed. 14. As the Management Company has no Chief Executive Officer (CEO). The financial statements Name of Modaraba FIRST PRUDENTIAL MODARABA of the Modaraba were duly endorsed by the Chairman and the Chief Financial Officer before Year Ended 30th JUNE , 2010 approval of the Board.

15. The Directors, Chief Financial Officer and Executives do not hold any interest in the certificates This statement is being presented to comply with the Code of Corporate Governance (the code) contained of the Modaraba other than disclosed in the pattern of certificate holding. in listing regulations of Karachi, Lahore & Islamabad Stock Exchanges for the purpose of establishing a framework of good governance, whereby listed Modaraba is managed in compliance with the best practices 16. The Modaraba has complied with all the corporate and financial reporting requirements of the of corporate governance. Code.

The Prudential Capital Management Limited (the Management Company), Manager of First Prudential 17. The Board has formed an Audit Committee. It comprises of three members, all of whom are Modaraba, (the Modaraba) has applied the principles contained in the code in the following manner. non-executive directors including the Chairman of the Committee.

1. The Management Company encourages requirement of independent non-executive on its 18. The meetings of the audit committee were held at least once every quarter prior to approval Board of directors. At present the Board consists of 05 directors. All of the directors are non of interim and final results of the Modaraba and as required by the Code. The terms of reference executive directors. There are no independent directors in the Board. of the Committee have been formed and advised to the committee for compliance.

2. The directors of the Management Company have confirmed that none of them are serving as 19. The Board has established an internal audit function which currently comprise of one person directors in more than ten listed companies including the Management Company. only, who is considered suitably qualified and experienced for the purpose and is conversant with the policies and procedures of the Modaraba and report to audit committee on quarterly 3. All the Directors of the Management Company are registered as tax payer and none of them basis. has defaulted in payment of any loan to a banking company, and DFI. None of the director is a member of stock exchange. 20. The statutory auditors of the Modaraba have confirmed that i) they have been given a satisfactory rating under the quality control review program of the Institute of Chartered Accountants of 4. During the year no casual vacancy has occurred in the Board of Management Company. Pakistan, ii) they or any of the partners of the firm, their spouses and minor children do not Casual vacancies occurred during last two financial years have yet not been filled. hold certificates of the Modaraba and iii) the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by 5. The Management Company has prepared a “Statement of Ethics and Business Practice” for Institute of Chartered Accountants of Pakistan. Modaraba which has been approved by the Board of Directors and is signed by all the Directors of the company and employees of the Modaraba. 21. The statutory auditor or the persons associated with them have not been appointed to provide 6. The Board has adopted a mission and vision statements, overall corporate strategy and other services except in accordance with the listing regulations and the auditors have confirmed significant policies of the Modaraba. that they have observed IFAC guidelines in this regards.

7. All the powers of the Board have been duly exercised and decisions on material transactions, 22. We confirm that all other material principles contained in the Code have been complied with. including appointment, terms and conditions of employment and roles and responsibilities of the Chief Executive Officer (CEO), have been taken by the Board. However the office of the CEO is vacant since July 2008 and application filed of the CEO of the company has been refused by Registrar Modaraba. Further fresh application made for the appointment is pending with Registrar Modaraba.

8. The related party transations are made on terms equivalent to those that prevail in the arm’s length transactions and have been discussed in the audit committee and approved by the Karachi For and on behalf of the Board Board. Date: August 31, 2010

9. The board has conducted one orientation course for its directors during the year to acquaint them with their duties and responsibilities.

10. The Meetings of the Board were presided over by the chairman elected by the Board of this purpose and the Board met at least once in every quarter. Written notices of the Board CHAIRMAN DIRECTOR Meetings, along with agenda and working papers, were circulated at least seven days before the meetings.

11. The minutes of the Meeting were appropriately recorded and circulated.

12. The appointment, remuneration and terms and conditions of employment of the Chief Financial Officer and the Company Secretary have been approved by the Board of directors.

7 8 First Prudential Modaraba Prudential First Modaraba Prudential First REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE WITH COMPLIANCE OF STATEMENT ON MEMBERS THE TO REPORT REVIEW BEST PRACTICES OF CODE OF CORPORATE GOVERNACE CORPORATE OF CODE OF PRACTICES BEST

Subclause (3) Clause (xiii a) of the Code of Corporate Governance requires the financial the requires Governance Corporate of Code the of a) (xiii Clause (3) Subclause 5. Corporate of Code the in contained practices best the with Compliance of Statement the reviewed have We statements of the Modaraba to be presented for board’s approval under signature of Chief of signature under approval board’s for presented be to Modaraba the of statements Modaraba (the Limited Management Capital Prudential of Directors of Board the by prepared Governance Executive Officer and Chief Financial Officer. Further Clause (ix) of the Code requires Board requires Code the of (ix) Clause Further Officer. Financial Chief and Officer Executive 2010, 30, June ended year the for Modaraba], [The Modaraba Prudential First representing Company) of Directors to clearly define the respective roles and responsibilities of the Chairman and Chairman the of responsibilities and roles respective the define clearly to Directors of Modaraba the where Exchange Stock e respectiv the of Regulations Listing relevant the with comply to The Chief Executive Officer. Due to non approval of the appointed Chief Executive Officer Executive Chief appointed the of approval non to Due Officer. Executive Chief The listed. is these requirements could not be met. be not could requirements these The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of Board the of that is Governance Corporate of Code the with compliance for responsibility The odaraba Company to Company odaraba M the requires Governance Corporate of Code the of (xxxv) Clause 6. be can compliance such where extent the to review, to is responsibility Our Company. Modaraba the of establish an internal audit function. The internal audit function of the Modaraba is carried is Modaraba the of function audit internal The function. audit internal an establish compliance Modaraba’s the of status the reflects Compliance of Statement the whether verified, objectively more effective. more it make to strengthened be to needs which person one only by out limited is review A not. does it if rt repo and Governance Corporate of Code the of provisions the with Modarba the by prepared documents rious va of review and personnel Modarba the of inquiries to primarily Except for the matters stated above, nothing has come to our attention, which causes us to believe that believe to us causes which attention, our to come has nothing above, stated matters the for Except Code. the with comply to the Statement of Compliance does not appropriately reflect the Modaraba’s compliance, in all material all in compliance, Modaraba’s the reflect appropriately not does Compliance of Statement the respects, with the best practices contained in the Code of Corporate Governance as applicable to the to applicable as Governance Corporate of Code the in contained practices best the with respects, accounting the of understanding an obtain to required are we statements financial of audit our of part As Modaraba for the year ended June 30, 2010. 30, June ended year the for Modaraba have We approach. audit effective an develop and audit the plan to sufficient systems control internal and not carried out any special review of the internal control system to enable us to express an opinion as to as opinion an express to us enable to system control internal the of review special any out carried not whether the Board’s statement on internal control covers all controls and the effectiveness of such internal such of effectiveness the and controls all covers control internal on statement Board’s the whether controls.

Further, Sub-regulation (xiii) of Listing Regulation 37 notified by The Karachi Stock Exchange (Guarantee) Exchange Stock Karachi The by notified 37 Regulation Listing of (xiii) Sub-regulation Further, the company to place before the board the before place to company the requires 2009 19, January dated KSE/N-269 circular vide Limited of directors for their consideration and approval related party transactions distinguishing between transactions between distinguishing transactions party related approval and consideration their for directors of M.Yousuf Adil Saleem & Co. & Saleem Adil M.Yousuf which transactions and transactions length arm’s in prevail that those to equivalent terms on out carried Chartered Accountants Chartered pricing alternate such using for justification proper recording price length arm’s at executed not are mechanism. Further, all such transactions are also required to be separately placed before audit committee. audit before placed separately be to required also are transactions such all Further, mechanism. We are only required and have ensured compliance of requirement to the extent of approval of related of approval of extent the to requirement of compliance ensured have and required only are We Karachi committee. audit the before transactions such of placement and directors of board the by transactions party August 31, 2010 31, August Dated: undertaken were transactions party related the whether determine to procedures any out carried not have We at arm’s length price or not. or price length arm’s at

We report that report We

Rule 10 of The Modaraba Companies and Modaraba Rules 1981 requires the Modaraba the requires 1981 Rules Modaraba and Companies Modaraba The of 10 Rule 1. Company to circulate half yearly financial information of the Modaraba within two months two within Modaraba the of information financial yearly half circulate to Company of close of the first half of the financial year. The half year financial statements for the period the for statements financial year half The year. financial the of half first the of close of ended December 31, 2009 were issued and circulated on March 30, 2010 which is contravention is which 2010 30, March on circulated and issued were 2009 31, December ended of the said rule. said the of

Clause (vi) of the Code of Corporate Governance requires that any casual vacancy in the in vacancy casual any that requires Governance Corporate of Code the of (vi) Clause 2. board of directors is filled with in 30 days. However three casual vacancies occurred due occurred vacancies casual three However days. 30 in with filled is directors of board to termination of Chief Executive Officer and two directors during last two financial years financial two last during directors two and Officer Executive Chief of termination to have not yet been filled however, proposed name for CEO is yet to be approved by the by approved be to yet is CEO for name proposed however, filled been yet not have Registrar Modarabas, Securities & Exchange Commission of Pakistan. of Commission Exchange & Securities Modarabas, Registrar

Sub-clause (b) of Clause (viii) of the Code of Corporate Governance requires the Modaraba the requires Governance Corporate of Code the of (viii) Clause of (b) Sub-clause 3. Company to maintain a complete record of particulars of the significant policies, as may be may as policies, significant the of particulars of record complete a maintain to Company determined, along with the dates on which they were approved or amended by the Board the by amended or approved were they which on dates the with along determined, of Directors. The Modaraba Company has not kept such record of significant policies in the in policies significant of record such kept not has Company Modaraba The Directors. of form of a Manual. However, investment and credit policies have been prepared and are in are and prepared been have policies credit and investment However, Manual. a of form process of approval. of process

During the year the Modaraba has acquired membership rights together with room of Lahore of room with together rights membership acquired has Modaraba the year the During 4. Stock Exchange. Decision to acquire the card, being material information relating to the to relating information material being card, the acquire to Decision Exchange. Stock business and other affairs of the Modaraba, is required to be notified to Securities and Securities to notified be to required is Modaraba, the of affairs other and business Exchange Commission of Pakistan and the respective Stock Exchanges under Clause (xxiii) Clause under Exchanges Stock respective the and Pakistan of Commission Exchange of the Code of Corporate Governance for onward intimation to certificate holders. certificate to intimation onward for Governance Corporate of Code the of

10 9 First Prudential Modaraba First Prudential Modaraba AUDITORS’ REPORT TO THE CERTIFICATE HOLDERS

We have audited the annexed balance sheet of First Prudential Modaraba (the Modaraba) as at June iii. CFS morabaha financing of rupees Rs 65.022 million has been advanced to Cordial 30, 2010 and the related profit and loss account, cash flow statement and statement of changes in equity Trading without approval of directors and documentation in respect of the transaction together with the notes forming part thereof (hereinafter referred to as the financial statements), for the was not made available by the management. year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. iv. Other qualifications based on limitation of scope include (a) minutes of the meetings of board of directors and audit committee of the Modaraba management company were These financial statements are the Modaraba company’s [Prudential Capital Management Limited] not provided or were unapproved (b) other income of Rs.2.543 million remained unverified responsibility who is also responsible to establish and maintain a system of internal control, and prepare (c) supporting documents of provision of non-performing balances of ‘Lease rentals and present the above said statements in conformity with the approved accounting standards as applicable receivable’, disposal of certain items of property, plant and equipment - lease out’ and in Pakistan and the requirements of the Modaraba Companies and Modaraba (Floatation and Control) its related gain were not verifiable. Ordinance, 1980 (XXXI of 1980), and the Modaraba Companies and Modaraba Rules, 1981. Our responsibility is to express an opinion on these statements based on our audit. e) in our opinion, proper books of account have been kept by the Modaraba company in We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These respect of First Prudential Modaraba as required by the Modaraba Companies and standards require that we plan and perform the audit to obtain reasonable assurance about whether the Modaraba (Floatation and Control) Ordinance, 1980 (XXXI of 1980), and the Modaraba financial statements are free of any material misstatement. An audit includes examining on a test basis, Companies and Modaraba Rules, 1981; evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting policies and significant estimates made by the Modaraba company, as well as, f) in our opinion: evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: a. the balance sheet and the related profit and loss account together with the notes thereon have been drawn up in conformity with the Modaraba Companies and a) Advances, prepayments and other receivables include a long outstanding balance of Rs.18.43 Modaraba (Floatation and Control) Ordinance, 1980 (XXXI of 1980) and the million receivable from Prudential Securities Limited (PSL). Further long term deposit includes Modaraba Companies and Modaraba Rules, 1981, and are in agreement with the security deposits receivable of Rs 3 million from the said company. The said company has books of account and are further in agreement with accounting policies consistently ceased its operations and the Modaraba has filed claim with Karachi Stock Exchange for these applied except for the change as indicated in note.4.1 to the financial statements, amounts. In our opinion, there is a very remote chance of recoverability of Rs 21.43 million, with which we concur; however no provision has been made by the Modaraba. b. the expenditure incurred during the year was for the purpose of the Modaraba’s b) Advances, prepayments and other receivables include Rs.1.8 million paid for the purchase of business; and a motor vehicle for the ex-managing director of the Modaraba. The said amount was paid wrongfully without approval of the board and is receivable from the ex managing director. The c. except for investment property acquired in satisfaction of claim through a court Modaraba has initiated criminal proceedings against the ex managing director. In our opinion, decree and which have not yet been disposed off, the business conducted, recovery of the said amount is doubtful however no provision has been made in respect of this investments made and the expenditure incurred during the year were in accordance amount. with the objects, terms and conditions of the Modaraba; c) Long term investments include investment of Rs.3.38 million (1,107,244 shares of Rs.10/- g) in our opinion, except for the effects of the matters stated in paragraphs (a), (b) each) in Prudential Securities Limited (PSL)-an unlisted public company. The company has and (c) the balance sheet, profit and loss account, cash flow statement and ceased its operations; therefore, in our opinion this investment is fully impaired. However no statement of changes in equity together with the notes forming part thereof conform impairment has been made in respect of this amount. with approved accounting standards as applicable in Pakistan and give the information required by the Modaraba Companies and Modaraba (Floatation and In respect of matters stated in paragraphs (a), (b) and (c), had the provision been made Control) Ordinance, 1980 (XXXI of 1980), and the Modaraba Companies and advances, prepayments and other receivables would have been reduced by Rs 20.23 million, Modaraba Rules, 1981, in the manner so required and respectively give a true and long term deposit by Rs 3 million, long term investments by Rs 3.38 million and accumulated fair view of the state of the Modaraba's affairs as at June 30, 2010 and of the profit, losses would have been increased by Rs 26.61 million. its cash flows and changes in equity for the year then ended; and d) The financial statements for the year ended June 30, 2009 were audited by another firm of h) in our opinion, no Zakat is deductible at source under the Zakat and Ushr Ordinance, Chartered Accountants whose report dated October 10,2009 contained an adverse opinion 1980 (XVIII of 1980). based on the matters covered in paragraphs (a) and (c) above and the following additional matters which have been appropriately resolved during the current year and do not have any i) Without further qualifying our opinion, we draw attention to following matters: impact on the attached financial statements

