Annual Report 2011 - Lahore Stock Exchange

LSE Performance Scorecard
Income
Expense
Operating Profit
Share of Profit from
Associated Companies
Surplus for the period
Accumulated Surplus -
Carried Forward
2010-11 2009-10 2008-09 2007-08 2006-07 2005-06
236,286
12%
148,879
-27%
87,407
966%
22,436
-6%
103,587
210%
753,284
16%
211,419
21%
203,220
28%
8,199
-50%
23,984
-32%
33,386
-66%
646,917
6%
174,717
-8%
158,301
1%
16,416
-49%
35,070
-53%
98,531
7%
610,605
18%
189,512
0%
157,047
45%
32,464
-60%
74,258
107%
92,384
-18%
516,158
23%
189,700
4%
108,169
25%
81,530
-14%
35,814
15%
112,795
10%
420,529
22%
182,041
10%
86,692
5%
95,349
15%
31,122
-41%
102,300
4%
343,460
42%
5-Year Financial Targets
Size of Reserves & Surplus
From Rs. 648 Million
To Rs. 1,300 Million
Economic Value Added
20% on Average
Profit Growth
From Rs. 32 Million
To Rs. 194 Million
Target 11-16
Budget FY-11
Actual FY-11
Budget FY-11
Actual FY-11
Target 11-16
Budget FY-11
Actual FY-11
14.9 %
10.0 %
16.5 %
10.4 %
16.5 %
43.0 %
86.0 %
210 %

Contents
03Corporate Information
Company Information | Vision & Mission Statement
07Board of Directors
Board of Directors | Profile of Directors
15Chairman’s Message
19Directors' Report
33Corporate Governance
Statement of Compliance & Ethics | Matrix of Voluntary & Expanded Compliance
43Board Committees
Committees and their proceedings
51Organizational Roundup
73LSE Highlights
81Financial Highlights
85Financials
Corporate Management, Operations and Strategy, Regulatory Affairs & Technology Services Division
Pictorial | Visitors’ Book
Income & Expenditure (10 years) | Horizontal Analysis | Vertical Analysis
Auditors’ Report | Financial Statements | Notes to Financials
1

Corporate Information

Corporate Information
LSE Plaza | 19-Khayaban-e-Aiwan-e-Iqbal | Lahore-54000 | Pakistan
Tel : + 92 42 3636 8000 | Fax: +9242 3636 8484-5
Email:info@lse.com.pk | Web : www.lse.com.pk
4
Board of Directors
n Mr. Aftab Ahmad Khan Chairman
n Mr. Aftab Ahmad Ch. MD/CEO
n Mr. Ammar-ul-Haq Elected Director
n Ms. Bushra Naz Malik Nominee Director
n Mr. Jahanzeb Mirza Elected Director
n Engr. Mazhar Rafiq Elected Director
n Mirza Ejaz Ullah Baig Elected Director
n Mr. M. Masud Akhtar Nominee Director
n Mr. Mumtaz Hussain Syed Nominee Director
n Mr. Naeem Anwar Elected Director
Bankers
n
n
n
n
n
n
n
n
n
n
n
Allied Bank Ltd.
Askari Bank Ltd.
Bank Alfalah Ltd.
Barclays Bank PLC, Pakistan
Bank Al-Habib Ltd.
Faysal Bank Ltd.
Habib Bank Ltd.
Habib Metropolitan Bank Ltd.
MCB Bank Ltd.
National Bank of Pakistan
Summit Bank Ltd.
Principal Officers
n Mr. Farid Malik, CFA CSO/COO (General Manager)
n Rana Naveed Ahmad Company Secretary
n Mr. Khurram Zafar Chief Information Officer
n Mr. Salman Bokhari Head of Finance
Associated Companies
n
n
n
n
n
Central Depository Company of Pakistan Ltd.
National Clearing Company of Pakistan Ltd.
Pakistan Mercantile Exchange Ltd.
The Pakistan Credit Rating Agency Ltd.
Institute of Capital Markets
Legal Advisors
n
n
n
n
M/s. Abid Aziz Sheikh & Advocates
M/s. Hassan & Hassan
M/s. Hassan Kaunain Nafees
M/s. Saleem Baig & Advocates
Auditors
n
M/s. KPMG Taseer Hadi & Co. Chartered
Accountants

Vision and Mission
Vision
To develop ourselves into a
dynamic and prominent multi
product trading place, a well
respected corporate entity and a
valued contributor to the
economy.
Mission
To deliver sustainable value and
offer best possible satisfaction to
all stakeholders .
5
Core Values
n To promote the values of fairness, justice and respect for our
investors in every aspect of the functioning of our markets;
n To establish a culture of responsiveness, excellent customer
services and utmost courtesy to our stakeholders;
n To inculcate the sense of accountability, professionalism,
teamwork and mutual trust in our human capital;
n To always work for sustainable improvement and continuous
innovations in our work methods and products.

Board of Directors

Board of Directors
8
Sitting (from left to right)
n
Engr. Mazhar Rafiq
Elected Director
n
Ms. Bushra Naz Malik
Nominee Director
n
Mr. Aftab Ahmad Khan
Chairman
n
Mr. Muhammad Masud Akhtar
Nominee Director
n
Mr. Ammar-ul-Haq
Elected Director
Standing (from left to right)
n
Mr. Mumtaz Hussain Syed
Nominee Director
n
Mr. Farid Malik
CSO/COO (General Manager)
n
Mr. Aftab Ahmad Ch.
Managing Director
n
Mr. Jahanzeb Mirza
Elected Director
n
Mr. Naeem Anwar
Elected Director
n
Mirza Ejaz Ullah Baig
Elected Director
n
Rana Naveed Ahmed
Company Secretary

Board of Directors
Mr. Aftab Ahmad Khan is the Group Director, Finance and
Accounts at Nishat Group of Companies, which involves
financial planning, strategic decision making and investment
appraisals for the group. He is also a fellow Chartered
Accountant of the Institute of Chartered Accountants of
Pakistan. Mr. Aftab Ahmad Khan has over 47 years of
diversified professional experience in various sectors.
Presently he serves on the boards of Commercial Banking,
Textile, Paper, Energy, Hotel and Tourism sectors. He has also
served on the Punjab Industrial Development Board and in
Public sector organizations such as Ghee, Sugar and Rice mills.
Mr. Aftab Ahmad Khan
Chairman
Mr. Aftab Ahmad Ch., has been the Managing Director/CEO of
the Lahore Stock Exchange (G) Limited since October 2010.
In his earlier capital market assignments, Mr. Aftab besides
heading another domestic exchange in Pakistan also served
as the Chief Operating Officer of an asset management
company. He has also been involved with the Board level work
related to the system designing & implementation of the
domestic nationwide structure for the Securities Clearing and
Settlement Company, as well as for the regulatory and
product development related work at the Board level for the
operations of the only commodity exchange in Pakistan. In the
recent past, Mr. Aftab has also served on the Board of Directors
of other capital market institutions in Pakistan such as M/s
JCR-VIS-a leading independent corporate credit rating agency
in Pakistan, and the Institute of Capital Markets.
9
Mr. Aftab holds an MBA degree from Nicholls State University,
Thibodaux (LA), USA, and is also a graduate of Executive
Management Program of Stanford University, USA. He has also
attended many other securities market related programs both
at home and abroad.
Mr. Aftab Ahmad Ch.
Managing Director

Board of Directors
Mr. Ammar-ul-Haq holds Masters Degree in Business
Administration from London. He has almost 10 years of
experience in the field of capital market. He is serving as
Chief Executive Officer of Al-Haq Securities (Pvt.) Limited
since 1998. His work experience includes selling and
marketing of Pakistani equities to local and international
investors. Mr. Haq had also represented LSE on the Board
of National Clearing Company of Pakistan Limited.
Presently he is representing LSE on the Board of
Directors of Pakistan Mercantile Exchange Limited and
also is the Convener of Legal Affairs Committee of LSE.
Mr. Ammar-ul-Haq
Director
10
Ms. Bushra Naz Malik is a Fellow Member of the Institute of
Chartered Accountants of Pakistan. She also holds MBA
Degrees from Kellogg Business School, Chicago, USA and
Schulich Business School, Toronto, Canada. She also attended
an Advance Management Program in Harvard Business
School, Boston, USA. She has diversified professional
experience of over 18 years. She has been the Group CFO &
Member of Board of Directors of Kohinoor Maple Leaf Group
and CFO & Member of Board of Directors of Nafees Group of
Industries. Presently she is also Chairing the Audit Committee
of LSE.
Ms. Bushra Naz Malik
Director

Board of Directors
Mr. Jahanzeb Mirza is a nominee director of S.D. Mirza
Securities (Private) Limited. He holds BBA (Finance) degree
from the University of Houston (U.S.A). He has several years of
experience in the field of capital/stock market.
He is representing LSE on the Board of Directors of Central
Depository Company of Pakistan Limited. He is also the
Convener of Membership Committee of LSE.
Mr. Jahanzeb Mirza
Director
11
Mr. Mazhar Rafiq is a Bachelor of Engineering (Electrical) from
the University of Engineering and Technology, Lahore. He has
an experience of more than 20 years of capital market. He is
currently the Chief Executive of M/s. M.R. Securities (SMC-Pvt.)
Ltd.
He is representing LSE on the Board of Directors of National
Clearing Company of Pakistan Limited and also the Convener
of Investment Committee of LSE.
Engr. Mazhar Rafiq
Director

Board of Directors
Mirza Ejaz ullah Baig is the Nominee Director of M/s.
Capital Vision Securities (Pvt.) Ltd. He holds B. Com.
degree from the University of the Punjab. He has several
years of experience in the field of capital/stock market.
He is representing LSE on the Board of Directors of
Pakistan Credit Rating Agency Limited and also the
Convener of Tax Committee of LSE.
Mirza Ejaz Ullah Baig
Director
12
Mohammad Masud Akhtar, CEO & MD KSB Pumps Company
Limited is an Electrical Engineer by profession and obtained
his Masters degree from Lehigh University, Pennsylvania USA
and B.Sc. from University of Engineering and Technology
Lahore. He has an extensive and diversified work experience in
Sales & Marketing, Operations and Manufacturing areas. He
has worked on senior management positions of renowned
multinational companies and put them on course to
profitability and growth. He is member of Board of Directors of
Technology Up gradation & Skill Development Company and
Lahore Stock Exchange. He is a member of Board of Governors
of National Management Foundation, LUMS.
He is Vice President of Pakistan Foundry Association. He is also
Director of Pakistan German Business Forum and the
Chairman of PGBF Northern Chapter. He has attended number
of executive training programs including value based
leadership, management and strategy, sales and marketing
and corporate management. He is Certified Director of
Pakistan Institute of Corporate Governance. He is a keen
swimmer and plays golf.
Mr. Muhammad Masud Akhtar
Director

Board of Directors
Mr. Mumtaz H. Syed is an investment banker by profession
with more than 22 years of extensive experience in project
finance, investment management & analysis, business
development and general management. He is presently the
Chief Executive of Crosby Capital Pakistan (Pvt. Ltd. He holds
MBA Degree from LUMS. He has been Instrumental in the
execution of several high profile transactions in sectors such
as energy, telecommunications, banking, cement, textile and
financial services industry. His experience includes
privatizations, acquisitions, divestures, debt arrangement,
equity placement as well as arranging strategic joint ventures.
He has also served on the Board of Directors of a number of
listed companies belonging to various sectors as well as
advisory positions with the Government of Pakistan. He is also
the Convener of Human Resources Committee of LSE.
Mr. Mumtaz Hussain Syed
Director
13
Mr. Naeem Anwar is a Nominee Director/Chief Executive of
Maan Securities (Private) Limited. He has been associated with
capital /stock markets for more than two decades, having
extensive experience of its mechanism and workings.
He holds a Graduate Degree from Karachi University, Karachi.
He is also the Convener of Trading Affairs Committee of LSE.
Mr. Naeem Anwar
Director

Key decisions taken by the Board of Directors
in the interest of market participants:
14
n
n
n
n
n
n
n
n
n
n
n
n
n
n
Provision of electronic submission of Weekly Net Capital Balance facility
through interface provided at LSS.
Reduction of initial listing fee for listing of Pakgen Power Ltd. and Engro
Foods Ltd. at LSE.
Recommended NCCPL to provide MT Market on a single non-segregated
(without identifying the location) platform on undisclosed basis in order
to enable al MT Participants to benefit from a larger pool of liquidity and
also to introduce Settlement Guarantee Mechanism.
Waiver of Market Access Fee on all UTS trades from May 10, 2011 to
February 29, 2012.
Provision of first free of cost terminal for Bonds Automated Trading
System to the Members.
Reduction of basic deposit requirement in Cash-Settled Futures Market
from Rs. 150,000 to Rs. 50,000/-.
Reduction of minimum initial exposure deposit required from a member
for the eligibility of trading in the Ready Market to Rs. 200,000/-.
Launch of new website of LSE.
Approval of Liquidity Network Project
Payment of profit/mark-up return was allowed to members on their cash
margins deposited against exposure. MtM losses and other margins in All
Markets as allowed previously in Deliverable Futures Market only.
Waiver of basic deposit of Rs. 150,000/- to participate in BATS Market.
Waiver of basic deposit required for Deliverable Futures Contract Market.
Exposure Margins in Deliverable Futures Market was allowed in the form
of 50% each in cash and margin eligible securities, as against 100% in
cash.
Allowing individual shareholders (including employees and Executive
Director) of Corporate Brokerage House, for the purpose of authorizing
utilization of their own securities to meet margin requirements of other
UINs.

Chairman’s Message
Chairman’s Message

Chairman’s Message
16
Seek and you will find, persevere and you will succeed!
In securities investment, this phrase contains within it the importance of timely, accurate and easily available information.
For investors seeking beneficial investments, perseverance by diligently searching for information will yield the success of finding such
investments.
The belief in constantly seeking ways to improve the market
was apparent in the market participants and all the other
stakeholders, during the year under review. Complementing
the efforts of members and listed companies in seeking to find
better levels of optimum operational efficiency, LSE also
continued to identify areas of improvement as part of the
Exchange's present and future development.
Greater effort, consistency and diligent application should
continue to be sought in accomplishing the many tasks ahead.
An efficient market needs innovative products and services to
be attractive to the investors. Our future depends on our
ability to adapt to change and lead the way in innovation,
especially in aspects that differentiate us from others; our
strengths. In order to widen accessibility to investors, LSE
encourages its members to expand their network of Branch

Chairman’s Message
Offices to other cities especially the remote towns. The
members should also join hands with the Exchange in
building the investor pool to tap mutual benefits.
Fairness, orderliness and transparency are keystones of
confidence, and together they strengthen the reputation of
the Exchange for operating with the highest integrity.
Maintenance of market integrity and investor protection
remains our primary focus. We undertake a wide range of
regulatory changes which are aimed at ensuring that our
market remains attractive as a destination for listing and
investment.
The Board plays an active role in the strategy development
and planning process. During the year, LSE management
presented strategic business & budgetary plans which were
reviewed and approved by the Board in a series of meetings.
Sustainable recovery in the capital market depends on many
factors; most of which are not within our control. The proactive
role of Government in development of capital market cannot
be ignored. We continue to pursue the Government for
accommodating fiscal & monetary policy which is the major
catalyst for sustaining positive sentiment, improving
investment climate and boosting up the capital market.
It is a fundamental truth that listed companies are the
lifeblood of any stock exchange. We continue to provide a
conducive environment for capital raising through our
efficient processes. The ranking of a stock exchange is usually
determined by the market capitalization of all the companies
listed on the exchange, and it is this market capitalization
which has made LSE the second largest bourse in Pakistan. A
quick snapshot of the listed companies indicates that we have
companies which build the essential infrastructure for the
nation, have received international recognition for excellent
services and have been voted as best service provider for
certain sectors. Furthermore, there is no easy way to measure
the combined charitable contributions these companies have
made to the deserving people of the nation.
LSE has held the Corporate Briefing Program for the benefit of
the investing public. The initiative is aimed at driving the
attractiveness of our market. This program also provides the
opportunity for listed companies to expand the base of their
retail investors and also help the investors to overcome
misconceptions through direct interaction with the top
management of listed companies. We also plan to organize
exhibitions by public listed companies to showcase their
products and services and to enable investors to get a
firsthand look at these companies' operations. LSE also
facilitated the new offerings by setting up of a 'help desk'.
Underscoring all these efforts is our continuous engagement
to increase the level of awareness of the markets' offerings, as
well as build the pipeline of retail investors. We want to
develop a sustainable and diversified investor base.
Here, I would like to advise the listed companies to adopt
greater corporate governance not only as a measure for
control and accountability but as an expanded approach to
continue to seek and find greater investibility and capital
generation capability. LSE will continue to seek and find ways
to strike an optimum balance between promotion of business
efficacy and the need for regulation of the conduct of listed
companies.
Our environment is extremely competitive. Issuers and
investors have become increasingly selective in their outlook
and adept at identifying the best available option for their
needs. To remain in the competition we must address a wide
variety of risks, and I think it is important to share with you the
three which in my opinion outweigh all others:
1. Erosion of our competitive position, resulting in our
losing ground to other markets, with an inability to attract
investors and quality companies to list on LSE.
2. Restoration of confidence of investors by strictly
placement of the internal controls to check willful defaults by
any of the brokers.
3. Most of our new strategies require essential support in
the form of technology and systems for them to be effectively
implemented.
As always, there are many who have contributed to the
financial year just passed. What has been satisfying is the
willingness of so many market participants to add their weight
to our efforts, and my thanks go to all of you. The Regulators
have shown an ability to take bold steps to help develop our
market and our products, and are set to continue doing so. Our
directors have provided guidance and encouragement, and
had a positive impact in terms of improving our governance
and business processes.
I would especially thank Mr. Muhammad Ali, Chairman SECP
and Commissioners as well as Senior Management of SECP for
their guidance and co-operation. My thanks to the member
community for their active support and cooperation
throughout the year.
Finally, the support of LSE management is paramount as we
address the challenges that face us in such a competitive
sphere as ours.
Chairman
17

Directors’ Report

Directors’ Report
20
On behalf of the Board of Directors, I am pleased to present
this report to the honorable members of LSE which will cover
the significant activities intensified and new initiatives
undertaken by the Exchange during the FY 2010-2011 and
also up to the date of this report. A brief about the long term
strategic plan of the Exchange will also be presented in this
report. The year may be considered as period of change since
the Exchange has adopted an out of the box approach after
thorough brain storming to seek diversification in its
operations by taking new initiatives.
ECONOMIC OVERVIEW
The macroeconomic landscape of the country was badly
affected by devastating floods in July 2010, which directly
affected about 20 million people, mostly by destruction of
property, livelihood and infrastructure; thereby inflicted
significant damage to the fragile economy. ADB approved a
US$ 650 million loan to Pakistan which was used to rebuild the
damaged infrastructure. Shortage of power and gas,
escalating utilities costs, high borrowing cost exacerbated the
situation for Large Scale Manufacturing as well as Service
sectors. The fiscal position remained weak with poor revenue
generation whilst expenditure escalated. Real GDP growth in
the outgoing year was recorded at 2.4% as compared to 3.8%
in the previous Fiscal Year. Nevertheless, our economy has
shown strong capacity to overcome challenges originated
from both internal and external economic environment while
struggling towards achieving long term sustainable growth.
PERFORMANCE OF THE MARKET
The market started in the FY 2010-11 with some positive note
as LSE-25 Index starting from 3092.70 points. The market and
the Index reached the lowest level of 2970.86 points of the
period under review and closed at 3051.12 points at the close
of the financial year. Local investors remained jittery while
seeking clarity on the modalities of Capital Gain Tax (CGT).
Investment in capital market during the period July-March
2010-11 by the foreign investors depicted a net inflow of US$
301.5 million. Corporate profitability increased in year 2011
but profitability concentrated in few large companies in the
Energy, Telecom and Banking sectors.
During the period under review, seven Open end Funds were
listed. Further, two companies, one TFC and one Participation
Term Certificate were in the pipeline of listings. Two Closed
end Funds were converted into Open End Funds. Twelve
securities were delisted out of which three companies merged
with other companies, seven companies went into Winding
Up by Court Orders, one Open end Fund matured and fully
redeemed and one Company was de-listed after the buy-back
the shares by the sponsors.
Total companies listed at LSE were 496 as compared to 510
companies in the previous year. The total listed capital
increased from Rs. 842.596 billion to Rs. 888.190 billion as on
June 30, 2011. Similarly, the aggregate market capitalization
increased from Rs. 2,622.928 billion to Rs. 3,166.044 billion as
on June 30, 2011. The most concerning and alarming factor to
highlight since the start of the fiscal year has been gradual
deterioration of the market activity/volume. The volumes of
the Exchange shrunk considerably i.e. by 66%. During the
period under review, total share volume of regular market
reduced to 1,124.762 million shares as compared to previous
FY figure of 3,362.668 million shares.
FINANCIAL PERFORMANCE OF THE EXCHANGE
The Exchange earned a Surplus after Tax of PKR 103.6 Million in
FY 2011 up by 210% from PKR 33.4 Million in FY 2010. The
increase in surplus is attributable to both increase in Total
Income and reduction in the Total Expenses. Resultantly, the
Exchange's Total Assets have increased to PKR 2.37 Billion with
Reserves & Surplus reaching PKR 755 Million outperforming
FY10 and Budgeted FY 2011. More importantly the
performance has set up an excellent launching pad for the
Exchange to achieve its strategic goals outlined in the
Strategic Business Plan 2011-15.
BALANCE SHEET
The total size of the Balance Sheet FY11 increased by PKR
34.60 million or 1.48% from the last year and reached at PKR
2,365.87 million from PKR 2,334.26 million. Operating Fixed
Assets and Capital Work in Progress were reduced by PKR
14.507 million or (-2%) due to depreciation. There was no
major direct addition in fixed assets. An amount of around PKR
20 million was capitalized from CWIP to fixed assets. Current
Assets increased due to increase of PKR 71 million in
receivables on account of Additional Listing Fee from NIB bank
and Fauji Cement Company. Cash and Bank balance show a
reduction of 3% from last year due to transfer of PKR 55 million
to the MCF trust. Reserve and Surplus increased by PKR 106.8
million or 16% due to transfer of net income from Income &
Expenditure Statement. Non-Current Liabilities shrank by PKR
17.64 million or 9% due to transfer of rent to Income and
Expenditure Account during the period. Overall Current
Liabilities were also reduced by PKR 51 million or 6%.
INCOME & EXPENDITURE ACCOUNT
Income
The Annual Income of the Exchange increased by around PKR
25 Million or 12% in the FY11 to PKR 236 Million from PKR 211
Million which is the highest ever income recorded by the
Exchange. Income from Fee and Other Income were the major
contributors to this net increase while Software Income
showed a dismal performance.

Directors’ Report
Actual
2010-11
Actual
2009-10
Variance
2010-11 Vs 2009-10
Remarks / Reasons / Explanations
Amount Percentage
Expenses
Administrative expenses 129,757 132,660 (2,903) -2% Reduction in Salaries & Benefits Expense and implementation of costcutting
measures
Finance cost 339 1,922 (1,583) -82% Finance Leases Matured. Smaller loss on Foreign Exchange Provisions
made for Financial Irregularities, Impairments of Assets, Impairments of
Invests during last year.
Other charges 18,783 68,641 (49,858) -73%
148,879 203,223 (54,344) -27%
Administrative Expenses: The total Administrative Expenses
decreased by 2.2% to PKR 130 Million in FY11 against 133
Million in FY10.
n Salaries & Benefits: The Salaries & Benefits expense overall
declined by 3% to PKR 76 Million from 78 Million in FY10. This
decrease was despite the extraordinary payments of around
PKR 2.9 million as severance pay to various employees during
the FY11.
n IT Expense: The IT Related Expenses were curtailed while
ensuring that the services are not disrupted. The expenses
resultantly showed an overall decrease of 11% to PKR 10.9
Million. This decrease was mainly due to decrease in Software
License Expenses (down by PKR 1.8Million).
Finance Charges: The Expenses decreased by 82% to 0.3
Million as against PKR 1.9 Million in FY10. In FY10, these
expenses included Finance charges on leases (PKR 0.9 Million),
Bank Charges (PKR 0.1 Million) and Foreign Exchange Loss
(PKR 0.9 Million). In FY11, most of the Lease agreements fully
matured and Loss on Foreign Exchange stood at 0.1 Million.
Other Charges: Other charges decreased by 73% or by
around PKR 50 Million compared to FY10, is described here
under:
n Legal Expenses: The expenses decreased by 47% to PKR
2.1 Million against PKR 4.0 Million in FY10. The higher expense
in FY10 was mainly due to a payment of PKR 800,000 to a
lawyer for case in the Competition Commission of Pakistan.
n Consultancy Charges: The expenses decreased by 20% to
PKR 2.9 Million against PKR 3.6 Million in FY10. In FY10, the
Exchange paid PKR 1.8 Million to E&Y for Special Audit of
Internal Controls.
Donations: PKR 5.0 Million was contributed to the Chief
Minister's Flood Relief Fund during August 2011.
n Provisions: In FY11 a provision of PKR 7.2 Million was
recorded against doubtful Annual Listing Fee. During FY10, a
total provision of PKR 49 Million had been recorded on
account of various provisions for impairment in fixed assets,
impairment of investment in Innovative Housing and
Financial Irregularities.
SHARE OF PROFIT/ (LOSS) ASSOCIATED COMPANIES
The Exchange's share in the income of its Associated
Companies registered a decrease of 6% to PKR 22 Million in
FY2011 from PKR 24 Million in FY2010.
n Pakistan Credit Rating Agency Limited: PACRA declared
a net income of PKR 11.472 Million in FY 2011. The Exchange’s
proportionate share for 36% equity in PACRA comes to PKR
4.130 Million.
n Central Depository Company of Pakistan: CDC declared
a net income of PKR 175.203 Million in FY 2011. The Exchange’s
proportionate share for 10% equity in CDC comes to PKR
17.520 Million.
n National Clearing Company of Pakistan: NCCPL
declared a net income of PKR 3.345 Million in FY 2011. The
Exchange’s proportionate share for 23.53% equity in NCCPL
comes to PKR 0.787 Million.
21

Directors' Report
Actual
2010-11
Actual
2009-10
Variance
2010-11 Vs 2009-10
Remarks / Reasons / Explanations
Amount Percentage
Income
Fee 146,602 138,164 8,438 6% Additional listing fee from NIB bank of 62M
Profit on rental 9,314 6,353 2,961 47% increase due to revision of tenancy agreement
Profit on bank deposits 53,513 51,655 1,858 4% Lower income due to decrease in funds at LSE
Software income 6,161 8,908 (2,747) -31% Development of SLB software. AMC of Ghana Stock Exchange not renewed
Other income 20,696 6,340 14,356 226% Reversal of bonus and Refund from Supplier
236,287 211,420 24,867 12%
22
Income from Fee: Incomes from the core operations of the
Exchange increased by 6%. Listing Operations were almost
the sole contributor, income from which represented more
than 99% of the total Fee. 7 new Open-Ended Funds were
listed during the year however no new company was listed. A
major event during the year was issuance of Right Shares by
NIB Bank Limited that fetched the Exchange a one-time
windfall Additional Listing Fee of PKR 62 million. Overall the
Exchange received PKR 114 on account of Additional Listing
Fee which forms 78% of the Fee received during the FY11.
Annual Listing Fee increased by 1% to reach PKR 30 Million in
FY11. Income from Trading Fee decreased by 79% to PKR 0.9
Million down from PKR 4.3 Million due to low trading volumes.
Income from Rental-Net: For the purpose of fairer
presentation, administrative expenses directly related to the
maintenance of LSE Building have been netted with the Rental
Income. Net Rental Income increased by 46% YoY due to 16%
increase in the Gross Rental Income; Building Related
Expenses increased by 8%. Resultantly, the Net Rental Margin
was 27% as opposed to 21% in FY10. Gross Rental Income
from Banks increased by 19% due to renewal & upward
revision of rental agreements. Other Income also increased by
8% due to revision in tenancy agreements with telecom
operators. On the expenses side, Rent & Taxes increased by
around PKR 3.0million due to charging of the Property Tax for 2
years i.e. PKR 1.5 Million and around PKR 1million rent for
vacated space on the Faisalabad Trading Floor.
Profit on Bank Deposits: The Income increased by 3.6%
compared to last year. The decrease in profit was mainly due to
decrease in profits on Exposure Deposits with the Clearing
House.
Software Income: The income from Technology services
witnessed a decrease of 30% during the FY as income from all
subheads in this head declined. Ultra Trade Lease Rental from
ISE decreased by 13% due to reduction in number of operative
terminals as a result of lower market activity. On Software
Sales & Services end, while the Technology Division
successfully bid and developed Securities Lending & Borrowing
Software for NCCPL, it lost its Annual Maintenance Contract
with Ghana Stock Exchange, resulting in an overall decrease of
40% in this subhead.
Other Income: The Income increased by 226% to PKR 20.6
million mainly attributable due to accounting treatment of
reversal of provisions in the Miscellaneous Income sub-head
due to Bonuses (PKR 10.4 million due to non-payment),
Employees' VSS (PKR 1.7 million due to non-payment), and
Financial Irregularities (PKR 5.3 million).
Expenses
Keeping the expenses under check and wherever possible
reduction of non-development expenses was an area of focus
of the management during the FY 2011 due to which the
overall expenses stayed almost in the range of the last year. For
this purpose, the management undertook various initiatives
to rationalize various expenses.

Directors' Report
BOARD'S RESPONSE TO THE AUDITORS' OBSERVATIONS
AND THE MATTERS OF SPECIFIC APPROVALS/ATTENTION
At the time of the consideration and the approval of the
aforementioned financial statements, the Auditors, in their
Board Letter had required the Board to consider and
specifically approve and furnish response to certain matters.
While the same was done by the Board, however the
followings are highlighted for the information of the
Members:
1. The Auditors sought the specific approvals of the Board
with regards to certain expenditures. Accordingly, the Board
gave approval to the following expenditures/charges/
allocations/adjustments and provisions on the verification of
the Internal Auditors and upon the recommendation of the
Board Audit Committee for recording the effect of the same in
the Financial Statements of the Exchange:
Description
Amount
(Rs. in '000)
Addition to Fixed Assets-Cost 4,336
Disposal of Fixed Assets-Cost 84
Amount Allocated to the Employees' Welfare Fund 318
Payments made from the Employees' Welfare Fund 318
Provision made against Doubtful Receivables 7,224
Related Parties Transactions (Note # 39 to the Financial Statements) 18,433
2. The Board also considered the following matters of specific
attention and decided as under besides responding
appropriately wherever needed:
n The Auditors qualified the audit report because of
uncertainty about the recoverability of Rs. 181.531 million due
from the defaulted/suspended Members of Exchange as
detailed in note 24. While the Board considered the matter
and advised the management to expedite the matter to get
the concerned court cases resolved at the earliest, however,
the Board noted that an amount of Rs. 78.088 million has
already been realized from the sale of shares and the proceeds
are kept in the interest bearing accounts. The Exchange is not
utilizing this amount at present, pending final resolution of
the Court cases. Furthermore, an amount of Rs. 7.075 million
was also realized during the FY 2002 when the Exchange had
auctioned the seat of one of the defaulted/suspended
member. The Exchange also has the right, under its Rules and
Regulations, to sell 3 other seats belonging to those
defaulted/suspended Members. At the current market price,
these seats may be sold for Rs. 37.5M approximately. The
Exchange also has the right to sell 6 rooms belonging to these
defaulted/suspended Members. At the current market price,
the Exchange may realize Rs. 24 million approximately from
these sales. These Memberships and rooms are the collateral
with the Exchange as the recoverability of the Clearing House
dues has a preferential status. The sale of these assets has been
held up due to pending Court cases. The Civil Judge - Lahore,
vide his order dated July 7th, 2003 has also attached the CDC
accounts of a defaulted member and his associates containing
shares having a value of Rs. 481.480 Million. As the above
amounts are in excess of the amounts receivable, therefore,
the management believes that no adverse effect is expected
on the financial condition of the Exchange.
n During the year the Company decided to fund the MCF
Trust by allocating the amounts having been accrued to the
fund with effect from the date of the establishment of the MCF
Trust i.e. April 14, 2006. A total amount of Rs. 55.401 million has
been transferred to Members Contribution Fund Trust being
the amount of total MCF Contributions and profit received
thereon since April 14, 2006 till June 30, 2011.
The External Auditors advised the Board to formally approve
the said transfer of funds to the MCF Trust. Accordingly, the
Board of Directors has formally approved transfer of the
marked Funds to the MCF Trust .
23

Directors' Report
24
ONGOING & FUTURE INITIATIVES
5 YEARS' STRATEGIC BUSINESS & BUDGETARY PLAN
It was for the first time in the history of the Exchange that the
management presented a comprehensive document on 5
Years' Strategic Business & Budgetary Plan with following
objectives. The plan for the years 2011-2016 was reviewed by
the Board in a series of meetings.
The strategic plan's objectives are classified as under:
Corporate Revitalization
n To rebalance the organization for achieving long term
corporate goals;
n To optimally utilize available resources for maximum
efficiency;
n To increase surplus size to PKR 1.3 billion at a CAGR of 20%.
Marketplace Initiatives
n To improve the credibility, fairness and efficiency of our
market for the investors;
n To attain one fourth liquidity in domestic equity trading;
n To position the Exchange in new segments by creating
efficient price discovery platform for a diverse range of asset
classes.
Some of the initiatives undertaken/planned are summarized
below:
1. RESTRUCTURING OF THE EXCHANGE
In order to bring efficiency in the operations of the Exchange,
the LSE Secretariat has been organized into four Divisions
each headed by a senior managerial level employee. The four
Divisions and their heads are described as under:
Division
Operations & Strategy Division:
Regulatory Affairs Division :
Technology Services Division:
Headed by
Chief Operations/Strategy
Officer (General Manager)
Chief Regulatory Officer
Chief Information Officer
Corporate Management Division: Company Secretary
Further, in order to improve performance following new
departments have been created under these divisions:
New Departments
n Member Relations Department
n Technology Business Development
n Compliance & Reporting
n Investor Relations Department
New Divisions
n Operations & Strategy Division
n Technology Services Division
n Corporate Management Division
n Regulatory Affairs Division
2. EXISTING MARKET DEVELOPMENT
Brief descriptions of some of the projects proposed in the plan
are as under:
n LIQUIDITY NETWORK PROJECT
This project is an attempt to re-vitalize LSE's order book and
mitigate inter-exchange trading issues by facilitating LSE
members to place their orders within ULTRA with the
provision of forwarding the unexecuted orders (after a
specified time limit) to KATS through pre-designated KSE
based Liquidity Provider(s).
n MULTI-MARKET GATEWAY
The aim of this initiative is to provide cost effective multiassets
trading opportunity to the members on singular
platform. LSE will set-up a subsidiary that will acquire
membership of Pakistan Mercantile Exchange. This subsidiary
will primarily act as a Brokers' Broker for accessing PMEX and
Spot Trading Market.
n AFTER-HOURS TRADING
The ability to trade after the market trading time of a stock
exchange is referred to as After-Hours Trading. Although there
are issues with price stability and reduced liquidity during
After-Hours Trading, there are potential users of this facility
especially for event driven momentum trading. Furthermore,
the market has the potential to attract investors across many
different time zones in the world thereby enabling some
hours of trading time to almost every continent. This project
may be offered in a variety of options depending upon the
regulatory approvals.
n MOBILE TRADING
In order to keep pace with technological trends and
developments, the Management is proposing to develop
mobile phone and web based trading applications. These
applications will assist in increasing accessibility to the market
and will provide members/ investors with an opportunity to
trade while on the move. It is envisaged that these two
applications will not only help in making trading more
convenient (in terms of location and accessibility) but will also
help members in attracting new clients. These two
applications would also make the stock markets as mass
markets as it would become possible for every mobile
consumer to access our market through their handsets.

