Annual Report 2016fatima-group.com/updata/files/files/136_20171123132205.pdf · Annual Report 2016...

Annual Report

2016

PAKARAB FERTILIZERS LIMITEDE-110, Khayaban-e-Jinnah,Lahore Cantt. Lahore. 54000Pakistan.

www.fatima-group.com

Client: Pakarab Job Name: Pakarab Annual Report Cover | Color: CMYK | Date: 14-12-2017

2 Core Values2 Our Vision and Mission3 Code of Conduct4 Company Information5 CompanyProfile6 ProfileoftheDirectors8 Board Structure and Committees10 ProfileoftheKeyManagement13 OrganizationChart14 Notice of 44thAnnualGeneralMeeting15 FinancialHighlights16 HorizontalAnalysis-BalanceSheet17 VerticalAnalysis-BalanceSheet18 HorizontalAnalysis-ProfitandLoss19 VerticalAnalysis-ProfitandLoss20 Directors’ReporttotheMembers26 StatementofCompliancewiththeCodeof Corporate Governance Financial Statements

30 ReviewReporttotheMembersonStatementof Compliance

31 Auditors’ReporttotheMembers32 BalanceSheet34 ProfitandLossAccount35 StatementofComprehensiveIncome36 CashFlowStatement37 StatementofChangesinEquity38 NotestoandformingpartoftheFinancialStatements

Consolidated Financial Statements

95 Auditors’ReporttotheMembers96 ConsolidatedBalanceSheet98 ConsolidatedProfitandLossAccount99 ConsolidatedStatementofComprehensiveIncome100 ConsolidatedCashFlowStatement101 ConsolidatedStatementofChangesinEquity102 NotestoandformingpartoftheConsolidatedFinancialStatements156 PatternofShareholding158 Financial Calendar Form of Proxy

Contents

1

Core Values

IntegrityOuractionsaredrivenbyhonesty,ethics,fairnessandtransparency

InnovationWeencouragecreativityandrecognizenewideas

TeamworkWeworkcollectivelytowardsacommongoal

Safety, Health, Environment & CSRWecareforourpeopleandthecommunitiesaroundus

Customer FocusWebelieveinlisteningtoourcustomersanddeliveringvalueinourproducts and services

ExcellenceWestrivetoexcelineverythingwedo

Valuing PeopleWevalueourpeopleasourgreatestresource

Our Vision and MissionVisionTobeaworldclassmanufactureroffertilizersandancillaryproducts,withafocusonsafety,qualityandcontributiontonationaleconomicgrowthanddevelopment.Wewillcarefortheenvironmentandthecommunitiesweworkinwhilecontinuingtocreateshareholders’value.

Mission• Tobe thepreferred fertilizer company for farmers, businessassociatesand suppliers throughqualityand

service.

• To provide employees an exciting, enabling and supportive environment to excel in, be innovative,entrepreneurialinanethicalandsafeworkingplacebasedonmeritocracyandequalopportunity.

• Tobearesponsiblecorporatecitizenwithaconcernfortheenvironmentandthecommunitieswedealwith.

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ANNUAL REPORT 2016

Code of Conduct

“Acommitmenttohonesty,ethicalconductandintegrityisthesupremeobjectiveoftheCompany.Toassistemployeesinachievingthisobjectiveandimplementitscommitment,theCompanyhasdevelopedacomprehensiveCodeofConductwhichguidesthebehaviorofdirectors,officersandemployeesoftheCompanyandisreproducedintheformofaPolicyStatementofEthicsandBusinessPractices.”

PakarabFertilizersLimitedconductsitsbusinesswiththehighestethicalstandardsinfullcompliancewithallapplicablelaws.Honestyandintegritytakeprecedenceinallrelationshipsincludingthosewithcustomers,suppliers,employeesandotherstakeholders.

Ethics and Business PracticesWebelieveinconductingtheCompany’sbusinessinamannerthatrespects,protectsandimprovestheenvironmentandprovidesemployeeswithasafeandhealthyworkplace.Weconductourbusinessinanenvironmentallyresponsibleandsustainablemanner.Employeesmustbecompletelyfamiliarwiththepermits,HealthSafetyandEnvironmentPolicy,locallawsandregulationsthatapplytotheirwork.

Allemployeesareexpectedtounderstandthelawsandbusinessregulationsrelatedtotheirworkandcomplyfullysothatourshareholders,employees,customers,suppliers,stakeholdersandtheGovernmenthavecompletefaithinthewayweoperateandthatourbusinessdecisionsaremadeethicallyandinthebestinterestsoftheCompany.

EmployeesareobligatedtoactinaccordancewiththeCompany’scodeofEthicsandBusinessConductandarerestrictedtousingonlylegitimatepracticesincommercialoperationsandinpromotingtheCompany’spositiononissuesbeforegovernmentalauthorities.Inducementsintendedtorewardfavorabledecisionsandgovernmentalactionsareunacceptableandprohibited.

Employeesareprohibitedfromusingtheirpositions,Companypropertyorinformationforpersonalgain,andfromcompetingwiththeCompany.EmployeesarealsoprohibitedfromtakingadvantagefromopportunitiesthatbecomeavailablethroughtheuseofCompanyinformation,propertyortheirposition.

Assets and Proprietary InformationWeconsiderourCompany’sassets,bothphysicalandintellectual,veryvaluable.Wehave,thereforeanobligationtoprotecttheseassetsintheinterestoftheCompanyanditsshareholders.

ProtectionoftheCompany’sinformationisimportantforourbusiness.Allemployeesareexpectedtoknowwhatinformationisproprietaryandwhichmustnotbedisclosedtounauthorizedsources.EmployeesareresponsibleforapplyingallavailabletoolstomanagetheCompany’sinformationresourcesandrecords.

Relations with Business PartnersWeseektodobusinesswithsuppliers,vendors,contractorsandotherindependentbusinesseswhodemonstratehighstandardsofethicalbusinessbehavior.OurCompanywillnotknowinglydobusinesswithanypersonsorbusinessesthatoperateinviolationofapplicablelawsandregulations,includingemployment,health,safetyandenvironmentallaws.Weshalltakestepstoassurethatoursuppliers,vendorsandcontractorsunderstandthestandardsweapplytoourselves,andexpectthesamefromthem.

Our EmployeesWebelievethathighlyengagedemployeesarethekeyingredientinprofessionaldevelopmentandbusinesssuccess.Therefore,weinviteouremployeestocontributetheirbestandtoavailtheopportunitiesforimprovementandgrowth.Weareanequalopportunityemployerandpromotegenderdiversity,self-developmentandinnovation.Weprovideemployeeswithtools,techniques,andtrainingtomastertheircurrentjobs,broadentheirskills,andadvancetheircareergoals.

TheAuditcommitteeoftheBoardensuresthecomplianceofaboveprinciples.

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Company Information

Board of Directors

Mr.ArifHabibChairman

Mr.FawadAhmedMukhtarChiefExecutiveOfficer

Mr.FazalAhmedSheikhExecutiveDirector

Mr.FaisalAhmedMukhtarNon-ExecutiveDirector

Mr.NasimBegNon-ExecutiveDirector

Mr.RehmanNaseemNon-ExecutiveDirector

Mr.AbdusSamadNon-ExecutiveDirector

Mr.MuhammadKashifHabibNon-ExecutiveDirector

Audit Committee

Mr.NasimBegChairman

Mr.FazalAhmedSheikhMember

Mr.RehmanNaseemMember

Mr.MuhammadKashifHabibMember

Human Resource andRemuneration Committee

Mr.NasimBegChairman

Mr.AbdusSamadMember

Mr.FaisalAhmedMukhtarMember

Mr.RehmanNaseemMember

Chief Financial Officer

Mr.ArifHamidDar

Company Secretary

Mr.AusafAliQureshi

Key Management

Mr.M.AbadKhanAdvisortoCEO

Mr.Arif-ur-RehmanChiefManufacturingOfficer

Mr.QadeerAhmedKhanDirectorSpecialProjects

Mr.Ahsen-ud-DinDirectorTechnologyDivision

SardarNaufilMahmudChiefInformationOfficer

Mr.IftikharMahmoodBaigDirectorBusinessDevelopment

Mr.AftabAhmedKhanChiefSupplyChainOfficer

Mr.SalmanAhmadHead of Internal Audit

Brig.(Retd)AdeebAzamGeneralManagerAdministration

Legal Advisors

M/s.Chima&IbrahimAdvocates1-A/245,TufailRoad,LahoreCantt.