i. The position of chief executive officer is vacant since July 12, 2008. After i. The Modaraba did not adopt Islamic Financial Accounting Standard (IFAS) - 2 ‘Ijarah’. rejection of a proposed appointment, the Modaraba has applied again on August 13, 2010 for approval of appointment of a chief executive officer to ii. Moradaba’s investments in listed securities exceeded the limits prescribed by the Registrar Modaraba, which is pending. prudential regulations.

11 12 First Prudential Modaraba Prudential First Modaraba Prudential First BALANCE SHEET BALANCE AS AT 30 JUNE, 2010 JUNE, 30 AT AS sis of matter paragraph: matter of sis empha following included also had auditors retiring the Moreover 2009 2010 Note ASSETS Rupees Rupees Current Assets Current inspection the conducted had (SECP) Pakistan of Commission Exchange and Securities i. 187,666,800 288,557,336 5 balances bank and Cash as awaited was findings the on report the and Modaraba the of affairs and records of 98,265,160 73,431,716 6 Investments such of outcome the to as uncertainties remained there finalized not was matter the 2,762,272 7 41,105,036 receivable rentals Ijarah Modaraba. of future and affairs the on impact its and inspection 42,326,767 30,610,088 8 finance other and morabaha Musharika, 46,307,629 34,150,437 9 receivables other and prepayments Advances, The report on findings has been received and SECP has imposed financial penalties on directors and directors on penalties financial imposed has SECP and received been has findings on report The 415,671,392 429,511,849 Assets Current Total against appeal an lodged has officer executive chief former and directors The officer. executive chief former the penalty imposed on them. There is no impact on the financial statements of the Modaraba. the of statements financial the on impact no is There them. on imposed penalty the 7,285,615 7,277,249 10 investments term Long 29,099,199 11,530,633 8 of portion term Long musharika,morabaha and other finance other and musharika,morabaha the of strategies business term short and term long the provided been not have We ii. 3,066,192 3,066,192 deposits term Long which recession and crises financial current the focusing plan business and Modaraba - 22,326,567 11 asset Intangible the by held investments of values fair The Modaraba. the of business the affected has 1,076,247 288,014 12 own - equipment and Property resulted has factors, other with coupled which, declined considerably have Modaraba 117,128,823 85,179,371 13 -Ijarah equipment and plant Property, the of loss accumulated The million. Rs.103.718 to amounting year the for loss net 8,400,000 9,922,500 14 property Investment equity its eroded has 2009 June 30 at as million Rs.513.702 to amounting Modaraba considerably. This necessitates re-assessing the long term and short term business business term short and term long the re-assessing necessitates This considerably. 581,727,468 569,102,375 ASSETS TOTAL plan. business comprehensive a preparing and strategies

LIABILITIES As the Modaraba has no long term exposure, have earned profit during the year and declared dividend, declared and year the during profit earned have exposure, term long no has Modaraba the As its current ratio is favorable, have sufficient liquid assets to carry out business, we have not considered not have we business, out carry to assets liquid sufficient have favorable, is ratio current its Current Liabilities Current appropriate to include a paragraph similar to above in our report. our in above to similar paragraph a include to appropriate 40,836,556 29,101,346 deposits ijarah term long of portion Current 39,001,181 15,447,635 15 liabilities other and Accrued 457,801 - Taxation 80,295,538 44,548,981 Liabilities Current Total Non-current liabilities Non-current 29,371,090 19,065,990 16 deposits ijarah term Long Co. & Saleem Adil M.Yousuf 109,666,628 63,614,971 LIABILITIES TOTAL Accountants Chartered 472,060,840 505,487,404 ASSETS NET

REPRESENTED BY REPRESENTED Partner: Engagement Certificate Capital Certificate Hirani Ali Mushtaq 872,176,600 872,176,600 17 each 10/- Rupees of Certificates Modaraba 87,217,660 113,586,162 120,244,702 reserve Statutory (513,701,922) (486,933,898) loss Accumulated Karachi 472,060,840 505,487,404 2010 31, August Dated:

18 commitments and Contingencies

The annexed notes form an integral part of these financial statements. financial these of part integral an form notes annexed The

These financial statements have been signed by three directors instead of chief executive officer and two and officer executive chief of instead directors three by signed been have statements financial These directors as approval of appointment of chief executive is pending with Securities and Exchange Commission Exchange and Securities with pending is executive chief of appointment of approval as directors of Pakistan. of

Director Director Director

14 13 First Prudential Modaraba Prudential First Modaraba Prudential First CASH FLOW STATEMENT FLOW CASH ACCOUNT LOSS AND PROFIT FOR THE YEAR ENDED 30 JUNE, 2010 JUNE, 30 ENDED YEAR THE FOR 2010 JUNE, 30 ENDED YEAR THE FOR

2009 2010 2009 2010 Note Rupees Rupees Rupees Rupees A. CASH FLOWS FROM OPERATING ACTIVITIES OPERATING FROM FLOWS CASH A. (LOSS) / INCOME

73,087,116 33,412,423 rentals Ijarah Profit / (loss) before taxation before (loss) / Profit (103,259,798) 32,834,898 16,575,407 30,832,882 accounts PLS and receipts deposit term on Return Adjustments for non-cash changes and other items: other and changes non-cash for Adjustments 13,369,225 9,297,886 19 finance other and morabaha musharika, on Income 9,093,050 (6,784,292) investments of sale on (Gain)/loss (9,093,050) 6,784,292 investments of sale on Gain/(loss) (4,738,022) (3,415,792) income Dividend 4,738,022 3,415,792 income Dividend (212,098) (93,499) assets disposal-own on Gain 18,312,921 4,034,830 20 income Other (12,295,602) (772,760) assets disposal-leased on Gain (675,032) (142,231) associate from loss of Share 675,032 142,231 associate from loss of Share 116,314,609 87,635,874 Unrealized loss on changes in fair value fair in changes on loss Unrealized Unrealized loss on changes in fair value fair in changes on loss Unrealized (86,160,153) (1,603,000) investments trading for held of 86,160,153 1,603,000 investments trading for held of of remeasurement on gain Unrealized (1,050,000) (1,522,500) property investment of remeasurement on gain Unrealised 1,050,000 1,522,500 property investment 64,041,687 1,726,740 receivables-net doubtful against Provision (64,041,687) (1,726,740) 21 receivables-net doubtful against Provision 54,037,905 33,431,814 out leased assets on Amortization (32,837,231) 85,828,634 874,730 716,232 Depreciation-owned EXPENDITURE 196,586,835 25,031,174 (54,037,905) (33,431,814) assets ijarah on Amortization 93,327,037 57,866,072 (16,269,745) (18,851,267) 22 expenses Administrative - (670,100) fund welfare Workers Cash flows before movements in working capital working in movements before flows Cash (114,917) (40,555) charges other and Bank (70,422,567) (52,993,736) (Increase) / decrease in operating assets operating in decrease / (Increase) (103,259,798) 32,834,898 period the for Profit/(loss) (19,014,900) 27,558,505 finance morabaha and Musharika - - 23 fee management company's Modaraba (103,259,798) 32,834,898 taxation before Profit/(loss) (20,407,841) 38,342,764 receivable rentals Ijarah (457,801) 457,801 24 taxation for Provision 78,404,979 20,009,815 receivables other and prepayments Advances, (103,717,599) 33,292,699 taxation after Profit/(loss) 38,982,238 85,911,084 - - income comprehensive Other Decrease in operating liabilities operating in Decrease (29,629,980) (22,040,310) deposits ijarah term Long (103,717,599) 33,292,699 period the for (loss) / income comprehensive Total (13,544,218) (23,133,375) liabilities other and Accrued (1.19) 0.38 25 certificate per Earnings (43,174,198) (45,173,685) 89,135,077 98,603,471 operations from generated Cash (1,515,663) (7,809,876) paid tax Income (24,388,048) (420,171) distribution Profit 63,231,366 90,373,424 activities operating from generated cash Net statements. financial these of part integral an form notes annexed The

These financial statements have been signed by three directors instead of chief executive officer and two and officer executive chief of instead directors three by signed been have statements financial These directors as approval of appointment of chief executive is pending with Securities and Exchange Commission Exchange and Securities with pending is executive chief of appointment of approval as directors of Pakistan. of

Director Director Director 16 15 First Prudential Modaraba First Prudential Modaraba

2010 2009 Rupees Rupees

B. CASH FLOWS FROM INVESTING ACTIVITIES

Dividend received 3,373,045 5,028,022 - Total

Long term deposits received - 118,001 133,865 33,292,699 601,943,737 472,060,840 505,487,404 (26,165,298)

Investments encashed / (made) -net 30,014,736 (77,959,477) (103,717,599) Purchase of own assets (134,500) - Proceeds from disposal-own assets 300,000 157,024 Purchase of assets leased out (40,793,500) (12,897,350)

Proceeds from disposal-leased assets 40,083,898 48,231,321 133,865 loss 33,292,699 (6,658,540) Purchase of intangible asset (22,326,567) - Revenue Director (26,165,298) (383,819,025) (103,717,599) (513,701,922) (486,933,898) Net cash used in investing activities 10,517,112 (37,322,459) Accumulated

100,890,536 25,908,907 - - - Net increase in cash and cash equivalents Reserves

Cash and cash equivalents at beginning of the period 187,666,800 161,757,893 6,658,540 Capital reserve ...... Rupees...... Statutory 113,586,162 113,586,162 Cash and cash equivalents at end of the period 288,557,336 187,666,800 120,244,702 - - - - Director The annexed notes form an integral part of these financial statements. capital Certificate 872,176,600 872,176,600 872,176,600

These financial statements have been signed by three directors instead of chief executive officer and two directors as approval of appointment of chief executive is pending with Securities and Exchange Commission YEAR ENDED 30 JUNE, 2010 FOR THE of Pakistan. OF CHANGES IN EQUITY STATEMENT Director The annexed notes form an integral part of these financial statements. The annexed notes form an integral part and two directors as approval of have been signed by three directors instead of chief executive officer These financial statements appointment of chief executive is pending with Securities and Ex change Commission Pakistan. Balance at July 1,2008 Total comprehensive loss for the year ended Total year ended June 30, 2009 Distribution at the rate of 3% declared for year ended June 30,2008 Balance at June 30,2009 comprehensive income for the year ended Total June 30,2010 on available for sale investment Reversal of impairment reserve to statutory Transfer Balance at June 30,2010

Director Director Director 17 18 First Prudential Modaraba Prudential First Modaraba Prudential First NOTES TO THE FINANCIAL STATEMENTS FINANCIAL THE TO NOTES January 01, 2009 01, January Segments Operating - 8 IFRS 2010 JUNE, 30 ENDED YEAR THE FOR

LEGAL STATUS AND NATURE OF BUSINESS OF NATURE AND STATUS LEGAL 1. IFRS 8 replaces IAS 14 and requires a ‘management approach’, under which segment which under approach’, ‘management a requires and 14 IAS replaces 8 IFRS rnal reporting purposes. The purposes. reporting rnal inte for used that as basis same the on presented is information Modaraba The Modaraba. etual perp multipurpose, a is modaraba) (the Modaraba Prudential First 1.1 modaraba considers itself as a single operating segment modaraba and the modaraba’s the and modaraba segment operating single a as itself considers modaraba Ordinance, Control) and (Floatation Modaraba and Companies Modaraba the under registered is performance is evaluated on an overall basis. The adoption of this standard has no impact on impact no has standard this of adoption The basis. overall an on evaluated is performance Prudential by managed is and 1981 Rules, Modaraba and Companies Modaraba the and 1980 the modaraba's financial statement. financial modaraba's the Companies the under Pakistan in incorporated company a Limited, Management Capital Ordinance 1984. The Modaraba is listed on the Karachi, Lahore and Islamabad Stock Exchanges. Stock Islamabad and Lahore Karachi, the on listed is Modaraba The 1984. Ordinance January 01, 2009 01, January 7 IFRS to Instruments(Amendments Financial about Disclosures Improving businesses and fundings Islamic of modes various in engaged currently is Modaraba The Financial Instruments: Disclosures) Instruments: Financial in investment morabaha, musharika, in fund of deployment assets, of leasing include which securities. The Modaraba has applied for approval of amendments in prospectus to allow it allow to prospectus in amendments of approval for applied has Modaraba The securities. The amendments to IFRS 7 expand the disclosures required in respect of fair value measurements value fair of respect in required disclosures the expand 7 IFRS to amendments The is which finance mortgage and housing and business commodity and security in engage to and liquidity risk. In particular, the amendment requires disclosure of fair value measurements value fair of disclosure requires amendment the particular, In risk. liquidity and Ground 54, No. Office at situated is modaraba the of office Registered SECP. with pending by level of a fair value measurement hierarchy. The modaraba has elected not to provide to not elected has modaraba The hierarchy. measurement value fair a of level by Islamabad. Area, Blue 56-G, Centre, Beverly Floor, comparative information for these expanded disclosures in the current year in accordance with accordance in year current the in disclosures expanded these for information comparative the transitional reliefs offered in these amendments. these in offered reliefs transitional the and functional Modaraba's the is which Rupees, Pak in presented is statements financial The 1.2 presentation currency. presentation As the change in accounting policy only results in additional disclosures, there is no impact no is there disclosures, additional in results only policy accounting in change the As on earnings per share. per earnings on POLICIES ACCOUNTING SIGNIFICANT 2.