Directors' Report
n MARKET MAKERS
Under this initiative, the Exchange will encourage and give
incentives to its Brokers to start Market Making activity by
maintaining firm bid/offer price in a given security by standing
ready to buy or sell at quoted prices.
n UTS/NMS
LSE will plan revival of Unified Trading System by
renegotiating the agreement with ISE and exploring options
for an expansion into National Market System (NMS) by
continuing efforts to make KSE join this platform.
n BONDS & DERIVATIVE TRADING
SECP has identified the development of a vibrant debt market
as one of its key focus areas. Based on the recommendations of
a Review Committee, the Bonds Automated Trading System
(“BATS”) is currently being re-vamped. There is also a need to
introduce Derivatives Trading to broaden the menu of market
segments currently being offered by the exchanges. The
timelines for these products will be worked in coordination
with SECP and the other Exchanges.
3. NEW MARKET DEVELOPMENT- SPOT TRADING
ECO-SYSTEM
Under this initiative, a country-wide, electronically integrated,
transparent ecosystem for spot trading of commodities shall
be developed. LSE plans to invest in a company that will
manage a nation-wide ecosystem supporting collateral
management companies, insurance companies, logistics
partners, banks, technology vendors and trading members.
4. ENHANCED MARKET PLACE INTEGRITY
n ENHANCED MANDATE FOR THE CRO & REGULATORY
DIVISION
In order to enable the Regulatory Affairs Division to perform
its tasks independently without any influence or pressure, the
position of the Chief Regulatory Officer (CRO) has been
envisaged to be made an independent post. As a first step
towards this transition, LSE Board has already appointed the
CRO as the head of the Arbitration Committee so that the
proceedings of this Committee can proceed without any
conflict of interest. Furthermore, 50% of the members on the
Arbitration Committee are comprised of the Management
staff. Both of these landmark decisions are expected to greatly
boost the confidence of the investors in the process of dispute
resolution system mechanism of the Exchange.
n INTRODUCTION OF SETTLEMENT GUARANTEE
MECHANISM
LSE has also floated the idea of a Central Clearing and
Settlement Guarantee to cover default risk and to ensure
timely settlement of all trades executed between brokers on
behalf of proprietary account or on behalf of the clients. This
central Clearing and Settlement Guarantee is essential to
promote credibility and confidence in brokerage houses
trading activity in all segments of the stock market. This fund is
supposed to meet all settlement obligations without any
discretion and shall provide guarantee in case of any lack of
commitment or non-performance of settlement of
transactions by any member. On the proposal of LSE, NCCPL
has constituted a Committee to evaluate the idea for
implementation.
25

Director’s Report
5. ENHANCING INVESTOR RELATIONS
IR DEPARTMENT
LSE has established 'Investor Relations Department' under the
Regulatory Division. In an age when instant corporate
information can be transmitted to a large audience via the
internet, companies which do not engage with investors on a
continuous basis will lack visibility. The Investor Relations (IR)
challenge is to secure investors' interest by delivering
information effectively and in a clear and timely manner.
Managing investor expectations through an effective ongoing
IR program is crucial for us.
This department shall mainly be responsible for investor
reporting and communication, and would also undertake the
following major initiatives in conjunction with the other
Divisions of LSE, wherever necessary. The idea behind this
initiative is that the Stock Exchange has not been able to
involve a significant percentage of population of the country
in the trading or investment activity in the Stock Exchange.
Moreover, declining economic & commercial activity in the
country coupled with the tightening of regulations has also
forced the current investors out of the market. Accordingly, it
is high time that LSE adopts a policy whereby it makes
investors outreach as a cornerstone of its efforts to expand the
market.
n Investors Education / Awareness Campaign
The Capital Market entities have not done enough with
regards to increasing investor education & awareness in the
general public about the capital market, which has caused a
lot of misconceptions about it. The Exchange now in
collaboration with other market participants intends to
launch a comprehensive investor awareness campaign to
reach the masses across Pakistan. As part of this campaign
investment seminars & road shows will be conducted,
investment guides & literature will be published, marketing
campaigns will be launched and courses to increase financial
literacy in the existing & prospective investors will be
introduced. The intention is that the current & future investors
are apprised about their rights & responsibilities and the
opportunities & risks investment in stock market offers.
26
n Young Investors Scheme
Most of the Universities in Pakistan now offer at least one
course on Investment & Portfolio Management at both the
undergraduate & post graduate level. However, as the study
material has no relevance with the local investment
environment, these finance graduates rarely explore the stock
exchanges as investment avenues later in their lives. LSE has
already in the past been inviting & encouraging educational
institutes to visit the Exchange to introduce them to the
working of the LSE. Going forward, the Exchange plans to
work closely with the educational institutes to not only
include local investment environment contents in the
curriculum but also to give them access to the market to put
theory into practice.
n Virtual Investment Management Games / Competitions
The Exchange in collaboration with the educational institutes
plans to launch a virtual trading platform for the students. To
encourage investors to use this platform, inter-university
fund/portfolio management & trading competitions will be
conducted. The Exchange expects that these activities will
cultivate interest in the students for investment & trading in
the stock market.
n Investors Hotline
Under this initiative, the Exchange shall establish a dedicated
telephone hotline containing the pre-recorded investors'
awareness messages. The investors would be able to call on
this hotline and get the basic market information/education
from though this hotline.
n Seminars / Conferences / Road Shows
The Exchange shall also participate in national and
international seminars, conferences and road shows
organized to promote investment in Pakistan.

Directors' Report
6 . I M P R O V I N G T R A N S PA R E N C Y A N D
ACCOUNTABILITY
Current management has to address some crucial issues that
were potentially detrimental to the long term sustainability
and workings of the Exchange. Such issues included but were
not limited to irregularities that took place through the
overriding of the internal controls, and absence of Standard
Operating Procedures etc. To mitigate the risks in the
operations/day to day transactions of the LSE, management
has taken a number of steps. Internal Audit department plays
a critical role to bring discipline and harmonization in the
processing the financial and non financial transactions. To
bring autonomy and independence in the function of internal
audit LSE has made co-sourcing arrangements with E&Y.
Further, In order to effectively use the process of system audit
for risk identification and enforcement of compliance, the
system audit related enforcement are planned to be
stringently followed. As part of the new HR manual, a
mechanism has been proposed whereby an employee
aggrieved by any action of the MD/CEO may send his/her
complaint to the Chairman of the Board. Also, the Manual
would include create zero tolerance for sexual harassments
and would encourage the whistle blowing process to improve
the accountability and discipline within the LSE.
n ONLINE MECHANISM FOR THE SUBMISSION OF
INVESTOR COMPLAINTS
In order to protect the rights of investors, LSE realizes that in
future, winning the trust of the investors would be the
cornerstone of its image building strategy. In order to keep a
vigilant eye on investors' issues and to provide a platform to
the general investors for voicing their concerns, an online
mechanism of submission of investor complaints has been
provided through LSE website.
n ASK THE BOARD
An active communication channel via LSE website has been
established through which the member community can put
their queries and suggestion which can be presented before
the Board of Directors of the Exchange in the shape of Agenda
items for consideration and decision.
n ARBITRATION COMMITTEE
Under Article 134 of the Exchange
The Board has resolved that the use of mechanism of alternate
dispute settlement through Arbitration Committee, as
provided under Article 134 of the Articles of Association of
LSE, shall be the mandatory first forum for seeking settlement
of complaints by the members of the Exchange. The Board has
decided that if a member bypasses this first available forum,
then the legal costs incurred by LSE in defending the case(s)
would be recovered from the concerned member. Further, an
appropriate disciplinary action would also be taken by the
Board against any member who violates the mandatory
provision specifying the arbitration under Article 135 as
'conditions precedent to any other action at law as explained
under the said Article of Association of LSE.
7. ENHANCING MEMBER RELATIONS
Member Relations Department (MRD) continued to support
the members to provide one window operations to the LSE
members. Further, members' capacity building initiative and
introductory sessions were held in the auditorium of the
Exchange for the members before taking any initiative which
could be directly or indirectly relates to them. IT support
function has also been entrusted to MRD.
An online Membership Enrollment application was
developed to solicit interest from prospective members
through an electronic medium. Further, the 'Membership
Manual' has been prepared to give a head start to any new
entrant regarding the requirements and procedure to be
followed by the brokers, both at the initial stage and on
regular basis.
In order to facilitate the members' trading, the Board has
decided to reduce the initial exposure deposit to Rs. 200,000/-
and to refund of surplus money to the members.
Our IT Team has developed a new application to store online
all information related to the members and brokers including
information about the directors, contact details, branch
information, paid up capital and registration status. A web
based Member support ticketing system was also developed
and deployed to reduce the paperwork involved in the
support process and bring transparency to the support
procedures and track various types of support requests, their
frequency and time to resolution.
On the social side, the Exchange has also started to send
Birthday wishes to its members. An Itfar dinner was arranged
and an Eid-millan party was also held to share the Eid
greetings.
n M E M B E R S C O N T I N U O U S P R O F E S S I O N A L
DEVELOPMENT
Members Continuous Professional Development Program is a
series of Seminars, Workshops, Presentations and Training
Sessions aimed at capacity building of members. The focus of
this initiative is to facilitate members in expanding the scope
of their businesses from traditionally being retail brokerage
houses to full fledge investment services providers. The
program will enable them to offer a wide array of services such
as Research, Asset Valuation, Assets & Portfolio Management,
IPO Advisory, Mergers & Acquisitions and Market Making. The
programs will allow the members to compete in today's
dynamic & evolving financial markets of Pakistan. Programs
focusing on enhancing financial literacy in the members of the
Exchange will also be arranged for the Members so they may
be able to fully comprehend the potential of more complex
Exchange Traded Products for the benefit of investors,
Exchange and the Capital Market of Pakistan.
27

Directors' Report
28
n ANNUAL REGISTRATIONS AND FILING PROCESSES
The Exchange is aware of the unnecessary burden on the
members at the time of annual renewal of their Broker
Registration. Same documents have to be re-submitted every
year causing inefficiencies at both the Members & Exchange's
end. It is now planned that all the required documents &
paperwork will be automated by the Exchange. The Members
Relations Department (MRD) will oversee and facilitate the
members in submission of all the required documents and
completing all necessary processes. Forms & documents that
are to be submitted every year will be filled by the MRD and
submitted following sign-off by the members.
n ONLINE SYSTEM FOR REPORTING REGULATION'S
COMPLIANCE
The members are required to comply with different
regulations & laws from time to time and report such
compliance to the Exchange. The Exchange in view of adding
efficiencies & facilitating members in these reporting has
automated such compliances by providing online interfaces
e.g. compliance with AML Regulations regarding submission
of all suspicious cash transactions over and above Rs. 25,000,
Compliance with weekly NCB Reporting and Compliance with
directions of Ministry of Foreign Affairs.
n 7.4 ASSOCIATION FOR REGULATING THE CONDUCT OF
THE STOCK BROKERS
LSE had proposed the establishment of a self monitoring
professional association for regulating the conduct of the
stock brokers. The project is aimed at the setting up of a self
monitoring broker association which shall be positioned to
effectively regulate its members and contribute to a culture of
compliance and self enforcement in the country. Once
implemented, the project would lead to the establishment of
better ethical and honest business practices in the broker
community besides serving as a tool to promote the
confidence and the trust of the investors and contributing to
an effective investors' protection framework in the country.
We are pleased to inform you that the USAID has approved its
concept paper. In this regard, a formal application has been
filed for the USAID's Small Grants and Ambassador's Fund
Program for the funding of the Project.
8. ENHANCING LISTED COMPANIES RELATIONS
n CORPORATE BRIEFING PROGRAMS
Corporate Briefings Program (CBP) is an initiative to increase
information efficiency & parity in the marketplace. The CBP
Program is an interactive session organized by the Exchange
to bring together market participants such as members,
investors & analyst and company representatives, so that
accurate first hand information reaches the participants.
Through CBP, trading activity leaders and companies that
have a large investor base are invited periodically for
presentation about their company's current state, future plans
and other matters they deem fit to disclose. The CBPs are part
of LSE's mission to promote Investor Relations in the
Corporate Sector of Pakistan. While investor relations is of
fundamental importance for companies in developed
countries and for forward looking companies, the IR function
has mostly been given low or no importance by most of our
listed companies. LSE through such initiatives will try not only
to highlight the importance of IR function but will also be
facilitating listed companies in this regard. During the period
under review 5 companies participated in this Program to
make it a success.
n PAKISTAN IPO SUMMIT
LSE joined hands with SAFE and SECP to organize the first ever
'Pakistan IPO Summit' held on October 3, 2011 at Lahore with a
purpose to attract such companies which were considering an
IPO, to meet with the market regulators/administrators,
financial advisors and underwriters etc., and learn about the
steps involved in bringing their companies to the market. The
major purpose of the summit was to highlight how our
markets can assist these potential IPO companies to meet
their objective of raising funds from the general public for
their future growth strategy.
The event was very much appreciated by the financial and
corporate sector and attracted representatives from 32
potential issuers along with 50 entities from the corporate
finance fraternity including regulators, stock exchanges,
investment banks, accounting firms, legal practitioners,
underwriters, the brokerage industry and other institutions
etc. The summit was successful in achieving its aim to identify
the most promising companies for future IPOs, and
highlighting the benefits and the pathway to manage a
successful IPO to aforesaid companies.
n REDUCTION OF INITIAL LISTING FEE
In order to facilitate the listing of the companies at the
Exchange, the Board reduced the initial listing fee for Pakgen
Power Ltd. and Engro Foods Ltd.

Directors' Report
9. ENHANCING INTERNATIONAL RELATIONS
In order to remain relevant in a global context and to gain the
knowledge and share the development of the securities
industry at the international level and projecting LSE in the
proper perspective, LSE continued its association with South
Asian Federation of Exchanges (SAFE) and Federation of Euro
Asian Stock Exchanges (FEAS).
LSE attended the 16th General Assembly of FEAS held on
December 7, 2009 at Istanbul, Turkey and 17th General
Assembly held on September Almaty, Kazakhstan. LSE also
participated in the marketing exhibition. CIO LSE represented
LSE in the exhibition to display and market the in-house
developed software products of LSE to attract foreign clients.
LSE also wants to form international alliances with regional
and other international securities exchanges in order to
facilitate cross border trades and listings in the future. LSE
entered into a MOU with Tehran Stock Exchange to provide a
frame work for cooperation over various topics and increased
mutual understanding between the Exchanges.
LSE also signed a MOU with Global Board of Trade, Mauritius
for building a partnership for the development of securities
markets within the respective jurisdictions of operation of
each entity.
LSE also entered into a MOU with Financial Technologies
(India) Ltd. (FTIL) - a growing India-based operator of securities
and derivatives exchanges and developer of electronic
trading platforms, to seek assistance for Spot Trading Eco
System project.
The above measures will also facilitate in putting us on the
radar screen of a wider audience of sophisticated
international institutional investors.
10. ENHANCING RELATIONS WITH THE
FINANCIAL MEDIA
The financial media continues to be a most effective conduit.
News and events of LSE and financial results of listed
companies were disseminated to all classes of investors
effectively through media coverage which generates interest
from individuals, institutions and analysts alike. Investor
opinion of a company is formed not only from stories that are
immediate and newsworthy but also from more considered,
analytical pieces. Articles or broadcast media presentations
from reputable financial commentators and analysts can have
considerable influence. Therefore, LSE maintained a good
relationship with leading journalists and the financial press,
broadcast and electronic media. Since simply putting out
press releases does not guarantee coverage as there is
competition for the attention of the media and coverage
capacity is limited. LSE therefore hired the services of a
professional journalist to conduct a detailed training course
for its key staff members covering all these aspects.
CORPORATE GOVERNANCE
LSE Board of Directors had voluntarily adopted the Code of
Corporate Governance few years ago. However, no connected
work related to the same was done. Accordingly, during the
year not only that all related work was undertaken but also a
revised matrix for Corporate Governance was tasked to be
developed for the Exchange. Till the issuance of this report, the
CG matrix for LSE was under preparation. However, some of
the salient points regarding CG are highlighted as under:
n Directors Fit and Proper Criteria
- As the frontline regulator the Board of Directors of the
Exchange is entrusted with fiduciary roles of discharging their
duties in utmost good faith. Moreover, the Directors are
expected to refrain from putting themselves in a position
where their personal interest and their fiduciary duties may
conflict. The regulatory framework prohibits the Directors on
the Board to abstain from participating in discussion of or
voting on any such agenda/issue which can give rise to a
conflict of interest on their part.
- Under the Article 64-A(4) of the Articles of Association of LSE,
no director of LSE shall participate in any discussion and/or
vote on any matter if he has any interest, pecuniary or
otherwise, in his duty to honestly discharge his functions as a
director of LSE and his other professional and/or business
occupation.
- The Directors are required to disclose their interest in writing
before each meeting of the Board of Directors, thereby
communicating that they have no conflict of interest,
whatsoever, with any agenda item to be discussed/voted
upon therein.
- Any person desiring to act as Director on the Board of
Directors of LSE shall be judged on the basis of Fit & Proper
Criteria as mentioned in Regulation No. 44 of the General
Rules & Regulations of LSE, which is in addition to meeting
requirements stipulated under the Companies Ordinance,
1984 relating to eligibility of a director. The criteria defines
certain bench marks for the candidates relating to Integrity,
Honesty, Reputation, Experience, Qualification, Solvency and
Financial Integrity, The Fit & Proper Criteria is perpetual in
nature and the Exchange has to ensure compliance with the
provisions of the Fit and Proper Criteria.
- The Directors are also required to maintain the
confidentiality of information entrusted to them by the
Exchange and other confidential information about the
Exchange that comes to them, except when disclosure is
authorized by the Board or legally mandated.
n Board of Directors Meetings
A total 21 meetings of the Governing Board of Directors were
held during the period from March 25, 2011 to the date of this
report. It may be mentioned that the Board in the very first
meeting fixed the remuneration of Directors for attending
Board meetings as Rs. 10,000/- instead of Rs. 20,000/- as per
previous year. The participation of each Director in the
meeting of the Board is as:
29

Directors' Report
30
Name of Director Regular Emergent Meetings
Attended
Mr. Aftab Ahmad Khan (Chairman) 8 11 19
Mr. Aftab Ahmad Ch. (MD/CEO) 8 13 21
Mr. Ammar ul Haq 8 13 21
Mr. Asif Kamal (Resigned on 17-May-11) 2 1 3
Ms. Bushra Naz Malik 7 10 17
Mr. Ejaz ullah Baig 8 13 21
Mr. Jahanzeb Mirza 8 13 21
Engr. Mazhar Rafiq 8 13 21
Mr. M. Masud Akhtar (Appointed on 07-Jul-11) 4 5 9
Mr. Mumtaz Hussain Syed 6 9 15
Mr. Naeem Anwar 6 13 19
n Related Party Transactions
All transactions with the related parties were placed along
with the annual accounts of the Exchange before the Audit
Committee and were approved by the Board of Directors of
the Exchange. Further, all transactions with the related parties
were carried out on an arm's length basis.
n Audit Committee's Proceedings
The Board of Directors of the Exchange establishes an Audit
Committee each year, which has not less than 1/3rd or 3,
whichever is higher, of the total members of the Committee as
independent directors. At least one independent director has
relevant experience. The Board identifies in the annual report
each non-executive director it considers to be independent.
The Board determines whether the director(s) is/are
independent in character and judgment and whether there
are relationships or circumstances which are likely to affect, or
could appear to affect the directors' judgment. The Convener
of the Board Audit Committee (BAC) shall always be a nonmember
director of the Exchange.
The BAC constituted by the Board for the year 2011 comprises
of following five members including the Convener:
1. Ms. Bushra Naz Malik – Convener
2. Mr. Ammar ul Haq
3. Mr. Ejaz ullah Baig
4. Mr. Mumtaz Hussain Syed
5. Mr. Omar Khalil Malik
The BAC held 5 meetings during the period under review and
dealt with the following agenda:
n Engagement of Ernst & Young Ford Rhodes Sidat Hyder
Chartered Accountants as co-sourced internal auditors to
undertake GAP analysis and develop an internal audit plan as
well as programs.
n
Appointment of Manager Internal Audit at LSE.
n Approval of new set of signatories for the handling of LSE's
Bank Accounts.
n Discussed and recommend the half yearly accounts of the
Exchange for the period ended December 31, 2010, quarterly
accounts for the period ended March 31, 2011 and annual
accounts for the year ended June 30, 2011.
n Updated LSE's panel of Auditors for System Audit of the
Brokers of the Exchange.
n Inquiry of engaged lawyers as to the legal status of cases
of LSE and consideration of the probable impact of such on
the financial statements' disclosures.
n Updated the terms of reference of the BAC.
n HR Committee's Proceedings
During the year 2011 the Board constituted HR Committee
consisting of the following members:
1. Mr. Mumtaz Hussain Syed – Convener
2. Ms. Bushra Naz Malik
3. Mr. Jahanzeb Mirza
4. Mr. Ammar ul Haq
5. Engr. Mazhar Rafiq
The Committee held 9 meetings during the period to give
recommendations to the Board on the following matters:
n New HR Manual of the Exchange
n Increment and Salary Rationalization
n Grant of Employee Welfare Fund
n Handling a harassment complaint
n Hiring of CFO
ACCOUNTABILITY
n Policies about Whistle Blowing and Sexual
Harassment
As per HR policy, LSE has made it as its basic policy to
encourage the acts of whistle blowing about the alleged
dishonest or illegal activities occurring in the administration
of the Exchange. In this respect, it shall be deemed as a moral
responsibility of all Employees of the Exchange to report in
writing any alleged misconduct such as any violation of LSE
policies, rule, regulation, fraud, health/safety violations, and
corruption. The Employees who shall act as Whistle Blowers
through proper written compliant shall be protected from any
adverse action against them as a reprisal. However, this
protection shall not be available if it is found that an Employee,
instead of first reporting the matter in writing to the Head of
HR Committee, has shared the same information with any
other person whosoever.
Further, the new HR manual has addressed the issue of sexual
harassment and also has provision for formation of an Inquiry
Committee to enquire into complaints under the Protection
against Harassment of Women at the Workplace Act, 2010.
n Handling of Ethics and Integrity Matters made part of
the Committee headed by ex Chairmen/Vice Chairmen
The Board of Directors of LSE has recommended that the
scope of the Arbitration Committee formed under Article 134
of the Articles of Association of LSE be widened so that it shall
deal with such disputes and matters of ethical/integrity nature
related to the affairs of the Exchange, as referred to the
Committee by the Board.

Directors' Report
MARKET DISCIPLINE & ENFORCEMENT
n Disciplinary Actions Taken during the year
Following corporate members had filed winding up petition
before the Honorable Lahore High Court and therefore after
adopting the procedure defined under the General Rules &
Regulations and Articles of Association of LSE, thus were
expelled by the Board:
Sr.
No.
Name of Corporate Member
Date of Expulsion
1 M/s. Khalid Javed Securities (Pvt.) Ltd. 19-04-2011
2 M/s. HSZ Securities (Pvt.) Ltd. 19-04-2011
3 M/s. Wasi Securities (SMC-Pvt.) Ltd. 03-06-2011
Following members of the Exchange were expelled by the
Board upon their failure to submit/abide by/implement the
award of Panel of Arbitrators the Exchange.
Sr.
No.
Name of Member
Date of Expulsion
1 Mr. Najam Riaz Ghauri 02-05-2011
2 Mr. Muhammad Tauqir Malik 28-10-2011
3 M/s. Ali Usman Stock Brokerage (Pvt) Ltd. 25-11-2011
n System Audits and follow up actions taken during the
Year
As on 1st July, 2010 which was the 4th and last balloting for the
cycle period (January 2009– December 2011) there were a
total of 152 members out of which 87 were active and 65 were
non active. 31 brokers were selected through random
selection held in the office of the Managing Director LSE.
These balloting results were communicated on the same date
to the members selected in the balloting along with the list of
auditors on LSE panel for the appointment of the auditors. All
the members duly submitted their System Audit Compliance
Report within the prescribed time with the exception of two
members. These two brokers requested waiver from System
Audit of their brokerage house due to the reasons of having
suspended operations during the period under review. Their
request was duly verified and exemptions were granted.
st
As on January 21, 2011, 1 balloting of the cycle period
(January 2011-December 2012) was held and 15 members
were selected out of the total active members of the
exchange. The members who were selected in this balloting
duly submitted the System Audit Compliance Report.
n Investor Complaints Handling Status and Arbitration
Awards Statistics
Opening Balance (as on 01-Jan- 2010) 97
Received Complaints & Appeals (01-Jan-10 to 31-Dec-10) 214
Disposed Off (01-Jan-10 to 31-Dec-10) 126
Opening Balance (as on 01-Jan- 2011) 185
Received Complaints & Appeals (01-Jan-11 to 04-Nov-11) 545
Disposed Off (01-Jan-11 to 04-Nov-11) 67
Pending Complaints & Appeals (as on 04-Nov-2011) 663
Pending Investor Complaints before the Arbitration
Committee
Pending before
Number of Complaints
Sole Arbitrator / Panel of Arbitrators 10
The Appellate Bench 6
Pending Investor Complaints against the expelled Members
Sr. Complaints against Number of Complaints
1 Mr. Najam Riaz Ghauri 72
2 M/s. Khalid Javed Securities (Pvt.) Ltd. 321
3 M/s. HSZ Securities (Pvt.) Ltd. 125
4 M/s. Wasi Securities (SMC-Pvt.) Ltd. 65
5 M/s. Ali Usman Brokerage (Pvt.) Ltd. 64
Total 647
31

Directors' Report
32
BOARD COMMITTEES
The Board of Directors of LSE constituted 17 Board
Committees which were entrusted with specific
responsibilities to oversee the affairs of the Exchange in
accordance with their respective TOR. This year the Board
nominated the Conveners of the Committees and authorized
them to select the member of the Committee. At each Board
meeting, the recommendations of the Board Committee
meetings were presented to the Board for approval. The
Convener of the relevant Board Committee also directly
reported to the Board on the key issues deliberated.
APPOINTMENT OF AUDITORS
The present auditors M/s. KPMG Taseer Hadi & Co., Chartered
Accountants have retired and have offered themselves for reappointment
in the forthcoming Annual General Meeting.
APPRECIATION
The Board of Directors would place on record its thanks to the
Chairman, Executives of Securities and Exchange Commission
of Pakistan for their guidance and support.
The Board express gratitude to the Chairmen and Managing
Directors of the Karachi and Islamabad Stock Exchange,
Central Depository Company of Pakistan Ltd., National
Clearing Company of Pakistan Ltd. and the management of
Pakistan Credit Rating Agency Ltd. and Pakistan Mercantile
Exchange Ltd. for their cooperation and coordination in
various strategic and operational matters during the year.
The Board thanks the print and electronic media in covering
its activities and projecting its image at national and
international level.
It is appropriate to reflect that as an organization that needs to
be relevant for the current time and for the times to come, LSE
will continue to be guided and supported by its Members. The
Board extends sincere appreciation to its members whose
feedback has been invaluable. The Board thanks the Convener
and the Members of various Committees for the continuing
dedication and contribution to the organization. The Board
also thanks the management team for their hard work,
dedication and sincerity of purpose.
For and on behalf of the Governing Board of Directors of LSE
Aftab Ahmad Ch.
Managing Director / CEO

Corporate Governance

Statement of Compliance with CCG
34
This statement is being presented in voluntary compliance with the
Code of Corporate Governance (the “Code”) as contained in
Regulation No.35 (xlv) of Listing Regulations of Lahore Stock
Exchange (Guarantee) Limited for the purpose of establishing a
framework of good governance.
The Company has applied the principles contained in the Code in the
following manner:
1. The Company by virtue of its Articles of Association is required
to provide the representation of independent non-executive
directors on its Board of Directors. At present, the Board includes all
non-executive directors except the Managing Director/CEO.
2. The directors have confirmed that none of them is serving as a
director in more than ten listed companies, besides this Company.
3. All the directors of the Company are registered as taxpayers and
none of them has defaulted in payment of any loan to a banking
company, a DFI or an NBFI. The directors, who are members of the
stock exchange, have not been declared as a defaulter by that stock
exchange.
4. The Chairman of the Board has been elected from amongst the
non-member directors of the Company.
5. One casual vacancy of Securities and Exchange Commission of
Pakistan's nominee director that occurred in the Board during the
year was filled up by the Commission in accordance with the Articles
of Association of the Company.
6. The Company has adopted a 'Statement of Ethics and Business
Practices', which has been signed by all the directors of the Company.
Similarly, the Company has also developed a 'Statement of Code of
Conduct and Business Practices' which has been signed by all the
employees of the Company.
7. The Board has also adopted the vision and mission statements,
overall corporate strategy and other significant policies for the
Company. A complete record of significant policies along with the
dates on which they were approved or amended has been
maintained.
8. All the powers of the Board have been duly exercised by the
Board, and the Board has taken decisions on all material transactions,
including appointment and determination of remuneration and
terms and conditions of employment of the Managing Director.
9. The meetings of the Board were presided over by the Chairman
and, in his absence, by a non-member director elected by the Board
for this purpose. The Board met at least once in every quarter. Written
notices of the Board meetings, along with agenda and working
papers, were circulated before the meetings. The minutes of the
meetings were appropriately recorded and circulated within the
prescribed time limit, as per the Code, with a few exceptions. The
meetings, where finance-related matters were discussed, were
attended by the Chief Financial Officer.
10. The Board was provided with the “Orientation Handbook”
followed by an orientation presentation to apprise them about their
duties and responsibilities and functioning of the Exchange.
11. All transactions with related parties were carried out on an arm's
length basis, and were notified to the Audit Committee, wherever
needed.
12. The Board approved the appointment of Chief Financial Officer,
Company Secretary and Head of Internal Audit, including their
remuneration and terms and conditions of employment, as
determined by the Managing Director.
13. The Directors' Report for this year has been prepared in
compliance with the requirements of the Code and fully describes
the salient matters required to be disclosed.
14. The financial statements of the Company were duly endorsed by
the Managing Director and Chief Financial Officer and the Audit
Committee before approval of the Board.
15. The Company has complied with all corporate and financial
reporting requirements.
16. The Board has formed an Audit Committee. It comprises of five
(5) members including the Chairman of the Committee.
17. The meetings of the Audit Committee were held at least once in
every quarter prior to the approval the financial results of the
Company and as required by the Code.
18. The Board has set-up an effective internal audit function
through a combination of internal and outsourced expertise.
Members of the internal audit function are conversant with the
policies and procedures of the Company and are considered suitably
qualified and experienced for the purpose. They are involved in the
function on regular basis.
19. The statutory auditors of the Company have confirmed that
they have been given a satisfactory rating under the Quality Control
Review Program of the Institute of Chartered Accountants of Pakistan
and that the firm and all its partners are in compliance with
International Federation of Accountants (IFAC) guidelines on code of
ethics as adopted by Institute of Chartered Accountants of Pakistan.
20. The statutory auditors and the persons associated with them
were not appointed to provide other services except in accordance
with the Listing Regulations and the auditors have confirmed that
they have observed IFAC guidelines in this regard.
21. We confirm that all other relevant material principles contained
in the Code have been complied with.
For and on behalf of the Board:
Aftab Ahmad Ch.
Managing Director

Statement of Ethics and Business Practices
1) The Directors shall be committed to conduct business in
an honest, ethical, transparent and legal manner in the best
interest of the Exchange. Their actions shall be governed by
the vision, mission, core values and the Articles of Association
and Rules & Regulations.
2) The Directors shall affirm that they are aware of their
duties and powers under the relevant law(s) and
Memorandum & Articles of Association of the Exchange. The
Directors shall adhere to all the relevant laws and conform to
the accepted standards of code of corporate governance.
3) The Directors shall meet the requirement of Fit & Proper
Criteria as mentioned in the General Rules & Regulations of
LSE, in addition to meeting the requirements as stipulated
under the Companies Ordinance, 1984 relating to their
eligibility of a director.
10) The Directors are forbidden to participate in any
discussion and/or vote on any matter if they have any interest,
pecuniary or otherwise, in such matters which could
reasonably be regarded as giving rise to a conflict of interest
between their duty to honestly discharge their functions as
Directors of LSE. The Directors are required to disclose their
interest in writing before each meeting of the Board of
Directors, thereby communicating that they have no conflict
of interest, whatsoever, with any agenda item to be
discussed/voted upon therein.
11) The Directors are also required to maintain the
confidentiality of information entrusted to them by the
Exchange and other confidential information about the
Exchange that comes to them, except when disclosure is
authorized by the Board or legally mandated.
4) The Directors shall ensure to take appropriate measures
for the sustainability of the capital market, integrity, building
an informed investment community and developing
competitive products and services.
5) The Directors shall play active role in the strategy
development and planning process, overseeing the conduct
of the Exchange's business, identifying principal risks and
ensuring the implementation of appropriate systems to
manage those risks and reviewing the adequacy and integrity
of the internal control systems.
35
6) The Directors shall, subject to the approval of the
Securities and Exchange Commission of Pakistan, alter, add to,
repeal or substitute any of the rules and regulations, as it may
consider necessary or desirable in the interests of LSE and its
stakeholders.
7) The Directors shall recognize the need to protect the
interests of members and investors in the securities market as
a primary condition to promote the development of dynamic
and efficient securities market.
8) As the frontline regulator, the Board of Directors of the
Exchange is entrusted with significant fiduciary role to
discharge its duties in utmost good faith. Moreover, the
Directors are expected to refrain from putting themselves in a
position where their personal interest and their fiduciary
duties may conflict.
9) The regulatory framework prohibits the Directors on the
Board to abstain from participating in discussion of or voting
on any such agenda/issue which can give rise to a conflict of
interest on their part.
12) The Directors or the companies or firms under their
control, are not required to have any business dealing with the
Exchange or enter into contracts with, or do any work for the
Exchange. The Board shall be the sole judge as to what
constitutes “business dealing”.
13) The Directors shall not take advantage of the company's
information or property, or their position with the company, to
develop inappropriate personal gains or opportunities.
14) In order to achieve the desired level of performance and
corporate objectives, the Directors shall encourage
preservation of congenial and professional working
environment where all the employees are treated equitably
and with respect, and where efforts of staff are encouraged
and their achievements are given due recognition.