Auditors

A.F.Ferguson&Co.,CharteredAccountants23-C,AzizAvenue,CanalBank,GulbergV,Lahore-54660.Tel:04235715864-71F-04235715872

Cost Auditors

KPMGTaseerHadi&Co.CharteredAccountants2ndFloor,ServisHouse,2-MainGulbergJailRoad,LahoreTel:04235790901-6Fax: 042 35790907www.kpmg.com.pk

Bankers

AlliedBankLimitedAl-BarakaBank(Pakistan)LimitedAskariBankLimitedBankIslamiPakistanLimitedBankAl-HabibLimitedBankofKhyberCitibank,N.A.FaysalBankLimitedHabibBankLimitedHabibMetropolitanBankLimitedMCBBankLimitedNational Bank of PakistanPak Oman Investment CompanyLimitedPakistanKuwaitInvestmentCompany(Private)LimitedPAIRInvestmentCompanyLimitedSindhBankLimitedStandardCharteredBank(Pakistan)LimitedSummitBankLimitedSoneriBankLimitedUnitedBankLimitedZaraiTaraqiatiBankLimited

Registered / Head Office

E-110,Khayaban-e-Jinnah,LahoreCantt.,Pakistan.UAN:111-FATIMA(111-328-462)Fax:042-36621389E-mail:[email protected]:www.fatima-group.com

Plant Site

KhanewalRoad,MultanTel: 061 9220022Fax: 061 9220021

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ANNUAL REPORT 2016

Company Profile

PakarabFertilizersLimited(‘PFL’orthe‘Company’)wasestablishedasaresultofprotocolconcludedandsignedonNovember15,1972bytheGovernmentofPakistantofurtherstrengthenanddevelopfraternaltiesbetweenIslamicRepublicofPakistanandstateofAbuDhabi.

AMemorandumofUnderstandingwasconcludedbetweenPakistanIndustrialDevelopmentCorporation(PIDC)andAbuDhabiNationalOilCompanyLimited(ADNOC)onMarch7,1973.AparticipationagreementemergedonNovember1,1973toestablishajointventurefortheexpansionandmodernizationoftheoldNaturalGasFertilizerFactory(NGFF)atMultan.

TheCompanywasincorporatedonNovember12,1973.Subsequently,PIDCassigned52%ofitssharestoNationalFertilizerCorporation(NFC)ofPakistanandADNOCassigned48%ofitsshareto International Petroleum Investment Company,withapaidupcapitalofRs.743.061million.

UndertheprivatizationpolicyofGovernmentofPakistan,PFLwasprivatizedonJuly14,2005atacostofRs.14.125billion.Itwasacquiredbytheconsortium of Fatima Group and Arif HabibGroup.

Underthenewmanagement,PFLhasundergoneextensivemodernizationandnewimprovedprocesseshavebeenintroducedtomaximizetheoutputwhileminimizingthenegativeimpactsontheenvironment.ForthisaCleanDevelopmentMechanism(CDM)plantwasinstalled,whichisthefirstprojectofitskindinPakistan.BasicaimofthisprojectistheabatementofN2O and NOXemissionsfromthestackgasesofNitricAcidplant.Thereductionofgreenhouseeffectofthesegasesshowsthenewmanagement’scommitmenttowardsacleanerenvironment.

PFLislocatedatKhanewalRoad,Multan.Thesiteareacomprises302acres,whichincludesareaforthefactoryandthehousingcolonywithallamenitiesincludingmedicalcentre,school,managementandstaffclubsforrecreationofemployeesandtheirfamilies,etc.

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Profile of the Directors

Mr. Arif HabibChairman/Non-ExecutiveDirector

Mr. Fawad Ahmed MukhtarChiefExecutiveOfficer/Director

Mr. Fazal Ahmed SheikhExecutiveDirector

Mr. Rehman NaseemNon-ExecutiveDirector

Mr.ArifHabibistheChairmanofPakarabFertilizersLimited.HeisalsotheChiefExecutiveOfficerofArifHabibCorporationLimited,DirectorofPakarabEnergyLimitedandChairmanofFatimaFertilizerCompanyLimited,FatimafertLimited,AishaSteelMillsLimited,FatimaCementLimitedandJavedanCorporationLimited.Mr.ArifHabibremainedtheelectedPresident/ChairmanofKarachiStockExchangeforsixtimesinthepastandwasaFoundingMemberandChairmanoftheCentralDepositoryCompanyofPakistanLimited.HehasservedasaMemberofthePrivatizationCommission,BoardofInvestment,TariffReformsCommissionandSecurities&ExchangeOrdinanceReviewCommittee.Overtheyears,hehasbeennominatedontheBoardofDirectorsofanumberofcompaniesbytheGovernmentofPakistan.Mr.Habibparticipatessignificantlyinwelfareactivities.HeisoneofthetrusteesofFatimidFoundationandMemonHealth&EducationFoundationaswellasaDirectorofPakistanCentreforPhilanthropyandKarachiEducationInitiative.

Mr.FawadAhmedMukhtaristheChiefExecutiveOfficerandDirectoroftheCompany.Hehasrichexperienceofmanufacturingandindustrialmanagement,andinadditiontobeingasuccessfulbusinessleader,heisalsoarenownedphilanthropist.Followinghisgraduation,hehasspent30yearsindevelopinghisfamilybusinessintoasizableconglomerate.Mr.FawadMukhtarleadsseveralcommunity service initiatives ofhisGroupincludingtheFatimaFertilizerTrustandWelfareHospital,FatimaFertilizerEducationSocietyandSchool,MukhtarA.SheikhWelfareTrustetc.HeisalsotheChairmanofRelianceWeavingMillsLimited,FatimaEnergyLimited,RelianceCommodities(Pvt)Limited,FatimaSugarMillsLimited,FatimaHoldingLimited,AirOne(Pvt)LimitedandisalsotheCEOofFatimaFertilizerCompanyLimited,FatimafertLimitedandFatimaCementLimited.HeisalsotheDirectorofFatimaTransmissionCompanyLimited,FatimaElectricCompanyandPakarabEnergyLimited.Inaddition,heismemberBoardofDirectorsof“TheNationalManagementFoundation”–asponsoringbodyofLahoreUniversityofManagementSciences(LUMS).

Mr.FazalAhmedSheikhisaDirectoroftheCompany.HeholdsadegreeinEconomicsfromtheUniversityofMichigan,AnnArbor,USA.HehasplayedastrategicroleinFatimaGroup’sexpansionandsuccess.HeistheCEOofRelianceWeavingMillsLimited,FatimaEnergyLimited,FatimaElectricCompanyLimited,FatimaTransmissionCompanyLimited,PakarabEnergyLimitedandAirOne(Pvt)Limited.Inaddition,heisalsothememberBoardofDirectorsatFatimaFertilizerCompanyLimited,FatimafertLimited,RelianceCommodities(Pvt)Limited,FatimaSugarMillsLimited,FatimaHoldingLimited,FatimaCementLimitedandFazalClothMillsLimited.

Mr.RehmanNaseemisaDirectoroftheCompany.HeobtainedaBachelorofEconomicsDegreefromColumbiaUniversity,NewYork.HeistheChiefExecutiveofAhmedFineTextileMillsLimitedandRehmanAmirFabricsLimited.HeisDirectorofFazalClothMillsLimited,FazalWeavingMillsLimited,FazalRehmanFabricsLimited,ZafarNasirOilExtractionLimited,HussainGinneriesLimited,FazalHoldings(Pvt)Limited(formerlyAmirFineExports(Pvt)Limited),RashidBrothersAssociates(Pvt)Limited,FazalFarms(Pvt)LimitedandFatimaEnergyLimited.HeisalsodesignatedasDirectorofPunjabThermalPower(Pvt)Limited,Quaid-e-AzamSolarPower(Pvt)LimitedandMultanElectricPowerCompanyLimited.