The amended standard requires additional disclosures about the fair value measurement and measurement value fair the about disclosures additional requires standard amended The COMPLIANCE OF STATEMENT 2.1 liquidity risk. Fair value measurement related to items recorded at fair value are to be disclosed be to are value fair at recorded items to related measurement value Fair risk. liquidity by source of inputs using a three level fair value hierarchy, by class, for all financial instruments financial all for class, by hierarchy, value fair level three a using inputs of source by the of requirements the with accordance in prepared been have statements financial These recognised at fair value. In addition, a reconciliation between the beginning and ending balance ending and beginning the between reconciliation a addition, In value. fair at recognised Modaraba the 1980, Ordinance, Control) and (Floatation Modaraba and Companies Modaraba of level 3 fair value measurements is now required, as well as significant transfers between transfers significant as well as required, now is measurements value fair 3 level of and Securities the by issued directives and Deed Trust 1981 Rules, Modaraba & Companies levels in the fair value hierarchy. The amendments also clarify the requirements for liquidity for requirements the clarify also amendments The hierarchy. value fair the in levels approved with together Regulations'] Modaraba ['the (SECP) Pakistan of Commission Exchange ets used for liquidity management. liquidity for used ets ass and transactions derivative to respect with disclosures risk standards accounting Approved Modarabas. to Pakistan in applicable as standards accounting 4. The liquidity risk disclosures risk liquidity The 4. 25. Note in presented are disclosures measurement value fair The Financial Islamic and (IFRS) Standards Reporting Financial International such of comprise are presented in Note 25.1. Note in presented are Ordinance, Companies the of provisions the under notified as (IFAS) Standards Accounting 1984 and made applicable to Modarabas under 'the Modaraba Regulations'. Wherever the Wherever Regulations'. Modaraba 'the under Modarabas to applicable made and 1984 July 01, 2009 01, July Morabaha IFAS-1- standards, these of requirements the from differ Regulations' Modaraba 'the of requirements the requirements of 'the Modaraba Regulations' take precedence. take Regulations' Modaraba 'the of requirements the Modaraba has adopted Islamic Financial Accounting Standard (IFAS - 1) 'Murabaha' , issued , 'Murabaha' 1) - (IFAS Standard Accounting Financial Islamic adopted has Modaraba by the Institute of Chartered Accountants of Pakistan, relating to accounting for Murabaha for accounting to relating Pakistan, of Accountants Chartered of Institute the by IAS of requirements specific and "Leases" 17 IAS of application the deferred has SECP The transactions undertaken by a bank and similar financial institutions. Modaraba has accordingly has Modaraba institutions. financial similar and bank a by undertaken transactions gain unrealized of recognition for Measurement" and Recognition Instruments, "Financial 39 changed its accounting policy for revenue recognition and associated assets in relation to relation in assets associated and recognition revenue for policy accounting its changed Modarabas. for investments trading" for "held on disbursement of Murabaha Finance with effect from July 01, 2009. IFAS-1 'Murahaba' requires 'Murahaba' IFAS-1 2009. 01, July from effect with Finance Murabaha of disbursement profit from Murabaha Finance be accounted for on culmination of Murabaha transaction. Murabaha of culmination on for accounted be Finance Murabaha from profit Standards Reporting Financial International new of Adoption 2.2 However, the profit on that portion of Murabaha Finance not due for payment is deferred by deferred is payment for due not Finance Murabaha of portion that on profit the However, accounting for "Deferred Murabaha Income" with a corresponding credit to "Unearned Murabaha "Unearned to credit corresponding a with Income" Murabaha "Deferred for accounting and IASB the by issued Standards new all adopted has Modaraba the period, current the In Income" which is recorded as a liability. The same is then recognised on a time proportion time a on recognised then is same The liability. a as recorded is which Income" its to relevant are that Pakistan of Commission Exchange and Securities the by notified as basis. 2009. 01, July on beginning period accounting Moradabad's for effective and operations

July 01, 2009 01, July Ijarah IFAS-2- disclosure and presentation affecting Standards Effective for accounting period period accounting for Effective The Modaraba has adopted Islamic Financial Accounting Standard 2 (IFAS-2) "Ijarah", issued "Ijarah", (IFAS-2) 2 Standard Accounting Financial Islamic adopted has Modaraba The after or on beginning by the Institute of Chartered Accountants of Pakistan, and as notified by the Securities and Securities the by notified as and Pakistan, of Accountants Chartered of Institute the by Exchange Commission of Pakistan with effect from July 01, 2009. Adoption of above mentioned above of Adoption 2009. 01, July from effect with Pakistan of Commission Exchange Statements Financial of Presentation - (revised) 1 IAS new standards will have no material impact on the Modaraba's financial statements except statements financial Modaraba's the on impact material no have will standards new 2009 01, January disclosure relating to future lease rentals. lease future to relating disclosure IAS 1 (revised), ‘Presentation of financial statements’. The revised standard prohibits the prohibits standard revised The statements’. financial of ‘Presentation (revised), 1 IAS presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the in equity’) in changes ‘non-owner is, (that expenses and income of items of presentation statement of changes in equity. It requires non-owner changes in equity to be presented be to equity in changes non-owner requires It equity. in changes of statement separately from owner changes in equity. All non-owner changes in equity are required to be to required are equity in changes non-owner All equity. in changes owner from separately shown in a performance statement, but entities can choose whether to present one performance one present to whether choose can entities but statement, performance a in shown statement (the statement of comprehensive income) or two statements (the profit and loss and profit (the statements two or income) comprehensive of statement (the statement account and statement of comprehensive income). Where entities restate or reclassify or restate entities Where income). comprehensive of statement and account comparative information, they are required to present a restated statement of financial position financial of statement restated a present to required are they information, comparative as at the beginning of comparative period, in addition to the current requirement to present to requirement current the to addition in period, comparative of beginning the at as statements of financial position at the end of the current period and comparative period. The period. comparative and period current the of end the at position financial of statements Modaraba has applied IAS 1 (revised) from July 1, 2009, and has elected to present one present to elected has and 2009, 1, July from (revised) 1 IAS applied has Modaraba statements( profit and loss). and profit statements(

20 19 First Prudential Modaraba Prudential First Modaraba Prudential First

January 01, 2010 01, January and Sale for Held Assets Non-current - 5 IFRS to Amendments statements financial the on effect no with adopted Interpretations and Standards Discontinued Operations Discontinued The following new and revised Standards and Interpretations have also been adopted in these in adopted been also have Interpretations and Standards revised and new following The The IASB clarified (as part of Improvements to IFRSs (2009)) that the disclosure requirements disclosure the that (2009)) IFRSs to Improvements of part (as clarified IASB The these in reported amounts the on impact significant no has adoption Their statements. financial in Standards other than IFRS 5 do not generally apply to non-current assets classified as held as classified assets non-current to apply generally not do 5 IFRS than other Standards in arrangements. or transactions future for accounting the affect may but statements financial for sale and discontinued operations. The adoption of this amendment would only affect the affect only would amendment this of adoption The operations. discontinued and sale for disclosures and would have no impact on earnings per share per earnings on impact no have would and disclosures January 01, 2009 01, January of Disclosure and Grants Government for Accounting - 20 IAS January 01, 2010 01, January Flows Cash of Statement - 7 IAS to Amendments Assistance Government January 01, 2009 01, January Property Investment - 40 IAS The amendments (part of Improvements to IFRSs (2009)) specify that only expenditures that expenditures only that specify (2009)) IFRSs to Improvements of (part amendments The result in a recognised asset in the statement of financial position can be classified as investing as classified be can position financial of statement the in asset recognised a in result 2009 01, January Costs Borrowing - 23 IAS activities in the statement of cash flows. Consequently, any cash flows in respect of items that items of respect in flows cash any Consequently, flows. cash of statement the in activities January 01, 2009 01, January Cancellations and Conditions Vesting : Payment Share-based - 2 IFRS do not qualify for recognition as an asset (and, therefore, are recognised in profit or loss as loss or profit in recognised are therefore, (and, asset an as recognition for qualify not do vities in the statement of cash of statement the in vities acti operating to investing from reclassified be would incurred) 2009 01, July Consolidated - 27 IAS and (Revised) Combinations Business - 3 IFRS flows and prior year amounts restated for consistent presentation. consistent for restated amounts year prior and flows consequential including (Amended) Statements Financial Separate and amendments to IFRS 7, IAS 21, IAS 28, IAS 31 and IAS 39 IAS and 31 IAS 28, IAS 21, IAS 7, IFRS to amendments January 01, 2010 01, January Disclosures Party Related - 24 IAS to Amendments July 01, 2009 01, July Operations Discontinued and Sale for Held Assets Non-current - 5 IFRS The amendments modify the definition of a related party and simplify related party disclosures party related simplify and party related a of definition the modify amendments The for government-related entities. The directors anticipate that these amendments will be adopted be will amendments these that anticipate directors The entities. government-related for January 01, 2009 01, January Puttable 1 IAS and Presentation : Instruments Financial 32- IAS in the modaraba’s financial statements for the period beginning 1 January 2010. The modaraba The 2010. January 1 beginning period the for statements financial modaraba’s the in Liquidation on arising Obligations and Instruments Financial ill not affect its financial its affect not ill w exemptions disclosure the therefore government-related, not is statements. However, some disclosures may be affected by the changes in the detailed definition detailed the in changes the by affected be may disclosures some However, statements. 2009 01, January Assets Intangible - 38 IAS of a related party. This may result in amendments to the relevant related party disclosures in disclosures party related relevant the to amendments in result may This party. related a of the financial statements. financial the 2009 01, July - Measurement and Recognition : Instruments Financial - 39 IAS Eligible Hedged Items Hedged Eligible BASIS OF PREPARATION OF BASIS 3. 2009 01, July 39 IAS and derivatives Embedded of Remeasurement - 9 IFRIC Financial Instruments : Recognition and Measurement and Recognition : Instruments Financial These financial statements have been prepared under the historical cost convention, except convention, cost historical the under prepared been have statements financial These for certain investments which have been measured at fair value / equity method. method. equity / value fair at measured been have which investments certain for 2009 01, January Estate Real of Construction the for Agreements - 15 IFRIC January 01, 2009 01, January Owners to Assets Non-cash of Distribution - 17 IFRIC SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING SIGNIFICANT 4. 2009 01, July Customers from Assets of Transfers - 18 IFRIC

4.1 Property, plant and equipment and plant Property, 4.1 New accounting standards and IFRS interpretatons that are not yet effective yet not are that interpretatons IFRS and standards accounting New (i) Ijarah and amortisation and Ijarah (i) The following International Financial Reporting Standards and Interpretations as notified by notified as Interpretations and Standards Reporting Financial International following The Ijarah assets are stated at cost less accumulated amortisation and impairment loss (if any). (if loss impairment and amortisation accumulated less cost at stated are assets Ijarah periods, accounting for effective only are Pakistan of Commission Exchange and Securities the Amortisation is charged to income applying the annuity method whereby the cost of an asset, an of cost the whereby method annuity the applying income to charged is Amortisation them of each against mentioned date the after or on beginning less its residual value, is written off over its lease period. In respect of additions and disposals and additions of respect In period. lease its over off written is value, residual its less during the year, amortisation is charged proportionately to the period of lease. of period the to proportionately charged is amortisation year, the during 2013 01, January Instruments Financial - 9 IFRS