Matrix of Voluntary Compliance with CCG
Matrix of Voluntary Compliance of Lahore Stock Exchange (an Unlisted and Guarantee Limited Company)
with the Code of Corporate Governance
Requirement of the Code of Corporate Governance
(I) All listed companies shall encourage effective representation of independent nonexecutive
directors, including those representing minority interests, on their Boards of
Directors so that the Board as a group includes core competencies considered relevant in
the context of each listed company.
Status of Compliance
The Exchange by virtue of its Articles of Association is required to
provide the representation of independent non-executive directors
on its Board of Directors. At present, the Board includes all nonexecutive
directors except the Managing Director.
Record, where
necessary
Clearance by the SECP
(ii) The directors of listed companies shall, at the time of filing their consent to act as such, The directors have affirmed that they are aware of their duties and Statement of Ethics and
give a declaration in such consent that they are aware of their duties and powers under the powers under the relevant law(s) and Memorandum and Articles of Business Practices
relevant law(s) and the listed companies' Memorandum and Articles of Association and Association of the Exchange.
the listing regulations of stock exchanges in Pakistan.
(iii) No listed company shall have as a director, a person who is serving as a director of ten
other listed companies.
The directors have confirmed that none of them is serving as a
director in more than ten listed companies, besides this Company.
Form-29
(iv) No person shall be elected or nominated as a director of a listed company if:
(a) his name is not borne on the register of National Tax Payers except where such person
is a non-resident; and
All the directors of the Company are registered as taxpayers and
none of them has defaulted in payment of any loan to a banking
company, a DFI or an NBFI. The directors, who are members of the
Nomination papers/Fit &
Proper Criteria of directors
(b) he has been convicted by a court of competent jurisdiction as a defaulter in payment of stock exchange, have not been declared as a defaulter by that stock
any loan to a banking company, a Development Financial Institution or a Non-Banking exchange.
Financial Institution or he, being a member of a stock exchange, has been declared as a
defaulter by such the stock exchange
(v) A listed company shall endeavour that no person is elected or nominated as a director if
he or his spouse is engaged in the business of stock brokerage (unless specifically
exempted by the Securities and Exchange Commission of Pakistan).
Not applicable (NA)
NA
36
(vi) The tenure of office of Directors shall be three years. Any casual vacancy in the Board of
Directors of a listed company shall be filled up by the directors within 30 days thereof
The Directors were duly elected for one year term as provided in the Articles of Association and
Articles of Association of the Exchange; however from the next year the Notice of EOGM
onwards, the Board has recommended 3 years' term of directors of
the Exchange to the general body which is being considered in the
EOGM dated December 23, 2011.
(vii) The directors of listed companies shall exercise their powers and carry out their The Directors have performed their duties in accordance with the
fiduciary duties with a sense of objective judgment and independence in the best interests Articles of Association and Rules and Regulations in the best
of the listed company.
interest of LSE.
Board Minutes
(viii) Every listed company shall ensure that:
(a) a “Statement of Ethics and Business Practices‟ is prepared and circulated annually
by its Board of Directors to establish a standard of conduct for directors and employees,
which Statement shall be signed by each director and employee in acknowledgement of
his understanding and acceptance of the standard of conduct;
(b) the Board of Directors adopt a vision/ mission statement and overall corporate
strategy for the listed company and also formulate significant policies, having regard to
the level of materiality, as may be determined it;
(c) the Board of Directors establish a system of sound internal control, which is
effectively implemented at all levels within the company;
(d) the following powers are exercised by the Board of Directors on behalf of the
company and decisions on material transactions or significant matters are documented by
a resolution passed at a meeting of the Board ….
(e) appointment, remuneration and terms and conditions of employment of the Chief
Executive Officer (CEO) and other executive directors of the listed company are determined
and approved by the Board of Directors.
The Company has adopted a 'Statement of Ethics and Business
Practices', which has been signed by all the directors of the
Company. Similarly, the Company has also developed a 'Statement
of Code of Conduct and Business Practices' which has been signed
by all the employees of the Company.
The Board of Directors of LSE has also adopted Vision & Mission
Statements and Core Values of LSE.
In order to strengthen the internal controls, the Board has decided
to co-source the Internal Audit function with E&Y is acting as
independent internal auditor with the Exchange having its own
Internal Audit Department as well.
All material decisions are made by the Board and the Board is
provided with the implementation status of all decisions made in
its previous Board meeting. Furthermore, the Board has approved
the Strategic Business and Budgetary Plan of the Exchange. Also,
all top level employees of the Exchange have been hired by the
Board itself
Statement of Ethics and
Business Practices.
Statement of Code of
Conduct and Business
Practices. Vision & Mission
Statements, Core Values,
the Internal Audit
Arrangements, Strategic
Business & Budgetary
Plan and the Board
minutes.
(ix) The Chairman of a listed company shall preferably be elected from among the nonexecutive
directors of the listed company. The Board of Directors shall clearly define the
respective roles and responsibilities of the Chairman and Chief Executive, whether or not
these offices are held by separate individuals or the same individual.
The Chairman of the Board is duly elected from among the nonmember
(non-executive) directors of the Company.
Articles of Association &
the Board Minutes

Matrix of Voluntary Compliance with CCG
Requirement of the Code of Corporate Governance
(x) The Chairman of a listed company, if present, shall preside over meetings of the Board
of Directors.
(xi) The Board of Directors of a listed company shall meet at least once in every quarter of
the financial year. Written notices (including agenda) of meetings shall be circulated not
less than seven days before the meetings, except in the case of emergency meetings,
where the notice period may be reduced or waived.
(xii) The Chairman of a listed company shall ensure that minutes of meetings of the Board
of Directors are appropriately recorded. The minutes of meetings shall be circulated to
directors and officers entitled to attend Board meetings within 14 days of the date of the
meeting.
(xiii) In order to strengthen and formalize corporate decision-making process, significant
issues shall be placed for the information, consideration and decision of the Boards of
Directors of listed companies.
(xiii-a)(1) All companies registered under the Companies Ordinance, 1984 shall place
before the Board of Directors all the transactions with the related parties for review and
approval.
(2) The detail of all related party transactions shall be placed before the Audit Committee
of the company.
(3) The related party transactions which are not executed at arm's length price will also be
placed separately at each Board meeting along with necessary justification for
consideration and approval of the Board and before the Audit Committee of the company.
Status of Compliance
The Chairman of the Board chaired all meetings held during the
year with the exception of two meetings.
Implemented as required by the Code.
The minutes of the meetings were appropriately recorded and
circulated within the prescribed time limit, as per the Code.
All significant issued were placed for the perusal and decision of
the Board.
Record, where
necessary
Board Minutes
Board Minutes
Board Minutes
Board Minutes
(xiv) All listed companies shall make appropriate arrangements to carry out orientation
courses for their directors to acquaint them with their duties and responsibilities and
enable them to manage the affairs of the listed companies on behalf of shareholders.
At the beginning of the term, every director was provided an
'Orientation Handbook', and subsequently a special orientation
session was also held to apprise the members about the
constitution and functioning of the Exchange and the critical
matters facing the Exchange. Besides, the Board members were
clearly apprised about the role and the duties of the Management
and the responsibilities of the Board.
Orientation Handbook
37
(xv) The appointment, remuneration and terms and conditions of employment of the Chief
Financial Officer (CFO), the Company Secretary and the head of internal audit of listed
companies shall be determined by the CEO with the approval of the Board of Directors.
The CFO or the Company Secretary of listed companies shall not be removed except by the
CEO with the approval of the Board of Directors.
Implemented as required by the Code.
Board minutes
(xvi) No person shall be appointed as the CFO of a listed company unless:
Had been implemented as per the spirit of the Code. The hiring of a Personal files of CS & CFO.
(a) he is a member of a recognized body of professional accountants; or
new CFO is under process again.
(b) he is a graduate from a recognized university or equivalent, having at least five years
experience in handling financial or corporate affairs of a listed public company or a bank or
a financial institution.
(xvii) No person shall be appointed as the Company Secretary of a listed company unless Implemented as per the spirit of the Code.
he is:
(a) a member of a recognized body of professional accountants; or
(b) a member of a recognized body of Corporate/Chartered Secretaries; or
a person holding a masters degree in Business Administration or Commerce or being a Law
Graduate from a University recognized by Higher Education Commission and having at
least two years relevant experience.
Board minutes
(xviii) The CFO and the Company Secretary of a listed company shall attend meetings of
the Board of Directors.
Provided that unless elected as a director, the CFO or the Company Secretary shall not be
deemed to be a director or entitled to cast a vote at meetings of the Board of Directors for
the purpose of this clause. Provided further that the CFO and/ or the Company Secretary
shall not attend such part of a meeting of the Board of Directors, which involves
consideration of an agenda item relating to the CFO, Company Secretary, CEO or any
director.
CS attended all the meetings however CFO was invited only to the
meetings where finance related matters were to be discussed. As
per the Articles of Association, the GM of the Exchange is required
to attend all Board meetings which was duly complied.
Attendance record/Board
Minutes

Matrix of Voluntary Compliance with CCG
38
Requirement of the Code of Corporate Governance
(xix) The directors of the listed companies shall include statements to the following effect in the Directors' Report, prepared under section 236
of the Companies Ordinance, 1984:
(a) The financial statements, prepared by the management of the listed company, present fairly its state of affairs, the result of its operations,
cash flows and changes in equity.
(b) Proper books of account of the listed company have been maintained.
(c) Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based
on reasonable and prudent judgment.
(d) International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements and any departure
there from has been adequately disclosed.
(e) The system of internal control is sound in design and has been effectively implemented and monitored.
(f) There are no significant doubts upon the listed company‟s ability to continue as a going concern.
(g) There has been no material departure from the best practices of corporate governance, as detailed in the listing regulations.
The Directors‟ Reports of listed companies shall also include the following, where necessary:
(a) If the listed company is not considered to be a going concern, the fact along with reasons shall be disclosed.
(b) Significant deviations from last year in operating results of the listed company shall be highlighted and reasons thereof shall be explained.
(c) Key operating and financial data of last six years shall be summarised.
(d) If the listed company has not declared dividend or issued bonus shares for any year, the reasons thereof shall be given.
(e) Where any statutory payment on account of taxes, duties, levies and charges is outstanding, the amount together with a brief description
and reasons for the same shall be disclosed.
(f) Significant plans and decisions, such as corporate restructuring, business expansion and discontinuance of operations, shall be outlined
along with future prospects, risks and uncertainties surrounding the listed company.
(g) A statement as to the value of investments of provident, gratuity and pension funds, based on their respective audited accounts, shall be
included
(h) The number of Board meetings held during the year and attendance by each director shall be disclosed.
(xx) The quarterly unaudited financial statements of listed companies shall be published and circulated along with directors‟ review on the
affairs of the listed company for the quarter.
(xxi) All listed companies shall ensure that second quarterly financial statements are subjected to a limited scope review by the statutory
auditors in such manner and according to such terms and conditions as may be determined by the Institute of Chartered Accountants of
Pakistan and approved by the Securities and Exchange Commission of Pakistan.
(xxii) All listed companies shall in the form and manner specified by the Commission ensure that the annual audited financial statements are
sent to every member of the company at least twenty-one (21) days before the Annual General Meeting is held to consider the same.
(xxiii) Every listed company shall immediately disseminate to the Securities and Exchange Commission of Pakistan and the stock exchange on
which its shares are listed all material information relating to the business and other affairs of the listed company that will affect the market
price of its shares. Mode of dissemination of information shall be prescribed by the stock exchange on which shares of the company are listed.
(xxvi) No listed company shall circulate its financial statements unless the CEO and the CFO present the financial statements, duly endorsed
under their respective signatures, for consideration and approval of the Board of Directors and the Board, after consideration and approval,
authorize the signing of financial statements for issuance and circulation. It shall be mandatory for the CEO and CFO to have the second quarter
and annual accounts (both separate and consolidated where applicable) initialed by the external auditors before presenting it to the audit
committee and the Board of Directors for approval.
(xxv) The Company Secretary of a listed company shall furnish a Secretarial Compliance Certificate, in the prescribed form, as part of the annual
return filed with the Registrar of Companies to certify that the secretarial and corporate requirements of the Companies Ordinance, 1984 have
been duly complied with.
Status of
Compliance
Implemented as
required by the
Code.
Not Applicable
Implemented as
required by the
Code.
Implemented as
required by the
Code.
Not Applicable
Implemented as
required by the
Code.
Under
implementation.
(xxvi) Where any director, CEO or executive of a listed company or their spouses sell, buy or take any position, whether directly or indirectly, in Not Applicable
shares of the listed company of which he is a director, CEO or executive, as the case may be, he shall immediately notify in writing the Company
Secretary of his intentions.
(xxvii) All listed companies shall ensure that the firm of external auditors or any partner in the firm of external auditors and his spouse and
minor children do not at any time hold, purchase, sell or take any position in shares of the listed company or any of its associated companies or
undertakings.
(xxviii) Every company which is proposed to be listed shall, at the time of public offering, comply with the requirements of offer of shares to the
general public as contained in the related Listing Regulations, unless the limit is relaxed by the stock exchange with the approval of the
Securities and Exchange Commission of Pakistan.
(xxix) In the event of divestiture of not less than 75% of the total shareholding of a listed company, other than a divestiture by non-resident
shareholder(s) in favour of other non-resident shareholder(s) or a disinvestment through the process of privatization by the Federal or
Provincial Government, at a price higher than the market value ruling at the time of divestiture, …
Not Applicable
Not Applicable
Not Applicable
Record, where
necessary
Annual Report,
Financial Statements
and the Directors'
Report.
Not Applicable
AGM Notice and
dispatch record.
NA
Board minutes
Not Applicable
Not Applicable
Not Applicable
Not Applicable

Matrix of Voluntary Compliance with CCG
Requirement of the Code of Corporate Governance
(xxx) The Board of Directors of every listed company shall establish an Audit Committee, which shall comprise not less than three members,
including the chairman. Majority of the members of the Committee shall be from among the non-executive directors of the listed company
and the chairman of the Audit Committee shall preferably be a non-executive director. The names of members of the Audit Committee shall
be disclosed in each annual report of the listed company.
(xxxi) The Audit Committee of a listed company shall meet at least once every quarter of the financial year. These meetings shall be held
prior to the approval of interim results of the listed company by its Board of Directors and before and after completion of external audit. A
meeting of the Audit Committee shall also be held, if requested by the external auditors or the head of internal audit.
(xxxii) The CFO, the head of internal audit and a representative of the external auditors shall attend meetings of the Audit Committee at
which issues relating to accounts and audit are discussed. Provided that at least once a year, the Audit Committee shall meet the external
auditors without the CFO and the head of internal audit being present. Provided further that at least once a year, the Audit Committee shall
meet the head of internal audit and other members of the internal audit function without the CFO and the external auditors being present.
Status of
Compliance
Implemented,
however the
composition is not as
per the Code.
Implemented as
required by the Code.
Implemented as
required by the Code.
Record, where
necessary
Board minutes &
Directors' Report
Board minutes
Minutes of the
Internal Audit
Committee
(xxxiii) The Board of Directors of every listed company shall determine the terms of reference of the Audit Committee.
(xxxiv) The Audit Committee of a listed company shall appoint a secretary of the Committee. The secretary shall circulate minutes of
meetings of the Audit Committee to all members, directors and the CFO within a fortnight.
(xxxv) There shall be an internal audit function in every listed company. The head of internal audit shall have access to the chair of the Audit
Committee.
(xxxvi) All listed companies shall ensure that internal audit reports are provided for the review of external auditors. The auditors shall discuss
any major findings in relation to the reports with the Audit Committee, which shall report matters of significance to the Board of Directors.
Implemented as
required by the Code.
Implemented as
required by the Code.
Implemented as
required by the Code.
Under
implementation
Board minutes
Board minutes
Board minutes
(xxxvii) No listed company shall appoint as external auditors a firm of auditors which has not been given a satisfactory rating under the
Quality Control Review programme of the Institute of Chartered Accountants of Pakistan.
(xxxviii) No listed company shall appoint as external auditors a firm of auditors which firm or a partner of which firm is non-compliant with
the International Federation of Accountants' (IFAC) Guidelines on Code of Ethics, as adopted by the Institute of Chartered Accountants of
Pakistan.
(xxxix) The Board of Directors of a listed company shall recommend appointment of external auditors for a year, as suggested by the Audit
Committee. The recommendations of the Audit Committee for appointment of retiring auditors or otherwise shall be included in the
Directors' Report. In case of a recommendation for change of external auditors before the elapse of three consecutive financial years, the
reasons for the same shall be included in the Directors' Report.
(xl) No listed company shall appoint its auditors to provide services in addition to audit except in accordance with the regulations and shall
require the auditors to observe applicable IFAC guidelines in this regard and shall ensure that the auditors do not perform management
functions or make management decisions, responsibility for which remains with the Board of Directors and management of the listed
company.
(xli) (a) All listed companies in the financial sector shall change their external auditors every five years. Financial sector, for this purpose,
means Banks, Non-Banking Finance Companies (NBFC‟s), Modarabas and Insurance Companies; and (b) All listed Companies other than
those in the financial sector shall, at a minimum, rotate the engagement partner after every five years.
(xlii) No listed company shall appoint a person as the CEO, the CFO, an internal auditor or a director of the listed company who was a partner
of the firm of its external auditors (or an employee involved in the audit of the listed company) at any time during the two years preceding
such appointment or is a close relative, i.e. spouse, parents, dependents and non-dependent children, of such partner (or employee).
(xliii) Every listed company shall require external auditors to furnish a Management Letter to its Board of Directors not later than 30 days
from the date of audit report.
(xliv) Every listed company shall require a partner of the firm of its external auditors to attend the Annual General Meeting at which audited
accounts are placed for consideration and approval of shareholders.
(xlv) All listed companies shall publish and circulate a statement along with their annual reports to set out the status of their compliance
with the best practices of corporate governance set out above.
(xlvi) All listed companies shall ensure that the statement of compliance with the best practices of corporate governance is reviewed and
certified by statutory auditors, where such compliance can be objectively verified, before publication by listed companies.
(xlvii) Where the Securities and Exchange Commission of Pakistan is satisfied that it is not practicable to comply with any of the best
practices of corporate governance in a particular case, the Commission may, for reasons to be recorded, relax the same subject to such
conditions as it may deem fit.
Implemented as
required by the Code.
Implemented as
required by the Code.
Implemented as
required by the Code.
Implemented as
required by the Code.
Implemented as
required by the Code.
Implemented as
required by the Code.
Under
implementation.
Implemented as
required by the Code.
Will be Implemented
as required by the
Code.
Under
implementation.
The code has been
adopted voluntarily so its
not binding and does not
require the approval of
any exception from the
Commission.
General body
minutes.
Directors' Report
Board minutes.
General body
meetings record.
Not Applicable
39

Matrix of Expanded Compliance
Matrix of Expanded Compliance Requirements as Approved by the Board of Lahore Stock Exchange for
Improved Transparency, Accountability and Corporate Governance
40
Expanded Compliance Requirements
BOARD's WORK
Fit and Proper Requirement
Any person desiring to act as Director on the Board of Directors of LSE is required to be judged on the basis of Fit &
Proper Criteria as mentioned in the General Rules & Regulations of LSE, which is in addition to the eligibility
requirements stipulated under the Companies Ordinance, 1984. The criterion defines certain benchmarks for the
candidates relating to Integrity, Honesty, Reputation, Experience, Qualification, Solvency and Financial Integrity.
Attendance
As per practice all directors are required to mark their attendance in the attendance register before the start of the
meeting.
Conflict of Interest
As per Article 64(A)(4) of Articles of Association of LSE, all directors are required to disclose their conflict regarding any
matter included in the agenda items for the consideration of the Board.
Status of Compliance
All directors met the Fit and Proper
criteria as prescribed by the Exchange,
and their clearance was duly obtained
from the Commission as per the
regulations.
Implemented as per the spirit.
Record, where
necessary
Clearance by the SECP
Given in the Directors'
Report
All agenda papers contain a specific During the year, no
Note for the Directors to remind them matter of conflict was
about their fiduciary duty to inform reported by any director.
the Board about any matter of conflict.
Matter wise Breakdown of the Business conducted by the Board
A statistical analysis of the category
This matrix has been developed as a decision tool to measure the performance of the Board. This highlights the category wise business conducted was
wise nature of Business dealt with by the directors. The Broad categories include:
presented to the general body on
December 2, 2011.
Responses to Ask the Board
The initiative has been implemented
In order to encourage the direct communication between the members of the Exchange and the Board and to address but no query has been raised from the
the points raised by the Members, the Board has provided an active communication channel on the LSE website. Subject Member's side.
to the importance of the matter, these points can be presented before the Board of Directors of the Exchange in the
shape of Agenda items for the consideration and decision.
WORKPLACE INTEGRITY
Whistle Blowing and Protection against Harassment of Women at the Workplace
In order to encourage the acts of whistle blowing about the alleged dishonest or illegal activities occurring in the
administration of the Exchange, the Exchange has adopted a policy to protect such employees who shall act as Whistle
Blowers through proper written complaint from any adverse action against them as a reprisal.
Policies introduced accordingly.
Exhibit-A
HR Manual
Further, to address the issue of sexual harassment, the Board has also included the provision for formation of an Inquiry
Committee to enquire into such complaints as required under the Protection against Harassment of Women at the
Workplace Act, 2010.
Handling of Ethics and Integrity Matters
Scope of the Committee under Article
In order to deal with the Ethics and Integrity matters, the Arbitration Committee formed under Article 134 of the Articles 134 has been broadened accordingly.
of Association of LSE has been tasked to deal with such issues related to the affairs of the Exchange.
Exit Interviews with senior level leaving Staff
In order to get proper feedback about the HR environment of the Exchange, the policy of Exit interviews with the
manager and above level employees has been devised by the Board.
Implemented as per the spirit.
Committee Charter &
Terms of Reference
HR Manual and record of
exit interviews.

Matrix of Expanded Compliance
Expanded Compliance Requirements Status of Compliance Record, where necessary
Disciplinary Actions Against Brokers
The Board of the Exchange is responsible for ensuring appropriate disciplinary action in
case of any market related wrong doing by a member of LSE.
System Audits of Brokers and follow up actions taken
The Regulations require that each broker of the Exchange should be audited once every
two years with respect to their compliance and conformity with the rules and regulations
of the Exchange.
Investor Complaints Handling Status and Arbitration Awards Statistics
Being the front line regulator, the Exchange is required to expeditiously dispose of the
complaints and the applications for Arbitration from the investors.
Issuer Compliance
The Exchange is required to enforce the Listing Regulations and to monitor its compliance
by the listed companies on regular basis.
MARKET REGULATION, DISCIPLINE & ENFORCEMENT
Five (5) members were expelled by the Board on account of
violation of Articles and Rules and Regulations of LSE.
During the year, 15 brokers were selected through balloting
and the System Audit Compliance Reports have been
submitted by the Auditors.
Investor Complaints handling status and Arbitration Awards
statistics and progress were present in each meeting of the
Board of Directors for information and perusal.
Disciplinary actions under the Listing Regulations are
initiated against the non-complaint companies. LSE
maintains statistics of defaults of non-complaint companies.
Directors' Report
Directors' Report
The data of handling of
Investors complaints and the
Arbitrations is given in the
Directors' Report
Exhibit-A
Summary of Major decisions of the Board during the year 2011
Classification
Number of
Decisions
Percentage of
Total Decisions
Corporate matters 18 24%
Financial matters 13 17.5%
HR matters 8 11%
Marketplace Integrity and disciplinary orders 13 17.5%
Operational and Strategic matters 11 15%
Regulatory matters 11 15
Total Decisions 74 -
41

Board Committees

Board Committees 2011
44
Every year the Board of Directors constitutes Board Committees to delegate specific advisory functions. These Board
Committees provide vital feedback to the Board to assist it in making well informed decisions and policies of the Exchange. The
Committees wore within the defined TORs as approved by the Board to discharge their respective responsibilities/functions.
For the year 2011, the Board decided that the Conveners of the Board Committees should preferably the Directors of the
Exchange so that the recommendations of the Committees are appropriately presented before the Board by the concerned
Convener of the Committee. The Board constituted 17 Committee. A brief write up on the performance of the Committees is
presented hereunder along with the attendance record of members:
Committees formed under the Articles of Association & General Regulations
Advisory & Arbitration Committee
(Under General Regulation No. 24)
Total number of meetings held during the year = 2
Sr.
No.
Members
Meetings
Attended
1 Rana Naveed Ahmed, CRO – Convener 2
2
3
4
5
6
7
Mr. Ahmed Naeem, Nominee Director,
Reliance Capital (Pvt.) Ltd.
Mr. Javaid Iqbal, Nominee Director,
Javed Iqbal Securities (Pvt.) Ltd.
Dr. Moatsim Billah, Nominee Director,
Techno Fundamental Securities (Pvt.) Ltd.
Mr. Naeem Anwar, Nominee Director,
Maan Securities (Pvt.) Ltd.
Syed Hassan Abid Zaidi, Nominee Director,
Escorts Capital Ltd.
Mr. Waseem Ahmed, Nominee Director,
Fairway Securities (Pvt.) Ltd.
8 Mr. Mujahid Nadeem –Deputy General Manager 2
9 Mr. Nadeem Asghar – Manager Member Relations 2
10 Mr. Salman Ali Bukhari – Assistant Manager 2
11
Mr. Barkat Ali Anjum – Assistant Manager, Media
Relations
Agenda / business dealt with:
The Committee dealt with granting extension of time in time barred
cases under the General Regulations. The Committee reviewed the
pending cases and also appointed fresh Arbitrator in a case where an
Arbitrator had resigned.
Arbitration Committee
(Under Article 134)
Total number of meetings held during the year = Nil
Sr.
No.
Members
2
0
2
1
2
Meetings
Attended
1 Mian Tajammal Hussain -
2
3
4
5
Mr. Habib ullah Sheikh, Nominee Director,
Habib ullah Sheikh (Pvt.) Ltd.
Khawaja Imtiaz Ahmed, Nominee Director,
INA Securities (Pvt.) Ltd.
Syed Asim Zafar, Nominee Director,
Zafar Securities (Pvt.) Ltd.
Dr. Yasir Mahmood, Nominee Director,
Yasir Mahmood Securities (Pvt) Ltd.
Agenda / business dealt with:
No meeting was held during the year.
-
-
-
-
Defaulters Committee
(Under Article 104)
Total number of meetings held during the year = Nil
Sr.
No.
1
2
3
4
5
6
7
Members
Mr. Javed Iqbal, Nominee Director, Javed Iqbal
Securities (Pvt.) Ltd. – Convener
Mr. Afzal Rahat, Nominee Director,
Rahat Securities Ltd.
Mr. Asif Baig Mirza, Nominee Director,
ABM Securities (Pvt.) Ltd.
Mr. Habib Ullah Sheikh, Nominee Director,
Habib Ullah Sheikh (Pvt.) Ltd.
Khawaja Imtiaz Ahmed, Nominee Director,
INA Securities (Pvt.) Ltd.
Mr. Omar Khalil Malik Nominee Director,
Networth Securities Ltd.
Mirza Ejaz Ullah Baig Nominee Director,
Capital Vision Securities (Pvt.) Ltd.
Agenda / business dealt with:
No meeting was held during the year.
Membership Committee
(Under Article 103)
Total number of meetings held during the year = 5
Sr.
No.
1
2
Members
Mr. Jahanzeb Mirza, Nominee Director,
S.D. Mirza Securities (Pvt.) Ltd. – Convener
Mr. Ammar-ul-Haq, Nominee Director,
Al-Haq Securities (Pvt.) Ltd.
Meetings
Attended
-
-
-
-
-
-
-
Meetings
Attended
3 Ms. Bushra Naz Malik 1
4
5
Mirza Ejaz Ullah Baig, Nominee Director,
Capital Vision Securities (Pvt.) Ltd.
Engr. Mazhar Rafiq, Nominee Director,
M.R. Securities (SMC-Pvt.) Ltd.
6 Mr. Mumtaz Hussain Syed 0
7
Mr. Naeem Anwar, Nominee Director,
Maan Securities (Pvt.) Ltd.
Agenda / business dealt with:
n As authorized by the Board of Directors, the Committee devised
the procedures and terms & conditions for the bidding/auction of
membership of LSE.
n To approve a comprehensive 'Membership Manual' of the
Exchange for the facility of new and existing members of the
Exchange.
5
3
4
3
4

Board Committees 2011
Committees formed under Code of Corporate Governance
Audit Committee
Total number of meetings held during the year = 5
Human Resources Committee
Total number of meetings held during the year = 9
Sr.
No.
Members
Meetings
Attended
1 Ms. Bushra Naz Malik – Convener 5
2
3
Mr. Ammar-ul-Haq, Nominee Director,
Al-Haq Securities (Pvt.) Ltd.
Mirza Ejaz Ullah Baig, Nominee Director,
Capital Vision Securities (Pvt.) Ltd.
4 Mr. Mumtaz Hussain Syed 5
5
Mr. Omar Khalil Malik, Nominee Director,
Networth Securities Ltd.
Agenda / business dealt with:
n Engagement of Ernst & Young Ford Rhodes Sidat Hyder Chartered
Accountants as co-sourced internal auditors to undertake GAP
analysis and develop an internal audit plan as well as programs.
n Appointment of Manager Internal Audit at LSE.
n Approval of new set of signatories for the handling of LSE's Bank
Accounts.
n Discussed and recommend the half yearly accounts of the
Exchange for the period ended December 31, 2010, quarterly
accounts for the period ended March 31, 2011 and annual
accounts for the year ended June 30, 2011.
n Updated LSE’s panel of Auditors for System Audit of the Brokers of
the Exchange.
n Inquiry of engaged lawyers as to the legal status of cases of LSE
and consideration of the probable impact of such on the financial
statements’ disclosures.
n Updated the terms of reference of the BAC.
3
3
4
Sr.
No.
Members
Meetings
Attended
1 Mr. Mumtaz Hussain Syed – Convener 8
2
Mr. Ammar-ul-Haq, Nominee Director,
Al-Haq Securities (Pvt.) Ltd.
3 Ms. Bushra Naz Malik 8
4
5
Mr. Jahanzeb Mirza, Nominee Director,
S.D. Mirza Securities (Pvt.) Ltd.
Engr. Mazhar Rafiq, Nominee Director,
M.R. Securities (SMC-Pvt.) Ltd.
Agenda / business dealt with:
n New HR Manual of the Exchange
n Increment and Salary rationalization
n Grant of Employee Welfare Fund
n Handling a harassment complaint
n Hiring of CFO
Committee formed under UTS Regulations
Joint Steering Committee
Total number of meetings held during the year = 2
Sr.
No.
1
Members
Mr. Adeel Zafar, Nominee Director,
Adeel Zafar Securities (Pvt.) Ltd.
9
9
9
Meetings
Attended
2 Mr. Aftab Ahmad Ch., Managing Director, LSE. 2
2
45
3
4
Mr. Ammar-ul-Haq, Nominee Director,
Al-Haq Securities (Pvt.) Ltd.
Mr. Omar Khalil Malik, Nominee Director,
Networth Securities Ltd.
2
2
5 Brig. (R) Fateh Khan Malik 2
6 Dr. Iftikhar Ahmad 2
7 Ms. Alya Majid 1
8 Mr. Imtiaz Haider, Managing Director, ISE 2
Agenda / business dealt with:
n To bring liquidity to the UTS platform the committee
recommended waiving off Market Access Fee for a limited period.
n To recommended to the respective boards that the UTS contract
between the exchanges be temporarily extended till December
31, 2011 before which the JSC will reconvene to negotiate the
terms and conditions of the UTS contract for an extended period
of time.