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ANNUAL REPORT 2016

Mr. Faisal Ahmed Mukhtar Non-ExecutiveDirector

Mr. Nasim BegNon-ExecutiveDirector

Mr. Abdus SamadNon-ExecutiveDirector

Mr. Muhammad Kashif HabibNon-ExecutiveDirector

Mr.FaisalAhmedMukhtarisaDirectoroftheCompany.HeholdsaLawdegreefromBahauddinZakariyaUniversity,Multan.HeistheformerMayorandCityDistrictNazimofMultan,andcontinuestoleadwelfareeffortsinthecity.HeisalsotheChiefExecutiveOfficerofFatimaHoldingLimitedandFatimaSugarMillsLimited.HeisalsotheChairmanofWorkersWelfareBoardatPakarabFertilizersLimitedandismemberBoardofDirectorsatFatimaFertilizerCompanyLimited,FatimafertLimited,FatimaCementLimited,FatimaEnergyLimited,FatimaElectricCompanyLimited,PakarabEnergyLimited,RelianceWeavingMillsLimited,RelianceCommodities(Pvt)Limited,FazalClothMillsLimited,andAirOne(Pvt)Limited.AdditionallyhewasalsoamemberintheProvincialFinanceCommission(Punjab),SteeringCommitteeofSouthernPunjabDevelopmentProjectandDecentralizationSupportProgram.

Mr.NasimBegqualifiedasaCharteredAccountantin1970;healsoholdsaBachelor’sdegreeinCommercefromtheKarachiUniversity.HeisthefounderChiefExecutiveofArifHabibConsultancyandwasthefounderChiefExecutive(nowViceChairman)ofMCB-ArifHabibSavings&InvestmentsLimited(formerlyArifHabibInvestmentsLimited),aleadingAssetManagementCompanyofPakistan.Mr.NasimBegservesontheBoardsofseveralArifHabibGroupcompanies,aswellassomeothers.HechairstheBoardsofArifHabibDolmenREITManagementLimitedandPowerCementLimited.Hehasexperienceofover46yearsinindustryandthefinancialservicessector,inboththedomesticandinternationalmarkets.HewasapartofataskforcesetupbytheSecuritiesandExchangeCommission of Pakistan (SECP),whichdevelopedandintroducedtheVoluntaryPensionSystem.HewasthefounderChairmanoftheSECPsponsored Institute of Capital MarketsandhasalsobeenaMemberofthePrimeMinister’sEconomicAdvisoryCouncil.

Mr.AbdusSamadisaDirectoroftheCompany.HeholdsaMaster’sdegreeinBusinessAdministrationandhasmorethan15yearsofexperience,including9yearsofworkinginthefinancialservices industry in various seniormanagementroles.HebeganhiscareerwithArifHabibCorporationLimited(theholdingcompanyofArifHabibGroup)andhasservedthecompanyin various executive positions includingExecutiveSalesandBusinessPromotions,CompanySecretary,HeadofMarketing,etc.InSeptember2004,hewasappointedastheChairmanandChiefExecutiveofArifHabibLimited.AsChairmanhewasresponsibleforthestrategicdirectionofthecompanyand was actively involved in capital market operations and corporatefinanceactivitiessuchasservingcorporateclients,institutionalclients,highnetworthindividuals,andraisingfundsforclientsthroughIPO’s,privateplacementsetc.HeresignedfromthatpositioninJanuary2011.Mr.AbdusSamadistheChiefExecutiveofJavedanCorporationLimitedandDirectorofArifHabibCorporationLimited,ArifHabibEquity(Pvt)Limited,ArifHabibDolmenREITManagementLimited,ArifHabibFoundation,DolmenArifHabibRealEstateServices(Pvt)Limited,MCB-ArifHabibSavings&InvestmentsLimited,InternationalComplexProjectsLimited,NooriabadSpinningMills(Pvt)Limited,PakistanOpportunitiesLimited,ParkviewCompanyLimited,PowerCementLimited,REMMCOBuilders&DevelopersLimited,RotocastEngineeringCompany(Pvt)Limited,Safe Mix Concrete LimitedandSweetwaterDairiesPakistan(Pvt)Limited.

Mr.MuhammadKashifHabibisaDirectoroftheCompany.HeisaCharteredAccountantfromtheInstituteofCharteredAccountants of Pakistan (ICAP)andhascompletedhismandatoryArticleswithM/s.A.F.Ferguson&Co.CharteredAccountants.HeistheCEOofPowerCementLimitedandSafeMixConcreteLimited.HeisalsoDirectorofArifHabibCorporationLimited,FatimaFertilizerCompanyLimited,FatimafertLimited,FatimaCementLimited,RelianceSacksLimited,JavedanCorporationLimited,AishaSteelMillsLimited,RotocastEngineeringCompany(Pvt)LimitedandatrusteeofMemonHealth&EducationFoundation.

7

Board Structure and Committees

Board StructurePFL’sBoardiscomprisedofeightdirectorswhohavebeenelectedbytheshareholdersforatermofthreeyearsexpiringonDecember31,2018.OtherthantheChiefExecutiveOfficer(CEO),thereisoneexecutivedirectorandsixnon-executivedirectorsontheBoard.TheChairmanoftheBoardisanon-executivedirector. TheBoardprovidesleadershipandstrategicguidancetotheCompany,overseestheconductofbusinessandpromotestheinterestsofallstockholders.Itreviewscorporatepolicies,overallperformance,accountingandreportingstandardsandothersignificantareasofmanagement,corporategovernanceandregulatorycompliance. TheBoardisheadedbytheChairmanwhomanagestheBoard’sbusinessandactsasitsfacilitatorandguide.TheBoardisassistedbyanAuditCommitteeandaHumanResourceandRemunerationCommitteewhiletheCEOcarriesresponsibilityforday-to-dayoperationsoftheCompanyandexecutionofBoardpolicies.

Board CommitteesThestandingcommitteesoftheBoardare:

Audit Committee

Composition

TheAuditCommitteeconsistsoffourmembersoftheBoard.MajorityofthemembersoftheAuditCommitteearenon-executivedirectorsincludingtheChairman.

Themembersare:

1.Mr.NasimBeg-Chairman2.Mr.FazalAhmedSheikh-Member3.Mr.RehmanNaseem-Member4.Mr.MuhammadKashifHabib-Member

Terms of Reference

Inadditiontoanyotherresponsibilitieswhichmaybeassignedfromtimeto

timebytheBoard,themainpurposeoftheAuditComitteeistoassisttheBoardbyperformingthefollowingmainfunctions:

• tomonitorthequalityandintegrityoftheCompany’saccountingandreportingpractices;

• tooverseetheperformanceofCompany’sinternalauditfunction;

• toreviewtheexternalauditor’squalification;independence,performanceandcompetence;and

• tocomplywiththelegalandregulatoryrequirements,Company’sby-lawsandinternalregulations.

TheTermsofReferenceoftheAuditCommitteehavebeendrawnupandapprovedbytheBoardofDirectorsincompliancewiththeCodeofCorporateGovernance.InadditiontocompliancewithCodeofCorporateGovernance,theAuditCommitteecarriesoutthefollowingdutiesandresponsibilitiesfortheCompanyasperitsTermsofReference:

a)determinationofappropriatemeasurestosafeguardtheCompany’sassets;

b)reviewofpreliminaryannouncementsofresultspriortopublication;

c)reviewofquarterly,half-yearlyandannualfinancialstatementsoftheCompany,priortotheirapprovalbytheBoardofDirectors,focusingon:

• majorjudgmentalareas;

• significantadjustmentsresultingfromtheaudit;

• thegoing-concernassumption;

• anychangesinaccountingpoliciesandpractices;

• compliancewithapplicableaccountingstandards;and

• compliancewithlistingregulationsandotherstatutoryandregulatoryrequirements.

d)facilitatingtheexternalauditanddiscussionwithexternalauditorsof

majorobservationsarisingfrominterimandfinalauditsandanymatterthattheauditorsmaywishtohighlight(intheabsenceofmanagement,wherenecessary);

e)reviewofmanagementletterissuedbyexternalauditorsandmanagement’sresponsethereto;

f) ensuringcoordinationbetweentheinternalandexternalauditorsoftheCompany;

g)reviewofthescopeandextentofinternalauditandensuringthattheinternalauditfunctionhasadequateresources and is appropriately placed withintheCompany;

h)considerationofmajorfindingsofinternalinvestigationsandmanagement’sresponsethereto;

i) ascertainingthattheinternalcontrolsystemincludingfinancialandoperationalcontrols,accountingsystemandreportingstructureareadequateandeffective;

j) reviewoftheCompany’sstatementon internal control systems prior toendorsementbytheBoardofDirectors;

k) institutingspecialprojects,valueformoneystudiesorotherinvestigationsonanymatterspecifiedbytheBoardofDirectors,inconsultationwiththeChiefExecutiveandtoconsiderremittanceofanymattertotheexternalauditorsortoanyotherexternalbody;

l) determinationofcompliancewithrelevantstatutoryrequirements;

m)monitoringcompliancewiththebestpracticesofcorporategovernanceandidentificationofsignificantviolationsthereof;and

n)considerationofanyotherissueormatterasmaybeassignedbytheBoardofDirectors.