Profit or loss on disposal of ijarah assets is recognised as income or expense. or income as recognised is assets ijarah of disposal on loss or Profit all requires It assets. financial its measure and classify should entity an how specifies 9 IFRS financial assets to be classified in their entirety on the basis of the entity’s business model for model business entity’s the of basis the on entirety their in classified be to assets financial managing the financial assets and the contractual cash flow characteristics of the financial the of characteristics flow cash contractual the and assets financial the managing (ii) In own use and depreciation and use own In (ii) of adoption The value. fair or cost amortised at either measured are assets Financial assets. this standard would affect the recognition and classification of existing financial assets financial existing of classification and recognition the affect would standard this Operating assets are stated at cost less accumulated depreciation and impairment loss (if any). (if loss impairment and depreciation accumulated less cost at stated are assets Operating The directors anticipate that these amendments will be adopted in the modaraba’s financial modaraba’s the in adopted be will amendments these that anticipate directors The Depreciation is charged to profit and loss account applying the straight-line method whereby method straight-line the applying account loss and profit to charged is Depreciation statements on the effective date. The directors have not yet had an opportunity to consider to opportunity an had yet not have directors The date. effective the on statements the cost of an asset is written off over its estimated useful life. In respect of additions and additions of respect In life. useful estimated its over off written is asset an of cost the the potential impact of the adoption of this Standard Standard this of adoption the of impact potential the disposal during the year, depreciation is charged proportionately to the period of use. of period the to proportionately charged is depreciation year, the during disposal January 01, 2010 01, January Payment based Share - 2 IFRS to Amendments Profit or loss on disposal of assets is recognised as income or expense. or income as recognised is assets of disposal on loss or Profit The amendments clarify how an individual subsidiary in a group should account for some for account should group a in subsidiary individual an how clarify amendments The Assets' residual values, if significant and their useful lives are reviewed and adjusted, if adjusted, and reviewed are lives useful their and significant if values, residual Assets' share-based payment arrangements in its own financial statements. In these arrangements, these In statements. financial own its in arrangements payment share-based appropriate, at each balance sheet date. sheet balance each at appropriate, another or parent its but liers supp or employees from services or goods receives subsidiary the entity in the group must pay those suppliers. The adoption of this amendment will have no have will amendment this of adoption The suppliers. those pay must group the in entity Maintenance and normal repairs are charged to income as and when incurred. when and as income to charged are repairs normal and Maintenance group. corporate a of part not is entity the as statements financial the on effect

22 21 First Prudential Modaraba Prudential First Modaraba Prudential First

4.6 Staff retirement benefits retirement Staff 4.6 properties Investment 4.2

Defined contribution plan contribution Defined is appreciation, capital for and/or rentals earn to held property is which property, Investment measured initially at its cost, including transaction costs. Subsequent to initial recognition, it recognition, initial to Subsequent costs. transaction including cost, its at initially measured The modaraba operates a defined contribution provident fund for all employees. Equal monthly Equal employees. all for fund provident contribution defined a operates modaraba The investment of value fair the in changes from arising losses or Gains value. fair its at measured is contributions are made both by the modaraba and the employees to the fund at the rate of rate the at fund the to employees the and modaraba the by both made are contributions arise. they which in period the for loss or profit in included are property 10% of basic salary. basic of 10% 4.3 Intangible 4.3 4.7 Provisions 4.7 Intangible assets with indefinite useful lives are carried at cost less accumulated impairment accumulated less cost at carried are lives useful indefinite with assets Intangible Provisions are recognised when the Modaraba has a present, legal or constructive obligation constructive or legal present, a has Modaraba the when recognised are Provisions assets such on charged is amortisation No any. if losses, as a result of past event, it is probable that an outflow of resources embodying economic embodying resources of outflow an that probable is it event, past of result a as benefits will be required to settle the obligation and a reliable estimate of the amount can be can amount the of estimate reliable a and obligation the settle to required be will benefits to period each reviewed is amortised being not is that asset intangible an of life useful The made. However, provisions are reviewed at each balance sheet date and adjusted to reflect to adjusted and date sheet balance each at reviewed are provisions However, made. life useful indefinite an support to continue circumstances and events whether determine the current best estimate. best current the asset. that for assessment

4.8 Impairment 4.8 Investments 4.4

Financial Assets Financial loss'' or profit through value fair ''at trading for Held i)

Impairment is recognised by the Modaraba on the basis of provision requirements given under given requirements provision of basis the on Modaraba the by recognised is Impairment fair at measured subsequently and value fair at recognised initially are investments These Prudential Regulations for Modaraba and subjective evaluation carried out on an ongoing an on out carried evaluation subjective and Modaraba for Regulations Prudential Measurement" and Recognition Instruments, "Financial IAS-39 of requirement per As value. basis. loss and profit in included be to is trading for held investment of revaluation on loss or gain the account. account. A financial asset is assessed at each reporting date to determine whether there is any objective any is there whether determine to date reporting each at assessed is asset financial A evidence that it is impaired. A financial asset is considered to be impaired if objective evidence objective if impaired be to considered is asset financial A impaired. is it that evidence sale for Available ii) indicates that one or more events have had a negative effect on the estimated future cash future estimated the on effect negative a had have events more or one that indicates flows of that asset. Individually significant financial assets are tested for impairment on an on impairment for tested are assets financial significant Individually asset. that of flows liquidity for needs to response in sold be may which Modaraba the by held securities Investment individual basis. The remaining financial assets are assessed collectively in groups that share that groups in collectively assessed are assets financial remaining The basis. individual investments These sale. for available as classified are prices equity or rates interest in changes or similar credit risk characteristics. risk credit similar fair at measured subsequently and cost transaction plus value fair at recognised initially are value. The investments for which quoted market price is not available, are measured at costs at measured are available, not is price market quoted which for investments The value. Available-for-sale financial investments investments financial Available-for-sale from arising losses and Gains methodology. valuation other any apply to possible not is it as re-measurement at fair value is recognised in profit and loss as other comprehensive income. comprehensive other as loss and profit in recognised is value fair at re-measurement For available-for-sale financial investments, the modaraba assesses at each balance sheet balance each at assesses modaraba the investments, financial available-for-sale For group of investments is investments of group a or investment an that evidence objective is there whether date maturity to Held iii) impaired. In the case of equity investments classified as available-for-sale, objective evidence objective available-for-sale, as classified investments equity of case the In impaired. ue of the investment below its below investment the of ue val fair the in decline prolonged or significant a include would which, and maturity, fixed and payments determinable or fixed with investments are These cost. Where there is evidence of impairment, the cumulative loss - measured as the difference the as measured - loss cumulative the impairment, of evidence is there Where cost. investments maturity to Held ty. maturi till hold to ability and intent positive has Modaraba the y impairment loss on that on loss impairment y an less value, fair current the and cost acquisition the between at measured subsequently are and cost transaction plus value fair at recognised initially are investment previously recognised in the profit and loss account - is removed from equity and equity from removed is - account loss and profit the in recognised previously investment to recognized loss impairment any less method, rate interest effective using cost amortized recognised in the profit and loss account. Impairment losses on equity investments are not are investments equity on losses Impairment account. loss and profit the in recognised amounts. irrecoverable reflect fair value after impairment are impairment after value fair their in increases account; loss and profit the through reversed recognised directly in equity. equity. in directly recognised Derecognition iv)

In the case of debt instruments classified as available-for-sale, impairment is assessed based assessed is impairment available-for-sale, as classified instruments debt of case the In investments the from flows cash receive to rights the when de-recognised are investments All on the same criteria as financial assets carried at amortised cost. Interest continues to be to continues Interest cost. amortised at carried assets financial as criteria same the on risks all substantially ferred trans has Modaraba the and transferred been have or expired have accrued at the original effective interest rate on the carrying amount of the asset and is recorded is and asset the of amount carrying the on rate interest effective original the at accrued ownership. of rewards and as part of ‘Interest and similar income’. If, in a subsequent year, the fair value of a debt a of value fair the year, subsequent a in If, income’. similar and ‘Interest of part as to an event occurring after occurring event an to related objectively be can increase the and increases instrument associtates in Investment v) the impairment loss was recognised in the profit and loss account, the impairment loss is loss impairment the account, loss and profit the in recognised was loss impairment the reversed through the profit and loss account. account. loss and profit the through reversed are initially and accounting of method equity using for accounted are investments These recognized at cost. at recognized All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an of respect in loss cumulative Any loss. or profit in recognised are losses impairment All ty is transferred to proft or loss. or proft to transferred is ty equi in previously recognised asset financial available-for-sale finances musharaka and murabaha ijraah, receivable, rentals Ijarah 4.5

An impairment loss is reversed if the reversal can be related objectively to an event occurring event an to objectively related be can reversal the if reversed is loss impairment An the of requirement the with accordance in for provided are doubtful considered Receivables after the impairment loss was recognised. For financial assets measured at amortised cost amortised at measured assets financial For recognised. was loss impairment the after considered receivables for made also is provision Specific Modarabas. for Regulations Prudential and available-for-sale financial assets that are debt securities, the reversal is recognised in recognised is reversal the securities, debt are that assets financial available-for-sale and doubtful. profit or loss. For available-for-sale financial assets that are equity securities, the reversal is reversal the securities, equity are that assets financial available-for-sale For loss. or profit recognised directly in equity. equity. in directly recognised

24 23 First Prudential Modaraba Prudential First Modaraba Prudential First

Deferred tax liability is generally recognised for all taxable temporary differences. Deferred differences. temporary taxable all for recognised generally is liability tax Deferred assets Non-financial income tax asset is recognized for all deductible temporary differences and carry forward of forward carry and differences temporary deductible all for recognized is asset tax income unused tax losses, if any, to the extent that it is probable that taxable profit will be available be will profit taxable that probable is it that extent the to any, if losses, tax unused assets that indication any s i there whether date sheet balance each at assesses modaraba The against which such temporary differences and tax losses can be utilized. be can losses tax and differences temporary such which against exists, indication such If impaired. be may property investment and assets tax deferred except the carrying amounts of such assets are reviewed to assess whether they are recorded in recorded are they whether assess to reviewed are assets such of amounts carrying the Deferred income tax assets and liabilities are measured at the tax rate that are expected to expected are that rate tax the at measured are liabilities and assets tax income Deferred recoverable respective the exceed values carrying Where amount. recoverable their of excess is settled, based on tax rates that rates tax on based settled, is liability the or realized is asset the when period the to apply impairment resulting the and amounts recoverable their to down written are assets amount, have been enacted or substantively enacted at the balance sheet date. sheet balance the at enacted substantively or enacted been have asset's an of higher the is amount recoverable The account. loss and profit in recognised is loss fair value less costs to sell and value in use. in value and sell to costs less value fair 4.11 Foreign currencies translation currencies Foreign 4.11 Where impairment loss for asset subsequently reverses, the carrying amount of the asset is asset the of amount carrying the reverses, subsequently asset for loss impairment Where Monetary assets and liabilities in foreign currencies are translated into Pak Rupees at the rates the at Rupees Pak into translated are currencies foreign in liabilities and assets Monetary asset. the of cost initial of extent the to limited but amount recoverable revised the to increased of exchange approximating to those prevalent on the balance sheet date. Foreign currency Foreign date. sheet balance the on prevalent those to approximating exchange of income. as recognised is loss impairment of Reversal transactions are converted into Rupees at the rate of exchange prevailing on the date of date the on prevailing exchange of rate the at Rupees into converted are transactions transactions. Exchange gains and losses on translation are taken to income currently. income to taken are translation on losses and gains Exchange transactions. recognition Revenue 4.9

4.12 Financial assets Financial 4.12 rentals Ijarah 4.9.1

Financial assets comprise of Ijarah rentals receivable, investments, musharaka and morabaha and musharaka investments, receivable, rentals Ijarah of comprise assets Financial basis systematic a on due become rentals lease when and as recognised is ijarah from Income finances, deposits, other receivables, excluding taxation. Ijarah rentals receivable, musharaka, receivable, rentals Ijarah taxation. excluding receivables, other deposits, finances, period. ijarah and lease the over morabaha and other receivables are stated at cost as reduced by appropriate allowances for allowances appropriate by reduced as cost at stated are receivables other and morabaha estimated irrecoverable amounts. irrecoverable estimated transactions purchase Hire 4.9.2

4.13 Financial liabilities Financial 4.13 income to taken and eferred d is income finance unearned the transactions, purchase hire For produce a constant rate of rate constant a produce to method annuity the applying purchase, hire of period the over Financial liabilities are classified according to the substance of contractual arrangements contractual of substance the to according classified are liabilities Financial investment. net the on return deposits and accrued and other and accrued and deposits ijarah includes liabilities financial Significant into. entered liabilities. transactions musharaka and Murabaha 4.9.3

4.14 Cash and cash equivalents equivalents cash and Cash 4.14 profit the of accrual rata pro of basis the on recognised is transactions musharaka from Profit estimated for the transaction over the period. the over transaction the for estimated Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the of purposes the For cost. at sheet balance the in carried are equivalents cash and Cash cash flow statement, cash and cash equivalents comprise cash in hand, with banks on current, on banks with hand, in cash comprise equivalents cash and cash statement, flow cash However, transaction. murabaha of culmination on for accounted is finance murabaha from Profit savings and deposit accounts, as well as balance held with the State Bank of Pakistan (SBP). Pakistan of Bank State the with held balance as well as accounts, deposit and savings accounting by deferred is payment for due not finance murabaha of portion that on profit the for "Deferred Murabaha Income" with a corresponding credit to "Unearned Murabaha Income" Murabaha "Unearned to credit corresponding a with Income" Murabaha "Deferred for 4.15 Offsetting of financial assets and financial liabilities financial and assets financial of Offsetting 4.15 basis. proportion time a on recognised then is same The liability. a as recorded is which