Board Committees 2011
Other Advisory Committees
Building Committee
Total number of meetings held during the year = 3
Company Affairs Committee
Total number of meetings held during the year = 12
46
Sr.
No.
1
2
3
4
5
6
7
8
9
10
Members
Mr. Zeeshan Dar, Nominee Director,
Darson Securities (Pvt.) Ltd. - Convener
Mr. Adeel Zafar, Nominee Director,
Adeel Zafar Securities (Pvt.) Ltd.
Mr. Ammar-ul-Haq, Nominee Director,
Al-Haq Securities (Pvt.) Ltd.
Mr. Hasan Ahmad Chaudhry, Nominee Director,
Jamshed & Hasan Securities (Pvt.) Ltd.
Mr. Jahanzeb Mirza, Nominee Director,
S.D. Mirza Securities (Pvt.) Ltd.
Mr. Javed Iqbal, Nominee Director,
Javed Iqbal Securities (Pvt.) Ltd.
Khawaja Usman Arif, Nominee Director,
Khawaja Securities (Pvt.) Ltd.
Mirza Ejaz Ullah Baig, Nominee Director,
Capital Vision Securities (Pvt.) Ltd.
Mr. Omar Khalil Malik Nominee Director,
Networth Securities Ltd.
Mr. Umair Butt Nominee Director,
Dosslani's Securities (Pvt.) Ltd.
Meetings
Attended
Agenda / business dealt with:
n Approval of plan and selection of contractor for the award of work
relating to refurbish works at LSE Secretariat & other areas of LSE
Building.
n To expedite the process for obtaining requisite approval from the
relevant authorities concerning Car Parking/Rear Tower Project.
3
3
3
3
3
2
0
2
3
1
Sr.
No.
1
2
3
Members
Mr. Omar Khalil Malik Nominee Director,
Networth Securities Ltd. - Convener
Mr. Afraz Zafar, Nominee Director,
Horizon Securities (SMC-Pvt.) Ltd.
Mr. Asif Baig Mirza, Nominee Director,
ABM Securities (Pvt.) Ltd.
Meetings
Attended
4 Ms. Bushra Naz Malik 7
5
6
7
8
9
10
11
Mr. Fawad Dosslani, representative,
Dosslani's Securities (Pvt.) Ltd.
Khawaja Imtiaz Ahmed, Nominee Director,
INA Securities (Pvt.) Ltd.
Mr. Muhammad Ashraf Hussain Adhi, Nominee
Director, Maha Securities (Pvt.) Ltd.
Mr. Muhammad Nadeem Ejaz, Nominee Director ,
Adeel & Nadeem Securities (Pvt.) Ltd.
Mr. Muhammad Rafiq, Nominee Director,
Equity Master Securities (Pvt.) Ltd.
Mr. M. Tabassum Munir, Nominee Director,
MTM Securities (Pvt.) Ltd.
Mr. Waseem Ahmad, Nominee Director, Fairway
Securities (Pvt.) Ltd.
Agenda / business dealt with:
n Listing of:
· First Habib Cash Fund
· HBL-Islamic Money Market Fund
· HBL-Islamic Stock Fund
· MCB Islamic Income Fund
· PakGen Power Ltd.
· Pak Oman Government Securities Fund
· Engro Foods Ltd.
· IGI Capital Protected Fund
· Lakson Asset Allocation Developed Markets Fund
· Lakson Asset Allocation Global Commodities Fund
· Lakson Asset Allocation Emerging Markets Fund
· NAFA Financial Sector Income Fund
· TFCs of Engro Corporation Ltd. (2nd Issue)
n Voluntary de-listing of Fecto Sugar Mills Ltd.
n Listing of actively traded companies of KSE not listed at LSE
n Amendments in the Listing Regulations of Exchange.
9
7
12
6
8
5
0
10
6
6

Board Committees 2011
Corporatization & Demutualization Committee
Total number of meetings held during the year = 5
IT Committee
Total number of meetings held during the year = 4
Sr.
No.
1
2
3
4
5
6
7
8
9
10
Members
Dr. Yasir Mahmood, Nominee Director,
Yasir Mahmood Securities (Pvt.) Ltd. - Convener
Mr. Adeel Zafar, Nominee Director,
Adeel Zafar Securities (Pvt.) Ltd.
Mr. Ammar-ul-Haq, Nominee Director,
Al-Haq Securities (Pvt.) Ltd.
Mr. Ashraf Hussain Adhi, Nominee Director,
Maha Securities (Pvt.) Ltd.
Dr. Arslan Razaque, Nominee Director,
Dr. Arslan Razaque Securities (SMC-Pvt.) Ltd.
Mr. Habib Ullah Sheikh, Nominee Director,
Habib Ullah Sheikh (Pvt.) Ltd.
Mr. M. Tabassum Munir, Nominee Director,
MTM Securities (Pvt.) Ltd.
Mirza Ejaz Ullah Baig, Nominee Director,
Capital Vision Securities (Pvt.) Ltd.
Mr. Omar Khalil Malik Nominee Director,
Networth Securities Ltd.
Syed Asim Zafar, Nominee Director,
Zafar Securities (Pvt.) Ltd.
Meetings
Attended
Agenda / business dealt with:
n Recommendation of revised TOR of the Committee.
n Deliberation to speed-up the process of Corporatization and
Demutualization of stock exchange.
n Examining other possible ways for Corporatization of the
Exchange without Demutualization.
Investment Committee
Total number of meetings held during the year = 5
Sr.
No.
Members
5
5
4
3
2
5
3
4
3
2
Meetings
Attended
1 Engr. Mazhar Rafiq - Convener 5
2 Mr. Aftab Ahmed Ch., Managing Director, LSE 3
3
4
Mr. Ammar-ul-Haq, Nominee Director,
Al-Haq Securities (Pvt.) Ltd.
Mr. Asif Baig Mirza, Nominee Director,
ABM Securities (Pvt.) Ltd.
5 Ms. Bushra Naz Malik 4
6 Mr. Mumtaz Hussain Syed 2
Agenda / business dealt with:
n To draft TOR of the Committee.
n To approve the Investment policy of the Exchange.
n To review the Investments of the Exchange.
n To recommend the Board amendments in the Articles of
Association of LSE with respect to investment of the Exchanges.
2
5
Sr.
No.
1
2
3
4
5
6
Members
Mr. Khurram Gulzar, Nominee Director, Value Stock
Securities (Pvt.) Ltd - Convener
Mr. Adeel Zafar, Nominee Director,
Adeel Zafar Securities (Pvt.) Ltd
Mr. Ali Raza Jafry, Nominee Director,
Switch Securities (Pvt.) Ltd.
Mr. Amir Ilyas, Nominee Director,
Amer Securities (Pvt.) Ltd.
Mr. Habib ullah Sheikh, Nominee Director,
Habib Ullah Sheikh (Pvt.) Ltd.
Mr. Kashif Nisar, Nominee Director,
Allied Securities (Pvt.) Ltd.
Meetings
Attended
7 Engr. Mian Sajid Masood 0
8
9
10
11
Dr. Moatsim Billa, Nominee Director,
Techno Fundamental Securities (Pvt.) Ltd.
Mr. Nadeem Ijaz, Nominee Director,
Adeel & Nadeem Securities (Pvt.) Ltd.
Mr. Omar Khalil Malik Nominee Director,
Networth Securities Ltd.
Dr. Yasir Mahmood, Nominee Director,
Yasir Mahmood Securities (Pvt.) Ltd.
Agenda / business dealt with:
n Review and approval of the TOR of the IT committee, proposed
Vision, Mission and Core Values of the LSE Technology Services
Division.
n Review the performance of LSE Technology Services Division for
the fiscal year 2011.
n Review the financial budget of the LSE Technology Services
Division
n Consideration and approval to develop software for Capital Gains
Tax reporting as per FBR requirements.
n Review and approve the pilot project to replace RSA with
alternative 2-factor authentication systems for enhanced trading
system security.
n To review and approve the agreement between LSE and Catalyst IT
n
n
for the Liquidity Network Provider project.
Review and recommend the renewal of the Annual support
contract for Server Maintenance, UPS maintenance and Oracle
Enterprise Support to the procurement department.
To review and approve the HR requirements in the Technology
Services Division.
3
4
2
2
4
1
1
3
3
47

Board Committees 2011
Legal Affairs Committee
Total number of meetings held during the year = 3
IT Steering Committee
Total number of meetings held during the year = Nil
Sr.
No.
1
2
3
4
5
6
Members
Mr. Ammar-ul-Haq, Nominee Director,
Al-Haq Securities (Pvt.) Ltd. - Convener
Mr. Adeel Zafar, Nominee Director,
Adeel Zafar Securities (Pvt.) Ltd.
Mr. Afzal Rahat, Nominee Director,
Rahat Securities Ltd.
Mr. Jahanzeb Mirza, Nominee Director,
S.D. Mirza Securities (Pvt.) Ltd.
Mr. Omar Khalil Malik Nominee Director,
Networth Securities Ltd.
Mr. Zeeshan Dar, Nominee Director,
Darson Securities (Pvt.) Ltd.
Meetings
Attended
3
3
3
3
2
0
Sr.
No.
1
2
Members
Mr. Omar Khalil Malik Nominee Director,
Networth Securities Ltd. - Convener
Mr. Khurram Gulzar, Nominee Director, Value Stock
Securities (Pvt.) Ltd
Meetings
Attended
3 Mr. Salman Shah: CEO - Softech Technologies Ltd. -
4 Syed Asif Shah: CIO – CDC -
5 Zafar Alvi: Chief Officer MIS – SNGPL -
Agenda / business dealt with:
n No meeting was held during the year.
-
-
48
Agenda / business dealt with:
n Status of all the pending cases in different courts was discussed
and future strategy was chalked out for proper follow up of the
said case in general and cases pertaining to the 2000 crisis & the
cases involving financial impact in particular.
New Product, Seminars, Publications & Sports
etc.
Total number of meetings held during the year = Nil
Sr.
No.
1
2
3
4
Members
Mr. Ali Naseer, Nominee Director,
Highlink Capital (Pvt.) Ltd. – Convener
Mr. M. Tabassum Munir, Nominee Director,
MTM Securities (Pvt.) Ltd.
Mirza Ejaz Ullah Baig, Nominee Director,
Capital Vision Securities (Pvt.) Ltd.
Dr. Moatsim Billah, Nominee Director, Techno
Fundamental Securities (Pvt.) Ltd.
Meetings
Attended
5 Mr. Muhammad Amir Riaz -
6
7
8
9
10
Mr. Muhammad Arshad, Nominee Director,
A.S. Securities (Pvt.) Ltd.
Mr. Muhammad Asghar, Nominee Director,
Pearl Brokerage (Pvt.) Ltd.
Mr. Omar Khalil Malik Nominee Director,
Networth Securities Ltd.
Mr. Umair Butt Nominee Director,
Dosslani's Securities (Pvt.) Ltd.
Mr. Zeeshan Dar, Nominee Director,
Darson Securities (Pvt.) Ltd.
Agenda / business dealt with:
n No meeting was held during the year.
-
-
-
-
-
-
-
-
-
Tax Committee
Total number of meetings held during the year = 2
Sr.
No.
1
2
3
4
5
6
7
8
9
10
11
Members
Mirza Ejaz Ullah Baig, Nominee Director,
Capital Vision Securities (Pvt.) Ltd. – Convener
Mr. Adeel Zafar, Nominee Director, Nominee
Director, Adeel Zafar Securities (Pvt.) Ltd.
Mr. Asif Baig Mirza, Nominee Director,
ABM Securities (Pvt.) Ltd.
Mr. Habib ullah Sheikh, Nominee Director,
Habib ullah Sheikh (Pvt.) Ltd
Mr. Jahanzeb Mirza, Nominee Director,
S.D. Mirza Securities (Pvt.) Ltd.
Mr. Muhammad Ilyaas Sethi, Nominee Director,
Sethi Securities (SMC-Pvt.) Ltd.
Dr. Moatsim Billah, Nominee Director,
Techno Fundamental Securities (Pvt.) Ltd.
Mr. Omar Khalil Malik, Nominee Director,
Networth Securities Ltd.
Syed Hassan Iqbal, Nominee Director,
MGM Securities (Pvt.) Ltd.
Syed Muhammad Ismail Abbasi, Nominee Director,
Abbasi & Company (Pvt.) Ltd.
Mr. Usman Hameed Chaudhri, Nominee Director,
NH Securities (Pvt.) Ltd.
Meetings
Attended
Agenda / business dealt with:
n To recommend the TOR of the Committee
n To deliberate on issues related to Capital Gain Tax
n To discuss common tax matters with Tax Advisor LSE
n To set the Agenda for meeting with the Chief Commissioner,
Inland Revenue FBR
n To discuss the allocation of Property Tax to leaseholders of LSE
Building.
9
7
12
7
6
8
5
0
10
6
6

Board Committees 2011
Trading Affairs Committee
Total number of meetings held during the year = 8
Sr.
No.
1
2
3
4
5
6
7
8
9
10
Members
Mr. Naeem Anwar, Nominee Director,
Maan Securities (Pvt) Ltd. - Convener
Mr. Adeel Zafar, Nominee Director, Nominee
Director, Adeel Zafar Securities (Pvt.) Ltd.
Mr. Amir Illyas, Nominee Director,
Amir Securities (Pvt.) Ltd.
Dr. Arsalan Razaque, Nominee Director,
Dr. Arsalan Razaque Securities (Pvt.) Ltd.
Khawaja Sami Rashid, Nominee Director,
KSR Stock Brokerage (Pvt.) Ltd
Mirza Ejaz Ullah Baig, Nominee Director,
Capital Vision Securities (Pvt.) Ltd.
Mr. Muhammad Asghar, Nominee Director,
Pearl Brokerage (Pvt.) Ltd.
Mr. Muhammad Ashraf Hussain Adhi, Nominee
Director, Maha Securities (Pvt.) Ltd.
Syed Hassan Iqbal, Nominee Director,
MGM Securities (Pvt.) Ltd.
Dr. Yasir Mahmood, Nominee Director,
Yasir Mahmood Securities (Pvt.) Ltd.
Meetings
Attended
Agenda / business dealt with:
n Recommendation of revised TOR of the Committee.
n Amendments in Bonds Automated Trading System (Debt
Securities Market) Regulations regarding:
8
7
8
4
0
4
5
6
8
6
o Waiver of Basic Deposit requirement for trading in debt
market.
o Circuit Breakers
o Order Types and Attributes for Debt Trades
n
Amendments in System Audit Regulations regarding:
o Insertion of new definition for Debt Market
o To amend the clause related with Confirmation of Client Order.
n
Amendments in General Regulations in respect of the following
issues:
o Standardized Account Opening Form
o Dissemination of Information relating to
Consequential
Actions by the Exchange
n
Amendments in Automated Trading Regulations regarding:
o Use of Disaster Recovery (DR) Terminal as a Normal Workstation,
if installed at Registered/Branch Office.
n
Amendments in Regulations for Futures Trading in the
Provisionally Listed Companies (FTPLC), 2002 in respect of the
following:
o Suspension of trading due to under subscription in the event of
certain number of application as prescribed in the new amendment.
n
Amendments in Regulations Governing Cash-Settled Futures
Contract regarding:
o Reduction in amount of Basic Deposit requirement.
n
Proposed Changes in Regulations Governing Risk Management
regarding:
o Pre-Settlement Delivery
o Basic Deposit as Exposure Margins
o Closing Price Methodology
n
Proposed Changes in Regulations Governing Deliverable Futures
Market (DFM) related with:
o Waiver of Basic Deposit requirement
o Liability to deposits in case delay in payments
n
Recommendations on the Notification for amendments to the
Securities (Leverage Market and Pledging) Rules, 2011.
49

Organizational Roundup

Operations and Strategy Division
52
Sitting (Left to Right)
Hifsa Siddiqi | Mujahid Nadeem | Farid Malik | Nadeem Asghar | Asma Tayyiba
Standing (Left to Right)
Qamar Jamil | Muhammad Raza | Gulzar Ahmad | Muhammad Rashid | Naseer Javed | Munir Islam Qureshi
Siddiq-ur-Rahman Khurram | Babar Latif Sufi | Shaukat Masih | Mudassir Alam
Muhammad Usman | Syed Wasim Shah | Barkat Ali Anjum
During FY 2010-11, the Operations & Strategy Division accounted for approximately
70% of Income vs. 12% of Admin. Exp
The Operations Division used to manage the day-to-day operations of the Exchange pertaining to Market Operations. However,
with the adoption of the 5 Years' Strategy Business and Budgeting Plan by the Board and the ensuing restructuring of the
Exchange, the activities of the Division have been expanded to include the strategy function as well. Under the Plan, the
Operations & Strategy Division has been given the additional mandate of crystallizing and implementing the objectives of (i)
Corporate Revitalization and (ii) Marketplace Initiatives.
These strategic initiatives can be broadly classified as under:
n Initiatives for Investors
n Initiatives for Companies
n Initiatives for Market
n Enhancing Intermediaries' Efficiencies

Operations and Strategy Division
Short Term Goals
n Introduction of 7-days
Deliverable Future Contracts
n Introduction of Sectorial Indices
n Auto release of securities
pledged against exposure
margins
n Introduction of Market Makers
n UTS Revival and expansion into
NMS
n Introduction of Market Wide
Circuit Breaker
n Revival of Bonds Trading by
enhancing BATS Trading
interface
n Corporate Briefings Program
n Training seminars on LSE
application software
n Continuous Professional
Development of Members
through various lectures/
seminars/programs
n Improving operational efficiency
(identification of issues through
surveys)
n
n
n
Medium Term Goals
Liquidity Network Project
Introduction of Stock Index
Futures
Introduction of Stock Index
Futures
n Introduction of Options on
Individual Securities
n Mobile and Web-based
Trading
n Introduction of Market
Makers
n Improvement in the pretrade
and post-trade risk
management systems
n Introduction of Exchange
Traded Funds (ETFs)
n Listing Business
Development
Capacity Building of Brokers
and Agents
Business Process Efficiencies
n
n
n
n
Long Term Goals
n
Multi-Market
Gateway
Introduction of After-
Hours Trading
n Currency Future
Trading
n Introduction of
derivative products
like Index Options,
Swap, Call Warrants
etc.
n Introduction of REITs
Demutualization
53
Organizational Structure
The division is headed by the Chief Strategy Officer/Chief Operating Officer (General Manager) and is presently structured as
follows:
Strategy and Planning Department
The Strategy and Planning Department will be responsible for developing and supervising the implementation of various
initiatives identified in the 5 Years' Strategy Business and Budgeting Plan. These initiatives are aimed at not only improving the
liquidity within LSE's order book but to also achieve diversification in product offerings and IT services. More specifically, the
strategic “Initiatives for Market” identified in the Plan have been further classified as follows:
Existing Market Development New Market Development Associated Initiatives/Campaigns
n Liquidity Network Project
n Multi-Market Gateway
n UTS/NMS
n Mobile & Web Based
n After Hours
n Bonds & Derivatives
n Spot Trading Eco System
n Currency Trading
n REITs
n Islamic & International Indices
n Listing Business Development
n Capacity Building of Brokers
n Enhanced Members’ Services
n Business Process Efficiencies
n Compliance & Surveillance
n Repositioning of Website

Operations and Strategy Division
54
The Liquidity Network Project is aimed at revitalizing LSE's
order book and to mitigate inter-exchange trading issues. The
Project comprises of two parts in which one part would
involve the establishment of a technological link of the
electronic gateways of the selected liquidity providers with
the trading engine of LSE. The other part of the project would
involve bilateral/multilateral commercial agreements by LSE
with these liquidity providers so as to ensure that most
competitive and cost effective arrangements are offered to
LSE members/investors. The project is in an advanced stage in
terms of technical development and regulatory framework.
New corporate identity was introduced to provide fresh look
and feel of the institution. The new logo with blue color
indicates the electronic form of transactions taking place. The
flying arrows crossing each other (»«) depict the
activity/liquidity and exchanging/intermediation of securities
at the LSE platform. LSE's website with a new domain
www.lse.com.pk was also launched. The new website would
act as business communication channel as it is more
informative, responsive and user friendly for the investors with
some unique facets and online services for the investors.
Further, it is optimized for Search Engines and integrated with
social media to propagate LSE/Market updates.
The department is also overseeing various other initiatives like
the Corporate Briefing Program, Training Seminars on trading
software, Continuous Professional Development of members
through various lectures/seminars/programs and other goals
as identified above.
Company Affairs
The Company Affairs Department is mainly responsible for
providing services to enable listing of new securities,
supervising the listed companies to ensure continuous
compliance with the listing/regulatory requirements and
dissemination of price sensitive material information of listed
securities to the market participants and the media. The
department's vision is pro-active supervision thus facilitating
good corporate governance to strengthen the confidence of
shareholders and other stakeholders in investing through
Lahore Stock Exchange. The department is also a major source
of generating significant amount of revenue through listing
fees.
The Listing Section is mainly involved in processing the
applications for listing of securities on the Exchange,
additional capital raised by listed companies and voluntary
delisting. For the companies desirous to make an initial public
offering ('IPO') of its securities on the Exchange, the section
reviews the prospectus/offering document and the
supporting documents required to be filed under the law and
admits the securities to listing once the compliance with
relevant listing criteria is made by the issuing company.
In case of voluntary delisting cases, joint meeting with KSE is
held to reach at the most favorable buy back price. The process
is continuously monitored by the section to ensure the
compliance of listing regulation and to safeguard the interest
of minority shareholders. In addition to the above, the section
also processes the request for issuance of additional capital by
listed companies through right issues, bonus or issue of shares
by way of other than right offers.
The Corporate Compliance Section monitors compliance
with the continuing obligations under the Listing Regulations
of the Exchange by listed companies. The continuing
obligations are intended to ensure that all market users have
simultaneous access to the same information and to maintain
an orderly market in the listed securities. Some of the
important post listing requirements under Listing Regulations
include holding of Annual General Meeting in accordance
with the law, intimation of board meetings and close period,
free-float updation on quarterly basis, details of shareholding,
timely intimation of material information to the exchange by
the listed companies and other requirements under the Code
of Corporate Governance. Record of companies in default of
listing regulations is maintained by the section and such
companies are regularly advised to ensure compliance with
the requirements of listing regulations.
Once listing is granted, there needs to be timely, accurate and
sufficient disclosure of information to investors to ensure that
they are kept fully informed by the issuer of all factors which
might affect their interests. The Ready section of Company
Affairs Department is primarily responsible for timely and
accurate dissemination of such material information to the
investors and other market participants through data entry in
the various systems provided by MIS of LSE in a swift and error
free manner. Active liaison with CDC, NCCPL and other
Exchanges is also established to smoothly handle the
corporate actions.
The Corporate Briefings Program has been launched by the
CAD to provide a platform to listed companies to regularly
interact with their stakeholders. The companies having large
investors following are given opportunities to further
promote their business strategies and performance through
this program. Besides being informative for the brokers,
media, investors and the general public, the program also
enables LSE to provide listed companies with any guidance
that they may need in the wake of the ever changing
governance and reporting environment. During the year the
following programs were organized:

Operations and Strategy Division
Name of Company
Date
Treet Corporation Limited 07-01-2011
Arif Habib Corporation Limited 10-02-2011
Engro Corporation Limited 24-02-2011
Nishat Mills Limited / D.G Khan Cement
Company Limited
24-03-2011
Bank Alfalah Limited 11-05-2011
Conversion of Close end Funds into Open end Funds
Sr.
Date of Conversion into
Name of Close end Fund
No. Open end Fund
1 JS Large Cap. Fund 27-09-2010
2 Pakistan Premier Fund 13-01-2011
Delistings
Sr Name Reason of Delisting Delisting Date
The department has actively participated in the IPO summit
organized in October 2011 under the banner of South Asian
Federation of Exchanges. The summit aimed at providing an
opportunity to companies considering making a debut as a
listed company to get familiarized with the applicable laws
relevant to listing, complete listing process and post-listing
compliance requirements.
Companies
1 Shaheen Cotton Mills Ltd. Merged with and into Shahzad
Textile Mills Ltd. (100:30)
2 Pak Elektron Ltd.-Convertible
Preference Shares & Pak
Elektron Ltd.-Non convertible
Preference Shares
Clubbed/consolidated into single
security i.e. Pak Electron Ltd.-
Preference shares
02-08-2010
14-09-2010
In order to increase the depth of the market, the department
has launched a Listing Campaign in order to attract
companies having potential for listings. The actively traded
companies of the other Exchanges which are not listed at LSE
are also being approached and incentives are proposed to
encourage new listing.
New Listings
Sr Name Listing Date
Companies
1 PakGen Power Ltd. 21-07-2011
2 Engro Foods Ltd. 10-08-2011
Open End Funds
1 HBL-Money Market Fund 15-07-2010
2 NAFA Asset Allocation Fund 23-08-2010
3 NAFA Riba Free Savings Fund 23-08-2010
4 First Habib Cash Fund 22-03-2011
5 HBL-Islamic Money Market Fund 11-05-2011
6 HBL-Islamic Stock Fund 11-05-2011
7 MCB Islamic Income Fund 23-06-2011
8 Pak Oman Government Securities Fund 04-08-2011
9 IGI Capital Protected Fund 19-10-2011
10 Lakson Asset Allocation Developed Markets Fund 19-10-2011
11 Lakson Asset Allocation Global Commodities Fund 19-10-2011
12 Lakson Asset Allocation Emerging Markets Fund 19-10-2011
13 NAFA Financial Sector Income Fund 31-10-2011
Term Finance Certificates
1 Engro Corporation Ltd. (Engro Rupiyah Certificate-2nd Issue) 04-11-2011
3 Ghulam Muhammad Dadabhoy
Ltd.
Winding up through Court Order 21-10-2010
4 Amazai Textile Mills Ltd. Winding up through Court Order 08-12-2010
5 Tawakkal Polyester Industries
Ltd.
6 Pakistan Strategic Allocation
Fund
Winding up through Court Order 08-12-2010
Converted into an Open end Fund 08-12-2010
7 Royal Bank of Scotland Ltd. Merged with and into Faysal
Bank Ltd. (6:1)
8 Atlas Bank Ltd. Merged with and into Summit
Bank Ltd. (1:0.45)
03-01-2011
11-01-2011
9 Itti Textiles Ltd. Winding up through Court Order 03-02-2011
10 Hala Spinning Mills Ltd. Winding up through Court Order 03-02-2011
11 First Interfund Modaraba Winding up through Court Order 03-02-2011
12 Universal Oil & Vegetable Ghee
Mills Ltd.
Winding up through Court Order 20-04-2011
13 My Bank Ltd. Merged with and into Summit
Bank Ltd. (1:0.80)
Open End Funds
06-07-2011
1 JS Capital Protected Fund IV Matured and fully redeemed 29-06-2011
2 MCB Sarmaya Mehfooz Fund 1 Matured and fully redeemed 05-08-2011
3 JS Principal Secure Fund II Matured and fully redeemed 19-09-2011
Term Finance Certificates
1 IGI Investment Bank Ltd. Matured and fully redeemed 02-08-2011
Buy-Back of Shares
Sr.
No.
Name of
Company
1 The Frontier Sugar
Mills & Distillery Ltd.
2 Fecto Sugar Mills
Ltd.
Price Proposed by the
Company
Rs. 32/- for ordinary shares &
Rs. 18.60 for preference shares
Price Fixed by the
Exchange
Rs. 190.20 for ordinary shares &
Rs. 18.60 for preference shares
Delisting
Date
25-10-2010
Rs. 32.23 per share Rs. 38/- per share 22-08-2011
55

Operations and Strategy Division
56
Risk and Clearing Department
The Risk and Clearing Department is responsible for
managing risks associated with trading of stocks through
carrying out real time monitoring of members exposures,
margins and losses, position limits, collateral management,
issuance of notices and clearing schedule, receipts from and
payment to members, collection of charges, taxes and fee,
suspension and restoration of trading rights, activation and
deactivation of membership, squaring-up of delivery default
positions. The department is also engaged in other activities
like ensuring compliance of regulatory requirements by the
member, monitoring the renewal of certificate of registration
of members with SECP, receipts of biannually/quarterly NCB
certificates from members, impose fines/penalty on late
submission of Net Capital Balance Certificates and to manage
members' capital adequacy.
There exists a comprehensive, reliable and updated risk
controlling and monitoring system in the Exchange which
enables Risk and Clearing Department to perform its function
more efficiently and effectively.
The department has achieved automation in many areas to
improve the efficiency of the department and eliminate
manual working. Interfaces at Lahore Stocks System (LSS)/
Clearing House System (CHS) have also been provided to
reduce human error. During the period under review, the
department has successfully implemented off-market trades
reporting mechanism, auto-debit facility for collection of
weekly charges and taxes, system generated auto-debit
receipt, auto-credit facility to credit Market Access Fee (MAF)
into the members account, interfaces for collateral
management system, automation of monitoring the brokers
registration renewals , increase of deposit worth linked with
direct pledging of securities in CDS against exposure margins,
automation of SECP transaction fee, interfaces at LSS for
compliances of submission of weekly NCB confirmation,
declaration form for not maintaining accounts related with
prohibited entities like Al-Qaeda & Taliban and interface for
recording of inter- exchange trades etc.
Surveillance and Market Control
Surveillance and Market Control department is responsible for
detecting and investigating any manipulative or illegal
trading activity at the Exchange to protect the interest of
investors and to ensure a fair and transparent market. Post
trade-based analyses are conducted to evaluate trading
patterns on a daily, weekly and monthly basis. Automated
reports reviewing each trade and price quotation on real-time
basis are also prepared.
Market Control section of the department is responsible to
address the queries related to trading on real time basis. The
market controller provides on-line support to the users
regarding circuit breakers of the companies and dealing with
the problems related to placement/cancellation of trade
orders etc. The section also adjusts prices of ex-symbols,
enters book closure schedules, future symbols and schedules
of futures contract in to the Ultra.
In addition to the surveillance activities, the department also
ensures compliances with various regulatory requirements
including Short Sale Regulations, General Regulations and
other directives and instructions issued by SECP and other
relevant government departments from time to time. For this
purpose, the department has developed various forms for
members of the Exchange at LSS.
The development of comprehensive market surveillance
system will enable the department to effectively and
efficiently deal with the market abuses like front running,
manipulation, washing, blank selling, insider trading, false
trades etc.
Members’ Relations Department
Members’ Relations Department (MRD) was established in
March, 2011 with an objective to provide business services to
members of the Exchange. This department is serving as a
single contact point for members of LSE for technical support
and providing them regulatory facilitation regarding annual
registrations, renewals and other regulatory filings etc. The
department organizes skill development/continuous
professional training programs for LSE members on a regular
basis enabling them to engage in underwriting, advisory and
investment banking related activities.
The department is mainly providing services in two areas:
The Technical Support section of MRD is primarily responsible
for installation, upgradation of trading applications, solving
network, hardware, software & applications related issues and
also providing consultancy to members of the Exchange on
their internal system/network problems and expansions.