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ANNUAL REPORT 2016

Human Resource and Remuneration Committee

Composition

TheHumanResourceandRemunerationCommitteeconsistsoffourmembersoftheBoard.AllthemembersoftheCommitteearenon-executivedirectorsincludingtheChairman.

Themembersare:

1.Mr.NasimBeg-Chairman2.Mr.AbdusSamad-Member3.Mr.FaisalAhmedMukhtar-Member4.Mr.RehmanNaseem-Member

Terms of Reference

TheHumanResourceCommitteeisameanbywhichtheBoardprovidesguidanceonhumanresourcesexcellence.Thespecificresponsibilities,authoritiesandpowersthattheCommitteecarriesoutonbehalfoftheBoard are as follows:

1. Duties and Responsibilities

TheCommitteeshallcarryoutthedutiesbelowfortheCompany:

1.1 toreviewandrecommendtheannualCompensationstrategywithfocusontheannualbudgetforHeadcountandSalariesandwages;

1.2 toreviewandrecommendtheannualBonusandIncentiveplan;

1.3 toreviewandrecommendthecompensationoftheChiefExecutiveandExecutiveDirectors;

1.4 toassisttheBoardinreviewingandmonitoringthesuccessionplansofkeypositionsintheCompany;

1.5 toreviewandmonitorprocessesand initiatives related to work environmentandculture;

1.6 toperformsuchotherdutiesandresponsibilitiesasmaybeassignedtimetotimebytheBoardofDirectors.

2. Reporting Responsibilities

2.1 theCommitteeChairmanshallreportformallytotheBoardonitsproceedingsaftereachmeetingonallmatterswithinitsdutiesandresponsibilities;

2.2 theCommitteeshallmakewhateverrecommendationstotheBoarditdeems appropriate on any area withinitsremitwhereactionorimprovementisneeded;

2.3 theCommitteeshall,ifrequestedbytheBoard,compileareporttoshareholdersonitsactivitiestobeincludedintheCompany’sAnnualReport.

3. Authorities and Powers

TheCommitteeisauthorisedandempowered:

3.1 toseekanyinformationitrequiresfromanyemployeeoftheCompanyinordertoperformitsduties;

3.2 toobtain,attheCompany’sexpense,outsidelegalorotherprofessional advice on any matter withinitstermsofreference;and

3.3 tocallanyemployeetobequestionedatameetingoftheCommitteeasandwhenrequired.

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Profile of the Key Management

Mr. M. Abad KhanAdvisortoCEO

Mr. Arif-ur-RehmanChiefManufacturingOfficer

Mr. Qadeer Ahmed KhanDirectorSpecialProjects

Mr. Ausaf Ali QureshiCompany Secretary

Mr.M.AbadKhangraduatedinMechanicalEngineeringfromUETLahoreandreceivedextensivetraininginFertilizermanufacturingfromabroad.HewaspartoftheteamthatcommissionedPakistan’sfirstUreaPlantundertheaegisofPIDC.HeservedExxonChemicalPakistanLimitedfor 15 years mostly at senior managementpositionsinmanufacturing.HeledFaujiFertilizerCo.manufacturingfor 14 years as General ManagerPlant.Duringthisperiod,Plantoperatedparexcellenceandthesitecapacity increased to more thandouble.In2001,whenFFBLfacedseriouschallenges,hetookresponsibilityasheadofmanufacturingandwasinstrumentalinsmoothoperationandamajorrevampof25%capacity.HehasbeenwithFatimaGroupforthelast11yearsandplayedasignificantroleinsettingupandprogressofFatimaFertilizerPlantandoperational improvements in PakarabFertilizers.Duringthecourseofalongcareer,hehadextensiveinternationalexposuresthroughseminars,symposiumsandtrainingsincludingoneatHarvardBusinessSchool.HeisalsoDirectorofseveralotherGroupCompanies namely Fatima EnergyLimited,PakarabEnergyLimited,FatimafertLimited,FatimaVentures(Pvt)Limited,FatimaCementLimitedandFatimaElectricCompanyLimited.

Mr.QadeerAhmedKhanhasdonehisMSinPetrochemicalsandHydrocarbonsfromtheInstituteofScienceandTechnology,UniversityofManchester,England.Hehasa vast experience of over 40 yearsofworkinginchemicalsandfertilizerindustries.BeforejoiningFatimaGroupasDirectorOperationsPakarabFertilizersin2008,heworkedatEngroChemicalsandEngroPolymersforover32years,whereheheldvariousseniormanagementpositions.

Mr.Arif-ur-RehmanjoinedFatima Group in early 2007 and ledtheprojectsuccessfullyasProjectDirectorFatimaFertilizer.Afterprojectcommissioning,heledtheManufacturingDivisionas‘DirectorOperations’andsteeredthesitethroughnumberofenergyimprovement and capacity enhancementinitiatives,thusachievingabovedesigncapability.SinceJuly2016,hehasmovedtoHeadOfficeinLahoreandnowoverseestheFertilizerManufacturingandSupplyChainfunctionsofFatimaGroup.HeisaChemicalEngineerwithover34yearsofexperienceinthefertilizerandpetrochemicalindustries.HisexperienceincludestenureswithFaujiFertilizerPlantatGothMacchiwherehewaspartofasuccessfulprojectteam,FaujiFertilizerBinQasimPlantandICIPTABinQasimPlant.

Mr.AusafAliQureshiisaFellowMemberofInstituteofCharteredAccountantsofPakistan.HejoinedtheGroup in May 2010 as CompanySecretarywithadditionalresponsibilityforinvestorrelations.Hehasover 34 years of experience withFaujiFertilizer,PakistanInternationalAirlines(Holdings)andBristolMyersSquibb(BMS).Inhis20years’pluscareeratBMS,heheldvariousseniormanagementpositionsinPakistan,SouthKorea,EgyptandSingaporeintheareasoffinance,corporatecomplianceandstrategicprojectplanning.

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ANNUAL REPORT 2016

Mr. Arif Hamid DarChiefFinancialOfficer

Mr. Iftikhar Mahmood BaigDirectorBusinessDevelopment

Sardar Naufil MahmudChiefInformationOfficer

Mr. Aftab KhanChiefSupplyChainOfficer

Mr.ArifHamidDarisafellowmemberoftheInstituteofCharteredAccountantsofPakistanandgottrainingwithA.F.Ferguson&Co.CharteredAccountants.Hehas14yearsofdiversifiedexperienceofhandlingfinance,businessplanning,aftersalesservicesfunctionswithHondaAtlasCars(Pakistan)Limited,asubsidiaryofHondaMotorCompany,Japan.HehasjoinedtheCompanyinearly2010.

SardarNaufilMahmudjoinedFatimaGroupinJanuary2017.Mr.Mahmudhasover28yearsofsuccessfulleadershipexperience in companies suchasK-ElectricLimited,DewanMushtaqGroupandICIPakistanLimited.Heholdsan MSc in Computer Science fromSyracuseUniversity,New York and a BSc in ElectricalEngineeringfromtheUniversityofEngineeringandTechnology,Lahore.HispreviousassignmentwasasCIO,K-ElectricLimited.