A financial asset and a financial liability is offset and the net amount reported in the balance the in reported amount net the and offset is liability financial a and asset financial A Income Rental 4.9.4 sheet, if the Modaraba has a legal enforceable right to set off the transaction and also intends also and transaction the off set to right enforceable legal a has Modaraba the if sheet, le the liability simultaneously. liability the le sett and asset the realize to or basis net a on settle to either basis. line straight a on for accounted is properties investment from arising Income Rental Corresponding income on the assets and charge on the liability is also off- set. off- also is liability the on charge and assets the on income Corresponding 4.9.5 Dividend income income Dividend 4.9.5 4.16 Related party transactions party Related 4.16 tablished. es is receipt of right the when income as recognised is Dividend Sales, purchases and other transactions with related parties are carried out on commercial on out carried are parties related with transactions other and purchases Sales, terms and conditions. and terms finance on Return 4.9.6

4.17 Profit distribution Profit 4.17 and outstanding principal e th to reference by basis, time a on accrued is finance on Return at the effective interest rate applicable, which is the rate that exactly discounts estimated future estimated discounts exactly that rate the is which applicable, rate interest effective the at Profit distribution to the modaraba’s cerificate holders is recognised as a liability in the financial the in liability a as recognised is holders cerificate modaraba’s the to distribution Profit amount. carrying net asset’s that to asset financial the of life expected the through receipts cash statements in the period in which the dividends are approved by the board of modaraba of board the by approved are dividends the which in period the in statements company. Taxation 4.10

4.18 Critical Accounting Estimates and Judgments and Estimates Accounting Critical 4.18 Current

The preparation of financial statements in conformity with approved accounting standards accounting approved with conformity in statements financial of preparation The taking after tax of rates prevailing the at any, if income taxable on made is taxation for Provision requires the use of certain critical accounting estimates. It also requires the management to management the requires also It estimates. accounting critical certain of use the requires available. credit tax any account into exercise its judgment in the process of applying the Modaraba's accounting policies. Estimates policies. accounting Modaraba's the applying of process the in judgment its exercise and judgments are continually evaluated and are based on historical experience, including experience, historical on based are and evaluated continually are judgments and Deferred expectations of future events that are believed to be reasonable under the circumstances. The circumstances. the under reasonable be to believed are that events future of expectations areas where various assumptions and estimates are significant to the Modaraba's financial Modaraba's the to significant are estimates and assumptions various where areas the at differences temporary all for method liability the using provided is tax income Deferred statements or where judgment was exercised in application of accounting policies are as are policies accounting of application in exercised was judgment where or statements for amounts carrying their and liabilities and assets of bases tax between date sheet balance follows: - follows: purposes. reporting financial

26 25 First Prudential Modaraba Prudential First Modaraba Prudential First

Name of investee of Name / Certificates of Number 2009 2010 Units Shares/ 6) (Note investments of classification i) Rupees Rupeees Modarabas 2009 2010 ii) provision for doubtful receivables (Note 21) (Note receivables doubtful for provision ii) 602,965 - Modaraba Habib First 104,500 - 31,000 - Modaraba KASB 10,000 - 14) & 13 (Note equipment and property on depreciation/amortisation iii) 4,950 - Modaraba Equity First 5,000 - 52,800 - Modaraba. Unity 165,000 - 11) assets(Note intangible of Amortisation iv) Investment Banks / Securities / Banks Investment June 30, June 30, June 9,315,389 4,014,583 Limited Corporation Securities Capital First 894,850 848,749 2009 2010 284,820 913,644 Limited Co & Siddiqui Jahangir 12,282 72,282 Rupees Rupees 1,340,015 - Limited Securities Habib Arif 26,875 - BALANCES BANK AND CASH 5. 338,800 - Limited Investments JS 20,000 - 1,345,960 - Limited Bank Investment IGI 322,000 - 9,572 20,200 hand in Cash 274,040 - Limited Capital Global JS 4,000 - banks at Cash 918,654 - Limited Company and Vohra Omer Javed 68,200 - 2,231,956 1,509,796 account Current - - Limited Bank Investment Assets 7,678 - 17,425,273 17,027,340 accounts Saving 5,290 - Limited Securities Ahmed Pervez 1,000 - 167,999,999 270,000,000 deposit Term 187,657,228 288,537,136 Commercial Banks Commercial 187,666,800 288,557,336

54,900 907,200 Punjab of Bank The 5,000 90,000 1,031,916 813,150 Limited Bank United 26,950 15,000 2009 (June % 11.75 to 5.5% from ranges accounts PLS of respect in rate mark-up Effective 5.1 1,295,154 522,523 Limited Bank Silk 239,400 192,813 annum. per 10%) to 4.5% : - 486,250 Limited Bank Habib - 5,000 1,327,194 320,500 Pakistan of Bank National 19,800 5,000 (June 17% to 11.5% from ranges accounts deposit term of respect in rate mark-up Effective 5.2 449,881 162,506 Limited Pakistan Islami Bank 70,625 50,625 annum. per 19%) to 11.5% : 2009 305,640 - Limited Bank Chartered Standard 36,000 - 550,893 - Limited Bank Soneri 50,264 - 784,432 - Limited Bank Habib Arif 112,222 - INVESTMENTS 6. 44,528 - Limited Bank Faysal 4,600 - 178,031 - Limited Falah Al Bank 16,875 - account loss and profit through value fair at trading for Held 403,750 - Limited Bank NIB 85,000 - 135,675 - Limited Bank JS 22,500 - of units certificates/ shares/ ordinary paid fully the in are holdings the otherwise, stated Unless 88,140 - Limited Bank Atlas 26,000 - each. 10/- Rs 22,920 - Limited Bank Askari 1,500 - 98,265,160 73,431,716 companies listed In 6.1 Insurance

35,030 - Limited Company Reinsurance Pakistan 1,000 - 1,293,446 191,712 Limited Company Insurance Adamjee 15,400 2,400 investee of Name share / Certificates of Number Shares/ Units Shares/ Fertilizer 2009 2010 Funds Mutual Closed-end 2009 2010 557,235 1,992,060 Limited Qasim Bin Fertilizer Fauji 31,500 76500 1,672,159 1,909,380 Limited Chemicals Engro 13,020 11000 551,450 - Limited Fund Premier Pakistan 134,500 - 336,931 - Limited Company Fertilizer Fauji 3,875 - 134,470 - Fund Mutual Cap. First 56,500 - 22,500 - Fund Energy PICIC 5,000 - Textile 5,650 - Limited Fund Stocks Selected Arrow Golden 5,000 - 3,820 - Fund Growth JS 2,500 - 4,030,893 875,506 Limited Mills Textile Ahmed Gul 103,782 47,248 132,840 446,400 Limited Nine Azgard 6,000 40,000 Funds Mutual Open-end 283,650 350,350 Limited Mills Nishat 7,500 8,125 398,288 203,472 Limited Industries Hussain 41,925 27,721 32,865,611 37,488,187 Pakistan of Trust Unit 362,555 362,555 30,144 24,881 Limited Mills Spinning Cotton Reliance 1,256 1,256 671,250 704,250 Trust (Unit) Investment National 25,000 25,000 3,162,000 - Limited Mills Fibers Sapphire 37,200 - each) Rs.100/- certificate of value (Face 34,375 - Limited Mills Textile Mubarak 27,500 - 14,175 - Limited Textiles Samin 2,500 - 22,100 - Limited Mills Textile Kohinoor 5,000 - 2,980 - Limited Fiber Salman Dewan 2,000 -

28 27 First Prudential Modaraba Prudential First Modaraba Prudential First

Name of investee of Name / Certificates of Number investee of Name / Certificates of Number 2009 2010 Units Shares/ 2009 2010 Units Shares/ Rupeees Rupeees 2009 2010 Rupees Rupeees 2009 2010 Cable & Electrical Goods Limited Goods Electrical & Cable Cement 218,750 51,892 Limited (Pakistan) Philips & Johnson 12,500 6,048 643,830 1,242,800 Limited Cement Lucky 11,000 20,000 Technology & Communication & Technology 871,710 1,223,044 Limited Company Cement Khan D.G. 29,400 51,780 70,220 - Limited Pakistan Cement Attock 1,000 - 51,720 356,000 Ltd. Company Telecommunication Pakistan 3,000 20,000 679,000 - Limited Cement Pioneer 50,000 - 86,500 - Limited TeleCard 50,000 - 1,050,000 - Limited Industries Cement Al-Abbas 150,000 - 135,000 - Limited Pakistan TRG 100,000 - 80,080 - Limited Company Cement Kohat 11,000 - 250,000 - Limited Telecom WorldCall 100,000 - 67,650 - Limited Company Cement Cherat 5,000 - 4,240 - Limited Industries Cement Dadabhoy 2,000 - Pharmaceuticals 41,500 - Limited Company Cement Dandot 5,000 - 59,125 - Limited Cement Dewan 21,500 - 606,312 - Limited (Pakistan) Laboratories Abbot 7,560 - 800,685 - Limited Company Cement Fauji 121,500 - 463,753 - Limited Laboratories Highnoon 15,210 - 127,800 - Limited Factory Cement Leaf Maple 30,000 - 119,810 - Limited Pakistan Glaxosmithkline 1,000 - 67,500 - Limited Company Cement Pakistan 25,000 -

Chemicals Refinery

280,500 3,201,120 Limited Pakistan ICI 2,000 27,000 1,250,703 2,609,097 Limited Refinery Attock 6,887 32,387 823,880 205,820 Limited Chemicals Polymers Engro 43,000 20,500 2,252,364 646,553 Limited Refinery Pakistan 25,082 8,229 92,200 - Limited Peroxide Sitara 5,000 - 1,104,500 - Limited Refinery National 5,020 - 154,500 - Limited Resins Nimir 50,000 - 94,075 - Limited Products Air Bawany 26,500 - Distribution & Generation Power

Paper & Board & Paper 2,260,910 2,998,894 Limited Company Power addu Kot 53,500 71,847 880,425 319,600 Limited Company Power Hub The 32,500 10,000 11,778 - Limited Packages 75 - 963,000 - Limited Company Power Electric Southern 300,000 - 18,000 - Limited Generation Power Japan 10,000 - Foods & Personal Care Products Care Personal & Foods 5,300 - Limited Company Supply Electric Karachi 2,000 -

- 57,120 Limited Products Foods Shakarganj 51,000 51,000 Companies Marketing Gas & Oil

Miscellaneous 213,650 260,200 Limited Oil State Pakistan 1,000 1,000 127,800 - Limited Pipelines Gas Northern Sui 4,000 - 295,740 - Ltd. Pakistan Pace 53,000 - 158,340 - Limited Ecopack 26,000 - Companies Exploration Gas & Oil 43,190 - Limited Gadoon Al-Khair 9,000 - 42,550 - Limited Plate Tin Siddiqsons 5,000 - 2,629,868 4,336,762 Limited Petroleum Pakistan 13,875 23,554 26,560 - Corporation Airlines International Pak 8,000 - 72,950 2,590,800 Limited Fields Oil Pakistan 500 12,000 - 905,660 XD Company Gass Mari - 7,000 Glass and Ceramics and Glass - 99,800 Pakistan Petroleum Byco - 10,000 4,600,440 - Limited Company Development Gas and Oil 58,500 - 315,496 - Limited Glass Tariq 45,200 - Engineering Suspended / Delisted Company Delisted / Suspended 869,335 - Limited Industries International 19,280 - 112,800 - Limited Factory Cement Zeal-Pak 360,000 360,000 681,962 - Limited Products Allied & Steel Crescent 37,950 - - - Fund Stock Prudential 1,670,720 1,670,720 571,380 - Limited Steels Dost 107,000 - - - Limited Bank Investment Prudential 130,500 130,500 - - Limited Fabrics Pearl 27,500 Assemblers & Automobiles 65,510 - Commercial and Industrial Pakistan 434,208 434,208 2,303,730 - Limited Tractors Millat 8,250 - 98,265,160 73,431,716 486,000 - Limited Tractors Al-Ghazi 3,000 - 203,700 - Limited Company Motor Suzuki Pak 3,000 - 161,580 - Limited Company Motor Indus 1,500 - 83,525 - Limited (Pakistan) Car Atlas Honda 6,500 - 63,000 - Limited Industries Gandhara 8,400 - (Face value of shares of Rs.5/- each) each) Rs.5/- of shares of value (Face

30 29 First Prudential Modaraba Prudential First Modaraba Prudential First

2009 2010 Note 2009 2010 Note value fair in changes on loss Unrealized 6.2 Rupees Rupees Rupees Rupees investments trading for held of Movement of provision of Movement 8.1.2 184,425,313 75,034,716 investment of Cost 390,839,456 370,824,302 Balance Opening (86,160,153) (1,603,000) value fair in changes on loss Unrealized (20,015,154) - Year the for Charge investments trading for held - (22,463,261) Year the during Reversals 98,265,160 73,431,716 investments of value Market 370,824,302 348,361,041 Balance Closing