Operations and Strategy Division
Total Complaints
Members’ Complaints
The department is handling the member's complaints
through “Support Ticketing System”. In addition, the
department has also setup “Members' Helpline 5045”- single
point of contact for the members/users to resolve their
problems up to their satisfaction level.
The Member Affairs section deals with all matters related to
members/agents/branches including registration/renewal
and compliances etc., and ensures that these are proactively
processed and handled in an efficient manner to reduce the
administrative and regulatory burden on members.
MRD has served as Helpdesk for providing adequate
information to the investors about the IPO of “Engro Foods
Ltd”. More than 100 applications of the members and their
clients/investors were processed in this event.
Institute of Capital Markets (ICM) Certification is mandatory
requirement for Stock Traders. For that purpose, MRD team
visited all the members of the Exchange and provided
assistance in completing ICM form and requisite information
required by the ICM. More than 56 applications for
grandfathering certification were processed through MRD.
MRD also prepares CRFs to satisfy the system requests
received from the members. During the period under review,
10 CRFs were processed and submitted to the Technology
Services Division on behalf of members which were
successfully deployed in the respective LSE software/
applications. MRD has also developed an in-house Member
Relations System to maintain updated information regarding
business structure of members of the Exchange on LSE
website.
The system maintains the following information:
nMembers' Profile
nBranch Offices Information
nAgents' Information
nMembership Directory
Under the Continuous Professional Development of
members, the department is also involved in organizing
training sessions, workshop and seminars. These includes:
n Training programs namely ‘Starting IPO Advisory Services’
and ‘Capital Markets in Pakistan – Current Challenges’.
n Made presentations to educate members on different
products like 'Deliverable Futures, Margin Trading and
Securities Lending and Borrowing etc'.
n Organized a seminar on ‘How to become a Stock Broker?’
with an objective to familiarize the investor community
with the regulatory requirements for becoming a stock
broker.
n Prepared membership manual providing a complete
guideline about the requirements and procedures for
acquiring a membership at LSE.
n Conducted survey on ‘Standardized Account Opening
Form’ (SAOF).
n Survey conducted on ‘Capital Gain Tax’ to develop best
system for computation of CGT.
n Performed the survey on ‘Liquidity Network Project’ (LNP).
57

LOTPTA
BOP
SILK
NBP
AHCL
DSFL
BYCO
FFBL
BAFL
DGKC
NIB
LPCL
NML
NICL NCL
ATRL
AKBL
FATIMA
WTL
PACE
JOVC
PAKRI
FCCL
MLCF
AICL
ENGRO
NPL
DFML
FFC
POL
NETSOL
RAVT
MCB
JPGL
FCCLR KESC
PPL
PIAA
PTC
SNGP
PASL
LUCK
OGDC
SSGC
EPCL
DCL
HUBC
UBL
SEPCO
NCPL
EMCO
WTCL
FABL
DGKCR1
PSO
PPFL
BAHL
SMBL
PGF
HIRAT
SBL
KAPCO
HBL
DCH
PIOC
TGLR
TREET
ABL
DSIL
KASBB
GASF
MYBL FLYNG
REWM
SMTM
SNBL
ATBL
FPJM
CSAP
CRTM
RBS
SCBPL
DBCI
ICI
PSAF
IGIBL
MTL
PAEL
SNBLR1
PIF
CEPB
THALL
SHCI
PSYL DAWH
FCSC
PRL
KSBP
KOHC
PEF
FUDLM
HCAR
FHBM
MARI IDRT
OLPL
BGL
TGL
FRCL
MACFL
BAFLTFC2
IGIIL
JKSM
GHNI
SSOM
NRL
HABSM
AKBLTFC
AKBLTFC2
PIL
ICIBL
PKGS
JSGF MODAM
SRVI
FFLM
DWSM
PRWM
STJT
FCEL
CPPL
SHEZ
GWLC
ADOS
JSLCF
SGML
GTYR
GHGL NONS
HMB
LINDE
INIL
SHEL
MQTM
TSBL
SHTM
GENP
SLL
FEROZ
KTML
BPL
PECO
EFUG
PNSC
HICL
HAL
DWAE
SSIC
SRSM
GLAXO
ATIL
TRIPF
GFIL
PSMC
ABOT
FECTC
NATF
PKGI
MZSM
BTL
ATEL
IBFL
PMI
CICL
CHCC
ATBA
SIBL
RUPL
ASFL
BAWS
AGIL
MFFL
JDMT
SPLC
ZIL
TRIBL
AGSML
SHDT
ICCT
MUREB
UCPF
BATA
BCML
BILF
ARUJ
SEL
ATLH
WAHN
MWMP
RMPL
FZCM
PINL
AGIC
DLL
SCM
SCLL
SLYT
ISIL
HINOON
MLCFPS
INDU
PAKT
AACIL
SAZEW
HINO
STCL
JDWS
PMPK
NOPK
PAKMI
SHCM
ULEVER
CPMFI
KSTM
KASBM
MDTL
HWQS
ESBL
DSML
CJPL
ADAMS
KOHP
* Volume leaders of the year
58

Corporate Management Division
59
Corporate Management Division is the collective name given
to the following corporate functions of the Exchange:-
n ·Corporate Secretariat
n ·Financial Management Department
n ·Human Capital Department
n ·Administration
n ·Media & Public Relations and
n ·LSE Archives
The summary of the activities undertaken by the respective
sections is highlighted as under:
1. Corporate Secretariat
The Company Secretary is responsible for the efficient
administration of a company, particularly with regard to
ensuring compliance with statutory and regulatory
requirements and for ensuring that decisions of the Board of
Directors are implemented.
a. Board Meetings
The annual meeting calendar of the Board was planned and
circulated to the Directors at the beginning of their term. In
the very first Board meeting, the directors were delivered an
‘Orientation Handbook’. This initiative was taken to give an
insight of the affairs of the Exchange and it served as an
essential companion throughout their term. Furthermore, an
orientation session was also held for the directors to help
them in getting on Board with effective orientation. The
agenda of each Board meeting was finalized by the Chairman
on the recommendation of the Managing Director. Meeting
papers were prepared by management in accordance with an
existing agreed format which provides details of relevant

Corporate Management Division
60
facts, analysis and recommendation for supporting the
proposals to enable informed decision-making by the Board.
The agenda and papers for meetings were furnished to
Directors in advance both through email and in printed form,
to enable them to prepare themselves for the meetings. The
Chairman has encouraged constructive, healthy debate, and
Directors are given the chance to freely express their views or
share information with their peers in the course of
deliberation. Any Director who has a direct or deemed interest
in the subject matter to be deliberated abstained from
deliberation and voting on the same during the meeting.
n
n
n
n
n
n
Orientation Handbook
Orientation Session
Calendar of Meetings
New format for Agenda/Working Papers
Timely and accurate recording of minutes
Digitalization of minutes of Board/General Body
The Company Secretary ensured there is a quorum for all
meetings. The minutes prepared by the Company Secretary
memorialized the proceedings of all meetings including
pertinent issues, the substance of inquiry and response,
members' suggestions and the decisions made. In doing so,
the Company Secretary internalized the governance
principles and kept the Board updated on the follow up action
arising from the Board's decisions. This allowed the Board to
perform its fiduciary duties and oversight role. The division
has digitalized all the Board, AGM and EOGM meetings
minutes since the inception of the Exchange. This would help
us to quickly review and make reference to the policy decision
already take by the House and the Board.
b. Statutory Filings
The Exchange successfully complied with the requirements of
the Companies Ordinance, 1984 with respect to filing of
statutory returns to the Registrar of Companies, SECP.
b. Liaison with associated companies
LSE maintained an active liaison with its associated
companies. The active participation of the appointed Board
nominees was ensured in the interest of the Exchange.
c. Ask the Board
With a view to add transparency to the operations &
governance of the Exchange, now members can directly post
their queries to be referred to the Board of Directors the
Exchange. For this purpose 'Ask the Board' link has been
created in the Members' login area at the LSE website. In this
manner, Members are able to send their queries to the
Company Secretary who shall ensure that queries &
suggestions are placed for consideration of the Board through
suitable agenda items. This new feature will not only ensure
privacy of opinion but will also serve as an effective conduit for
communication between the Board and the Members of the
Exchange.
2. Financial Management Department
This department formulates, prescribes and implements
accounting and investment policies, procedures, and controls.
The department prepared, presented and got approved the
LSE budget for the FY 2011-12 at the beginning of the financial
year from the Board. With effective controls, the expenditures
were curtailed with the budgeted figures and the expected
revenue targets were achieved. Active liaison with Internal
Audit Department was seen during the year and queries of
external Auditors were satisfactorily addressed. Through
effective financial management, the revenues of the
Exchange for the current year were further boosted to reach a
record level.
a. Centralization of all the purchases
LSE has centralized its purchases. Centralization has the
advantages of reducing duplication of effort, pooling volume
purchases for discounts, enabling more effective inventory
control, consolidating transport loads to achieve lower costs,
increasing skills development in purchasing personnel, and
enhancing relationships with suppliers. Further, departments
other than purchasing are relieved from the burden of
purchasing. As a result of which employees concentrate their
mind in own work.
b. Cost saving measures
Finding ways to cut office expenses without sacrificing the
quality of service or demoralizing staff is a challenge task.
Internally, we have taken a hard look at our costs and made
some significant changes and improvements. We have reset
our priorities and adopted innovative cost management
measures without compromising quality. LSE has
implemented a number of money saving ideas for the office
that can end up not only cutting costs, but also enhancing
productivity and making it more environmentally friendly.
Running an office within budget is a daunting task. LSE has
taken certain initiatives that have a surprisingly significant
effect on the bottom line. Buy bulk of office supplies from
wholesale suppliers; double side printing, using the backs of
discarded paper for rough drafts, not printing every email,
utilizing what we already own instead of buying new Office
equipment, create a budget for discretionary items and stick
to it, electricity saving by efficient use of electric equipments
and change of WAPDA tariff are the some of the measures that
we have adopted.
How administrative overheads were reduced?
n Electro Mechanical meters replaced with time of use
(TOU) Meters, with attractive off-hours tariff structure.
n Idol working of Generator stopped to save diesel
consumption.
n Telephone lines reduced from 72 to 37Savings of around
Rs. 1 million despite almost 25% raise in utilities.
n Saving of around Rs. 100,000/- per annum only in
preventive maintenance.

Corporate Management Division
3. Administration
a. Weekly Management Meetings
As a regular feature, LSE holds weekly management meetings
on every Monday which is attended by all the departmental
heads and is chaired by the Managing Director/General
Manager of the Exchange. Departmental issues and progress
are discussed and follow up actions are also reviewed in the
meetings.
b. Events Management
A number of local and foreign delegates and companies
representatives visited LSE during the year under review.
Administrative Department arranged memorial shields to be
presented to them and also facilitate media coverage of their
visits. An Iftar dinner was also organized during the holy
month of Ramadan which was attended by a large number of
members of dignitaries.
c. Security of the Building
In view of prevailing security threats faced by the nation, LSE
continued to strengthen the security of the Building and
remained high alert for providing safe and secure
environment for the market participants. Moreover, in order to
facilitate the member community, one of the main gates of the
LSE Building was dedicated for members for entrance in a
graceful manner. Fire fighting drill was regularly conducted to
check the working and validity of firefighting equipments
installed in the Building.
d. Healthy work environment
The work environment is very important in terms of
productivity, creativity, and job satisfaction etc. LSE strived to
achieve a healthy work environment for all the occupants of
the building. Smoking is banned in the LSE Building corridors,
stairs and lifts therefore 'no smoking' signs were placed at
suitable placed on every floor of the building. Any reported
violation was effectively handled. Good ventilation, natural
lighting, lots of plants, job security and respect for employee
values were remained the areas of our concentration. We also
plan for an onsite gym in the LSE Building. A table tennis
playing area will soon be available for the members and staff
of the Exchange. LSE has further lifted the cleanliness
benchmarks. Regular fumigation and awareness campaign
was started to fight against 'dengue viruses'.
e. Building Maintenance & Projects
There was a need of an executive lounge for the distinguish
guests of the Exchange. In a very cost effective manner and
under the Building department supervision, the MD office has
been converted into the guest room after refurbishing and
redesigning the passage and available space MD office as well
as GM was constructed and smartly furnished. In this manner,
a dining area with sufficient space is now also available for the
Exchange's guests. Further alterations in Basement-I are
planned in order to effectively and economically use the
available space.
f. Rear Tower Plan
Authorities' approvals for the construction of rear tower of LSE
Building are in the pipeline. The Exchange is fully committed
to start the car parking basements project along with the rear
tower as and when approval is granted. Active liaison has been
established with LDA and other government agencies for
achieving earlier results.
61

Corporate Management Division
62
4. Human Resources
The objective of HR department is to promote a working
environment which fosters employee satisfaction and
development in areas of recruitment, benefits and
compensation, staff development and anticipating emerging
needs of the Universities. LSE has adopted an open door
policy. We allow the employees to mingle and discuss their
matters with the CEO, senior management and HR. It
contributes to improving work relationships and enhancing
internal relationships.
To deliver value and manage our stakeholders' expectations,
we rely heavily on our greatest asset which is our employees.
We want to be a preferred employer that can attract and retain
the best talents for the sustainable growth of our Exchange. To
us, being a caring and responsible employer is not an option
but an obligation we have to our employees. On that score, we
shall continue to invest in our employees, supporting their
personal and professional development, inculcating a worklife
balance, and ensuring employees' health and safety. As a
learning organization, we offer opportunities for employees
to be challenged, to make a difference, to grow, to make
significant contributions, to innovate and ultimately to
succeed. In the workplace, establishing strong succession
planning and increasing the number of positively engaged
employees ranked high in our sustainability agenda.
continue to prioritize investing in our people as a fundamental
pillar of our future plans. LSE provided training programs on
media relations, English speaking and writing skills and
computer literacy to its staff members. Our efforts towards
building a talent pool saw the recruitment of 6 local university
graduates for our in-house 12-months management training
program.
LSE also arranged excursions for the staff of the Exchange to
provide an open atmosphere to defuse the stress elements at
work. In this regard, one day recreational trip to Rohtas Fort
was arranged for the staff members. LSE also expects all
Employees to maintain good discipline at all times in order to
promote a healthy atmosphere needed for the smooth
conduct of business activities. We also plan to organize health
talks and sports activities, we raise awareness among
employees of the benefits of leading a healthy lifestyle. The
dress code was strictly implemented to maintain the office
etiquette and uniforms were provided for Peons, technical &
support staff and Security Guards of the Exchange.
5. Media & Public Relations
Media Relations continued to disseminate the activities of LSE
and projection the image of the Exchange to the masses
through print and electronic media. LSE arranged a special
course on Media Relations which was conducted by a
prominent journalist and attended by relevant officials of the
Exchange. The purpose of the course was to enlighten the LSE
staff and to acquire the expert practical knowledge to
successfully meet the requirements and to facilitate the media
persons to efficiently cover the activities of the Exchange.
Throughout the year, LSE remained in the media spotlight
with regular coverage in the national and international press
and electronic media.
During the year under review, the Board approved the new HR
Manual as well as new benefits for the LSE employees. The new
manual has provisions for protection of whistle blowers &
workplace harassment, Provident Fund scheme, leave fare
assistance and Hajj sponsorship.
LSE believes in a performance based reward system. We plan
to design an effective reward system to drive productivity
improvements and contribute to the achievement of our
corporate goals, while recognizing individual excellence. The
performance management system and our pay structure are
reviewed at appropriate intervals to ensure they remain
relevant and competitive. Developing human talent is an
evolutionary process. To sustain ourselves as an organization,
we refine our policies and practices to get the very best from
our people and to be able to attract new talent. We will
6. LSE Archives
The Record Room of LSE has been revamped and the staff is
efficiently handling and maintaining the office record of the
Exchange. Moving towards paperless environment more
attention was given to use the electronic distribution of
official mail & notices through email & website.

Regulatory Affairs Division
63
Sitting (Left to Right)
Mehr Muhammad Iqbal | Rana Naveed Ahmad | Shagufta Siddiqui
Standing (Left to Right)
Yasir Waheed | Muhammad Shoib Chughtai | Innam-ullah | Tariq Bashir
LSE has taken following measures to improve quality of work of the Regulatory Division:
1. Independent post of Chief Regulatory Officer (CRO)
2. CRO is the Convener of the Arbitration Committee and the members of the Arbitration Committee are comprised of the
management staff & the brokers
3. Periodical progress reporting to the Board
4. Online mechanism of submission of investors' complaints through LSE website & status update
5. Dedicated 'Investor Relations Department' set up under the Division
6. Launching investors' education/awareness campaign
7. More than 30% of the law suits of the Exchange are handled by in house team of lawyers.

Regulatory Affairs Division
During the year, the Regulatory Affairs Division was reorganized and structured as under:
Earlier Primary
Role
n Looking after
the legal
matters
n Dealing with
Investors’
complaints/
Arbitration
Expanded mandate
n Restoration & enhancement of confidence of
investors
n Serving as single point of contact for all sorts of
investor related matters
n Expeditious disposal of Investors’ complaints
through effectively conducting the Arbitration
proceedings
n Conducting Investors’ awareness programs
n Providing satisfactory feedback to the investors
n In-house legal resource for rendering advice to
the management and the Board
n Reviewing and reporting on the adequacy of the
surveillance & monitoring actions taken by the
Operations Division.
64
1. Legal & Arbitration Department
a. Legal matters
The in house legal team of LSE is well competent to provide
professional services to the Exchange. The team is handling
more than 30% of the lawsuits in a timely and cost effective
manner in which LSE is directly or indirectly involved. Further,
expert legal opinions and vetting services are provided by the
department as and when required by the Exchange.
b. Arbitration proceedings
Arbitration as an alternate method of dispute settlement has
long been recognized as convenient, efficient and less
expensive than the traditional lawsuits in the court. LSE
provides an Arbitration forum and complaints/grievances of
members and investors which are transparently processed
and decided by the Sole Arbitrator/ Panel of Arbitrators/
Appellate Bench. The awards/decisions of the Sole
Arbitrator/Panel of Arbitrators/Appellate Bench are effectively
implemented and the Governing Board of Directors takes
strict action under the Regulations in case of any nonimplementation
of the award by issuing notice of expulsion of
membership to implement the awards.
Investors’ Complaints - 2010
Opening Balance 97
Received Complaints and Appeals 214
Disposed Off 126
During the year, 545 investors complaints were received
(mostly against the expelled members) and 67 complaints
were settled. This year the CRO of the Exchange was appointed
as Convener of the Committee by the Board.
2. Investor Relations Department
LSE has setup an Investor Relations Department with the aim
to establish a two way communication channel with the most
important stakeholder of the capital markets i.e. the investors.
This department shall mainly be responsible for investor
reporting and communication, and would also undertake
various tasks. The idea behind this initiative is that the Stock
Exchanges have not been able to involve a significant
percentage of population of the country in the trading or
investment activity. Moreover, declining economic &
commercial activity in the country coupled with the
tightening of regulations has also forced the current investors
out of the market. Accordingly, it was considered as high time
for LSE to adopt a policy whereby it made investors outreach
as a cornerstone of its efforts to expand the market.
Investors’ Complaints - 2011
Opening Balance 185
Received Complaints and Appeals 545
Disposed Off 67

Technology Services Division
Sitting (Left to Right)
Sehar Fatima | Sarmad Hussain | Khurram Zafar | Muhammad Ali | Maryam Ehsan
65
Standing (Left to Right)
Siddiq-ur-Rahman Khurram | Asif Saeed | Muhammad Sohail | Muhammad Arif Azad | Rana Khurram Ali
Osama Ali | Farhan Asim | Imran Shah | Muhammad Saleem | Zeeshan Tayyab | Agha Hamid | Irfan Khan
Bilal Anwar | Fayyaz Shahid | Aftab Alam | Muhammad Kaleem Ullah
During the last decade, the MIS department of the Exchange has also evolved to become the largest organizational unit of LSE,
providing software, hardware and network support to the local and remote brokers/traders, investors and the Exchange itself.
Additionally, the division supports its end-to-end trading software system customers within and outside of Pakistan.
Following in the footsteps of recent global trend marked by the acquisitions of OMX by NASDAQ, MilleniumIT by London Stock
Exchange and the launch of NYSE Technologies as an independent commercial division of NYSE Euronext, the erstwhile MIS
department has been converted into LSE Technology Services Division, with following distinct vision and mission:

Technology Services Division
Vision
"To position LSE Technology Services Division as a worldclass
provider of innovative technology solutions to the
global capital markets ecosystem."
Mission
“To remain at the fore-front of technological evolution and
continue to offer innovative technology products and services
that help our customers differentiate themselves and succeed,
while at the same time offering our employees unparalleled
opportunities to grow professionally."
66
Core Values
Innovation
Quality
Integrity
Communication
Respect
Efficiency
Value Statement
We shall strive to remain at the cutting edge, but not the bleeding edge, of technological
advancements in the industry in order to continue to serve the bottom line and the customers of the
Exchange
By developing processes and nurturing an environment where quality is paramount, we shall serve
our stakeholders with products and services in which we take personal pride
We shall continue to strive to honor our commitments and conduct all activities as per the highest
standards of personal and professional ethics and integrity
We shall place utmost importance on frank, honest and direct communication and knowledge
sharing within the division as well as with our peers in the organization and our customers outside
the organization as appropriate
We shall show respect for the professional responsibilities, perspectives and opinions of all with
whom we interact within and outside the division and LSE
We shall be responsive to our customers and perform all duties and assignments with speed and
efficiency to the extent that the reliability and quality of the end work product is not compromised.
The new Division now has the mandate to convert the technology operations from a cost center to a profit center and drive the
top-line growth of the exchange and is planned to be spun-off within the next three years as an independent corporate
subsidiary that will continue to serve LSE while at the same time pursue other commercial interests as well.
The division organized into functional sections which work together to maintain and support all mission critical software,
hardware and networking infrastructure of the exchange.
New Organizational Structure
Headed by the Chief Information Officer, the division currently
employs 28 technology professionals that have been
organized into four new departments as per the following
illustration:

Technology Services Division
Assets of LSE Technology Services Division
The primary rationale for structuring the organization this way
was to maximize the return on our IT assets and convert the
division, presently a cost-center, into a profit center by
offering innovative technology and infrastructure solutions.
The four primary assets of the division are as follows:
Intellectual Property
LSE has been granted 8 different copyrights to its various
technology products including ULTRA Trading System,
BrokerNet and Smart Stock Services to name a few. The
Software Development department within the Technology
Services division has been tasked with upgrading all our
software systems and incorporating the latest protocols,
security standards, graphical user interface libraries and social
networking elements to differentiate these products and turn
them into marketable assets. Similarly, the Business
Development Department will be created to actively market
and sell these software systems to exchanges, brokers and
investors around the globe and generate revenue for the
exchange.
Additionally, the Technology Services Division is geared for a
renewed focus on creating and marketing data spanning from
real-time market information in FIX protocol to historical
corporate financial data in XBRL format. The Administration
and Security department has been charged with ensuring
that proper safeguards are in place to protect these IT assets.
Portfolio of Services
Some of the key services that the Technology Services Division
is offering to the Exchange and its customers include:
n
n
n
n
n
n
n
n
ULTRA Trade – a world-class, high-speed trading platform
UTS Platform – an integrated market platform for
Islamabad Stock Exchange
Local and remote desktop based trading & view-only
terminals
BrokerNet platform for extending online trading services
to brokers' investors
Smart Stock System – a platform for managing the Brokers'
back office operations
Lahore Stock Services – a comprehensive trade reporting
platform
CHS – a comprehensive clearing and settlement reporting
platform
LSE corporate website containing a wealth of market
related information
Infrastructure
LSE has made significant capital investments in developing
the operating and networking infrastructure of the exchange
and plans on making additional capital investments in order
to upgrade the internal data center and build a disaster
recovery site. The past investments in the infrastructure have
generally not been accompanied with a strategy to
recuperate the expense through some monetization
mechanism.
The planned IT infrastructure upgrade like the development
of a tier-2 or tier-3 datacenter within the LSE premises
incorporates a monetization strategy of offering the excess
capacity as co-location and hosting facilities to third parties
including banks in the building and/or brokers wanting a
more reliable and secure environment for their systems.
Human Resources
Skilled human resources are the backbone of any technology
operation and LSE Technology Services division is no
exception. The primary skills employed by the division are
C++, Oracle Developer, Cisco Networking, .NET and IT security.
Some of these skills like C++ development are not easily
available in the market but are a prerequisite for the
development of a platform that needs to support the highest
throughput and performance requirements. Additionally, the
division requires a certain minimal level of domain expertise in
the capital markets before a resource can be productive. That
also is hard to come by and the division often ends up
spending on training any new hires through orientation
sessions in different exchange departments and with brokers.
The afore mentioned factors coupled with the fact that LSE
competes with a very thriving IT industry in general
necessitates that we invest in and value our HR and ensure
long term loyalty by providing the staff with an opportunity to
grow professionally and compensating them at least at par
with the rest of the industry.
In order to maximize the return on this investment, it is critical
that the staff is not just supporting the existing software but is
creating new and marketable software solutions for the global
capital markets ecosystem. The various IT initiatives outlined
in the remainder of this section provide a high level overview
of such projects which are expected to generate sales and
bring in revenue to the division and the exchange. In order to
continue to support the existing operations and execute
these planned projects, it is planned that the division shall
grow its HR strength from 28 to a total of 47 professionals over
the next 5 years with bulk of the hiring taking place in the
coming year. It may be noted that the usual strength of the
division in the recent past has been in the neighborhood of 40
professionals.
67

Technology Services Division
68
The IT Software Development department is primarily
tasked with implementing the requirements driven by the
operations, regulatory and strategy divisions of the exchange.
It is also the hub of all innovation and all the intellectual
property of the Exchange has originated from this
department. The software Quality Assurance section within
the Software Development department is tasked with
ensuring that all output of the Technology Services division
that touches any of our stakeholders adheres to the strictest
standards of quality and reliability.
During the fiscal year 2011, the following key developments
were primarily driven by the IT Software Development
department:
n Launch time of the entire market trading system was
dramatically reduced from over 35 minutes to less than
180 seconds, a whopping 92% improvement.
n Although the trading platform is extremely resilient,
however if the system ever has to be restarted due to an
error during market hours, all market features will be
available post re-launch in under 3 minutes including
client trade risk management functionality.
n The Securities Lending and Borrowing platform was
developed and deployed at NCCPL to enhance the
Pakistani markets with new products and services.
Complete integration of the SLB platform with ULTRA
trading system was also accomplished during the same
period.
n The Unified Trading System (UTS) between Lahore and
Islamabad Stock Exchanges was enhanced to support
Margin Trading functionality and complete integration
with MTS platform was accomplished.
n In order to support debt instruments, Bonds Automated
Trading Platform (BATS) was developed and deployed
within very aggressive deadlines as requested by the SECP.
n An SMS based real-time trade alert service was developed
and tested, however deployment is pending the approval
of the schedule of charges.
n A mobile and web-based, near real-time, Market Tracker
(view-only terminal) was developed and deployed on the
corporate website.
n In order to bring increased transparency to the investors, a
web-based real-time order tracker was developed so that
anyone with an order ticket number and proper access can
check the status of their orders from an internet terminal
or a smart phone device.
n An online Membership Enrollment application was
developed to solicit interest from prospective members
through an electronic medium.
n LSE's website goes through a continuous content update
process. A web-based administrative panel was
developed to streamline and automate this content
management process.
n
n
n
n
n
n
In order to support a new department of the Exchange, the
Member Relations Department, a new Oracle based
application was developed to store online all information
related to the members and brokers including information
about the directors, contact details, branch information,
paid up capital, registration status and other pertinent
details.
The Smart Stock System, broker back-office product of the
LSE Technology Services division underwent numerous
feature enhancements supported by the Oracle
development team. The key ones include:
o Tighter integration with NCCPL and CDC systems
o Support for electronic signatures
o Minimum cash balance limits on trading
o New reports like Memo of Confirmation
o Conversion of text based reports to graphical format
Aside from supporting over 117 different development
tasks (CRFs) that were completed during this period, the
QA section of the department has been leading the
division's process maturity efforts and took the lead by
automating several of the testing workflows using an
open source automated testing framework.
To further the cause of process maturity, the entire scheme
of the ULTRA trade system was documented in detail and a
comprehensive, system-wide, data dictionary is being
developed.
All of LSE's intellectual property including source code and
documentation were moved to an open source change
and configuration management system called SVN under
tight access control and audit configuration.
An open source desktop as well as web based defect
management system was rolled out division-wide after
complete integration with the SVN.

Technology Services Division
The IT Operations & Support department has been set up to
manage the entire hardware, software, data, networking and
communication infrastructure of the Exchange and, in some
cases, the members of LSE. The market support operations of
the Exchange are managed by the staff from this department
also. The Support section within the department is
responsible for providing software, desktop, hardware, LAN
and application support to the customers of the Exchange.
Fiscal year 2011 was marked by a department wide effort to
reduce operating expenses, save on capital expense where
possible, introduce automation, embrace open source
software and rationalize the support staff strength so that the
department is operating as a lean organizational unit. During
the year, the followings activities had been performed:
n
n
n
n
n
n
n
An assessment was carried to establish LSE's current
internet communication requirements without
compromising the QoS offered to our customers, and
based on that exercise, the service charges were renegotiated
and extraneous services were discontinued
resulting in annualized cost savings of over PKR 1.1 Million
in Lahore and over PKR 800,000 in Faisalabad.
In order to prepare for the commissioning of the Disaster
Recovery site, the department created a parallel trading
system environment within the Exchange premises to test
fail-over scenarios.
The department negotiated the purchase of a premium
lse.com.pk domain name to replace the previous
lahorestock.com domain name.
The entire Exchange based email system was seamlessly
transitioned from the lahorestock.com to lse.com.pk
domain name.
A project was initiated to gradually transition LSE
employees to a Microsoft domain based environment to
improve the security and manageability of our internal
network.
LSE's website and all associated web based services were
seamlessly transitioned to the new lse.com.pk website.
Internal DNS, FTP and File servers were transitioned to the
new domain name.
n
n
n
n
n
n
n
Real-time email integration with corporate Blackberry
devices was launched using Blackberry Express server.
A web based Member support ticketing system was
developed and deployed to reduce the paperwork
involved in the support process and bring transparency to
the support procedures and track various different types of
support requests, their frequency and time to resolution,
etc. The system has an integrated support knowledge base
also to capture and re-use the knowledge on an on-going
basis.
Another ambitious project was launched to evaluate open
source Linux operating system variants for use within LSE
to reduce the operating expenses. Ubuntu operating
system was chosen as a result to replace Windows based
operating systems. Company-wide training sessions were 69
organized to familiarize users to the new operating system
and currently 4 pilot users in the LSE Technology Services
division are using the system for their day to day job. The
new operating system will be rolled out company-wide
after completion of this pilot in 4-6 weeks.
One of LSE's core network switches became out of order
due to a fault in the mother board of the switch. All vendors
consulted recommended that the switch be replaced at a
cost of approximately PKR 4 Million. The department took
the initiative to have the switch repaired by engaging a
CISCO consultant. The effort paid off, and the switch was
re-deployed back into production at 100% operating
capacity after the repairs saving the Exchange the cost of a
new switch.
A project was executed within the LSE Technology Services
division to replace individual UPS' with a centralized UPS
resulting in savings in annual maintenance costs of those
smaller UPS'.
The department deployed for the first time, a Dynamic
Host Configuration Protocol (DHCP) server to
automatically do IP address assignments company-wide
eliminating the need to perform this tedious task manually
for every computer joining the LSE network.
Several of Operations routine tasks were automated
through the use of an open-source task automation toolkit
named AutoIT including launch and shutdown of the
market servers.