Mr.IftikharMahmoodBaigisDirectorBusinessDevelopmentofFatimaGroup.HeisaFellowMemberofInstituteofCharteredSecretariesandManagersofPakistan.Hehasover30years of Financial and Commercial experienceatprogressivelyseniorlevelsofmanagement.HestartedhiscareerfromtheTextileandSugarindustry.HejoinedFatimaGroupin1996andduringhisovertwo-decadewithFatimaGroup,hehadbeenassociatedwiththeGroup’sprojectssuchasSugar,Textile,InternationalTrade,PowerandFertilizer.Hehastheexperienceofdevelopingprojectsfromplanning,commissioningtooperationalstages.HeplayedanimportantmanagerialroleintheacquisitionofPakarabFertilizersLimitedin2005.Hewaspartoftheseniorteaminstrumentalinthesuccessfulallocationof110MMCFDgasfortheFatimaFertilizerPlantanditsFinancialCloseachievingthelargestrupeesyndicationofRs.23billionin2006forthegreenfieldfertilizermanufacturingcomplexof(InvestmentUS$750million).HewasinvolvedintheIPOandlistingofFatimaFertilizeronstockexchangesofPakistan.Hewasassociatedwithco-generationpowerprojectof120MW;FatimaEnergyLimited,fromconceptualstageuntilitsimplementation.Heismainlydealingwithissuesofgassupplytofertilizerplants,regulatoryframework&policyinitiativestoresolveGroup’sindustrialandotherissueswithFederal&ProvincialGovernmentsandtheirregulatorybodies.HehasbeenrepresentingtheGrouponlegalissuesinHighCourtsandSupremeCourtofPakistan.Hehaspreviouslyservedinsenior positions in Group companies as CFOandCompanySecretary.

Mr.AftabKhanisanMBA,aFellowoftheCharteredInstituteofProcurement&Supply,UKaswellasaFellowoftheCharteredInstituteofLogistics&Transport,UK.Hehasover27yearsofsuccessfulleadershipexperiencegainedwithintheleadingBritish,American,EuropeanandMiddleEasterncompaniesatbothnationalandinternationallevels.Heiswellexperiencedindeliveringvaluetocustomersandstakeholdersandindevelopingpeopleandprocesses.

11

Profile of the Key Management

Mr. Salman Ahmad Head of Internal Audit

Brig. (Retd) Adeeb AzamGeneralManagerAdministraiton

Mr.SalmanAhmadjoinedFatima Group as Head of InternalAuditinDecember2016.Mr.SalmanAhmadisaFellowCharteredAccountant(FCA)fromInstituteofCharteredAccountantsofPakistan,withover20yearsof experience in Audit and Finance in companies like AlrostamaniGroupDubaiUAE;OasisGroupHoldings(SouthAfrica);GharibwalCementLimitedandEmaar.Mr.SalmanAhmadhasservedFatimaFertilizerintheInternalAuditfunctionfortwoyearsinthepastandhasrejoinedFatimaGroupin2016.

Brig.(Retd)AdeebAzamjoinedPakarabFertilizersLimited’sAdministrative Servicesdepartment as GeneralManagerAdministration.Hehaspreviouslyworkedfor34yearswithPakistanArmy.Brig.(Retd)AdeebAzamhascompletedhisMaster’sinArtandScienceofWarfare,WarStudies and National Security Strategy.

12

ANNUAL REPORT 2016

Organization Chart

Board of Directors

HR & RemunerationCommittee

Audit Committee

Advisor to CEO

Director Special Projects

Director Marketing

Chief HumanResource Officer

Chief Manufacturing Officer

Head of InternalAudit

Director BusinessDevelopment

Chief Information Officer

Chief Supply Chain Officer

General Manager Administraiton

Chief FinancialOfficer

Company Secretary

Chief Executive Officer

13

Notice of the 44th Annual General Meeting

Noticeisherebygiventhatthe44thAnnualGeneralMeetingoftheshareholdersofPAKARABFERTILIZERSLIMITED(the‘Company’or‘PFL’)willbeheldonTuesday,May30,2017at11:00a.m.atE-110,Khayaban-e-Jinnah,LahoreCantt.,totransactthefollowingbusiness:

Ordinary Business

1. Toconfirmminutesofthe43rdAnnualGeneralMeetingheldonApril30,2016.

2. Toreceive,considerandadopttheauditedfinancialstatementsoftheCompanytogetherwiththeDirectors’andAuditors’ Reports thereon for the yearendedDecember 31, 2016 togetherwiththeauditedconsolidatedfinancialstatementsofPakarabFertilizersLimitedandsubsidiaryRelianceSacksLimitedfortheyearendedDecember31,2016andtheAuditors’Reportsthereon.

3. ToappointAuditors for theyearendingDecember31,2017and tofix their remuneration. TheAuditCommitteeandtheBoardofDirectorshaverecommendedforreappointmentofM/s.A.F.Ferguson&Co.,CharteredAccountantsasexternalauditors.

Special Business

4. To consider and approve equity investment in associated company namely Fatima ElectricCompanyLimitedandtopassthefollowingSpecialResolution(s)withorwithoutmodification(s):

“ResolvedthattheconsentandapprovalbeandisherebyaccordedunderSection208oftheCompaniesOrdinance,1984andCompanies(InvestmentinAssociatedCompaniesorAssociatedUndertakings)Regulations, 2012 for investmentup toPKR70,000/- in FatimaElectricCompanyLimited,anassociatedcompany,forsubscribingatpar,fullypaid-up7,000ordinarysharesofPKR10/-eachofFatimaElectricCompanyLimited.

ResolvedfurtherthattheSecretary,theCFOandanyDirectoroftheCompanybeandareeachherebyauthorized singly to takeall stepsnecessary in this regard, includingbutnot limited tonegotiating and executing any necessary agreements/documents, and any ancillarymattersthereto.”

Other Business

5. TotransactanyotherbusinesswiththepermissionoftheChair.

ThestatementunderSection160(1)(b)oftheCompaniesOrdinance,1984settingoutthematerialfactsconcerningthespecialbusinessisannexedherewith.

ByorderoftheBoard

AusafAliQureshiLahore;May08,2017 CompanySecretary

Notes:1. ThesharetransferbooksoftheCompanywillremainclosedfromMay24,2017toMay30,2017

(bothdaysinclusive).TransfersreceivedinorderattheregisteredofficeoftheCompanybythecloseofbusinessonMay23,2017willbetreatedintime.

2. Amemberentitledtoattendandvoteatthemeetingmayappointanothermemberashis/herproxywhoshallhavesuchrightsasrespectsattending,speakingandvotingatthemeetingasareavailabletoamember.

3. ProxiesinordertobeeffectivemustbereceivedbytheCompanyattheRegisteredOfficenotlaterthan48hoursbeforethetimeforholdingmeeting,dulysignedandstampedandwitnessedbytwopersonswiththeirnames,address,NICnumberandsignatures.

4. Shareholdersarerequestedtoimmediatelynotifythechangeoftheiraddress,ifany.

14

ANNUAL REPORT 2016

Financial HighlightsSix years at a glance (Rs. in millions except share data and ratios)

Dec31, Dec31, Dec31, Dec31, Dec31, Dec 31, 2011 2012 2013 2014 2015 2016Income Statement:

Turnover Rs. 16,701 8,136 7,428 14,248 21,920 16,176CostofGoodsSold Rs. (7,188) (6,221) (7,143) (12,264) (17,353) (16,206)GrossProfit Rs. 9,513 1,915 286 1,984 4,568 (30)AdminCost Rs. (969) (1,165) (888) (731) (879) (694)DistributionCost Rs. (829) (299) (495) (686) (897) (830)FinancialCost Rs. (3,472) (2,610) (1,579) (1,626) (1,677) (1,802)OtherExpenses Rs. (510) (218) (382) (1) (333) (16)InterestIncome Rs. 736 685 63 – – –OtherIncome Rs. 1,119 843 198 1,036 333 352Re-measurementgain/(loss) Rs. 741 (47) – – – –Sharegain/(loss)ofassociatedcompany Rs. (18) – – – – –Profit/(loss)beforeTax Rs. 6,311 (896) (2,798) (25) 1,114 (3,019)Profit/(loss)afterTax Rs. 4,590 (240) (1,825) (45) 2,460 (1,927)EBITDA Rs. 10,665 2,929 (745) 2,041 3,555 (524)

Balance Sheet:

PaidupCapital Rs. 4,500 4,500 4,500 4,500 4,500 4,500Shareholder’sEquityincludingrevaluationreserve Rs. 17,856 15,396 13,584 16,273 19,411 17,507Longtermborrowings Rs. 8,484 4,559 1,466 1,891 4,203 11,590Capitalemployed Rs. 32,636 25,943 20,650 23,764 28,114 33,597Deferredliabilities Rs. 11,058 11,038 10,059 10,303 8,105 6,861Property,plant&equipment Rs. 37,937 37,290 37,114 39,909 39,194 38,749Longtermassets Rs. 46,336 41,188 40,945 43,735 43,027 42,620Netcurrentassets/Workingcapital Rs. (2,456) (4,111) (10,188) (9,620) (6,762) (2,126)TotalAssets Rs. 65,341 54,636 48,148 52,727 65,680 60,561