IJARAH RENTALS RECEIVABLE RENTALS IJARAH 7. This finance has been made to Invest Capital Investment Bank against certain ijarah assets ijarah certain against Bank Investment Capital Invest to made been has finance This 8.2 under funded risk participation agreement. It carries return at the rate 17.16 % and is receivable is and % 17.16 rate the at return carries It agreement. participation risk funded under 41,105,036 2,762,272 good Considered by 2012 in monthly installments. monthly in 2012 by 16,403,858 32,961,066 doubtful Considered 57,508,894 35,723,338 (16,403,858) (32,961,066) 7.1 receivables doubtful for Provision Less: 41,105,036 2,762,272 ADVANCES, PREPAYMENTS AND OTHER RECEIVABLES OTHER AND PREPAYMENTS ADVANCES, 9. Advances 3,205,196 11,015,072 9.1 -net tax Income receivables doubtful for provision in Movement 7.1 369,057 281,557 services / supplies against Advance (281,557) (281,557) recoveries doubtful for Provision 13,345,230 16,403,858 balance Opening 87,500 - - (3,169,617) off Written 1,878,913 1,953,235 staff to Advance 3,058,628 19,726,825 period the for Charge 5,171,609 12,968,307 16,403,858 32,961,066 balance Closing 1,831,688 39,162 Prepayments Other receivables Other - 42,747 receivable Dividend payments ijarah minimum Future 7.2 64,620,930 64,620,930 9.2 shares of sale against Receivable (64,620,930) (64,620,930) recovery doubtful for Provision 80,246,358 61,013,907 year one Within - - receivables Net 17,806,397 23,740,541 years five than more not but year one After 23,040,907 17,889,240 9.3 parties Related 98,052,755 84,754,448 1,807,259 2,684,082 deposits bank on profit Accrued 10,241,347 10,241,347 9.4 bank a from Receivable (10,241,347) (10,241,347) recovery doubtful for Provision FINANCE OTHER AND MURABAHA MUSHARAKA, 8. - - bank a from receivables Net 22,781,180 13,315,089 receivables Other 71,425,966 23,970,244 8.1 finance morabaha and Musharika (8,325,014) (12,788,190) recovery doubtful for Provision - 18,170,477 8.2 finance-secured Other 14,456,166 526,899 71,425,966 42,140,721 46,307,629 34,150,437 portion term Long Less: (29,099,199) (3,712,119) finance Murabaha - (7,818,514) finance Other It includes tax of Rs. 9,051,500 on income for the tax year 2009. The modaraba has filed has modaraba The 2009. year tax the for income on 9,051,500 Rs. of tax includes It 9.1 (29,099,199) (11,530,633) revised return and has claimed refund of this amount owing to the exemption clause as referred as clause exemption the to owing amount this of refund claimed has and return revised 42,326,767 30,610,088 accounting loss and taxable and loss accounting of case the in even Modaraba the to applicable is (23.1) note in finance morabaha and Musharika 8.1 income for the year 2009. year the for income

The amount represents claim of Rs.64,620,930/- (June 2009 : Rs.64,620,930/-) receivable Rs.64,620,930/-) : 2009 (June Rs.64,620,930/- of claim represents amount The 9.2 from a defaulted stock broker. broker. stock defaulted a from 58,546,658 57,133,391 finance-unsecured Musharika 391,173,169 316,061,468 finance-secured Murabaha The amount was paid as advance for purchase of securities to Prudential Securities Limited Securities Prudential to securities of purchase for advance as paid was amount The 9.3 449,719,827 373,194,859 (PSL), an associated undertaking. The PSL defaulted and claim for the amount has been filed been has amount the for claim and defaulted PSL The undertaking. associated an (PSL), with the Karachi Stock Exchange. Stock Karachi the with (7,469,559) (863,574) income Morabaha Deferred Less:

This represents unauthorized amount debited to Modaraba's account by a scheduled commercial scheduled a by account Modaraba's to debited amount unauthorized represents This 9.4 (370,824,302) (348,361,041) 8.1.2 receivables doubtful for Provision Less: bank on behalf a of party considered to be a group company. The Modaraba filed a suit for suit a filed Modaraba The company. group a be to considered party of a behalf on bank 71,425,966 23,970,244 Ordinance, XLVI of 2001 of XLVI Ordinance, Finances) of (Recovery Institutions Financial the under recovery which was decreed against the Modaraba only due to the reason that it was time-barred. was it that reason the to due only Modaraba the against decreed was which Management filed an appeal in the Sindh High Court against the judgment of the Banking the of judgment the against Court High Sindh the in appeal an filed Management The annum. per 18%) o t 14% (2009: 21% to 14% from ranges murabaha these on return The 8.1.1 Court. The Sindh High Court has set aside the decree of the Banking Court with the directions the with Court Banking the of decree the aside set has Court High Sindh The Court. charge and properties immovable of mortgage equitable against secured are finances above that the Banking Court, in the first instance, shall decide the application for leave to defend to leave for application the decide shall instance, first the in Court, Banking the that directors. sponsor of guarantee personal and assets other machineries, vehicles, of moved by the Bank. The case is under process with the Banking Court. Banking the with process under is case The Bank. the by moved

32 31 First Prudential Modaraba Prudential First Modaraba Prudential First

10.2 Available for sale for Available 10.2 INVESTMENTS TERM LONG 10.

Name of investee of Name share / Certificates of Number Rs.10/- of units certificates/ shares/ ordinary paid fully the in are holdings the otherwise, stated Unless June 30, June 30, June Units Shares/ each.

2009 2010 2009 2010 30, June 30, June 2009 2010 Note 10.2.1 Listed entities Listed 10.2.1 Rupees Rupees Pakistan Industrial and Commercial Commercial and Industrial Pakistan 181,973 181,973 - - Limited Leasing 1,184,046 1,041,815 10.1 associate in Investment 10.2 sale for Available National Investment (Unit)Trust Investment National 101,413 101,413 2,722,939 2,856,804 entities Listed 2,722,939 2,722,939 Cost 3,378,630 3,378,630 company unlisted An - 133,865 gain Unrealized Add: 6,101,569 6,235,434 2,722,939 2,856,804 7,285,615 7,277,249 10.2.2 Unlisted company Unlisted 10.2.2 Prudential Securities Limited(PSL) Securities Prudential 1,107,244 1,107,244 listed - method Equity - associate in Investment 10.1 4,173,707 4,173,707 Cost (795,077) (795,077) Impairment Less: (PDGHL) Limited House Guarantee and Discount Prudential 3,378,630 3,378,630 1.92% 1.92% % Ownership 2010 Note ASSETS INTANGIBLE 11. Rupees 452,058 452,058 investment of Cost 829,338 687,107 profits acquisition Post (97,350) (97,350) received Dividend 22,326,567 11.1 room and membership exchange stock Lahore 1,184,046 1,041,815

Cost 191,700 191,700 held shares of Number

- 01 July At - Addition 22,326,567 30 June At 10.1.1 The Modaraba has significant influence in Prudential Discount and Guarantee House Limited House Guarantee and Discount Prudential in influence significant has Modaraba The 10.1.1 - losses impairment Accumulated Management Modaraba the in directors the are directors seven of out directors three as (PDGHL) Company. Due to common directorship and significant influence investment is classified ' classified is investment influence significant and directorship common to Due Company. 22,326,567 amount Carrying IAS-28. by required as method equity under associate' in investment

10.1.2 The financial year of the investee company ends on June 30. However, due to non-availability to due However, 30. June on ends company investee the of year financial The 10.1.2 The useful life of membership is assessed to be indefinite as there is no foreseeable limit of limit foreseeable no is there as indefinite be to assessed is membership of life useful The 11.1 statements, financial these of preparation of time the at PDGHL of statements financial latest of time for which the membership is expected to generate economic benefit. economic generate to expected is membership the which for time statements. financial the in adjustments for used been have 2009 June,30 of as results financial

Summarized financial information financial Summarized

Prudential Discount and Guarantee House Limited (PDGHL) Limited House Guarantee and Discount Prudential

118,467,764 58,232,027 assets Total

8,391,437 8,207,893 liabilities Total

1,111,482 (42,778,492) ended year for (loss)/income operating Total

34 33 First Prudential Modaraba Prudential First Modaraba Prudential First 20 33 20 20 33 20 33 33 Rate% Rate% Purhaser 59,055 Address of 31,806 86,219 62,587 114,662 658,844 288,014 1,076,247 107,402 243,686 June 30, 2009 June 30, 2010 Garden, Karachi Colony , Federal Govt Officer House No. 36-C, Karachi. North Karachi, Sector 15-A/5, Zone, House No. 497, Buffer Carrying value at Carrying value at 5,528,731 1,165,554 1,656,173 9,916,291 4,378,769 1,224,290 1,712,448 10,770,558 2,420,100 2,600,784 Purchaser Particulars of June 30, 2009 June 30, 2010 Accumulated at Accumulated at Musawir ul Hassan Saeed-ul-Haque 34,753 57,395 58,736 56,275 97,040 874,730 685,542 716,232 420,537 180,684 (389,508) (389,508) (1,570,499) (1,570,499) Mode of Disposal Depreciation Depreciation Negotiation Negotiation For the year / For the year / (on disposals) (on disposals) 93,499 82,833 10,666 ...... Rupees...... 5,232,697 1,130,801 1,598,778 5,528,731 1,165,554 1,656,173 2,323,060 2,420,100 ...... Rupees...... Rupees...... 10,285,336 10,770,558 Gain / (Loss) Accumulated Accumulated at July 1, 2008 at July 1, 2009 50,000 300,000 250,000 at at 6,187,575 1,224,609 1,770,835 2,663,786 4,410,575 1,310,509 1,775,035 2,708,186 11,846,805 10,204,305 June 30, 2009 June 30, 2010 Insurance Claim Disposal proceed/ 6,500 4,200 39,600 85,900 39,334 44,400 157,024 134,500 206,501 167,167 Cost Cost 110,924 (472,661) (472,661) Value Additions/ Additions/ (1,777,000) (1,777,000) (Disposals) (Disposals) Written down Written at at 550,666 2,663,786 1,570,499 1,019,833 6,660,236 1,185,009 1,764,335 2,552,862 6,187,575 1,224,609 1,770,835 11,846,805 12,162,442 July 1, 2008 July 1, 2009 Depreciation Accumulated Cost 590,000 1,777,000 1,187,000 Vehicle 12.1 Disposal of property and equipment - Own Vehicle Office equipment Office equipment Office Motor vehicles Computer equipments Furniture and fixtures Motor vehicles Computer equipments Furniture and fixtures 12 PROPERTY AND EQUIPMENT - OWN 12 PROPERTY 36 35 First Prudential Modaraba Prudential First Modaraba Prudential First

June 30, June 30, June 2009 2010 PROPERTY INVESTMENT 14. Rupees Rupees -Acquired in satisfaction of claim of satisfaction in -Acquired 7,350,000 8,400,000 01 July At Rate% Rate%

Unrealized gain on remeasurement of remeasurement on gain Unrealized 24 to 60 months 24 to 60 months 24 to 60 months 24 to 60 months 24 to 60 months 24 to 60 months 24 to 60 months 24 to 60 months 1,050,000 1,522,500 property investment

8,400,000 9,922,500 30 June At 36,411 134,654 4,581,809 96,546,951 10,926,818 85,179,371 72,102,677 117,128,823 8,458,474

In pursuance of execution of the decree the office premises, mortgaged with the Modaraba Modaraba the with mortgaged premises, office the decree the of execution of pursuance In 14.1 9,520,400 June 30, 2009 as security against a morabaha facility, were auctioned by the Sindh High Court. The Modaraba The Court. High Sindh the by auctioned were facility, morabaha a against security as June 30, 2010 Carrying value at purchased the said property in the auction. Property has been recognized as investment as recognized been has Property auction. the in property said the purchased Carrying value at property under IAS-40 and stated at fair value fair at stated and IAS-40 under property 55,589 201,746 7,849,182 The fair value of the investment property at June 30, 2010 has been arrived at on the basis the on at arrived been has 2010 30, June at property investment the of value fair The 14.2 4,219,191 91,000,641 80,178,835 8,988,251 6,547,026

of a valuation carried out on August 10, 2010 by Rizvi Associates (Private) Limited, independent Limited, (Private) Associates Rizvi by 2010 10, August on out carried valuation a of 138,982,188 121,943,009 Accumulated valuers not connected with the Modaraba. The valuation has been arrived at by reference to reference by at arrived been has valuation The Modaraba. the with connected not valuers Accumulated at June 30, 2009 at June 30, 2010

market evidence of transaction prices for similar properties. similar for prices transaction of evidence market - June 30, June 30, June - - -

2009 2010 Note - Rupees Rupees Amortisation Amortisation (1,911,677) (502,138) (6,480,202) (4,066,387) Adjustments ACCRUED AND OTHER LIABILITIES OTHER AND ACCRUED 15. Adjustments

12,857,020 12,436,849 payable distributions Profit 30,666 - 670,100 fund welfare Workers 24,923 (400,000) Unearned income Unearned (171,080) 3,123,768 674,290 534,063 4,373,136 4,500,208 3,756,949 54,037,905 46,383,263 33,431,814 25,276,806 (3,074,924) (5,184,077) (6,091,450) (5,696,036) (77,158,693) (68,499,692) 9,046,662 1,806,623 others and payable insurance Ijarah (74,933,159) (62,974,593) For the year / For the year / (on disposals) 16,423,209 - brokers stock to Payable (on disposals) 39,001,181 15,447,635 ...... Rupees...... Rupees...... 201,746 3,246,004 9,909,491 7,849,182 4,888,043 8,988,251 162,218,617 144,175,079 LONG TERM IJARAH DEPOSITS DEPOSITS IJARAH TERM LONG 16. 138,982,188 121,943,009 Accumulated Accumulated at July 1, 2008 at July 1, 2009 70,207,646 48,167,336 deposits Ijarah (40,836,556) (29,101,346) portion Current

29,371,090 19,065,990 92,000 at at 336,400 8,801,000 18,776,000 15,005,500 256,111,011 18,508,651 218,489,960 176,180,012 152,281,512 June 30, 2009 CERTIFICATE CAPITAL CERTIFICATE 17. June 30, 2010 -