Technology Services Division
70
The IT Administration & Security department has been
tasked for ensuring the safety, security and integrity of all
information that resides within the LSE domain and
everything that enters and leaves the communication
channels into and out of the Exchange. IT Administration
section is tasked with supporting the various departments
within the Technology Services division and to liaison with
other divisions within the exchange as well as our vendors and
partners.
During the fiscal year 2011, the following were the noteworthy
accomplishments of the department:·
n Deployed a Data Loss Prevention (DLP) system to
safeguard the source code and other proprietary assets of
the division from unauthorized transfer from the
computers to anywhere outside the organization.
n In order to centrally capture and administer company
knowledge and processes, an open source, state of the art,
online knowledge management and collaboration system
was developed and deployed. The system has support for
web-based collaborative editing, revision control, full text
and document search, content notifications and
community features like user profiles, activity streams and
comments.
n The commercial online vulnerability scanner used by LSE
previously was replaced with an open source alternative
after performing an extensive exercise of parallel scans
over a period of several months.
n A comprehensive internal IT audit was carried out to
identify any internal threats, security holes, unsupported
software, etc and an action plan developed to mitigate all
the identified risks. Several of the internal processes were
redefined and security controls introduced to make LSE
information systems more secure.
n The Intrusion Prevention System (IPS) was upgraded
during the year in order to continue to receive on-going
support, maintenance and policy updates from the vendor.
A parallel effort is underway to evaluate an open source
Intrusion Detection System which may replace the
n
n
commercial IPS solution if the test results are satisfactory.
Although the IT procurement function has been gradually
subsumed into the central LSE procurement department,
however, almost all annual maintenance contracts were
renewed at a lower price than the preceding year resulting
in significant cost savings for the Exchange, through the
negotiations carried out by the Technology Services
Division.
In order to save on printing and paper costs, the
department introduced the concept of printing two pages
on one and re-using the printouts to consume both sides of
the paper.
The IT Business Development department is the planned
new addition to the Technology Services division that has
been chartered with the goal of marketing and selling the
software and data products and services offered by the
division and help make the division fully self-sufficient and
profitable.
In order to bootstrap the department, the following activities
were performed during the fiscal year 2011:
n Development of marketing collateral including brochures
and pamphlets for LSE's marketable trading software
systems including ULTRA Trade and Broker Back-Office.
n
n
n
A Flash based movie was developed to walk prospective
customers through LSE's product line. The movie is
currently being enhanced by adding voice annotations
and commentary before deploying to LSE's new website.
Compiled a list of regional and international Exchanges for
input to a telesales and email campaign. LSE's product
brochures were sent as part of an email campaign.
A campaign was launched to solicit banner advertisements
on our website resulting in signing up of Microsoft as one
of our first online advertisers for PKR 200,000.
Summary of Cost Savings by the Division: Using a
combination of careful planning, some bold measures, good
negotiations, and prudent operational initiatives, the division
has affected already or foresees annualized savings of almost
PKR 11,000,000. The breakdown of these annualized savings is
as follows:
Expense Item
Amount (PKR)
Internet Communication (Lahore) 1,100,000
Internet Communication (Faisalabad) 800,000
Faulty core switch procurement 4,000,000
Various re-negociated contracts 100,000
Annual server maintenance 1,169,000
Reduction in support HR expense 1,158,888
Vulnerability scanner 144,417
ise.com.pk domain name purchase 200,000
Linux replacing 50 Windows operating system (forecast for
2012 only)
OpenOffice replacing 30 MS Office 2010 Pro licenses
(forecast for 2012 only)
946,000
1,290,000
Total Savings 10,908,305
In addition to the above, the department has chosen to boldly
embrace, deploy at LSE and support several open source
enterprise products whose commercial alternatives would
have cost at least US$ 200,000 or PKR 17,000,000 onetime
expense followed by annual support charges of over PKR
3,400,000!

Technology Services Division
IT Strategy Roadmap
A five stage strategic plan has been devised for the LSE Technology Services division to aid in achieving the following short-term
and long-term goals:
Near Term
nSupport the Exchange in its
efforts to bring liquidity to the
market and introduce a variety
of investment options for
investors.
n Bring efficiency and improve
the quality of services that the
division offers to the Exchange
and its stakeholders.
n Build the HR capacity, develop
processes & re-factor existing
software IP to support the
strategic/ long-term goals.
Long Term
nTransform the current cost
center operations into a profit
center for the Exchange.
n Secure a leadership position
in the global capital markets
technology solutions providers
landscape.
n Achieve sufficient selfreliance
to be spun-off by the
Exchange into an independent
company to pursue aggressive
growth strategies.
The first step of the 5 phase plan focuses on internal capacity
building to lay a strong foundation for the future growth by
attracting good talent and taking concrete steps to retain this
precious talent. We compete with a very thriving IT industry in the
country for the technical resources and it is critical that our HR
policies and remunerations are at par with the industry norms.
Similarly, processes and infrastructure need to be developed to
ensure quick time to market for any market or regulation driven
enhancement to our software assets. The following initiatives and
projects are planned to this end.
n Build staff capacity to deploy and support open source
technology
n Develop staff capacity through training programs on industry
domain, new technologies and project management disciplines
n Develop a top tier data center within the LSE premises
n Build and deploy a Disaster Recovery site
n Develop and mature internal software development and
operational processes to achieve CMMi & ISMS certifications
n Revision of HR policy & compensation structure to bring the
salaries and benefits at par with the industries we compete with
for the required talent
n An aggressive hiring campaign to recruit technology staff
In the second step, the primary focus shall be on consolidating
our existing technology assets, including 8 different patented
software systems, and re-factoring them for productization/
commercialization and upgrading them for marketability in
today's competitive IT environment. Some of the projects that
will lay the foundation for this step include:
n Create a software development framework
n Redesign & Upgrades of ULTRA trading system, BrokerNet &
BackOffice
n Institute centralized source code management system
n Deployment of a data loss prevention system
n Make ULTRA FIX compliant
n Consolidate Market & Corporate Financial data in online format
The next stage will be marked by technology innovation and
development of new solutions for the capital markets driven by
customer demand that shall help LSE's top-line and bring
liquidity to the market. The following initiatives are planned to
addresses the objectives of this phase:
n Liquidity Network
n Bonds Automated Trading System
n Web based Trading Portal
n Mobile Trading Portal
n Adoption of MySQL to lower Oracle support and license fees
n Adoption of Linux and open source office application to lower
expense
n Deployment of an Open source Intrusion Detection System
n Development support for After-hours trading and Multi-Market
Gateway initiatives
The fourth phase of the IT strategy will emphasize revenue
generation and market outreach to capitalize upon the
technological innovation in the previous phase. A business
development organization is to be developed to market and sell
LSE's products and services nationally and globally. LSE's existing
references and innovative technology solutions will be the prime
ingredients to drive the profitability goals earmarking this phase.
n Create a business development department within the division
n Develop sales and marketing collateral for LSE products and
services
n Develop a telephone sales campaign to identify prospects
locally and internationally
n Create and manage a revenue target driven sales pipeline
n Create and market a Virtual Investment Management game to
colleges and universities
n Market & sell FIX compliant Market data
n Market & sell XBRL compliant corporate financial data
n Market & sell LSE software solutions and services
n Market & sell LSE hosting services and solutions
Lastly, building upon the success of the preceding 4 phases, it is
planned to spin-off LSE Technology Services division into a
separate corporate entity capitalized with seed money from LSE
and a strategic investor to pursue aggressive growth strategies
and secure a leadership position in the global capital markets
technology solutions playing field. LSE is expected to benefit
from this spin-off by reducing its capital and operating expenses
and strengthening its bottom line from the dividends from the
spun-off company.
Additionally, LSE Technology Services division has envisaged the
following two strategic projects to further support the long term
vision of the exchange:
n Development of a National Spot Trading Ecosystem through a
corporatized private company
n Spin-off of LSE Technology Services division as a corporate
subsidiary.
71

LSE Highlights

Pictorial
Chairman and Managing Director LSE presenting
custodian key to the new Chairman.
Mr Siraj-ud-din Aziz, CEO Bank Alfalah, addressing the
Corporate Briefing Program of Bank Alfalah at LSE
Auditorium.
74
Visit of delegation from Competition
Commission of Pakistan to LSE.
Visit of delegation from British High Commission to LSE.
LSE Staff’s tour to Rohtas Fort and Mangla

Pictorial
Group photo on the occasion of Continuous Professional Development Program - IPO Advisory Services
75
Mr. Aftab Ahmed Khan Chairman LSE,
Presenting a souvenir to Ms. Carmela Conroy
US Consul General at Lahore.
Chairman LSE on the occasion of launching
new website of the Lahore Stock Exchange
with a new domain name
www.lse.com.pk

Pictorial
Group photo of directors and senior members of Lahore Stock Exchange with a delegation from European Union
76
Participants of Pakistan IPO
Summit
Miss Ayla Majid hosting the first ever Pakistan IPO Summit organized by SAFE, LSE & SECP
and cohosted by KSE, ISE, CDC & NCCPL
Ms Nina Fite, US Counsel General and Mr.
Andrew Sisson, Mission Director USAID
Pakistan during a reception hosted by LSE

Pictorial
A Reciprocity Cricket Match was played between LSE and Royal Palm at Royal Palm Club. Mr Arif Habib, chairman Arif Habib
Corporation was also part of the LSE team.
77
Mr. Muhammad Ali, Chairman SECP during his visit to Lahore Stock Exchange
Information Desk by LSE during IPO of Engro Foods.
Certificate awarding ceremony of Media Relations Course

Visitors’ Comments
It is indeed a pleasure to meet the LSE Board whom I found raising must pertinent question
relating to the purpose of the meeting i.e. adoption of the voluntary Competition Compliance
Code. It is heartening that a Stock Exchange has volunteered considering its adoption. I am
sure that they would serve as effective leaders to this end.
I wish LSE the very best in its endeavor's and would like to record my gratitude to Board and
particularly to Mr. Aftab Ahmad Ch., Managing Director/CEO for taking such an initiative.
Ms. Rahat Kaunain Hassan
Chairperson, Competition Commission of Pakistan
December 29, 2010
It is very pleasing to see what the LSE is doing and especially meeting members of its Board
whom I'm sure would not only sustain the current growth, but exceed our expectations. LSE
has our best wishes and support as always.
Syed Sheryar Ali
Executive Director, Treet Group
January 7, 2011
78
Many thanks for a fascinating, informative and productive conversation.
Dr. Peter Tibber
Deputy High Commissioner,
British High Commission,
Islamabad.
February 1, 2011
Thanks for inviting me and my team. We have been enlightened by your briefings and
appreciate the future thinking of your organization. Hope to continue this coordination.
Mr. M. Irfan Elahi
Secretary Food Punjab
February 2, 2011
Thank you Mr. Aftab Ch. for your hospitality and the warmth, with which you have received us
from NESPAK. Your dynamism is already visible and I am very sure you will restore the Stock
Exchange Building in a befitting manner. Your vision needs to be implemented in letter &
spirit. Wish you a long and happy tenure. Much impressed by your team and their level of
excitement in wanting to improve all that is around. All the very best.
Mr. Asad I. A. Khan
President and Managing Director
National Engineering Services Pakistan (Pvt.) Ltd. (NESPAK)
February 3, 2011

Visitors’ Comments
It has been a great experience to present Arif Habib Corporation Ltd. before the Members of
Lahore Stock Exchange. It is an excellent initiative by the Management of LSE. I
congratulate the Board of LSE and Its Managing Director for giving investors educations an
important priority. I wish LSE a great success in creating investment culture in the country.
Mr. Arif Habib
Chairman & Chief Executive
Arif Habib Corporation Ltd.
It is always a pleasure to visit LSE as a visitor, what to tell how delightful it was today when
I was asked to deliver a presentation on IPOs. I wish all the very best to the LSE members
and the Exchange.
Muhammad Farid Alam, FCA
CEO AKD Securities Ltd.
It has been an honour and a privilege to serve on the Board of Directors of the Lahore Stock
Exchange from 2006-2010. The support given by successive Boards and management has
been invaluable throughout this period. It has been a great learning opportunity and occasion to
serve. I retain a strong emotional bond with the LSE on account of time spent here and also
from a historical prospective, as my forefathers were prominent in the establishment of this
institution. Thank you once again.
Mr. Arif Saeed
Servis Industries Ltd.
March 25, 2011
79
I am very delighted and honoured to be amongst the stakeholders of the Capital Market. I
would like to thank you all for the invitation and warm hospitality extended to me. It would be
a great pleasure to work with the team members of LSE. God Bless you. With profound
regards.
Mr. Abdul Qadir Memon
Director, Karachi Stock Exchange (G) Ltd.
March 31, 2011
Mr. Aftab Ahmad Ch. & all Members of Board of Directors, Thank you for your hospitality
and inviting me to meet the Board of Directors and share our vision. The presentation you
made was extremely informative & full of energy and initiatives. I was extremely happy to
share various thoughts with a well diversified Board of Directors and competent management
team. I know that times are tough but I also believe that we keeping working together as a
team with sincerity and hard work, soon we will see a very vibrant Stock Exchange, Regards.
Mr. Muhammad Ali
Chairman, Securities and Exchange Commission of Pakistan.
March 29, 2011.

Visitors’ Comments
Thank you for an interesting and impressive presentation. I look forward to learning more about the
capital markets in Lahore and your exchange innovative financial products. Thank you for hosting
our team.
Robert B Hawkins III
Economic Officer US Consulate General
Lahore
April 6, 2011
Indeed it has been remarkable day for Bank Alfalah's management to be so deeply engaged with
the Honorable members of the Lahore Stock Exchange. We found our visit to LSE not only
rewarding but highly educative. We have noted the positive attitude of the members towards the
bank and have taken all suggestive comments, with an extremely positive attitude. On behalf of
the Board and management of Bank Alfalah wish LSE members great success in their business.
God bless you all.
Mr. Sirajuddin Aziz, CEO
Bank Alfalah Ltd.
May 11, 2011
80
This was my first visit to Lahore Stock Exchange. Thoroughly enjoyed the hospitality of the
members and the management. I was impressed by the in depth knowledge of the analysts and
the brokers and very professional environment and the management. My impression of the Stock
Exchange environment is changed. Good luck for the bright and successful future. Wishing the
best.
Mr. Shahid Khan, CEO.
PakGen Power Ltd.
June 7, 2011
Today in Pakistan, we need optimism. My visit to LSE has shown exactly the same what we need
today. LSE's management professionalism and commitment made me believe that LSE will grow
by leaps and bounds going forward. Insha Allah.
Mr. Imran Anwar, CFO
Engro Foods Ltd.
July 1, 2011
First visit of many by EU to LSE. Hospitality and interaction fully appreciated. Let's see the future
together in a global economy!
Pierre Mayaudom,
Deputy Head
European Union Delegation to Pakistan
August 29, 2011
Thank you for hosting our visit, my only regret is that it took me so long to get here. All the best
and I hope this continues a practical and prosperous relationship between US Consulate General,
Lahore and Lahore Stock Exchange. Regards.
Ms. Carmela Conroy,
US Consul General
September 14, 2011

Financial Highlights

Income and Expenditure Comparison
For last Ten Years
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Revenue
Rupees in thousand
Fees 44,813 86,842 90,970 134,645 121,223 133,423 122,766 79,550 138,164 146,602
Rental (1,176) (948) 841 211 1,312 5,899 6,732 8,221 6,353 9,313
Profit on Bank deposits and Investment 16,306 12,998 14,590 22,108 51,031 43,845 52,619 56,156 51,655 53,513
Software Revenue 2,080 1,131 6,427 5,373 5,309 2,960 4,106 21,528 8,908 6,161
Other Income 1,081 4,685 8,907 2,745 3,166 3,573 3,289 9,262 6,339 20,697
63,104 104,708 121,735 165,083 182,041 189,700 189,512 174,717 211,419 236,286
Expenditure
Admin Expense 50,451 46,903 60,933 77,366 82,577 96,624 115,034 138,723 132,658 129,757
Finance Cost 432 381 332 100 28 48 957 4,492 1,922 339
Donations 171 132 1,105 1,012 2,020 675 550 4,370 1,060 5,000
Other Charges 11,079 3,370 2,351 3,900 2,067 10,822 40,506 10,716 67,580 13,783
62,133 50,786 64,721 82,377 86,692 108,169 157,047 158,301 203,220 148,879
Operational Income 970 53,922 57,014 82,705 95,349 81,530 32,464 16,416 8,199 87,407
Income from Associated companies - - - 52,904 31,122 35,814 74,258 35,070 23,984 22,436
82
Income before taxation 970 53,922 57,014 135,609 126,471 117,344 106,722 51,486 32,183 109,843
Taxation 500 35,635 14,800 36,995 24,171 4,550 14,338 (47,045) (1,203) 6,256
Net Income after tax 470 18,287 42,214 98,614 102,300 112,795 92,384 98,531 33,386 103,587
Administrative Main Heads
Salaries & Benefits 24,138 25,104 34,940 44,486 47,623 57,606 70,458 77,340 78,180 75,786
Legal & Other Charges 1,966 2,813 2,341 3,847 2,067 6,882 31,458 8,544 8,418 5,898
Repair & Maintenance 135 253 248 242 295 416 813 1,018 1,918 2,027
Communication Expense 1,734 2,295 3,705 4,338 4,633 5,044 4,952 2,063 3,336 2,965
IT related expenses - - 2,587 1,419 3,977 1,897 2,076 12,425 12,322 10,893
Water & Power 1,922 1,267 959 1,686 1,432 2,734 2,971 3,936 4,783 4,244
Others* 32,239 19,055 19,942 26,359 26,665 33,590 44,319 52,975 94,263 47,066
Total 62,133 50,786 64,721 82,377 86,692 108,169 157,047 158,301 203,220 148,879
* Other head includes rest of the administrative, other charges, donations and finance cost/ charges

Income & Expenditure Statement
Horizontal Analysis (year on year basis)
2007 2008 2009 2010 2011
Revenue Absolute % Absolute % Absolute % Absolute % Absolute %
Fees 12,200 10% (10,657) -8% (43,216) -35% 58,614 74% 8,438 6%
Rental 4,586 349% 833 14% 1,489 22% (1,868) -23% 2,960 47%
Profit on Bank deposits and Investment (7,186) -14% 8,774 20% 3,537 7% (4,501) -8% 1,858 4%
Software Revenue (2,349) -44% 1,146 39% 17,422 424% (12,620) -59% (2,747) -31%
Other Income 407 13% (284) -8% 5,973 182% (2,923) -32% 14,358 227%
7,658 4% (188) 0% (14,795) -8% 36,702 21% 24,867 12%
Expenditure
Admin Expense 14,047 17% 18,410 19% 23,689 21% (6,065) -4% (2,901) -2%
Finance Cost 20 70% 909 1894% 3,535 369% (2,570) -57% (1,583) -82%
Donations (1,345) -67% (125) -19% 3,820 695% (3,310) -76% 3,940 372%
Other Charges 8,755 424% 29,684 274% (29,790) -74% 56,864 531% (53,797) -80%
21,477 25% 48,878 45% 1,254 1% 44,919 28% (54,341) -27%
Operational Income (13,819) -14% (49,066) -60% (16,048) -49% (8,217) -50% 79,208 966%
Income from Associated companies 4,692 15% 38,444 107% (39,188) -53% (11,086) -32% (1,548) -6%
83
Income before taxation (9,127) -7% (10,622) -9% (55,236) -52% (19,303) -37% 77,660 241%
Taxation (19,621) -81% 9,788 215% (61,383) -428% 45,842 -97% 7,459 -620%
Net Income after tax 10,494 10% (20,410) -18% 6,147 7% (65,145) -66% 70,201 210%
Main Administrative Heads
Salaries & Benefits 9,982 21% 12,852 22% 6,882 10% 840 1% (2,394) -3%
Legal & Other Charges 4,815 233% 24,576 357% (22,914) -73% (126) -1% (2,520) -30%
Repair & Maintenance 121 41% 397 95% 205 25% 900 88% 109 6%
Communication Expense 412 9% (92) -2% (2,889) -58% 1,273 62% (371) -11%
IT related expenses (2,080) -52% 179 9% 10,349 499% (103) -1% (1,429) -12%
Water & Power 1,302 91% 237 9% 965 32% 847 22% (539) -11%
Others* 6,925 26% 10,729 32% 8,656 20% 41,288 78% (47,197) -50%
Total 21,477 25% 48,878 45% 1,254 1% 44,919 28% (54,341) -27%
* Other head includes rest of the administrative, other charges, donations and finance cost/ charges

Income & Expenditure Statement
Vertical Analysis
Revenue 2007 2008 2009 2010 2011
%
Fees 70% 65% 46% 65% 62%
Rental 3% 4% 5% 3% 4%
Profit on Bank deposits and Investment 23% 28% 32% 24% 23%
Software Revenue 2% 2% 12% 4% 3%
Other Income 2% 2% 5% 3% 9%
100% 100% 100% 100% 100%
Expenditure
Admin Expense 51% 61% 79% 63% 55%
Finance Cost 0% 1% 3% 1% 0%
Donations 0% 0% 3% 1% 2%
Other Charges 6% 21% 6% 32% 6%
57% 83% 91% 96% 63%
Operational Income 43% 17% 9% 4% 37%
84
Income from Associated companies 19% 39% 20% 11% 9%
Income before taxation 62% 56% 29% 15% 46%
Taxation 2% 8% -27% -1% 3%
Net Income after tax 59% 49% 56% 16% 44%
Main Administrative Heads
Salaries & Benefits 30% 37% 44% 37% 32%
Legal & Other Charges 4% 17% 5% 4% 2%
Repair & Maintenance 0% 0% 1% 1% 1%
Communication Expense 3% 3% 1% 2% 1%
IT related expenses 1% 1% 7% 6% 5%
Water & Power 1% 2% 2% 2% 2%
Others* 18% 23% 30% 45% 20%
Total 57% 83% 91% 96% 63%
* Other head includes rest of the administrative, other charges, donations and finance cost/ charges

Financials

Auditors’ Report to the Members
We have audited the annexed balance sheet of Lahore Stock Exchange (Guarantee) Limited (“the Company”) as
at 30 June 2011 and the related income and expenditure account, statement of comprehensive income,
statement of changes in funds and reserves, and cash flow statement together with the notes forming part
thereof, for the 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.
It is the responsibility of the Company's management to establish and maintain a system of internal control, and
prepare and present the above said statements in conformity with the approved accounting standards and the
requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these
statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards
require that we plan and perform the audit to obtain reasonable assurance about whether the above said
statements are free of any material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the above said statements. An audit also includes assessing the
accounting policies and significant estimates made by management, as well as, evaluating the overall
presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion
and, after due verification, we report that:
a) Due to pending court cases, recoverability of Rs. 181.531 million due from the defaulted / suspended
members depends upon favourable judgements by the respective courts as detailed in note 24.
b) in our opinion, proper books of account have been kept by the Company as required by the Companies
Ordinance, 1984;
c) in our opinion:
87
i) the balance sheet and income and expenditure account together with the notes thereon have been drawn
up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are
further in accordance with accounting policies consistently applied.
ii)
the expenditure incurred during the year was for the purpose of the Company's business; and
iii) the business conducted, investments made and the expenditure incurred during the year were in
accordance with the objects of the Company;
d) in our opinion and to the best of our information and according to the explanations given to us, the balance
sheet, income and expenditure account, statement of comprehensive income, statement of changes in funds
and reserves, and cash flow statement together with the notes forming part thereof conform with approved
accounting standards as applicable in Pakistan, and, give the information required by the Companies
Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the
Company's affairs as at 30 June 2011 and of the income, its comprehensive income, its changes in funds and
reserves and its cash flows for the year then ended; and
e) in our opinion, no Zakat was deductible at source by the Company under section 7 of the Zakat and Ushr
Ordinance, 1980 (XVIII of 1980).
Lahore:
Date: November 04, 2011
-sd-
KPMG Taseer Hadi & Co.
Chartered Accountants
(Kamran Iqbal Yousafi)

Balance Sheet
As at June 30, 2011
88
2011 2010
FUNDS, RESERVES AND LIABILITIES Note (Rupees in thousand)
Members Initial Contribution 116,102 116,102
Reserves 7 1,922 1,469
Accumulated Income 753,284 646,917
755,206 648,386
Funds and Reserves 871,308 764,488
Surplus on revaluation of property,
plant and Equipment 8 456,224 459,003
Non-current liabilities
Employee retirement benefits 9 15,896 14,264
Liabilities against asset
subject to finance lease 10 720 -
Provision for earned leaves 5,813 6,311
Employees' welfare fund 11 500 500
Long term deposits 12 122,273 146,888
Deferred taxation 13 36,320 33,329
Current liabilities
181,522 181,522
Current portion of liabilities against
asset subject to finance lease 10 342 905
Members' contribution fund 14 457,534 464,752
Investors' protection fund 15 232,113 215,304
Accrued and other liabilities 16 169,824 228,516
Contingencies and commitments 17
859,813 909,477
2011 2010
ASSETS Note (Rupees in thousand)
Non-current assets
Property, plant and equipment 18 594,544 608,391
Intangibles 19 - 661
Investment in associates 20 275,566 267,677
Long term investments 21 24,369 22,805
Long term loans 22 3,175 1,550
Long term deposits 2,096 2,087
Current assets
899,750 903,171
Stores 1,458 606
Short term investments 23 - -
Loans and advances 24 205,097 200,939
Short term prepayments and
other Receivables
25
74,553 5,130
Mark-up receivable 26 1,501 11,726
Tax refunds from the government 27 65,047 58,371
Cash and bank balances 28 1,121,461 1,154,317
1,469,117 1,431,089
2,368,867 2,334,260
2,368,867 2,334,260
The annexed notes 1 to 43 form an integral part of these financial statements.
-sd-
Managing Director
-sd-
Director
-sd-
Director

Income and Expenditure Account
For the year ended June 30, 2011
INCOME
Note
2011 2010
(Rupees in thousand)
Fee 29 146,602 138,165
Rental - net 30 9,314 6,355
Profit on bank deposits and investments 31 53,513 51,655
Software revenues 32 6,161 8,908
Other income 33 20,697 6,340
EXPENDITURE
236,287 211,423
Administrative expenses 34 129,757 132,660
Finance cost 35 339 1,922
Other charges 36 18,783 68,641
148,879 203,223
87,408 8,200
Share of after tax profit of associated
companies - net 22,436 23,984
Income for the year - before taxation 109,844 32,184
Taxation
- Current 37 3,265 3,198
- Deferred 2,991 (4,401)
6,256 (1,203)
89
Income for the year - after taxation 103,588 33,387
The annexed notes 1 to 43 form an integral part of these financial statements.
-sd-
Managing Director
-sd-
Director
-sd-
Director

Statement of Comprehensive Income
For the year ended 30 June 2011
2011 2010
(Rupees in thousand)
Net Income for the year 103,588 33,387
Other comprehensive income
Share of other comprehensive income of associates in
respect of gain / (deficit) on revaluation of ‘available for
sale’ investments
Incremental depreciation charged during the year
transferred to accumulated income
453 (482)
4,276 4,502
Income tax on other comprehensive income (1,497) (1,577)
Other comprehensive income 3,232 2,443
106,820 35,830
90
The annexed notes 1 to 43 form an integral part of these financial statements.
-sd-
Managing Director
-sd-
Director
-sd-
Director

Statement of changes in Funds and Reserves
For the year ended 30 June 2011
Members
Initial
Contribution
Capital Reserve
Revenue
reserve
Accumulated
Income
Total
-----------------------------------------(Rupees in thousand)-----------------------------------------
Balance as at 30 June 2009 116,102 1,342 609 610,605 728,658
Total comprehensive income for the year
Income for the year - - - 33,387 33,387
Incremental depreciation charged during the
year transferred to accumulated income - - - 2,925 2,925
Share of other comprehensive loss of
associates - - (482) - (482)
Total comprehensive income for the year - - (482) 2,925 2,443
Balance as at 30 June 2010 116,102 1,342 127 646,917 764,488
Total comprehensive income for the year
91
Income for the year - - - 103,588 103,588
Incremental depreciation charged during the
year transferred to accumulated income - - - 2,779 2,779
Share of other comprehensive income of
associates - - 453 - 453
Total comprehensive income for the year - - 453 2,779 3,232
Balance as at 30 June 2011 116,102 1,342 580 753,284 871,308
The annexed notes 1 to 43 form an integral part of these financial statements.
-sd-
Managing Director
-sd-
Director
-sd-
Director

92
Cash Flow Statement
For the year ended 30 June 2011 2011 2010
Cash flow from operating activities
Note
(Rupees in thousand)
Income for the year before taxation and share of profit of
associated companies 87,408 8,200
Adjustments for:
Depreciation 19,387 20,902
Amortization of intangibles 661 661
Deferred income - (9,050)
Staff retirement benefits - gratuity 6,795 6,642
Provision for earned leaves (498) 1,282
Profit / interest on bank deposits and investments (53,513) (51,655)
Lease rentals (34,287) (29,441)
Loss on disposal of property, plant and equipment 9 9,195
Change in fair value reserve (1,564) (6,245)
Provision against:
- impairment of fixed assets - 918
- material and other costs - 9,526
- doubtful advances - 19,258
- doubtful fee receivable 7,224 9,599
- impairment of investment - 9,716
Finance cost 339 1,922
(55,447) (6,770)
(Decrease) / increase in working capital 40 (130,758) 38,128
Receipts / (payments) in respect of:
(98,797) (39,557)
Long term deposits - liabilities 9,663 69,620
Internet trading - 227
Long term loans (1,625) 1,130
Staff retirement benefits - gratuity (5,163) (5,091)
Taxation (9,941) (17,288)
(7,066) 48,598
Net cash (outflow) / inflow from operating activities (105,863) 88,155
Cash flow from investing activities
Fixed capital expenditure (4,336) (50,234)
Proceeds from sale of property, plant and equipment - 30
Investments matured during the year - 48,375
Profit / interest received on bank deposits 63,739 57,328
Dividend received 15,000 24,012
Net cash inflow from investing activities 74,403 79,511
Cash flow from financing activities
Lease rentals paid (1,056) (2,390)
Finance cost paid (339) (1,949)
Net cash outflow from financing activities (1,395) (4,339)
Net (decrease) / increase in cash and cash equivalents (32,856) 163,327
Cash and cash equivalents at the beginning of the year 1,154,317 990,990
Cash and cash equivalents at the end of the year 1,121,461 1,154,317
The annexed notes 1 to 43 form an integral part of these financial statements.
-sd-
Managing Director
-sd-
Director
-sd-
Director

Notes to the Financial Statements
For the year ended 30 June 2011
1 The Company and its operations
Lahore Stock Exchange (Guarantee) Limited ("the Company") was incorporated under the
Companies Act, 1913 (now the Companies Ordinance, 1984) on 05 October, 1970 as a Company
limited by guarantee. The registered office of the Company is situated at 19, Khayaban-e-Aiwane-Iqbal,
Lahore, Pakistan.
The Company is engaged in conducting, regulating and controlling the trade or business of
buying, selling and dealing in shares, scripts, participation term certificates, modaraba
certificates, pre-organisation certificates and securities, stocks, bonds, debentures, debenture
stocks, Government papers, loans and any other instruments and securities of like nature
including but not limited to special national fund bonds and documents of a similar nature
issued by the Government of Pakistan or any institution or agency authorised by it.
2 Basis of preparation and statement of compliance
These financial statements have been prepared in accordance with the approved accounting
standards as applicable in Pakistan. Approved accounting standards comprise of such
International Financial Reporting Standards (IFRS) issued by the International Accounting
Standards Board as are notified under the Companies Ordinance, 1984, provisions of and
directives issued under the Companies Ordinance, 1984. In case requirements differ, the
provisions of and directives of the Companies Ordinance, 1984 shall prevail.
3 Basis of measurement
These financial statements have been prepared under the historical cost convention except
for land, building on free hold land and investments classified as available for sale which are
stated at fair value and obligations in respect of gratuity schemes which are measured at present
value.
4 Use of estimates and judgments
The preparation of financial statements in conformity with approved accounting standards,
as applicable in Pakistan, requires management to make judgments, estimates and
assumptions that affect the application of policies and the reported amounts of assets,
liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and various
other factors that are believed to be reasonable under the circumstances, the results of which
form the basis of making the judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimates are revised if the
revision affects only that period, or in the period of the revision and future periods if the revision
affects both current and future periods.
Judgements made by the management in the application of approved accounting standards,
as applicable in Pakistan, that have significant effect on the financial statements and estimates
with a significant risk of material adjustment in the next year are as follows:
- Income taxes
In making the estimates for income taxes currently payable by the Company, the management
looks at the current income tax laws and the decisions of appellate authorities on certain issues
in the past.
- Investment stated at fair value
Management has determined fair value of investment by using quotations from active market
conditions and information about the financial instrument. These estimates are subjective in
nature and involve some uncertainties and matters of judgment and therefore, cannot be
determined with precision.
- Property, plant and equipment
The Company reviews the rate of depreciation, useful life, residual value and value of assets for
possible impairment on an annual basis. Any change in the estimates in future years might affect
the carrying amounts of the respective items of property, plant and equipment with a
corresponding effect on the depreciation charge and impairment.
- Intangible assets
The Company reviews the rate of amortization and value of intangible assets for possible
impairment on an annual basis. Any change in the estimates in future years might affect the
carrying amounts of intangible assets with a corresponding affect on the amortization charge
and impairment.
- Staff retirement benefits
Certain actuarial assumptions have been adopted as disclosed in note 9 to the financial
statements for valuation of present value of defined benefit obligations and fair value of plan
assets. Changes in these assumptions in future years may affect the liability under these
schemes in those years.
5 Initial application of new standards, interpretations or amendments to existing
standards and forthcoming requirements
5.1 Standards, amendments or interpretations which became effective during the
year
During the year certain amendments to Standards or new interpretations became effective,
however, the amendments or interpretation did not have any material effect on the financial
statements of the Company.
5.2 New / revised accounting standards, amendments to published accounting
standards, and interpretations that are not yet effective
The following standards, amendments and interpretations of approved accounting standards
will be effective for accounting periods beginning on or after 01 July 2011;
- IAS 24 Related Party Disclosures (revised 2009) – (effective for annual periods beginning
on or after 1 January 2011). The revision amends the definition of a related party and modifies
certain related party disclosure requirements for government-related entities. The
amendment would result in certain changes in disclosures.
- Amendments to IAS 12 – deferred tax on investment property (effective for annual periods
beginning on or after 1 January 2012). The 2010 amendment provides an exception to the
measurement principle in respect of investment property measured using the fair value model
in accordance with IAS 40 Investment Property. The measurement of deferred tax assets and
liabilities, in this limited circumstance, is based on a rebuttable presumption that the carrying
amount of the investment property will be recovered entirely through sale. The presumption
can be rebutted only if the investment property is depreciable and held within a business
model whose objective is to consume substantially all of the asset's economic benefits over
the life of the asset. The amendment has no impact on financial statements of the Company.
- Amendments to IFRIC 14 IAS 19 – The Limit on a Defined Benefit Assets, Minimum Funding
Requirements and their Interaction (effective for annual periods beginning on or after 1
January 2011). These amendments remove unintended consequences arising from the
treatment of prepayments where there is a minimum funding requirement. These
amendments result in prepayments of contributions in certain circumstances being
recognised as an asset rather than an expense. This amendment has no impact on Company's
financial statements.
- Improvements to IFRSs 2010 – In May 2010 the IASB issued improvements to IFRSs 2010
which comprise of 11 amendments to 7 standards. Effective dates, early application and
transitional requirements are addressed on a standard by standard basis. The majority of
amendments are effective for annual periods beginning on or after 1 January 2011. The
amendments include list of events or transactions that require disclosure in the interim
financial statements, add an explicit statement that qualitative disclosure should be made in
the context of the quantitative disclosures to better enable users to evaluate an entity's
exposure to risks arising from financial instruments and fair value of award credits under the
customer loyalty programmes to take into account the amount of discounts or incentives that
otherwise would be offered to customers that have not earned the award credits. Certain of
these amendments will result in increased disclosures in the financial statements.
- IAS 27 Separate Financial Statements (2011) - (effective for annual periods beginning on or
after 1 January 2013). IAS 27 (2011) supersedes IAS 27 (2008). IAS 27 (2011) carries forward
the existing accounting and disclosure requirements for separate financial statements, with
some minor clarifications. The amendments have no impact on financial statements of the
Company.
- IAS 28 Investments in Associates and Joint Ventures (2011) - (effective for annual periods
beginning on or after 1 January 2013). IAS 28 (2011) supersedes IAS 28 (2008). IAS 28 (2011)
makes the amendments to apply IFRS 5 to an investment, or a portion of an investment, in an
associate or a joint venture that meets the criteria to be classified as held for sale; and on
cessation of significant influence or joint control, even if an investment in an associate
becomes an investment in a joint venture. The amendments have no impact on financial
statements of the Company.
- IAS 19 Employee Benefits (amended 2011) - (effective for annual periods beginning on or
after 1 January 2013). The amended IAS 19 includes the amendments that require actuarial
gains and losses to be recognised immediately in other comprehensive income; this change
will remove the corridor method and eliminate the ability for entities to recognise all changes
in the defined benefit obligation and in plan assets in profit or loss, which currently is allowed
under IAS 19; and that the expected return on plan assets recognised in profit or loss is
calculated based on the rate used to discount the defined benefit obligation.
93