Cash Flows:

Operatingactivities Rs. 4,023 (1,179) (682) 2,797 (10,603) 813Investingactivities Rs. (710) 5,870 2,790 345 50 (207)Financingactivities Rs. (2,643) (5,665) (1,864) (1,789) (857) 5,249Changesincash&cashequivalents Rs. 669 (973) 244 1,352 (11,410) 5,855Cash&cashequivalents-Yearend Rs. (3,847) (4,820) (4,576) (3,224) (14,634) (8,779)

Key Indicators:

Operating: GrossProfitMargin % 56.96 23.54 3.84 13.92 20.84 (0.19)Pretaxmargin % 37.79 (11.01) (37.67) (0.17) 5.08 (18.67)Netprofitmargin % 27.48 (2.95) (24.57) (0.31) 11.22 (11.91)EBITDA%agetosale % 63.86 36.00 (10.04) 14.33 16.22 (3.24)Earningpershare(Rs.)Basic Rs. 10.20 (0.53) (4.06) (0.10) 5.47 (4.28)

Performance:

BookValuepershare(Excludingrevaluationsurplus) Rs. 23.14 17.63 13.78 13.96 19.75 15.85BookValuepershare(Includingrevaluationsurplus) Rs. 49.68 44.21 40.19 46.16 53.14 48.91Returnonassets % 7.02 (0.44) (3.79) (0.08) 3.74 (3.18)TotalAssetsTurnover Times 0.26 0.15 0.15 0.27 0.33 0.27FixedAssetsTurnover Times 0.44 0.22 0.20 0.36 0.56 0.42Debtorsturnover Times 12.19 11.14 20.52 83.57 15.59 5.86Debtorsturnover Days 29.95 33 18 4 23 62Inventoryturnover Times 1.45 1.32 1.40 3.07 2.39 1.33Inventoryturnover Days 251 276 261 119 153 275ReturnonShareCapital % 102.00 (5.33) (40.56) (0.99) 54.66 (42.82)ReturnonEquity(excludingrevaluationsurplus) % 44.08 (3.03) (29.44) (0.71) 27.67 (27.02)

Leverage:

Debt:Equity Ratio 59:41 54:46 43:57 36:64 49:51 50:50Interestcover Times 1.82 (0.66) (0.77) (0.02) 0.66 (0.68)

Liquidity:

CurrentRatio Times 0.89 0.77 0.41 0.48 0.77 0.89Quickratio Times 0.67 0.49 0.20 0.30 0.42 0.57

Valuation:

Earningspershare(beforetax) Rs. 14.02 (1.99) (6.22) (0.05) 2.48 (6.71)Earningspershare(aftertax) Rs. 10.20 (0.53) (4.15) (0.10) 5.47 (4.28)EarningsGrowth % 42.02 (105.23) 660.45 97.55 5,608 (178)Speciedividend % 148 49 – - – –

15

Horizontal AnalysisBalance Sheet

Rupees(Million) %Change

Dec31, Dec31, Dec31, Dec31, Dec31, Dec 31, 2011 vs 2012 vs 2013 vs 2014 vs 2015 vs 2016 vs 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015

Share Capital and ReservesIssued,subscribedandpaidupcapital 4,500 4,500 4,500 4,500 4,500 4,500 – – – – – –

Reserves 5,714 3,432 1,700 1,782 4,389 2,631 (24.30) (39.94) (50.47) 4.85 146.23 (40.05)

Sharedepositmoney 200 – – – – – – (100.00) – – – –

Revaluationreserve 11,942 11,964 11,884 14,491 15,023 14,877 382.31 0.18 (0.67) 21.93 3.67 (0.97)

22,356 19,896 18,084 20,773 23,911 22,007 51.83 (11.00) (9.11) 14.87 15.11 (7.96)

Non-Current Liabilities Longtermfinances 8,484 4,559 1,466 1,891 4,203 11,590 (36.55) (46.26) (67.84) 28.97 122.29 175.74

Supplier’scredit-secured 1,796 1,488 1,100 1,100 – – (17.15) (26.08) – (100.00) – –

Liabilitiesagainstassetssubjecttofinancelease 138 50 – – – – (36.70) (63.77) (100.00) – – –

Longtermdeposits 48 46 47 48 45 37 9.09 (4.17) 2.49 1.96 (6.68) (18.46)

Deferredliabilities 91 115 126 116 133 114 59.65 26.37 9.98 (8.45) 14.85 (14.31)

Deferredtaxation 10,967 10,923 9,933 10,187 7,972 6,747 96.75 (0.40) (9.07) 2.56 (21.74) (15.37)

21,524 17,181 12,672 13,342 12,353 18,487 11.73 (20.18) (26.24) 5.28 (7.41) 49.66

Current Liabilities Currentportionoflongtermliabilities 6,335 4,878 3,132 901 1,072 1,082 58.02 (23.00) (35.79) (71.23) 18.96 0.91

Financesundermarkuparrangements-secured 4,644 5,814 4,736 4,637 15,152 9,173 (1.23) 25.19 (18.54) (2.08) 226.72 (39.46)

PayabletoPrivatizationCommissionofPakistan 2,198 2,198 2,198 2,198 2,198 2,198 – – (0.00) – – –

Shorttermloanfromrelatedparty-secured – – 3,000 3,000 2,200 – – – – – (26.67) (100.00)

Tradeandotherpayables 3,121 3,225 3,989 7,555 8,345 6,974 (29.99) 3.33 23.68 89.42 10.46 (16.42)

Accruedfinancecost 677 366 337 320 449 639 4.15 (45.94) (8.04) (5.07) 40.65 42.14

Dividendpayable 3,755 1,078 – – – – – – –

Provisionfortaxation 731 – – – – – 15.85 (100.00) – – – –

21,461 17,559 17,391 18,611 29,416 20,066 28.91 (18.18) (0.95) 7.01 58.06 (31.79)

65,341 54,636 48,148 52,727 65,680 60,561 29.04 (16.38) (11.88) 9.51 24.57 (7.80)


Dec31, Dec31, Dec31, Dec31, Dec31, Dec 31, 2011 vs 2012 vs 2013 vs 2014 vs 2015 vs 2016 vs 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015Non-Current Assets Property,plantandequipment 37,937 37,290 37,114 39,909 39,194 38,749 73.10 (1.71) (0.47) 7.53 (1.79) (1.14)

Assetssubjecttofinancelease 230 121 51 – – – (18.73) (47.39) (58.16) (100.00) – –

Intangibles 161 149 144 125 94 63 (12.02) (7.45) (3.08) (13.16) (24.81) (33.44)

Goodwill 3,305 3,305 3,305 3,305 3,305 3,305 – – 0.00 – – –

Investments-relatedparty 130 262 295 361 405 467 (95.56) 101.54 12.42 22.56 12.09 15.38

Loantosubsidiary 4,516 – – – – – – (100.00) – – – –

Securitydeposits 57 61 36.22 35 28.55 37 26.67 7.02 (40.63) (4.65) (17.32) 28.82

46,336 41,188 40,945 43,735 43,027 42,620 39.66 (11.11) (0.59) 6.81 (1.62) (0.94)

Current Assets Storesandspareparts 2,583 3,023 2,904 2,631 2,561 2,502 11.82 17.03 (3.92) (9.41) (2.66) (2.31)

Stock-in-trade 2,058 1,734 812 829 7,661 4,070 (30.17) (15.74) (53.19) 2.18 823.72 (46.87)

Tradedebts 890 571 153 188 2,624 2,898 (51.92) (35.84) (73.18) 22.62 1,297.23 10.44

otherreceivables 5,300 6,042 3,174 3,930 9,290 8,076 47.92 14.00 (47.47) 23.82 136.40 (13.07)

Derivative 19 – – – – – (72.46) (100.00) – – – –

Investments 7,359 1,084 – – – 250 12.99 (85.27) (100.00) – – –

Cashandbankbalances 796 994 160 1,413 517 144 327.96 24.87 (83.92) 784.32 (63.39) (72.19)

19,005 13,448 7,203 8,992 22,654 17,940 8.86 (29.24) (46.44) 24.83 151.94 (20.81)

65,341 54,636 48,148 52,727 65,680 60,561 29.04 (16.38) (11.88) 9.51 24.57 (7.80)