2009 2010 2009 2010 - - - -

Authorised Authorised Certificates of Number (676,000)

872,176,600 872,176,600 each Rs.10/- of certificates Modaraba 87,217,660 87,217,660 (8,682,099) (5,506,099) (2,500,000) Adjustments Adjustments

Issued, subscribed and paid-up paid-up and subscribed Issued, Cost Cost Modaraba certificates of Rs.10/- Rs.10/- of certificates Modaraba 13,451,650 13,451,650 134,516,500 134,516,500 cash in paid fully each 92,000 (244,400) 4,548,500 8,256,850 (808,774) 4,585,000 12,897,350 40,793,500 36,208,500 (3,495,803) (6,850,000) (7,475,000) (7,412,151) Additions/ Additions/ (Disposals) (Disposals) (96,910,849) (113,367,077) (112,042,400) Modaraba certificates of Rs.10/- Rs.10/- of certificates Modaraba 8,864,716 8,864,716 (102,212,500) 88,647,160 88,647,160 certificates bonus paid fully each at at Modaraba certificates of Rs.10/- issued issued Rs.10/- of certificates Modaraba 64,901,294 64,901,294 336,400 3,740,203 17,369,150 19,317,425 18,776,000 18,508,651 256,111,011 356,580,738 316,153,960 218,489,960

under scheme of arrangement for for arrangement of scheme under July 1, 2008 July 1, 2009 for amalgamation with Second and and Second with amalgamation for 649,012,940 649,012,940 Modaraba Prudential Third

872,176,600 872,176,600 87,217,660 87,217,660 and Madaraba Rules 1981. and Control) Ordinance, 1980 Modaraba Companies and Modaraba (Floatation of disposals as required by Modaraba Companies Due to numerous disposals, the management is of opinion that it impractical provide details

CONTINGENCIES AND COMMITMENTS AND CONTINGENCIES 18. 13.1 Plant and machinery Plant and machinery Vehicles Computer equipment Office Vehicles Computer equipment Office No contingencies and commitments exist at the year end. year the at exist commitments and contingencies No 13 PROPERTY AND EQUIPMENT - IJARAH 13 PROPERTY 38 37 First Prudential Modaraba Prudential First Modaraba Prudential First

June 30, June 30, June REMUNERATION OF OFFICERS AND OTHER EMPLOYEES OTHER AND OFFICERS OF REMUNERATION 22.1 2009 2010 Note 2010 Rupees Rupees Total employees Other Officers FINANCE OTHER AND MORABAHA MUSHARIKA, ON INCOME 19...... Rupees...... 16,575,407 8,467,940 morabaha and musharika on Profit - 829,946 finance other on Return 6,025,220 4,865,839 1,159,381 Remuneration 16,575,407 9,297,886 140,821 65,857 74,964 fund Provident 199,175 199,175 - expenses Medical INCOME OTHER 20. 220,066 220,066 - Fuel 731,626 731,626 - Others 260,803 86,675 fee end Front 7,316,908 6,082,563 1,234,345 25,945 54,439 charges Documentation 18 3 persons of No. 206,847 93,499 -owned equipment and property of disposal on Gain 12,507,700 772,760 Ijarah equipment- and plant property, of disposal on Gain 2009 818,400 907,500 property investment an from income Rental 5,347,706 4,208,517 1,139,189 Remuneration 4,493,226 2,119,957 others and charges payment Late 64,455 64,455 - fund Provident 18,312,921 4,034,830 229,952 229,952 - expenses Medical 123,322 123,322 - Fuel 435,299 435,299 - Others RECEIVABLES-NET DOUBTFUL AGAINST PROVISION 21. 6,200,734 5,061,545 1,139,189 18 2 persons of No. 20,015,154 (22,463,261) finance morabaha and Musharika June 30, June 30, June 3,058,628 19,726,825 finance Ijarah 2009 2010 40,967,905 4,463,176 securities unlisted of Others/impairment Rupees Rupees 64,041,687 1,726,740 AUDITOR'S REMUNERATION AUDITOR'S 22.2 ADMINISTRATIVE EXPENSES ADMINISTRATIVE 22. 250,000 400,000 fee audit Statutory 50,000 150,000 fee review year Half 6,200,734 7,316,908 22.1 benefits and allowances Salaries, - 50,000 governance corporate of code of Review 398,463 1,355,495 professional and Legal - 10,000 certification CDC 798,050 930,324 Miscellaneous 80,000 40,000 expenses pocket of Out 297,832 965,387 subscription and Fees 380,000 650,000 337,377 831,423 maintenance and Repairs 752,298 829,104 taxes and rates Rent, 440,000 810,000 services Registrar MODARABA COMPANY'S MANAGEMENT FEE MANAGEMENT COMPANY'S MODARABA 23. 1,037,655 771,842 postage and Telephone 2,523,423 732,688 prepayments of Amortization The management fee is calculated @ 10% on profit before tax. Management company has waived has company Management tax. before profit on 10% @ calculated is fee management The 224,905 726,781 conveyance and Travelling the management fee for the year of Rs 3.283 million. 3.283 Rs of year the for fee management the 874,730 716,232 assets Depreciation-owned 391,000 650,000 22.2 renumeration Auditor's 579,009 632,942 gas and water Electricity, PROVISION FOR TAXATION FOR PROVISION 24. 400,083 604,791 stationery and Printing 229,428 377,234 running Vehicles 457,801 - year Current 193,989 244,778 Entertainment - (457,801) year Prior 519,963 214,537 Advertisement 457,801 (457,801) 9,644 13,199 periodicals and Newspapers 61,162 107,602 Insurance - 20,000 Donation The income of the modaraba is exempt from tax, provided not less than 90% of their profits their of 90% than less not provided tax, from exempt is modaraba the of income The 24.1 16,269,745 18,851,267 are distributed to the certificate holders. The management intends to distribute the profit and profit the distribute to intends management The holders. certificate the to distributed are accordingly no provision for tax has been made in the current year. The Modaraba is also is Modaraba The year. current the in made been has tax for provision no accordingly exempt from the provisions of section 113 (minimum tax) under clause 11 of Part IV of the of IV Part of 11 clause under tax) (minimum 113 section of provisions the from exempt Second Schedule of the Income Tax Ordinance, 2001. Ordinance, Tax Income the of Schedule Second

EARNINGS PER CERTIFICATE - BASIC AND DILUTED AND BASIC - CERTIFICATE PER EARNINGS 25.

(103,717,599) 33,292,699 (Rupees) year the for Profit/(loss) 87,217,660 87,217,660 certificates ordinary of number average Weighted (1.19) 0.38 certificate) per (Rupees certificate per Earnings

40 39 First Prudential Modaraba Prudential First Modaraba Prudential First

Credit Risk and Concentration of Credit risk Credit of Concentration and Risk Credit 27.2 TRANSACTIONS PARTY RELATED 26.

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation an discharge to fail will instrument financial a to party one that risk the is risk Credit Management Modaraba the of directors undertakings, associated of comprise parties related The and cause the other party to incur a financial loss. The Modaraba control credit risk by monitoring by risk credit control Modaraba The loss. financial a incur to party other the cause and related these with transactions out carries business of course normal the in Modaraba, The Company. credit exposure, limiting transactions with specific counter parties and continually assessing continually and parties counter specific with transactions limiting exposure, credit - follows: as are parties related with transactions Significant parties. the credit worthiness of counter parties. counter of worthiness credit the 30, June 30, June 2009 2010 Transactions of Nature Company the with Relationship The Modaraba is exposed to credit risk from its financing activities (murabaha and musharaka and (murabaha activities financing its from risk credit to exposed is Modaraba The Rupees Rupees finance , ijarah rental receivables), deposits with bank and financial institutions and other and institutions financial and bank with deposits receivables), rental ijarah , finance exchange stock of Purchase Undertakings Associated receivables. - 22,326,567 room a and card membership 51,415,846 - investments of Purchase 27.3 Market Risk Market 27.3 88,236,775 - investments of Sale - 140,821 made Contribution Fund Provident Market risk is the risk that the value of the financial instrument may fluctuate as a result of result a as fluctuate may instrument financial the of value the that risk the is risk Market - - 23 Fee Management company Management changes in market interest rates or the market price due to change in credit rating of the issuer the of rating credit in change to due price market the or rates interest market in changes or the instrument, change in market sentiments, speculative activities, supply and demand of demand and supply activities, speculative sentiments, market in change instrument, the or securities and liquidity in the market. The modaraba incurs financial liabilities to manage its manage to liabilities financial incurs modaraba The market. the in liquidity and securities market risk. All such activities are carried out with the approval of the Board. The modaraba The Board. the of approval the with out carried are activities such All risk. market MANAGEMENT RISK FINANCIAL 27. is exposed to interest rate and currency risks. currency and rate interest to exposed is The Modaraba’s activities expose it to a variety of financial risks: market risk (including currency risk, currency (including risk market risks: financial of variety a to it expose activities Modaraba’s The fair value interest rate risk and price risk}, credit risk and liquidity risk. liquidity and risk credit risk}, price and risk rate interest value fair 27.3.1 Interest Rate Risk Rate Interest 27.3.1 npredictability of financial of npredictability u the on focuses programme management risk overall modarba's The The interest rate risk is the risk that the fair value or the future cash flows of a financial instrument financial a of flows cash future the or value fair the that risk the is risk rate interest The performance. financial modarba's the on effects adverse potential minimise to seeks and markets will fluctuate because of changes in market interest rates. Majority of the interest rate exposure rate interest the of Majority rates. interest market in changes of because fluctuate will term deposits with banks. with deposits term short and banks from borrowings term long and short from arises other and accrued creditor and deposits ijarah comprise liabilities financial principal Modaraba’s The modaraba’s interest bearing interest modaraba’s the of profile risk rate interest the date sheet balance the At finance, murabaha and musharaka receivable, rental ijarah has Modaraba The liabilities. financial instruments is: instruments financial from directly arrive that balances bank and cash and receivable other and advance,prepayments June 30, June 30, June investment and investments available-for-sale trading, for held holds also Modaraba The operations. its 2009 2010 associates. in Rupees Rupees instruments financial rate Fixed Management Risk Liquidity 27.1 185,425,272 287,027,340 instiutions financial and banks with Balances 71,425,966 42,140,721 finance other and morabaha Musharika, of availability the and cash sufficient maintaining implies management risk liquidity Prudent funding through an adequate amount of committed credit facilities. facilities. credit committed of amount adequate an through funding Fair value sensitivity analysis for fixed rate instruments rate fixed for analysis sensitivity value Fair The modaraba does not hold any of the above financial assets at fair value through profit and profit through value fair at assets financial above the of any hold not does modaraba The balances. bank and cash sufficient maintaining by risk liquidity manages modaraba The loss. Liquidity and Interest Risk Table Risk Interest and Liquidity 27.1.1 27.3.2 Equity price risk price Equity 27.3.2 The following tables detail the Modarabas’s remaining contractual maturity for its non-derivative its for maturity contractual remaining Modarabas’s the detail tables following The The modaraba’s listed equity securities are susceptible to market price risk arising from arising risk price market to susceptible are securities equity listed modaraba’s The of flows cash undiscounted the on based up drawn been have tables The liabilities. financial uncertainties about future values of the investment securities. The modaraba manages the manages modaraba The securities. investment the of values future about uncertainties pay. to required be can daraba Mo the which on date earliest the on based liabilities financial equity price risk through diversification and placing limits on individual and total equity instruments. equity total and individual on limits placing and diversification through risk price equity flows. cash principal and interest both includes table The Reports on the equity portfolio are submitted to the modaraba’s senior management on a on management senior modaraba’s the to submitted are portfolio equity the on Reports regular basis. The modaraba’s Board of Directors reviews and approves all equity investment equity all approves and reviews Directors of Board modaraba’s The basis. regular Carrying Total years 5 - 1 months 6 than Less decisions. amount Contractual year 1 - month 6 cash flows cash 2010 The carrying amount of investment in listed equity securities carried at fair value is as follows: as is value fair at carried securities equity listed in investment of amount carrying The Rupees 15,447,635 15,447,635 - - 15,447,635 liabilities other and Accrued June 30, June 30, June 48,167,336 48,167,336 19,065,990 8,671,107 20,430,239 deposits ijarah term Long 2009 2010 63,614,971 63,614,971 19,065,990 8,671,107 35,877,874 Rupees Rupees 98,265,160 73,431,716 Investments 2009

39,001,181 39,001,181 - - 39,001,181 liabilities other and Accrued 70,207,646 70,207,646 29,371,090 - 40,836,556 deposits ijarah term Long 109,208,827 109,208,827 29,371,090 - 79,837,737

42 41 First Prudential Modaraba Prudential First Modaraba Prudential First

The Modaraba manages credit risk and its concentration through diversification of activities of diversification through concentration its and risk credit manages Modaraba The to avoid undue concentration of risks with individuals, groups or specific industry segments. industry specific or groups individuals, with risks of concentration undue avoid to analysis Sensitivity

Detail of the industrial sector analysis of Ijarah(Cost), murabaha and musharika(original musharika(original and murabaha Ijarah(Cost), of analysis sector industrial the of Detail index exchange stock karachi in increase/decrease of impact the summarises below table The Principal) portfolio Principal) that assumption the on based is analysis The equity. on and tax after profit modaraba's the on riables held constant and all and constant held riables va other all with 5% by increased/decreased had index equity the 2009 2010 index. the with correlation perfect on moved instruments equity modaraba's %age Rupees %age Rupees Sector equity and tax after profit on Impact Index