Notes to the Financial Statements
94
- Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) -
(effective for annual periods beginning on or after 1 July 2012). The amendments require that
an entity present separately the items of other comprehensive income that would be
reclassified to profit or loss in the future if certain conditions are met from those that would
never be reclassified to profit or loss. The amendments do not address which items are
presented in other comprehensive income or which items need to be reclassified. The
requirements of other IFRSs continue to apply in this regard. The amendments have no impact
on financial statements of the Company.
- Disclosures – Transfers of Financial Assets (Amendments to IFRS 7) - (effective for
annual periods beginning on or after 1 July 2011). The amendments introduce new disclosure
requirements about transfers of financial assets, including disclosures for financial assets that
are not derecognised in their entirety; and financial assets that are derecognised in their
entirety but for which the entity retains continuing involvement. The amendments have no
impact on financial statements of the Company.
6 Summary of significant accounting policies
6.1 Property, plant and equipment
Property, plant and equipment (except freehold land, building and capital work-inprogress)
are stated at cost less accumulated depreciation and identified impairment losses, if
any. Freehold land and building is stated at revalued amount. Capital work-in-progress is
stated at cost less any impairment loss.
Depreciation charge, except on lease holding improvements is based on the reducing
balance method whereby the cost or revalued amount of an asset is written off to income and
expenditure account over its estimated useful life after taking into account the residual value if
material. Depreciation on lease hold improvement is charged based on straight line method.
Depreciation on additions is charged from the month in which the asset is acquired or
capitalized while no depreciation is charged for the month in which items is disposed off.
The residual value, depreciation method and the useful lives of each part of property, plant and
equipment that is significant in relation to the total cost of the asset are reviewed and adjusted
if appropriate, at each balance sheet date.
Surplus on revaluation of land and building is credited to the surplus on revaluation
account. Revaluation is carried out with sufficient regularity to ensure that the carrying
amount of assets do not differ materially from the fair value.
Maintenance and normal repairs are charged to income as and when incurred. Renewals
and improvements are capitalized when it is probable that respective future economic
benefits will flow to the Company and the cost of the item can be measured reliably, and the
assets so replaced, if any, are derecognized.
The gain or loss on disposal or retirement of an asset represented by the difference between
the sale proceeds and the carrying amount of the asset is recognized as an income or expense.
Where the carrying amount of assets exceeds its estimated recoverable amount it is written
down immediately to its recoverable amount.
6.2 Intangible assets
Expenditure incurred on intangible asset is capitalized and stated at cost less accumulated
amortization and any identified impairment loss. Intangible assets are amortized using the
straight-line method at the rates mentioned in note 19.
Amortization on additions to intangible assets is charged from the month in which an asset is
acquired or capitalized while no amortization is charged for the month in which that asset is
disposed off.
6.3 Leases
Finance leases
Leases in terms of which the Company has substantially transferred all the risks and
rewards of ownership are classified as finance leases. Assets subject to finance lease are stated
at the lower of present value of minimum lease payments under the lease agreements and the
fair value of the assets, less accumulated depreciation and any identified impairment loss.
The related rental obligations, net of finance costs are classified as current and long term
depending upon the timing of the payment.
Each lease payment is allocated between the liability and finance costs so as to achieve a
constant rate on the balance outstanding. The interest element of the rental is charged to
income over the lease term.
Assets acquired under a finance lease are depreciated over the estimated useful life of the
asset on the reducing balance method at the rates used for similar owned assets. Depreciation
of leased assets is charged to income.
Residual value and the useful life of an asset are reviewed at least at each financial year-end.
Depreciation on leased assets is charged on the same basis as used for owned assets.
6.4 Impairment
The carrying amount of assets are reviewed at each balance sheet date to determined whether
there is any indication of impairment. If any such indication exists then the assets recoverable
amount is estimated. The recoverable amount is the greater of its value in use and fair value
less cost to sell. An impairment is recognized if the carrying amount exceed its estimated
recoverable amount.
6.5 Foreign currencies
All monetary assets and liabilities in foreign currencies are translated into rupees at exchange
rates prevailing at the balance sheet date. Transactions in foreign currencies are translated into
rupees at exchange rates prevailing at the date of transaction. Non-monetary assets and
liabilities that are measured in terms of historical cost in a foreign currency are translated into
rupees at exchange rates prevailing at the date of transaction. Non-monetary assets and
liabilities denominated in foreign currency that are stated at fair value are translated into
rupees at exchange rates prevailing at the date when fair values are determined. Exchange
gains and losses are included in the income currently.
6.6 Investments in associates
The Company's investment in its associates is accounted for under the equity method of
accounting. An associate is an entity in which the company has significant influence.
Under the equity method, the investment in the associate is carried in the balance sheet at
cost plus post-acquisition changes in the Company's share of net assets of the associate.
Goodwill relating to an associate is included in the carrying amount of the investment and is
not amortized. After application of the equity method, the Company determines whether it is
necessary to recognise any additional impairment loss with respect to the Company's net
investment in the associate. The income statement reflects the share of the results of
operations of the associate. Where there has been a change recognized directly in the equity of
the associate, the Company recognises its share of any changes and discloses this, when
applicable, in the statement of changes in equity.
Financial statements of the associates for the year ended 30 June 2011 have been used in
applying the equity method. Associates' accounting policies confirm to those used by the
company for like transactions and events in similar circumstances.
6.7 Long term investments
Held to maturity
Held to maturity investments are financial assets with fixed or determinable payments and
fixed maturity that the Company has the positive intent and ability to hold to maturity. Held to
maturity investments are initially recognized at cost inclusive of transaction cost and are
subsequently carried at amortized cost using effective interest rate method.
Available for sale
Investments which are intended to be held for an indefinite period of time but may be sold
in response to the need for liquidity are classified as available for sale. Available for sale
investments are recognized initially at fair value plus any directly attributable transaction
costs. After initial recognition, these are stated at fair values unless fair values can not be
measured reliably, with any resulting gains and losses being taken directly to equity until the
investment is disposed or impaired. At each reporting date, these investments are remeasured
at fair value, unless fair value cannot be reliably measured. At the time of disposal, the
respective surplus or deficit is transferred to profit and loss currently. Fair value of quoted
investments is their bid price on Karachi / Lahore Stock Exchange at the balance sheet date.
Unquoted investments, where active market does not exist, are carried at cost as it is not
possible to apply any other valuation methodology.
Investments intended to be held for less than twelve months from the balance sheet date
or to be sold to raise operating capital, are included in current assets, all other investments are
classified as non-current. Management determines the appropriate classification of its
investments at the time of the purchase and re-evaluates such designation on a regular basis.
All purchases and sales of investments are recognized on the trade date which is the date that
the company commits to purchase or sell the investment.
Available for sale, investments are tested for impairment at each reporting date.
Investments are considered to be impaired if there is a significant or prolonged decline in the
fair value of the investment at the reporting date.

Notes to the Financial Statements
6.8 Stores
Usable stores are valued at cost (FIFO), while items considered obsolete are carried at nil value.
Items in transit are valued at cost comprising invoice value plus other charges paid thereon.
6.9 Loans, advances and deposits
These are stated at cost.
6.10 Financial instruments
Financial assets and financial liabilities are recognized when the Company becomes a party
to the contractual provisions of the instrument and de-recognized when the Company looses
control of the contractual rights that comprise the financial asset and in case of financial
liability when the obligation specified in the contract is discharged, cancelled or expired.
A financial asset and a financial liability is offset and the net amount reported in the balance
sheet, if the Company has a legal enforceable right to set off the transaction and also intends
either to settle on a net basis or to realize the asset and settle the liability simultaneously.
The particular measurement methods adopted are disclosed in the individual policy
statements associated with each item of financial instruments.
6.11 Fees and other receivables
These are recognized and carried at original invoice amount less an allowance for any
uncollectible fees. An estimate for doubtful fees receivable is made when collection of the full
amount is no longer probable. Uncollectible fees receivable are written-off when identified.
6.12 Borrowing cost
Mark-up bearing borrowings are recognized initially at fair value, less attributable transaction
costs. Subsequent to initial recognition, mark-up bearing borrowings are stated at amortized
cost with any difference between cost and redemption value being recognized in the income
and expenditure account over the period of the borrowings on an effective interest basis.
6.13 Taxation
Income tax expense comprises current and deferred tax. Income tax is recognized in profit
and loss except to the extent that it relates to items recognized directly in equity, in which case
it is recognized in equity.
Current
Provision of current tax is based on the taxable income for the year determined in
accordance with the prevailing law for taxation of income. The charge for current tax is
calculated using prevailing tax rates or tax rates expected to apply to the profit for the year if
enacted after taking into account tax credits, rebates and exemptions, if any. The charge for
current tax also includes adjustments, where considered necessary, to provision for tax made
in previous years arising from assessments framed during the year for such years.
Deferred
Deferred tax is accounted for using the balance sheet liability method in respect of all
temporary differences arising from differences between the carrying amount of assets and
liabilities in the financial statements and the corresponding tax bases used in the computation
of the taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary
differences and deferred tax assets are recognized to the extent that it is probable that taxable
profits will be available against which the deductible temporary differences, unused tax losses
and tax credits can be utilized.
Deferred tax assets and liabilities are calculated at the rates that are expected to apply to
the period when the asset is realized or the liability is settled, based on the tax rates (and tax
laws) that have been enacted or substantively enacted by the balance sheet date. Deferred tax
is charged or credited in the income statement, except in the case of items credited or charged
to equity in which case it is included in equity.
6.14 Provisions
Provisions are recognized when the Company has a legal or constructive obligation as a
result of past events and it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable estimate of the amount can be
made. However, provisions are reviewed at each balance sheet date and adjusted to reflect
current best estimate.
6.15 Retirement and termination benefits
Defined benefits scheme
The Company maintains an unfunded gratuity fund for all its eligible employees.
The contributions are made to gratuity scheme in accordance with the actuary's
recommendations based on the actuarial valuation of these funds as at 30 June 2011.
The future contribution rates of these funds include allowances for deficit and surplus.
Projected unit credit method is used for valuation of these funds based on the following
assumptions stated in note 9.
The Company's policy with regard to actuarial gains / losses is to follow minimum
recommended approach under IAS 19.
6.16 Earned leaves
The Company accounts for compensated absences on the basis of unavailed earned leave
balance of each employee at the end of the year, upto maximum of 60 days.
6.17 Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow
statement, cash and cash equivalents comprise cash in hand and balances at bank.
6.18 Revenue recognition
Income from initial listing fee is recognized when the securities are initially listed on the ready
board. Income from annual listing fee is recognized on an accrual basis.
Income in respect of trading by members in ready and future is recognized when the
transaction take place as per trade date accounting practices.
Income in respect of trading by members in CFS is recognized when the financing is settled.
Rental income, facilities and equipment fee, non-operating facilities income and membership
fees are recognized on accrual basis while other fees are recognized when received.
Investments purchased at premium or discount, are amortized through the income and
expenditure account using the effective interest rate method.
Income from investments and bank accounts is recognized on an accrual basis.
Dividend income is recognized when the Company's right to receive payment is established.
6.19 Related party transactions
The Company enters into transactions with related parties on an arm's length basis. Prices for
transactions with related parties are determined using admissible valuation methods, except
in extremely rare circumstances where, subject to approval of the Board of Directors, it is in the
interest of the Company to do so.
2011 2010
Note Rupees in ‘000
7 Reserves
Capital reserve 7.1 1,342 1,342
Revenue reserve - fair value reserve 7.2 580 127
1,922 1,469
7.1 This represents gain on land and building of the Company disposed-off in the year 1983.
7.2 This represents Company's share of unrealized gain on investments in associated
companies.
8 Surplus on revaluation of property, plant and equipment
Balance as at 01 July 459,003 461,928
Transferred to unappropriated income in respect of
incremental depreciation charged during the year (4,276)
454,727
(4,502)
457,426
Less: Related deferred tax liability on:
Transferred to unappropriated income in respect of
incremental depreciation charged during the year 1,497 1,577
Balance as at 30 June 456,224 459,003
9 Employee retirement benefits
The actuarial valuation of gratuity scheme has been conducted in accordance with IAS 19,
'Employee benefits' as at 30 June 2011. The projected unit credit method, using the following
significant assumptions, has been used for the actuarial valuation.
2011 2010
- Discount rate 14% 12%
- Expected rate of growth per annum in future salaries 13% 11%
- Average expected remaining working life time of employees 15 years 15 years
9.1 Amount recognised in the Balance Sheet are as follows:
Present value of defined benefit obligation 9.3 19,761 17,956
Unrecognized actuarial loss 9.4 (3,865) (3,692)
Liability as at 30 June 15,896 14,264
9.2 Change in present value of net staff gratuity
95

Notes to the Financial Statements
96
2011 2010
Note (Rupees in thousand)
Liability as at 01 July 14,264 12,713
Charge to income and expenditure account 9.7 6,795 6,642
Payments made during the year (5,163) (5,091)
Liability as at 30 June 15,896 14,264
9.3 Movement in liability for defined benefit obligation
Present value of defined benefit obligations as at 30 June 17,956 16,738
Current service cost for the year 4,513 4,465
Interest cost for the year 2,155 2,009
Benefit paid during the period (5,162) (5,091)
Actuarial loss / (gain) on present value of defined benefit obligation 299 (165)
Present value of defined benefit obligations as at 30 June 19,761 17,956
9.4 Movement in unrecognized actuarial (losses) / gains
Unrecognized actuarial losses as at 30 June (3,692) (4,025)
Actuarial (loss) / gain arising during the year (299) 165
Actuarial loss charged to income and expenditure
account during the year 126 168
Unrecognized actuarial losses as at 30 June (3,865) (3,692)
9.5 Actuarial losses to be recognized
Corridor limit
The limits of corridor as at 1 July 10% 10%
- 10% of present value of obligations 1,796 1,674
Unrecognized net actuarial losses as at 1 July 9.4 3,692 4,025
Excess 1,896 2,351
Average expected remaining working lives in years 15
14
Actuarial losses recognized 126 168
9.6 Expected contribution for the next year
The expected contribution to the gratuity schemes for the year ending June 30, 2012 works out
to Rs. 7.547 million.
9.7 Charge for the year 2011 2010
Additional liability charged for the year: Note (Rupees in thousand)
Current service cost for the year 4,513 4,465
Interest cost for the year 2,155 2,009
Actuarial loss charged during the year 126
6,794
168
6,642
9.8 Historical information for gratuity plan
2011 2010 2009 2008 2007
--------------- (Rupees in thousand) ------------------
Present value of defined
benefit obligation 15,896 17,956 16,738 20,502 18,202
Experience adjustment
on obligation - (165) 172 878 925
10 Liabilities against asset subject to finance lease
The liabilities against assets subject to finance lease represents lease entered into with a
leasing company. The amount of future payments for the lease and the period in which the
lease payments will become due are as follows: 2011 2010
Note (Rupees in thousand)
Present value of minimum lease payments 1,062 905
Less: current portion shown under current liabilities 342 905
Present value of minimum lease payments 720
-
Salient features of the leases are as follows:
Discounting factor 16.8%-17.3% 16.1%-16.8%
Period of lease
36 months 36 months
Security deposits 20% 10%
10.1 The Company has entered into a lease agreement with a Commercial Bank for lease of
one vehicle. The liabilities under these arrangements are payable in monthly instalments.
Interest rates implicit in the leases are used as discounting factor to determine the present
value of minimum lease payments.
10.2 Lease agreement carry renewal option at the end of lease period and the Company
intends to exercise its option to purchase the leased asset upon completion of the lease term.
Residual value of the leased assets has already been paid at the inception of the lease in the
form of security deposit. There are no financial restrictions imposed by lessor. Taxes, repairs,
replacements and insurance costs are borne by the lessee.
10.3 The amount of future minimum lease payments along with their present value and
the periods during which they will fall due are:
2011
Not later Later than one
than one
year and not later
year than five years Total
----------------(Rupees in thousand)----------------
Minimum lease payments 499 832 1,331
Future finance charge 157 112 269
Present value of minimum lease payments 342 720 1,062
2010
Not later Later than one
than one
year and not later
year than five years Total
----------------(Rupees in thousand)----------------
Minimum lease payments 918 - 918
Future finance charge 13 - 13
Present value of minimum lease payments 905 - 905
11 Employees' welfare fund
This fund was created during the year 1992 in accordance with the decision of the Board of
Directors for welfare of the Company's employees. Movement in this fund during the year is as
follows:
2011 2010
Note (Rupees in thousand)
Opening balance 500 500
Add: amount allocated during the year 318 271
Less: payments made during the year (318)
500
(271)
500
12 Long term deposits
Lease deposits 12.1 52,032 73,997
Members' deposits 12.2 17,557 17,557
Security deposits 12.3 52,684
122,273
55,334
146,888
12.1 Lease deposits
Members Tenants Total
2011 2010
----------------(Rupees in thousand)----------------
Opening balance 18,373 55,624 73,997 32,964
- 12,322 12,322 70,474
18,373 67,946 86,319 103,438
Less: credited to income &
expenditure account 218 34,069 34,287 29,441
18,155 33,877 52,032 73,997
Lease term 99 years 1 to 3 years
12.1.1 These deposits represents advance rental from members and tenants for renting out
of office space. Realised rental income in credited to income and expenditure account,
periodically.

Notes to the Financial Statements
12.2 Member's deposits
These deposits were obtained from the Company's members for construction of the second
tower. The Company's members, in the extra ordinary general meeting held on 19 May 2006,
resolved to scrap the second tower project and approved a project of car parking facilities for
the members / investors in its place. Accordingly the amount comprising of 3rd installment
with interest, was refunded to members. This amount represents the undistributed
contributions for the 1st and 2nd installments retained to offset the expenses made for the
said purpose.
2011 2010
Note
(Rupees in thousand)
12.3 Security deposits
Deposits received against:
- clearing house 12.3.1 48,812 51,462
- furnished rooms 12.3.2 3,200 3,200
- others 672
52,684
672
55,334
12.3.1 These interest-free deposits have been received from members of the Company for
Clearing House Operations and are repayable on demand.
12.3.2 These interest-free deposits have been received from members of the Company as
security against furnished rooms provided to them at Faisalabad and Sialkot Trading Floors.
12.3.3 Total value of securities, pledged as margins against the exposures taken by the
Members is Rs. 372.56 million as at 30 June 2011 (2010: Rs. 648 million)
2011 2010
Note (Rupees in thousand)
13 Deferred taxation
This is composed of the following:
Taxable temporary differences arising in respect of:
Accelerated tax depreciation allowances 22,769 20,755
Surplus on revaluation of fixed assets 28,436 19,456
Investments in associated companies 21,574 20,635
Deductible temporary differences arising in respect of:
Accelerated tax amortization allowance (174) (1,025)
Liabilities against assets subject to finance lease (372) (317)
Staff retirement benefit - gratuity (5,564) (4,992)
Unused tax losses (30,349)
36,320
(21,183)
33,329
14 Members’ contribution fund
Opening balance 464,752 418,167
Add:
Profit / interest accrued on bank deposits 46,164 42,369
Gain raised on sale of investments 674
-
Fair value gain on measurement of
available-for-sale investments 890 2,065
Contribution during the year 14.1 455
48,183
2,151
46,585
Transferred to Member Contribution Fund Trust 14.2 (55,401)
457,534
-
464,752
14.1 MCF was established by the Company on 03 October 1995.
As prescribed by SECP, with effect from 28 September 2005, contributions are made at
following rates:
- Service charges (Automated Trading Fee) at the rate of 0.001785% of the turnover
value. There is no cap on service charges with effect from 28 September 2005.
- MCF at the rate of 0.0008925% of the turnover value.
- IPF at the rate of 0.0008925% of the turnover value.
14.2 The Company, on 14 April 2006, made a deed of trust to setup MCF as a trust. The trust
deed was duly registered on 01 June 2006 in the office of sub-registrar, Lahore.
The Company has now decided to fully fund the MCF by allocating the amounts having been
accrued to the fund with effect from the date of the establishment of the MCF Trust. i.e April
14, 2006.
A total amount of Rs. 55.401 million has been transferred to Members Contribution Fund
Trust being the amount of total MCF Contributions and profit received thereon since April 14,
2006 till June 30, 2011.
These funds have been retained within the Exchange to cover any contingent and liabilities
that the Exchange may face either in the future or due to any adverse decision against LSE
involving the earlier clearing house defaults/ cases under trial at various courts of laws.
Total receipts / payments made out of the funds of MCF during the year are as follows:
2011 2010
Note (Rupees in thousand)
Balance of MCF as at 01 July 421,767 367,125
Add:
Members' contribution for the year 455 2,151
Profit credited during the year 47,795
48,250
52,491
54,642
Transferred to Member's Contribution Fund Trust 14.2 (55,401)
-
Balance of MCF as at 30 June 414,616 421,767
Balance of MCF as at 30 June comprised of:
Term deposit receipts:
- Faysal Bank Limited 73,348 65,708
- Habib Bank Limited 14.2 59,577 89,340
- Askari Bank Limited 50,000
-
- Bank Alfalah Limited 9,000 25,000
- Bank Al-Habib Limited 120,190 73,792
- United Bank Limited 45,008 62,980
- Barclays Bank 50,000 33,545
- MCB Bank Limited 18,000
425,123
47,548
397,913
Saving / PLS accounts at:
- Habib Bank Limited 19
18
- KASB Bank 20,000
-
- MCB Bank Limited 104 186
- Bank Alfalah Limited 87
20,210
523
727
Current accounts at:
- United Bank Limited 315 322
Mutual Fund - Atlas Income Fund - 22,805
Mutual fund - Atlas Money Market Fund 24,369
-
Transferred to Member's Contribution Fund Trust
Term deposit receipts- Habib Bank Limited 14.2 (55,401)
-
414,616 421,767
15 Investors' Protection Fund
Balance as at 1 July 15.1 215,304 194,148
Add:
Profit / interest accrued on bank deposits 22,354 19,005
Payment made during the year 15.2 (6,000)
-
Contribution during the year 455
16,809
232,113
2,151
21,156
215,304
15.1 This represents members' contributions, with effect from 08 October 1997, towards
Investors' Protection Fund (IPF). The contributions have been made at the following rates:
- upto 05 March 2003 @ 15% of the amounts collected by the Company's
Clearing House on account of MCF;
- after 05 March 2003 to
27 September 2005 @ 0.001% of the turnover value; and
- after 27 September 2005
to 30 June 2011
@ 0.0008925% of the turnover value
97

Notes to the Financial Statements
98
2011 2010
Note (Rupees in thousand)
15.2 Total receipts / payments made out of the funds of
IPF during the year are as follows:
Balance of IPF as at 01 July 208,296 187,074
Add:
Members' contribution for the year 455 2,151
Profit credited during the year 24,665
25,120
233,416
19,081
21,232
208,306
Less:
Bank charges -
10
Payment made from funds 15.2.1 6,000
-
Balance of IPF as at 30 June 227,416 208,296
Balance of IPF as at 30 June comprised of the following assets
Term deposit receipts:
- Faysal Bank Limited - 23,179
- Innovative Investment Bank Limited 9,716 9,716
- Bank Alfalah Limited 27,000 28,500
- Bank Al-Habib Limited 38,837 13,846
- Barclays Bank PLC, Pakistan 51,000 33,247
- MCB Bank Limited 31,172 45,165
- United Bank Limited 68,831
226,556
50,190
203,843
Saving / PLS accounts at:
- MCB Bank Ltd. 6 3,496
- Bank Alfalah Limited 318
324
957
4,453
Current accounts at:
- Barclays PLC Pakistan 536
227,416
-
208,296
15.2.1 The payment is made to the claimants of Mehdi Securities (Pvt) Limited.
15.3 The Company, during the financial year ended 30 June 2000, had made payments
aggregating Rs. 12.089 million to its Clearing House on behalf of the defaulted members.
These payments were made out of the funds kept in the bank accounts earmarked for IPF.
Payments made on behalf of the defaulted members were accounted for as due from them.
During the period an amount of Rs. 6 million is paid from IPF to claimants of defaulted
members. 2011 2010
Note (Rupees in thousand)
16 Accrued and other liabilities
Due to members 3,781 3,054
Advance payments received from:
- members 16.1 24,914 39,054
- companies / others 9,063 4,223
Defaulted members' membership sale proceeds 16.2 7,984 51,946
Due to suspended and defaulted members 16.3 3,171 3,171
Defaulted members' securities sale proceeds 16.4 78,088 78,088
Defaulted member's room sale proceeds - net of expenses 619 619
Accrued expenses 12,231 17,823
Security deposit of ex-members 1,025 1,455
Retention money 75
75
Members' cash deposits for settlement of future trading 150 150
Other payables 28,723
169,824
28,858
228,516
16.1 These represent margins received from members against their exposures.
16.2 These represent amounts realized through auctions of the defaulted members'
memberships and have been retained by the Company for settlement of claims against these
members.
16.3 This represents amount payable to suspended and defaulted members on account of
trading in the clearing house of the Company.
16.4 This amount represent the value of the securities sold by LSE, which had been pledged
to LSE's Clearing house through the sub account of an investor namely Mian Nisar Elahi from
the house of an earlier expelled member Tanveer Malik. SECP carried-out an investigation of
May-June 2000 crisis at the Company, where a number of members had defaulted in making
payments to the Company's clearing house. As per the SECP's order dated 09 April 2001,
certain members and investors were identified as being responsible for the crisis. Two
members were removed from their membership of the Company.
Pursuant to the SECP's order, the Company sold the shares pledged on account of an
investor of one of the members and realized amounts aggregating Rs. 78.088 million. The
defaulted members / investors challenged SECP's order before the Lahore High Court (LHC),
which remanded the case back to SECP for hearing afresh. SECP challenged the LHC's order
before the Supreme Court of Pakistan, which set aside the LHC's order. The Supreme Court
directed the defaulted members / investors to approach SECP for filing appeals as per relevant
proviso of the Securities and Exchange Commission of Pakistan Act, 1997 being the only
appropriate forum as per the Securities and Exchange Ordinance, 1969.
The Appellate Bench of SECP, in its order dated 30 July 2002, upheld the earlier order of
SECP. The Bench further held, inter alia, that the Company be allowed to obtain the securities
lying in the CDC accounts of members / investors in satisfaction of their defaulted amounts to
the Company. However, the proceeds, already realized from the sale of pledged shares, cannot
be utilized by the Company until the final determination of losses through the courts.
The Company has filed a review petition before the SECP's Bench for rectification of the
following areas of the order:
(a) sale proceeds from the sale of securities of defaulted members are lying in the
'Deposit Accounts' of the Company and not in the 'Escrow Accounts'; and
(b) the Company, as per its Default Regulations, has already determined quantum of the
default obligations.
The Company has also filed an appeal before the LHC by partially challenging the SECP
Appellate Bench's order to enforce recovery of the defaulted amounts. The members /
investors, who were held responsible by SECP, also filed appeals against the Appellate Bench's
order before the LHC. These cases are pending adjudication.
17 Contingencies and commitments
17.1 (a) The Excise and Taxation Department, Lahore (the Department), during the
financial year ended 30 June 2003, had raised property tax demand amounting Rs. 1.704
million against which the Company had filed a writ petition under article 199 of the
Constitution of Pakistan. The Lahore High Court, vide its order dated 08 March, 2004, dismissed
the Company's petition and held that section 5-A of the Urban Immovable Property Tax Act of
1958 is intra vires the legislative power of the Provincial Legislature and neither it offends any
existing provision of the Act nor is violative of any of the fundamental rights of the petitioner as
guaranteed by the Constitution. The Company has filed a civil petition before the Supreme
Court of Pakistan, which has been disposed off with the direction that the Department shall
prepare fresh valuation tables / valuation lists after conducting proper survey and following
the procedures in accordance with the law.
(b) The Department, during April, 2004, had raised property tax demand of Rs. 2.824
million for the period from 01 January, 2002 to 30 June, 2004 after adjusting payment of Rs.
1.682 million made by the Company. The Department, during July, 2005, had also raised
annual property tax demand of Rs. 1.572 million. The Company has filed an appeal before the
Collector, Excise & Taxation Department, Lahore, which vide its order dated 30 June, 2005 has
held that as the fresh survey in the light of Supreme Court of Pakistan's order is being
conducted in respect of the Company's property and a new valuation table / valuation list is
being prepared by the Department; the Company can avail the departmental remedies on
finalization of fresh assessment by way of objection / appeal.