16

ANNUAL REPORT 2016

Rupees(Million) Percentage

Dec31, Dec31, Dec31, Dec31, Dec31, Dec 31, Dec31, Dec31, Dec31, Dec31, Dec31, Dec 31, 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016

Share Capital and ReservesIssued,subscribedandpaidupcapital 4,500 4,500 4,500 4,500 4,500 4,500 6.89 8.24 9.35 8.53 6.85 7.43

Reserves 5,714 3,432 1,700 1,782 4,389 2,631 8.74 6.28 3.53 3.38 6.68 4.34

Sharedepositmoney 200 – – – – – 0.31 – – – – –

Revaluationreserve 11,942 11,964 11,884 14,491 15,023 14,877 18.28 21.90 24.68 27.48 22.87 24.57

22,356 19,896 18,084 20,773 23,911 22,007 34.21 36.42 37.56 39.40 36.41 36.34

Non-Current Liabilities Longtermfinances 8,484 4,559 1,466 1,891 4,203 11,590 12.98 8.34 3.04 3.59 6.40 19.14

Supplier’scredit-secured 1,796 1,488 1,100 1,100 – – 2.75 2.72 2.28 2.09 – –

Liabilitiesagainstassetssubjecttofinancelease 138 50 – – – – 0.21 0.09 – – – –

Longtermdeposits 48 46 47 48 45 37 0.07 0.08 0.10 0.09 0.07 0.06

Deferredliabilities 91 115 126 116 133 114 0.14 0.21 0.26 0.22 0.20 0.19

Deferredtaxation 10,967 10,923 9,933 10,187 7,972 6,747 16.78 19.99 20.63 19.32 12.14 11.14

21,524 17,181 12,672 13,342 12,353 18,487 32.94 31.45 26.32 25.30 18.81 30.53

Current Liabilities Currentportionoflongtermliabilities 6,335 4,878 3,132 901 1,072 1,082 9.70 8.93 6.51 1.71 1.63 1.79

Financesundermarkuparrangements-secured 4,644 5,814 4,736 4,637 15,152 9,173 7.11 10.64 9.84 8.80 23.07 15.15

PayabletoPrivatizationCommissionofPakistan 2,198 2,198 2,198 2,198 2,198 2,198 3.36 4.02 4.56 4.17 3.35 3.63

Shorttermloanfromrelatedparty-secured – – 3,000 3,000 2,200 – – – 6.23 5.69 3.35 –

Tradeandotherpayables 3,121 3,225 3,989 7,555 8,345 6,974 4.78 5.90 8.28 14.33 12.71 11.52

Accruedfinancecost 677 366 337 320 449 639 1.04 0.67 0.70 0.61 0.68 1.05

Dividendpayable 3,755 1,078 – – – – 5.75 1.97 – – – –

Provisionfortaxation 731 – – – – – 1.12 – – – – –

21,461 17,559 17,391 18,611 29,416 20,066 32.84 32.14 36.12 35.30 44.79 33.13

65,341 54,636 48,148 52,727 65,680 60,561 100.00 100.00 100.00 100.00 100.00 100.00



Non-Current Assets

Property,plantandequipment 37,937 37,290 37,114 39,909 39,194 38,749 58.06 68.25 77.08 75.69 59.67 63.98

Assetssubjecttofinancelease 230 121 51 – – – 0.35 0.22 0.11 – – –

Intangibles 161 149 144 125 94 63 0.25 0.27 0.30 0.24 0.14 0.10

Goodwill 3,305 3,305 3,305 3,305 3,305 3,305 5.06 6.05 6.86 6.27 5.03 5.46

Investments-relatedparty 130 262 295 361 405 467 0.20 0.48 0.61 0.68 0.62 0.77

Loantosubsidiary 4,516 – – – – – 6.91 – – – – –

Securitydeposits 57 61 36 35 29 37 0.09 0.11 0.08 0.07 0.04 0.06

46,336 41,188 40,945 43,735 43,027 42,620 70.91 75.39 85.04 82.95 65.51 70.38

Current Assets Storesandspareparts 2,583 3,023 2,904 2,631 2,561 2,502 3.95 5.53 6.03 4.99 3.90 4.13

Stock-in-trade 2,058 1,734 812 829 7,661 4,070 3.15 3.17 1.69 1.57 11.66 6.72

Tradedebts 890 571 153 188 2,624 2,898 1.36 1.05 0.32 0.36 4.00 4.79

Otherreceivables 5,300 6,042 3,174 3,930 9,290 8,076 8.11 11.06 6.59 7.45 14.14 13.34

Derivativefinancialinstruments 19 – – – – – 0.03 – – – – –

Investments 7,359 1,084 – – – 250 11.26 1.98 – – – 0.41

Cashandbankbalances 796 994 160 1,413 517 144 1.22 1.82 0.33 2.68 0.79 0.24

19,005 13,448 7,203 8,992 22,654 17,940 29.09 24.61 14.96 17.05 34.49 29.62

65,341 54,636 48,148 52,727 65,680 60,561 100.00 100.00 100.00 100.00 100.00 100.00

Vertical AnalysisBalance Sheet

17

Horizontal AnalysisProfit & Loss


Dec31, Dec31, Dec31, Dec31, Dec31, Dec 31, 2011 vs 2012 vs 2013 vs 2014 vs 2015 vs 2016 vs 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015

Sales 16,701 8,136 7,428 14,248 21,920 16,176 (8.48) (51.28) (8.70) 91.81 53.85 (26.21)

CostofSales (7,188) (6,221) (7,143) (12,264) (17,353) (16,206) (20.58) (13.45) 14.82 71.70 41.49 (6.61)

Gross Profit 9,513 1,915 286 1,984 4,568 (30) 3.44 (79.87) (85.09) 594.68 130.24 (100.66)

AdministrativeExpenses (969) (1,165) (888) (731) (879) (694) 24.23 20.23 (23.82) (17.67) 20.35 (21.11)

Selling&DistributionExpenses (829) (299) (495) (686) (897) (830) (16.60) (63.93) 65.69 38.52 30.65 (7.44)

FinanceCost (3,472) (2,610) (1,579) (1,626) (1,677) (1,802) (3.26) (24.83) (39.49) 2.94 3.15 7.44

OtherOperatingExpenses (510) (218) (382) (1) (333) (16) 31.78 (57.25) 75.08 (99.63) 23,190 (95)

OtherOperatingIncome 1,855 1,528 261 1,036 333 351.87 31.65 (17.63) (82.95) 297.47 (67.88) 5.77

Operating Profit 5,588 (849) (2,798) (25) 1,114 (3,019) 15.07 (115.19) 229.55 (99.12) (4,627.66) (370.97)

Shareofprofit/(loss)ofassociatedco. (18) – – – – – (53.85) (100.00) – – – –

Re-measurementgain/(loss) 741 (47) – – – – (712.40) (106.34) (100.00) – – –

Profit / (loss) before taxation 6,311 (896) (2,798) (25) 1,114 (3,019) 34.39 (114.20) 212.26 (99.12) (4,627.66) (370.97)

Taxation (1,721) 656 973 (20) 1,345 1,092 17.55 (138.12) 48.29 (102.06) (6,810.44) (18.80)

Profit / (loss) after taxation 4,590 (240) (1,825) (45) 2,460 (1,927) 42.02 (105.23) 660.45 (97.55) (5,607.61) (178.34)

18

ANNUAL REPORT 2016

Vertical AnalysisProfit & Loss



Sales 16,701 8,136 7,428 14,248 21,920 16,176 100.00 100.00 100.00 100.00 100.00 100.00

CostofSales (7,188) (6,221) (7,143) (12,264) (17,353) (16,206) (43.04) (76.46) (96.16) (86.08) (79.16) (100.19)

Gross Profit 9,513 1,915 286 1,984 4,568 (30) 56.96 23.54 3.84 13.92 20.84 (0.19)

AdministrativeExpenses (969) (1,165) (888) (731) (879) (694) (5.80) (14.32) (11.95) (5.13) (4.01) (4.29)

Selling&DistributionExpenses (829) (299) (495) (686) (897) (830) (4.96) (3.68) (6.67) (4.82) (4.09) (5.13)

FinanceCost (3,472) (2,610) (1,579) (1,626) (1,677) (1,802) (20.79) (32.08) (21.26) (11.41) (7.65) (11.14)

OtherOperatingExpenses (510) (218) (382) (1) (333) (16) (3.05) (2.68) (5.14) (0.01) (1.52) (0.10)