Investment/Securities 2009 2010 0.00% - 0.02% 92,000 Companies/Banks 5,049,405 3,671,586 increase) 100(5% KSE 0.00% - 0.00% - Insurance (5,049,405) (3,671,586) decrease) 100(5% KSE 4.40% 15,920,399 5.99% 23,567,000 Weaving Textile 7.80% 28,223,293 9.57% 37,643,000 Composite Textile instruments financial of value Fair 27.4 7.96% 28,806,282 10.84% 42,642,000 Tobacco 0.21% 764,709 6.32% 24,854,000 Energy & Fuel between settled, liability a or exchanged, be could asset an which for amount the is value Fair 0.18% 654,596 0.00% - Engineering financial the of values carrying The transaction. length arm’s an in parties willing knowledgeable, 1.17% 4,215,356 1.59% 6,240,000 Engg. Allied & Auto musharika and murabaha for except values fair their approximate liabilities financial and assets 0.42% 1,519,960 0.46% 1,790,000 Goods Electrial & Cables be cannot asset/liability financial these values fair The return. of rate fixed at receivable 4.57% 16,539,192 8.43% 33,143,000 Communication & Transport assets/liability. such for market of absence to due estimated reasonably 0.19% 678,240 0.00% - Pharmaceutical & Chemical 0.00% - 0.00% - Industries Allied & Vanaspati 2.87% 10,383,015 2.20% 8,669,000 Construction receivables to related risk Credit 27.2.1 0.03% 109,437 0.04% 162,000 Tannerise & Leather 20.14% 72,866,883 9.21% 36,240,000 Industries Allied & Food and counterparties thy creditwor with dealing only of policy a adopted has modaraba The 50.05% 181,074,525 45.33% 178,269,000 Miscellaneous financial of risk the mitigating of means a as appropriate, where collateral, sufficient obtaining 100.00% 361,755,887 100.00% 393,311,000 available where agencies rating independent by supplied is information This defaults. from loss e financial information and its and information financial e availabl publicly other uses modaraba the available, not if and, own trading records to rate its major customers. The modaraba’s exposure and the credit the and exposure modaraba’s The customers. major its rate to records trading own 27.4.1 Fair value hierarchy value Fair 27.4.1 transactions of value aggregate the and monitored continuously are counterparties its of ratings concluded is spread amongst approved counterparties. Credit exposure is controlled by controlled is exposure Credit counterparties. approved amongst spread is concluded The table below analyses financial instruments carried at fair value, by valuation method. The method. valuation by value, fair at carried instruments financial analyses below table The committee. management risk the by approved and reviewed are that limits counterparty different levels have been defined as follows: as defined been have levels different The Modaraba’s maximum exposure to credit risk related to receivable at June 30, 2010 and 2010 30, June at receivable to related risk credit to exposure maximum Modaraba’s The June 30, 2009 is the carrying amounts of following financial assets financial following of amounts carrying the is 2009 30, June Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities or assets identical for markets active in (unadjusted) prices quoted 1: Level 30, June 30, June Level 2: inputs other than quoted prices included within Level 1 that are observable are that 1 Level within included prices quoted than other inputs 2: Level 2009 2010 for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from derived (i.e., indirectly or prices) as (i.e., directly either liability, or asset the for Rupees Rupees prices). prices). 98,265,160 2,762,272 receivable rentals Lease 71,425,966 42,140,721 finance other and morabaha Musharika, Level 3: inputs for the asset or liability that are not based on observable market observable on based not are that liability or asset the for inputs 3: Level 39,304,332 21,142,968 receivables Other data (unobservable inputs). (unobservable data 208,995,458 66,045,961

Total 3 Level 2 Level 1 Level FVTPL at assets Financial deposits cash and instruments financial to related risk Credit 27.2.2

73,431,716 - - 73,431,716 Investments department finance by managed is institutions financial and banks with balances from risk Credit in accordance with the Modaraba’s policy. Investments of surplus funds are made only with approved with only made are funds surplus of Investments policy. Modaraba’s the with accordance in Available-for-sale financial assets financial Available-for-sale are limits credit Counterparty counterparty. each to assigned limits credit within and counterparties approved by the Board of Directors. The limits are set to minimise the concentration of risks and risks of concentration the minimise to set are limits The Directors. of Board the by approved Available for sale for Available failure. counterparty potential through loss financial mitigate therefore

2,856,804 - - 2,856,804 entities Listed institutions financial and banks with balances from risk credit to exposure maximum Modaraba’s The at June 30, 2010 and June 30, 2009 is the carrying amounts of following financial assets. financial following of amounts carrying the is 2009 30, June and 2010 30, June at

187,657,228 288,537,136 institutions financial and banks with Balances

44 43 First Prudential Modaraba First Prudential Modaraba

28. CAPITAL RISK MANAGEMENT

The modaraba manages its capital to ensure that it will be able to continue as a going concern while maximising thereturn to stakeholders through the optimisation of the debt and equity balance.

Consistently with others in the industry, the modaraba monitors capital on the basis of the debt-to- adjusted capital ratio. This ratio is calculated as net debt divided by adjusted capital. During the current year, the modaraba’s strategy, unchanged from last year, was to maintain the debt-to-adjusted capital ratio to zero.

CONTENTS 29. NON-ADJUSTING EVENTS AFER THE BALANCE SHEET DATE

The Board of Directors have approved profit distribution of Rs. 26,165,298 at the rate of 3 % ( Rs 0.3 per certificate of Rs 10) for the year ended June 30, 2010.These financial statements do not reflect this distribution.

30. DATE OF AUTHORISATION OF ISSUE VISION STATEMENT & MISSION STATEMENT 02

These financial statements has been authorised for issue on August 31, 2010 by the Board DIRECTOR’S REPORT 03 of Directors of the Prudential Capital Management Limited. SUMMARY OF KEY FINANCIALS 06

31. FIGURES STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE 07 Figures have been rounded off to the nearest Rupee. REVIEW REPORT TO THE MEMBERS ON STATEMENT OF COMPLIANCE WITH BEST PRACTICES OF CODE OF CORPORATE GOVERNANCE 09

AUDITORS’ REPORT TO THE CERTIFICATE HOLDERS 11

These financial statements have been signed by three directors instead of chief executive officer and two BALANCE SHEET 14 directors as approval of appointment of chief executive is pending with Securities and Exchange Commission of Pakistan. PROFIT AND LOSS ACCOUNT 15

CASH FLOW STATEMENT 16

STATEMENT OF CHANGES IN EQUITY 18

NOTES TO THE FINANCIAL STATEMENTS 19

CATEGORIES OF CERTIFICATES HOLDING 46

PATTERN OF CERTIFICATE HOLDINGS 48

Director Director Director

45 First Prudential Modaraba First Prudential Modaraba

CATEGORIES OF CERTIFICATES HOLDING AS ON 30-06-2010 CATEGORIES OF CERTIFICATES HOLDING AS ON 30-06-2010 NO OF NO OF NO OF NO OF CERTIFICATE CERTIFICATES PERCENTAGE CERTIFICATE CERTIFICATES PERCENTAGE HOLDER HOLDER

ASSOCIATED COMPANIES UNDERTAKING AND 2 10,530,205 12.07 RELATED PARTIES GENERAL MODARABA 3306 PRUDENTIAL CAPITAL MANAGEMENT LTD. 10,521,205 MODARABA AL MALI 47 Prudential Discount & Guarantee House Limited 9,000 FIRST PROVIDENCEMODARABA 449 FIRST HAJVERI MODARABA 3000 NIT AND ICP 2 948,123 1.09 FIRST EQUITY MODARABA 16484 FIRST EQUITY LEASING MODARABA 378 NATIONAL BANK OF PAKISTAN TRUSTEE WING 905,220 SHAREHOLDING TEN PERCENT OR MORE VOTING INVESTMENT CORPORATION OF PAKISTAN 42,903 INTEREST IN THE LISTED COMPANIES.

DIRECTORS, C.E.O THEIR SPOUSE AND MINOR CHILDREN 5 10,824,170 12.41 INDIVIDUAL 10995 97165.09 53,952,305 61.86

MR. ASAD IQBAL SIDDIQUI 4,220,500 OTHER CORPORATE SHAREHOLDERS 89 6,692,410 7.67 MR.FAZAL M.MUGHAL 155,412 DR.MOHAMMAD HUSSAIN 51,340 11118 87,217,660 100.00 MR. ATAULLAH KHAN 6,015,139

CHIEF EXECUTIVE OFFICER

SPOUSE

MRS. WASIA HUSSAIN 381,779 W/O DR. M. HUSSAIN

EXECUTIVES. ------

PUBLIC SECTOR COMPANIES AND CORPORATIONS. 1 1,929,159 2.21

STATE LIFE INSURANCE CORPORATION OF PAKISTAN LTD. 1,929,159

BANKS, DEVELOPMENT FINANCIAL INSTITUTIONS, NON BANKING FINANCIAL INSTITUTIONS, INSURANCE COMPANIES, MODARABAS AND MUTUAL FUNDS 24 2,341,288 2.68

THE BANK OF PUNJAB 2974 FAISAL BANK LTD. 101 HABIB BANK LTD. LSE BRANCH 848 HABIB BANK LTD. AG ZURICH 396 CITY BANK LTD. 2635 BANKERS EQUITY LTD. 600 NATIONAL DEVELOPMENT FINANCE CORPORATION 10625 CRESCENT INVESTMENT BANK LTD. 100 FIDELITY INVESTMENT BANK LTD. 1,374 PARAMOUNT INVESTMENT BANK LTD. 264 GULF INSURANCE COMPANY LTD. 13653 DELTA INSURANCE COMPANY LTD. 164 CRESCENT STAR INSURANCE COMPANY LTD. 154 NATIONAL INSURANCE COMPANY LTD. 2275232 FIRST INTER FUND MODARABA 263 UNI CAP MODARABA 136 INDUSTRIAL CAPITAL MODARABA 170 FIRST MEHRAN MODARABA 7935

46 47 First Prudential Modaraba First Prudential Modaraba

PATTERN OF SHARE HOLDING AS AT 30 - 06 - 2010 PATTERN OF SHARE HOLDING AS AT 30 - 06 - 2010 NUMBER OF SHARE HOLDINGS TOTAL NUMBER OF SHARE HOLDINGS TOTAL SHARE SHARES SHARE SHARES HOLDERS HOLDERS HELD HELD 1 320001 325000 325,000 3,396 1 100 274,730 1 330001 335000 331,500 2,757 101 500 861,507 1 340001 345000 341,251 2,231 501 1000 1,923,399 1 350001 355000 353,521 1,999 1001 5000 4,107,579 1 395001 400000 400,000 330 5001 10000 2,371,097 1 475001 480000 477,932 119 10001 15000 1,656,395 1 495001 500000 500,000 65 15001 20000 1,132,452 1 515001 520000 519,792 43 20001 25000 975,090 1 595001 600000 600,000 11 25001 30000 309,098 1 605001 610000 610,000 20 30001 35000 647,523 1 610001 615000 612,786 19 35001 40000 712,342 1 635001 640000 637,000 13 40001 45000 556,946 1 650001 655000 651,000 13 45001 50000 628,652 1 675001 680000 679,483 10 50001 55000 525,260 1 695001 700000 700,000 8 55001 60000 462,248 1 710001 715000 714,448 2 60001 65000 124,666 1 1925001 1930000 1,929,159 4 65001 70000 272,440 1 2275001 2480000 2,275,232 4 70001 75000 293,465 1 2475001 2480000 2,478,374 3 75001 80000 235,289 1 3310001 3315000 3,313,843 4 85001 90000 352,224 1 4200001 4225000 4,220,500 3 90001 95000 280,140 1 4265001 4270000 4,270,000 7 95001 100000 696,574 1 5995001 6000000 6,000,000 2 105001 110000 216,888 1 9565001 9570000 9,567,740 1 115001 120000 120,000 1 9715001 9720000 9,716,508 1 120001 125000 123,071 1 9870001 9875000 9,870,205 1 125001 130000 127,000 2 130001 135000 267,150 11,118 86,942,930 1 135001 140000 140,000 1 140001 145000 142,334 2 145001 150000 300,000 1 150001 155000 150,624 2 155001 160000 317,500 1 170001 175000 175,000 2 175001 180000 355,322 1 180001 185000 180,200 1 200001 205000 205,000 1 205001 210000 206,387 1 210001 215000 211,168 2 215001 220000 436,000 1 220001 225000 223,073 1 225001 230000 227,523 1 230001 235000 235,000 1 235001 240000 236,000 1 245001 250000 250,000 1 255001 260000 257,279 1 300001 305000 303,461 1 315001 320000 317,290

48 49 21 ANNUAL REPORT ANNUAL ST21 JUNE 30, 2010 30, JUNE

First Prudential Modaraba Prudential First

Managed by : by Managed Prudential Capital Management Ltd Management Capital Prudential If undelivered please return to : Talpur Road, P.O Box No.621, Karachi.74000 Road, P.O Talpur Mehersons Estate, First Floor First Prudential Modaraba 21 ANNUAL REPORT ANNUAL ST21 JUNE 30, 2010 30, JUNE

First Prudential Modaraba Prudential First

Managed by : by Managed Prudential Capital Management Ltd. Management Capital Prudential If undelivered please return to : Talpur Road, P.O Box No.621, Karachi.74000 Road, P.O Talpur Mehersons Estate, First Floor First Prudential Modaraba