Notes to the Financial Statements
(c) In pursuance of the Supreme Court of Pakistan's order, the Department assessed
annual rental value of the Company's property at Rs. 6.987 million and fixed annual tax at Rs.
1.572 million. The Company raised objections in respect of the said proposed assessment of
the property and after hearing the objections, the Assessing Authority assessed gross annual
rental value of the property at Rs. 5.781 million vide order dated 22 November, 2005. The said
order was challenged before the Appellate Authority, which is currently sub-judice. During
pendency of the appeal, the Department has raised demands aggregating Rs. 5.195 million;
the Company has deposited the alleged tax liability under protest and has charged this
amount to the respective Members.
17.2 Frederic J. Whyte Group (Pak) Limited had filed suit for settlement of their claim of Rs.
1.790 million through arbitration. The claim was made on account of 'architectural
services' alleged to have been provided by them to the Company. The case is pending for
arbitration with the Lahore Chamber of Commerce and Industries. However, no provision
in this regard has been made in the books of account as the Company expects a favourable
outcome of the case.
17.3 The Lahore High Court, Lahore, vide its judgment and decree dated 18 December
2006, has decreed the Civil Original Suit against the Company and Central Depository
Company, jointly and severally, which was filed by Mian Nisar Elahi against disposal of the
pledged shares. The said shares, as per the Company's point of view, were disposed-off
pursuant to the order dated 09 April 2001 of the Securities and Exchange Commission of
Pakistan (SECP), which was subsequently upheld by the Appellate Bench of SECP.
The Company has challenged the said order by filing ICA No.1 of 2007 whereby the
Appellate Court has suspended the order dated 18 December 2006 of the learned single Judge
subject to freezing of Rs. 120 million for payment of the awarded amount and furnishing of
corporate guarantee. The Intra Court Appeal is still pending. The Board of Directors in their
meeting held at 16th August 2011, has approved the said contingent liability from out of MCF,
being the clearing house liability of the exchange.
17.4 Mr. Aslam Motiwala (the Appellant) has filed a civil suit in the Court of Senior Civil
Judge, Lahore seeking damages in the amount of Rs.109.363 million against the Company.
The Appellant seeks directions to the Company for settling trades, which the Company had
cancelled. No provision in this regard has been made in the books of account as the Company
expects a favourable outcome of the case.
17.5 An appeal has been filed for Rs. 5.046 million at Lahore High Court against Judgment
of Civil Court for recovery of Sialkot Trading Floor rent. The case is pending adjudication and no
provision has been made accordingly.
17.6 Commitments for capital expenditure outstanding as at 30 June 2011 were Nil (2010:
Nil)
2011 2010
Note (Rupees in thousand)
18 Property, plant and equipment
Operating fixed assets 18.1 584,212 577,377
Capital work-in-progress 18.4 10,332
594,544
31,015
608,391
18.1 Operating Fixed Assets Reconciliation of net carrying value Reconciliation of gross carrying value
Owned
Net book
value (NBV)
as at 01 July
2010
Additions /
(transfers)
Disposals
(at NBV)
Depreciation
charge
Net book
value (NBV)
as at 30 June
2011
Cost
as at 30 June
2011
Accumulated
depreciation
as at 30 June
2011
Accumulated
Impairment
as at 30 June
2011
-------------------------------------------------------------------(Rupees in thousand)-------------------------------------------------------------------
Net book
value
as at 30 June
2011
Depreciation
rate
(% per
annum)
Land - Freehold 407,000 - - - 407,000 407,000 - - 407,000 -
Buildings on freehold land 108,653 18,264 - 5,965 120,952 144,648 23,695 - 120,953 5
Generators 6,492 - - 649 5,843 9,454 3,611 - 5,843 10
Furniture and fixtures 10,412 2,016 - 1,159 11,269 17,894 6,625 - 11,269 10
Office equipment 1,245 1,725 - 465 2,505 7,450 4,944 - 2,506 20
Computers and accessories 19,762 3,069 - 6,584 16,247 72,111 54,946 918 16,247 30
Electric fittings and appliances 6,104 2,844 9 1,537 7,402 22,324 14,923 - 7,401 20
Elevators 1,434 - - 287 1,147 5,471 4,324 - 1,147 20
Vehicles and bicycles 9,961 330 - 2,030 8,261 14,592 6,331 - 8,261 20
Library books 67 - - 18 49 320 272 - 48 25
Arms and security equipment 2,339 - - 234 2,105 4,416 2,311 - 2,105 10
Leasehold improvements - - - - - 5,697 5,697 - - 20
Leased
573,469 28,248 9 18,928 582,780 711,377 127,679 918 582,780
Office equipment 1,613 (1,479) - 134 - - - - -
Computers and accessories 1,399 (1,224) - 175 - - - - -
Electrical fittings and appliances 574 (526) - 48 - - - - -
Vehicles 321 1,213 - 102 1,432 1,507 75 - 1,432 20
99
2011 577,376 26,232 9 19,387 584,212 712,884 127,754 918 584,212

Notes to the Financial Statements
Reconciliation of net carrying value Reconciliation of gross carrying value
Net book
value (NBV)
as at 01 July
2009
Additions /
(transfers)
Disposals
(at NBV)
Depreciation
charge
Impairment
Net book
value (NBV)
as at 30 June
2010
Cost
as at 30 June
2010
Accumulated
depreciation
as at 30 June
2010
Impairment
Net book
value
as at 30 June
2010
Depreciation
rate
(% per
annum)
-------------------------------------------------------------------(Rupees in thousand)-------------------------------------------------------------------
100
Owned
Land - Freehold 407,000 - - - - 407,000 407,000 - - 407,000 -
Buildings on freehold land 114,372 - - 5,719 - 108,653 126,384 17,730 - 108,653 5
Generators 7,979 - 753 734 - 6,492 9,454 2,962 - 6,492 10
Furniture and fixtures 14,922 282 3,575 1,217 - 10,412 15,878 5,466 - 10,411 10
Office equipment 1,167 374 19 277 - 1,245 4,404 3,158 - 1,247 20
Computers and accessories 15,368 12,615 532 6,771 918 19,762 66,006 45,326 918 19,762 30
Electric fittings & appliances 8,787 7 1,127 1,563 - 6,104 18,969 12,866 - 6,104 20
Elevators 1,793 - - 359 - 1,434 5,471 4,037 - 1,434 20
Vehicles and bicycles 9,265 3,090 - 2,394 - 9,961 13,916 3,955 - 9,961 20
Library books 55 28 - 16 - 67 322 255 - 66 25
Arms and security equipment 2,209 587 231 226 2,339 4,416 2,077 - 2,339 10
Leasehold improvements 3,387 - 2,988 399 - - 5,697 5,697 - - 20
586,304 16,983 9,225 19,675 918 573,469 677,916 103,530 918 573,469
Leased
Office equipment 2,016 - - 403 - 1,613 2,800 1,187 - 1,613 20
Computers and accessories 1,999 - - 600 - 1,399 4,260 2,861 - 1,399 20
Electrical fittings & appliances 718 - - 143 - 575 1,120 546 - 574 20
Vehicles 402 - - 81 - 321 640 319 - 321 20
2010 591,439 16,983 9,225 20,902 918 577,377 686,737 108,442 918 577,376
The land and building on freehold land of the Company have been revalued as on 30 June 2007
by independent valuer (UNIT-3 Consultants - Architect, Engineers, Surveyors & Valuation
Consultants, Lahore), on the basis of replacement value. The impact of valuation has been
incorporated in the accounts and has resulted in a surplus of Rs. 503.161 million over the
written down value of Rs. 26.812 million of these assets (total revalued amount being Rs.
529.973 million). The details of revalued amounts are as follows:
(Rupees in thousand)
Total revalued amount of freehold land 407,000
Total revalued amount of building on freehold land 122,973
Had the land, building and plant and machinery not been revalued, the total carrying amounts
as at 30 June 2011 would have been as follows:
Freehold land 3,586
Building on freehold land 22,065
18.2 Depreciation has been allocated as follows:
2011 2010
(Rupees in thousand)
Administrative expenses 13,604 15,198
Charged against rental income 5,783
19,387
5,704
20,902
18.3
Particulars
Electrical fittings &
appliances
Cost
Accumulated
depreciation
Book
Value
Sale
proceeds
----------------- Rupees in thousands -----------------
Gain/
(Loss)
Mode of
payment
Sold To
84 75 9 - (9) donation -
84 75 9 - (9)
18.4 Capital work-in-progress 2011 2010
Buildings (Lahore Stock Exchange second tower): (Rupees in thousand)
- mobilization advance 12,223 12,511
- materials and other costs 21,060
33,283
41,126
53,637
Tube well installations 301
301
Advance payments for:
- computer accessories and software 277 5,861
Less:
-provision against material and other costs (9,526) (9,526)
-provision for doubtful advances 18.4.1 (14,003)
10,332
(19,258)
31,015

Notes to the Financial Statements
18.4.1 This includes provision amounting to Rs. 7.724 million against advance paid to
Mughals Pakistan (Pvt.) Ltd. (the contractor) for construction of Lahore Stock Exchange second
tower. This advance was secured against an irrevocable bank guarantee arranged by the
contractor, which had expired on 17 September 2004. The contractor has submitted an
undertaking to furnish a new bank guarantee in place of the expired bank guarantee, however
new bank guarantee has not been furnished by the contractor. Board of directors has approved
the above provisions in their meeting held at 1 December 2010.
2011 2010
Note (Rupees in thousand)
19 Intangibles - computer software licenses
Net carrying value
Opening net book value (NBV) 661 1,322
Amortization charged (661) (661)
Closing net book value (NBV) -
661
Gross carrying value
Cost 17,147 17,147
Accumulated amortization (17,147) (16,486)
Net book value -
661
Amortization rate per annum ( % ) 33% 33%
20 Investment in associates
Equity instruments of un-quoted associated companies 20.1 275,566 267,677
20.1 Equity instruments of un-quoted associated companies - equity method
2011 2010 Face value Name of Company 2011 2010
(Number of shares) Rs. (Rupees in thousand)
1,058,400 1,058,400 10 The Pakistan Credit Rating
Agency Limited (PACRA)
5,000,000
1,499,999
Equity held 36% (2010: 36%)
Opening balance 19,599 15,784
Share of (loss) / income for
the year - net of tax 4,130 5,327
Dividend received -
23,729
(1,511)
19,600
5,000,000 10 Central Depository Company
of Pakistan Limited (CDC)
Equity held 10% (2010: 10%)
Opening balance 158,388 156,420
Share of income for the
year - net of tax 17,520 16,867
Change in fair value reserve
on account of availablefor-sale
investments 383
101
Dividend received (15,000)
161,291
(15,000)
158,388
1,499,999 10 National Clearing Company
of Pakistan Limited (NCCPL)
Equity held 23.53% (2010: 23.53%)
Opening balance 88,689 94,958
Share of (loss) / income for
the year - net of tax 787 1,815
Change in fair value reserve
on account of available
-for-sale investments 70 (583)
Dividend received -
89,546
(7,500)
88,689
2011 2010 Face value Name of Company 2011 2010
(Number of shares) Rs. (Rupees in thousand)
2,272,727 2,272,727 10 Pakistan Mercantile Exchange
Limited ( PMEX )
Ordinary shares - cost Equity
held 11.96% (2010: 11.96%) -
-
200
200 5,000 Institute of Capital
Markets - at cost 1,000 1,000
267,677
20.2 Summarized financial information of the Associated Companies as at and for the year
ended 30 June 2011, based on the audited (CDC and NCCPL) and un-audited (PACRA, PMEX and
ICM) financial statements are as follows:
Name of the associated companies Assets Liabilities Operating Profit /(loss)
revenues after tax
As at 30 June 2010 From 1 July 2009 to 30 June 2010
---------------------(Rupees in thousands)---------------------
PACRA 73,996 21,185 114,550 14,406
CDC 1,883,735 299,849 817,469 168,674
NCCPL 856,910 487,785 98,666 7,716
101
PMEX 312,009 434,556 31,695 (76,273)
ICM 12,893 1,134 2,631 (6,109)
(a) The Company holds 10% equity of CDC and has one common director on its Board; hence,
the management presumes to have significant influence over CDC.
(b) The unrecognized share of losses of PMEX till 30 June, 2011 aggregated to Rs. 50.98 million
(2010: Rs. 44.294 million).
21 Long term investments
Available-for-sale
275,566
Name of the associated companies Assets Liabilities Operating Profit /(loss)
revenues after tax
As at 30 June 2011 From 1 July 2010 to 30 June 2011
---------------------(Rupees in thousands)---------------------
PACRA 73,054 8,771 101,688 11,472
CDC 1,892,875 279,955 770,542 175,203
NCCPL 911,588 538,819 101,636 3,345
PMEX 685,222 835,681 65,200 (55,912)
ICM 12,893 1,134 2,631 (6,109)
2011 2010 Name of Investee 2011 2010
(Number of units) Note (Rupees in thousand)
47,138 - Atlas Money Market Fund 24,369
-
- 40,380 Atlas Income Fund -
24,369
22,805
22,805
22 Long term loans - considered good
Vehicles’ loans 22.1 159
257
Other loans 22.2 5,745
5,904
3,492
3,749
Less: current portion 2,729
3,175
2,199
1,550
22.1 This vehicle loan is secured against demand promissory note and registration of
vehicle in the name of Company. This loan is recoverable in monthly installments and carry
mark-up at the rate of 9 % per annum (2010: 9%).

Notes to the Financial Statements
22.2 These interest free loans to employees have been advanced for various purposes and
are recoverable in monthly installments which vary from case to case.
2011 2010
Note (Rupees in thousand)
23 Short term investment - held to maturity
Certificate of deposit
Opening investments 4,858
-
Transferred from long term investments 4,858
9,716
4,858
4,858
Less: provision for impairment of investment 23.1 & 23.2 (9,716) (4,858)
- -
23.1 The Company made an investment amounting to Rs. 9.716 million through decision of
Board of Directors in meeting held at 14 June 2005 in three (3) certificates of deposits (CoDs) of
Innovative Investment Bank Limited (IIBL) carrying profit at the rate of 7% per annum,
receivable at maturity, due on 29 July 2009, 29 July 2010 and 29 July 2011. IIBL is in process of
liquidation since January 2010 so a provision against these CoD's has been booked as decided
by the Board meeting December 01, 2010.
2011 2010
Note (Rupees in thousand)
23.2 Provision for impairment
Provision for impairment 4,858 4,858
Provision transferred from long term investments 4,858
-
Closing provision for impairment 9,716 4,858
24 Loans and advances
Due from defaulted / suspended members 24.1 & 24.2 181,531 181,531
Due from associated undertakings:
- National Clearing Company of Pakistan Limited 2,321
94
- Central Depository Company of Pakistan Limited 107
70
102 - Institute of Capital Market 40
-
- Pakistan Mercantile Exchange Limited 205
2,673
-
164
Due from:
- Members 24.3 12,256 11,194
- Others 3,526 3,526
Advances to employees - including current portion
of loans to employees 2,729 2,199
Advance payments - considered good 594
193
Prepayments 2,036
205,345
2,380
201,187
Less: provision for doubtful advances and receivables 248
205,097
248
200,939
24.1 These represent amounts due from the defaulted / suspended members who could
not settle their Company's clearing house liabilities. The Company had recovered amounts
aggregating Rs. 78.088 million from these defaulted members by sale of their pledged shares.
The Appellate Bench of SECP vide its order dated 30 July, 2002, had directed the Company's
management not to utilise these amounts till the determination of final liabilities quantum by
the respective courts.
24.2 (a) The Company, during the financial year 2000-01, recovered an amount of Rs.
78.088 million from the sale of shares pledged by the defaulted / suspended members. This
amount is not being utilized by the Company, pending final resolution of the court cases. The
Company, during the financial year ended 30 June 2002, auctioned the seat of one of the
defaulted / suspended members and realized an amount of Rs. 7.075 million. The Company
has the right, under its Rules and Regulations, to sell 3 other seats belonging to the defaulted /
suspended members namely Iqbal Khawaja, Iftikhar Shaffi and Shahid Numan Rana however
the matter is subjudice at various courts of law. At the current market price, these seats may be
sold for Rs. 37.5 million approximately.
(b) The Company also has the right to sell 6 rooms belonging to above members. At the
current market price, the Company may realize Rs. 24 million approximately from these sales.
However, auction of these memberships and rooms is also held up due to pending court cases.
Further, the sale of shares worth Rs. 481.48 million as at 30 June, 2011 has been frozen by
SECP pending resolution of the court cases. These shares are held in the CDC accounts and the
Civil Judge - Lahore, vide his order dated 07 July 2003, has attached the CDC accounts of a
defaulted member and his associates.
(c) In addition to the aforementioned recovery of amount subject to the judgment of the
respective courts, the Civil Judge - Lahore, vide his order dated 07 July 2003, had attached the
CDC accounts of a defaulted member and his associates.
24.3 The balance includes Rs. 0.681 million (2010: Rs. 0.681 million) on account of
provisional trading of Kohat Cement Limited outstanding since the year 1995.
2011 2010
Note (Rupees in thousand)
25 Short term prepayments and other receivables
Prepayments 48
48
Fees receivable - unsecured 25.1 71,265
369
Other receivables 25.2 3,240
74,553
4,713
5,130
25.1 Fees receivable - unsecured
Fees receivable from the companies listed:
- considered good 71,265
369
- considered doubtful 103,312
174,577
96,088
96,457
Less: provision made against doubtful receivable 103,312
71,265
96,088
369
25.2 Other receivables
Receivable from Karachi and Islamabad Stock Exchange 1,602 3,541
Others 1,638
3,240
1,172
4,713
26 Mark-up receivable
Profit / interest accrued on bank deposits 26.1 1,501 11,726
26.1 This includes balance amounting Rs. 0.16 million (2010: Rs. 1.927 million) and Rs.
0.08 million (2010: Rs. 2.503 million) pertaining to MCF and IPF respectively.
2011 2010
Note (Rupees in thousand)
27 Tax refunds due from the government - net
Wealth tax paid:
- under protest 27.1 10,063 10,063
- with returns 27.2 461
10,524
461
10,524
Less: Provision for wealth tax (3,728)
6,796
(3,728)
6,796
Tax deducted at source / advance tax - less provision 58,251 51,575
65,047 58,371
27.1 The ITAT, vide its order dated 03 June 2003, for the Assessment Years 1992-93 and
1994-95 to 2000-01 accepted the contention that the Company qualifies for exemption under
section 5(1)(i)/clause 22 of the Second Schedule to the Wealth Tax Act, 1963 in all the years
under consideration. Amounts aggregating Rs. 10.063 million paid under protest have been
grouped under 'tax refunds due from the Government'.
27.2 The Department has filed a writ petition before the Lahore High Court, Lahore against
the order of the ITAT that the Company qualifies for exemption under the aforementioned
clause of the repealed Wealth Tax Act, 1963 for the Assessment Years 1992-93, 1994-95 to
2000-01. The petition is pending adjudication.

Notes to the Financial Statements
2011 2010
Note (Rupees in thousand)
28 Cash and bank balances
Cash-in-hand 124
127
Cash at banks on:
- Current accounts 2,098
899
- PLS accounts 28.1 & 28.3 51,496 102,414
- Deposit accounts 1,062,533 1,045,710
- Foreign currency accounts 28.2 5,110
1,121,237
5,067
1,154,090
Share transfer stamps 100
100
1,121,461 1,154,317
28.1 These include Clearing House balances aggregating Rs. 26.723 million (2010: Rs.
50.135 million).
28.2 This represents balance of USD 59,442 (2010: 59,337), which has been translated into
Pak Rupees at the exchange rate prevailing on the balance sheet date, i.e. USD 1 = Rs. 85.95
(2010: Rs. 85.4).
28.3 PLS accounts include defaulters' committee deposits aggregating Rs. 1.070 million
(2010: Rs. 1.070 million).
28.4 PLS and deposit accounts, during the current year, carried mark-up at the rates
ranging from 5% to 12.75% (2010: 5% to 12.9%) per annum.
2011 2010
Note (Rupees in thousand)
29 Fee
Annual listing 30,065 29,690
Initial listing 500 6,611
Additional listing 114,708 87,689
Extension - annual general meetings -
16
Listing service charges 275
575
Accredited agents 14
15
Membership transfers 100
200
Automated trading fee - collected from members 29.1 910 4,302
Net-work connection fees -
246
Internet trading fees 15 3,919
Furnished rooms fees - 4,885
Members' annual subscription 15
146,602
16
138,165
29.1 The Company, during the year, has paid transaction fees to SECP aggregating Rs. 0.331
million (2010: Rs. 1.566 million).
30 Rental - net
Building rent from:
- banks 26,049 21,816
- associated company 634
592
Members:
- ground rent 157
158
- lease rentals 218
218
Others 7,386
34,444
6,815
29,600
Direct expenses incidental to rental income (25,130)
9,314
(23,245)
6,355
31 Profit on bank deposits and investments
Bank deposits 31.1 53,513 50,510
Defense Savings Certificates -
53,513
1,145
51,655
31.1 This amount includes profit earned on funds frozen in different banks amounting to
PKR 120 million in accordance with Division Bench , Lahore High Court Order dated January 24,
2007 in ICA No. 1/2007 titled Lahore Stock Exchange Vs. Mian Nisar Elahi etc. It may be
mentioned that LSE has earned a profit around Rs. 62.40 million on this deposit till June 30,
2011. This amount is being taken into accounts as the interest income of the Exchange. In case
of any decision to pay the frozen amount together with its accrued interest, the income of the
Exchange during the earlier years would need to be restated.
2011 2010
Note (Rupees in thousand)
32 Software revenues
Ultra trade lease rentals from Islamabad Stock Exchange 1,644 1,894
Broker net software 254
288
Back office software 727
912
Software sale and services 3,436 5,714
Gateway terminal charges 100
6,161
100
8,908
33 Other income
Income from financial assets:
Mark-up on:
- loans advanced to employees 14
20
- Members' Support Fund -
14
1,441
1,461
Income from assets other than financial assets:
Room transfer fees -
70
Booth charges 55
60
Room maintenance fees 861 1,087
Anti-virus installation / dial-up connection fees 13
50
Renewal / registration fee of brokers’ sub-offices 560
653
Miscellaneous 19,194 2,958
20,683 4,878 103
20,697 6,340
34 Administrative expenses
Salaries and benefits 34.1 75,786 78,180
I.T. and other related expenses 10,893 12,322
Insurance - net 1,658
697
Travelling and conveyance:
- directors 34.2 1,625 1,792
- staff and others 3,279 3,335
Printing and stationery 1,489 1,713
Communication 2,965 3,336
Electricity, gas and water 4,242 4,784
Entertainment and public relations 2,403 2,236
Repair and maintenance 2,027 1,917
Depreciation 13,604 15,198
Amortization 661
661
Fees and subscription 1,262
968
Rent and taxes 748
58
Security expenses 827 1,086
Advertisement 865
243
Auditor's remuneration:
- statutory audit 300
250
- half-yearly review 104
77
- other certifications 100
-
- out-of-pocket expenses 117
621
67
394
Training and courses 813
543
Miscellaneous expenses 3,989
129,757
3,196
132,660

Notes to the Financial Statements
34.1 Salaries and benefits includes Rs. 6.794 million (2010: Rs. 6.642 million) in respect of
contribution to gratuity fund.
34.2 This includes traveling and conveyance expenses borne in respect of Managing
Director amounting to Rs. 0.854 million (2010: Rs. 1.098 million).
2011 2010
Note (Rupees in thousand)
35 Finance cost
Lease finance charges 111
919
Bank charges 160
105
Exchange fluctuation loss - net 68
339
898
1,922
36 Other charges
Legal and professional charges (other than Auditors')
- legal expenses 2,157 4,049
- retainer ship fees 870
3,027
780
4,829
Consultancy charges 2,871 3,589
Zakat deducted 18
950
Loss on disposal of fixed assets 18.3 9 9,195
Penalty on prematurity of TDR 634
-
Donations 36.1 5,000 1,060
Provision against:
- impairment of fixed assets 18.1 -
918
- material and other costs 18.4 - 9,526
- doubtful advances 18.4 - 19,258
- doubtful fee receivable 25.1 7,224 9,599
104
- impairment of investment 23.1 - 9,717
7,224 49,018
18,783 68,641
36.1 Donations (without directors' interest)
Lahore University of Management Sciences - 1,060
Chief Minister of Punjab's Relief Fund
for Internally Displaced Persons of Khyber Pakhtunkhwa 5,000
5,000
-
1,060
37 Taxation
The provision for current period taxation represents the tax liability based on presumptive
tax regime (PTR). Accordingly tax charge reconciliation has not been prepared and presented.
38 Remuneration of directors and executives
Particulars Managing Director Executives
2011 2010 2011 2010
--------------- (Rupees in thousand) ---------------
Managerial remuneration 3,512 4,919 27,293 18,534
House rent 1,405 1,968 7,140 7,414
Utilities 351 492 1,785 1,853
Staff retirement benefits 1,088 861 4,883 3,132
Others 1,715 2,455 3,315 8,170
8,071 10,695 44,416 39,103
1 1 24
19
38.1 Nine (2010: nine) of the executives have been provided with the Company's
maintained cars.
38.2 Meeting fees aggregating Rs. 3.620 million (2010: Rs.2.16 million) were paid to
sixteen (2010: fourteen) of the directors during the year.
39 Transactions with related parties
"The related parties comprise of subsidiaries and associated companies, Directors of the
Company, companies in which directors also hold directorship, related group companies, key
management personnel and staff retirement benefit funds.
Transactions with related parties other than those disclosed elsewhere are as follows:”
Name Nature of relationship Nature of transaction 2011 2010
(Rupees in thousand)
CDC Associated Company -Dividend received
-Reimbursement of utilities
15,000
166
15,000
134
-Reimbursement of expenses 363
410
PACRA Associated Company -Dividend received - 1,512
-Reimbursement of expenses -
500
NCCPL Associated Company -Dividend received - 7,500
-Instalment in respect of
sale of software to NCCPL 2,070 2,128
-Reimbursement of expenses 591 1,050
PMEX Associated Company -Reimbursement of expenses 205 1,648
ICM Associated Company -Reimbursement of expenses 38
760
40 Increase / (decrease) in working capital
Decrease / (increase) in current assets:
Stores
Loans and advances
Short term prepayments and other receivables
Increase / (decrease) in current liabilities:
(852)
(4,158)
(76,647)
(81,657)
22
19,815
(3,962)
15,875
Members' contribution fund
Investors' protection fund
Accrued and other liabilities
(7,218)
16,809
(58,692)
(49,101)
(130,758)
46,585
21,156
(45,488)
22,253
38,128
41 Financial Instruments
The Company's principal financial liabilities comprise gratuity payable, provision for
earned leaves, member's contribution fund, investor's protection fund and accrued and other
liabilities. The financial assets comprise of investments, long term loans, long term deposits,
loans and advances, other receivables and markup receivable.
The Company has exposures to the following risks from its use of financial instruments:
n
n Credit risk
n Liquidity risk
n Market risk
The Board of Directors has overall responsibility for the establishment and oversight of
Company's risk management framework. The Board is also responsible for developing and
monitoring the Company's risk management policies.
41.1 Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an
obligation and cause the other party to incur a financial loss. The Company is exposed to credit
risk on its investments, long term loans, long term deposits, loan and advances, other
receivables, markup receivables and bank balances.

Notes to the Financial Statements
The carrying amount of financial assets represents the maximum credit exposure before
any credit enhancements. The maximum exposure to credit risk at the reporting date is:
2011 2010
(Rupees in thousand)
Investments 299,935 290,482
Long term loans 3,175 1,550
Long term deposits 2,096 2,087
Loans and advances 205,097 200,939
Other receivables 74,505 5,082
Markup receivable 1,501 11,726
Bank balances 1,121,237
1,707,546
1,154,090
1,665,958
Loans and advances primarily include due from defaulted / suspended members against
which the Company holds adequate assets of these members. In respect of due from members,
the management, based on past experience and long standing relationship with them, does
not expect any non-performance by these members.
Total bank balance of Rs. 1,176.6 million placed with banks have a short term credit rating
of at least AA.
The year wise ageing of fee receivables is as follows:
2011 2010
(Rupees in thousand)
Fees pertaining to the financial year ended
30 June, 2007 and prior to the said date 79,296 72,538
Fees pertaining to the financial year ended 30 June 2008 7,193 6,758
Fees pertaining to the financial year ended 30 June 2009 9,599 7,193
Fees pertaining to the financial year ended 30 June 2010 369 9,599
Fees pertaining to the financial year ended 30 June 2011 78,120
174,577
369
96,457
Less: provision made against doubtful fees receivable 103,312
71,265
96,088
369
Based on past experience, the management believes that no additional provision is
required against fees receivable considered good as at 30 June 2011. Further, provision against
doubtful fees receivable, to the extent considered necessary, has been recognized in these
financial statements.
41.2 Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties in releasing funds to
meet commitments associated with financial liabilities. Liquidity risk may result from an
inability to sell a financial asset quickly at an amount close to its fair value.
The Company's approach to managing liquidity is to ensure, as far as possible, that it will
always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring losses or risking damage to the Company's reputation.
The following are the contractual maturities of the financial liabilities, including estimated
interest payments:
2011
Financial Liabilities
Liabilities against assets
subject to finance lease
Carrying
amount
Contractual
Cash flows
Six
months or
less
Six to
twelve
months
Over one
year
------------------------- Rupees in thousand --------------------------
1,331 499 499 - -
Gratuity payable 15,896 15,896 - - 15,896
Provision for earned leaves 5,813 5,813 - - 5,813
Employee welfare fund 500 500 - - 500
Long term deposits 122,273 122,273 - - 122,273
Member's contribution fund 457,534 457,534 - - 464,752
Investor's protection fund 232,113 232,113 - - 215,304
Accrued and other liabilities 169,824 169,824 64,656 105,168 -
2010
Financial Liabilities
Liabilities against assets
subject to finance lease
1,005,284 1,004,452 65,155 105,168 824,538
Carrying
amount
Contractual
Cash flows
Six
months or
less
Six to
twelve
months
Over one
year
------------------------- Rupees in thousand --------------------------
905 918 918 - -
Gratuity payable 14,264 14,264 - - 14,264
Provision for earned leaves 6,311 6,311 - - 6,311
Employee welfare fund 500 500 - - 500 105
Long term deposits 146,888 146,888 - - 146,888
Member's contribution fund 464,752 464,752 - - 464,752
Investor's protection fund 215,304 215,304 - - 215,304
Accrued and other liabilities 228,516 230,652 104,564 126,088 -
1,077,441 1,079,590 105,482 126,088 848,020
41.3 Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest
rates and equity prices will affect the Company's income or the value of its holdings of financial
instruments. As at 30 June 2011, the Company does not have any significant assets or liabilities
wich may affect by the change in market prices.
41.3.1 Currency risk
Currency risk is the risk that the value of a financial instrument will fluctuate due to a
change in foreign exchange rates. The Company is exposed to foreign currency risk on its bank
balance in saving account. The Company's functional currency is Pak Rupee. The Company's
exposure to foreign currency risk is as follows:
2011 2010
(Rupees in thousand)
Foreign currency bank account 5,109 5,067
Net exposure 5,109 5,067
Reporting Date Rate
2011 2010
USD to PKR 85.95
85.40
Sensitivity analysis
At reporting date, if the PKR had strengthened by 10% against the US Dollar with all other variables
held constant, post-tax profit for the year would have been higher by the amount shown below, mainly as
a result of net foreign exchange gain on translation of foreign currency bank account.

Notes to the Financial Statements
Effect on profit or loss 2011 2010
(Rupees in thousand)
USD (511)
(507)
The weakening of the PKR against US Dollar would have had an equal but opposite impact on
the post tax loss / profits.
The sensitivity analysis prepared is not necessarily indicative of the effects on (loss) / profit
for the year and assets / liabilities of the Company.
41.3.2 Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in market interest rates. The Company's exposure to the risk
of changes in market interest rates relates primarily to the Company's short term investments,
liabilities against assets subject to finance lease and deposits in profit and loss sharing
accounts with banks. At the balance sheet date, the interest rate profile of the Company's
interest-bearing financial instruments is as follows:
Effective rate Carrying amount
2011 2010 2011 2010
Financial assets %
% Rupees in thousand
Fixed rate instruments
Bank balances 5 to 12.75 5 to 12.9 1,114,029 1,148,124
Financial liabilities
Variable rate instruments
Liabilities against assets
subject to finance lease 16.8 to 17.3 16.1 to 6.8 1,062
905
Fair value sensitivity analysis for fixed rate instruments
The Company does not account for any fixed rate financial assets and liabilities at fair value
through profit and loss. Therefore a change in interest rates at the reporting date would not
affect profit and loss account.
Cash flow sensitivity analysis for variable rate instruments
106 A change of 100 basis points in interest rates at the reporting date would have decreased /
(increased) loss for the year by the amounts shown below. This analysis assumes that all other
variables, in particular foreign currency rates, remain constant. The analysis is performed on
the same basis for 2011.
Profit and loss 100 bp
Increase Decrease
(Rupees in thousand)
As at 30 June 2011
Cash flow sensitivity-Variable rate financial liabilities
As at 30 June 2010
Cash flow sensitivity-Variable rate financial liabilities
(10.62)
(9.05)
10.62
9.05
The sensitivity analysis prepared is not necessarily indicative of the effects on profit/ (loss)
for the year and assets / liabilities of the Company.
41.3.3 Equity price risk
Equity price risk is the risk that the fair value of equity instruments changes as a result of
changes in the levels of equity indices and the value of individual stocks. The Company does
not have exposure in listed equities as at 30 June 2011.
41.4 Fair value of financial instruments
The carrying values of other financial assets and financial liabilities reported in balance sheet
approximate their fair values.
41.5 Capital management
The Company does not have any share capital nor it has any borrowings, hence, the above
disclosure has not been presented in the financial statements.
41.6 Fair value of financial instruments
The carrying values of other financial assets and financial liabilities reported in balance sheet
approximate their fair values. The Company measures fair values using the following fair value
hierarchy that reflects the significance of the inputs used in making the measurements.
n Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
n Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
n Level 3: Valuation techniques using significant unobservable inputs.
Investment in ordinary shares of listed companies is valued using quoted prices in active
market, hence, fair value of such investments fall within Level 1 in fair value hierarchy as
mentioned above.
42 Date of authorization
These financial statements were authorised for issue on November 04, 2011 by the Board
of Directors of the Company.
43 General
Figures have been rounded off to the nearest thousand rupees.
Corresponding figures have been re-arranged, wherever necessary, for the purposes of
comparison. However, no significant re-arrangements have been made.
Lahore
Managing Director
Director
-sd-
-sd-
-sd-
Director