OtherOperatingIncome 1,855 1,528 261 1,036 333 352 11.11 18.78 3.51 7.27 1.52 2.18

Operating Profit 5,588 (849) (2,798) (25) 1,114 (3,019) 33.46 (10.44) (37.67) (0.17) 5.08 (18.67)

Shareofprofit/(loss)ofassociatedco. (18) – – – – – (0.11) – – – – –

Re-measurementgain/(loss) 741 (47) – – – – 4.44 (0.58) – – – –

Profit / (loss) before taxation 6,311 (896) (2,798) (25) 1,114 (3,019) 37.79 (11.01) (37.67) (0.17) 5.08 (18.67)

Taxation (1,721) 656 973 (20) 1,345 1,092 (10.30) 8.06 13.10 (0.14) 6.14 6.75

Profit / (loss) after taxation 4,590 (240) (1,825) (45) 2,460 (1,927) 27.48 (2.95) (24.57) (0.31) 11.22 (11.91)

19

Directors’ Report To The Members

OnbehalfoftheBoardofDirectorsofPakarabFertilizersLimited,IpresentherewiththeAnnualReportofyourCompanyandtheauditedfinancialstatementsfortheyearendedDecember31,2016togetherwithauditors’reportthereonandabriefoverviewoffinancialandoperationalperformanceoftheCompany.

Company performance

Year 2016 experienced mix trends onaccountoffertilizerpricesandofftake.Duringthefirsthalf,volumesremained suppressed due to expected price reduction on account of farmer packageannouncedbyGovernmentofPakistan(GoP).Thesecondhalfoftheyearwitnessedarevivalinofftakeprimarily due to downward revision in pricesandimplementationofsubsidyregime.

TheCompany’soperationswerealsoconstrainedduetolimitedandirregularsupplyofgasresultingin193daysofoperations as compared to 267 days in2015.TheProductionofCAN,NPandUreaasapercentageofannualdesignedcapacitywas35%,59%and53%respectively.

IncontinuationofthestrategicinitiativetodiversifyCompany’srevenuestream,73,283MTofimportedDAPwassoldduringtheyear2016contributingpositivelytowardsthebottomline.

Asummaryoffinancialresultsfortheyear 2016 is as under: (Rupeesinmillion)

Year 2016 Year 2015

Sales 16,176 21,920GrossProfit (30) 4,568OtherOperatingIncome 352 333ProfitfromOperations (1,202) 3,124FinanceCost (1,802) (1,677)Profit/(Loss)aftertax (1,927) 2,460

Asummaryofconsolidatedfinancialresultsfortheyear2016isasunder: (Rupeesinmillion) Year 2016 Year 2015

Sales 17,347 23,022GrossProfit 187 4,789FinanceCost (1,835) (1,713)OtherIncome 352 333Profit/(Loss)aftertax (1,808) 2,604

Appropriationsduringtheyearwereasfollows: (Rupeesinmillion) FairValue General Un-Appropriated Reserve Reserve Profit/ (accumulatedloss)

Balance as at December31,2015 100 2,098 2,191Othercomprehensiveincomefortheyear2016 43 – 126Profitfortheyear2016 – – (1,927) 143 2,098 390

Earnings Per Share(Rupees)

10.2

(0.53)

(4.28)

(0.10)

(4.15)

5.47

FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

20

ANNUAL REPORT 2016

70%60%50%40%30%20%10%

0%10%

-20%-30%

64%

36%

–25%

11%

–12%

16%

–3%–0.3%

14%

2011 2012 2013 2014 2015 2016

Profit to sale EBITDA margin

–10%–3%

27%

Performance of wholly owned subsidiary company-Reliance Sacks Limited (RSL)RelianceSacksLimited,awhollyownedsubsidiaryofPFL,isprincipallyengagedinthemanufacturingandsaleofpolypropylenesacks,polypropyleneclothandliners.

ThepricesofPolypropyleneGranules(PPG)remainedintherangeof850US$/MTto1,090US$/MT.RSLhadprocuredsufficientPPGstockduetolowerpricesinthisyear.

Net Profit & EBITDA Margin ThedecreasingtrendofPPGpricehadanimpactonprofitabilityascomparedtolastyear2015.However,demandofPPGbagsandlinersintermsofKgswitnessedastabletrendthroughtheyear.

RSLproduced5.355millionKgs(2015:5.332millionKgs)oftapelinesection,thusachieved92.25%(2015:92.10%)ofthestandardcapacity(5.805MillionKg).Productionofbagswas52.435million(2015:53.28millionbags)whichvariesaccordingtosizeandweightofbags.Further,RSLproduced1.876millionKgsofliners(2015:1.788millionKgs)whichwas96.84%ofthecapacity(2015:92.31%ofcapacity).

FinancialresultsofRelianceSacksLimitedfortheyearendedDecember31,2016havebeensummarizedbelow: (Rupeesinmillion)Description Yearended Yearended December31, December31, 2016 2015

SalesexcludingGST 1,385 1,492Costofsales (1,170) (1,271)Grossprofit 215 221Adminandsellingexpenses (29) (27)FinancialCharges (33) (36)OtherExpenses (9) (15)Otherincome 1 –Profitbeforetaxation 146 143Taxation (29) 1Profitaftertaxation 116 144

SalesintermsofRupeesremainedlow due to decrease in PPG prices andintermsofKgs,itincreasedfrom5.268millionKgsto5.306millionKgsascomparedtolastyear.Electricitycostincreasedby11.78%duetoincreasein input cost of electricity supplier as comparedwithlastyearcost.Longtermfinancehasbeenfullyrepaidduringtheyear.

21


Manufacturing OverviewPlant Operations with RLNG

TheplantoperationsweremaintainedsmoothlywithrestrainedcostsandmanninginviewofthehighcostofRLNGascomparedtodomesticgas.Withcoordinatedefforts,allfertilizerproducedin2016wasliftedfromplantsite.

OwingtolowsalevolumesofCAN,itwas decided to operate CAN plant onminimumload.Itwasachallengeaslowloadoperationisagainstthedesignedoperationalphilosophybutwasmanagedsuccessfully,achievingdesiredresults.

NitricacidlineC,takeninserviceaftersuccessfulrevivalofcompressorrotor,throughlocalresourcesandsupportisincontinuousplantoperation.TimelyavailabilityofcatalystremainedachallengeforNitricacidplantsduetoexportissuesatvendor’send.Alternateresourcesweresourcedandengagedtoensuresmoothsupplychain.

Energy Conservation Projects

Owingtohighgasprices,energyconservationremainedthefocalpointthroughouttheyear,andseveralshorttermenergyandwaterconservationprojectswereenvisagedandcompletedalongwithstudiesforlongtermsolutions.

Completed projects

• Partial conversion of vacuum pumps installedatNPplantfromDMWtoRW-Waterconservation

• FueloptimizationatFurnaceofAmmoniaplant-Gasoptimization

• Ammonia Process condensate recoveryproject-Waterconservation

• PGRUexchangerE-102tubebundlereplacement-Ammoniaproductlossreduction

• NitricAcidBFWpreheaterspurchasedandavailableonsite.Willbereplacedinnextavailableopportunity.Expectedsavingaround0.2MMSCFD.

• Long/mediumtermCAPEXprojectswillbeinitiatedin2017,havingsignificantimpactonenergycost

Raw water quality at site

Tocopeupwithregulardepletioninsubsoilwaterqualityandquantity,boringof a new well was done after selection ofappropriatelocation.Theexercisetoboreadditionalwellswillcontinue.

Employee Engagement Activities

FunFairwasorganizedforthefamiliesofPFLemployeeswithactiveparticipationofemployees/familiesthemselves.Thegeneratedincome(aroundRs.700K)willbespendonAlShifadispensaryandsimilarsocialwelfareactivities.

Wall of Kindness

WallofKindnessprojectwaslaunchedin April 2016 outside plant premises to helpneedynearbycommunitythroughdonationsbyPFLemployees.

Water Filtration Plants

Two Water Filtration Plants were installed byPFLasCSRprojectandhandedoverto local administration for provision of potabledrinkingwatertotheadjacentcommunities.

Pakarab Technical Training Institute

Phase-IofajointprojectofPFLandHunarFoundation,namedasTheHunarFoundationPakarabTechnicalTrainingInstitute(THFPATTI),completedandclasses commenced on 2ndJanuary2017.Thisproject,workingasapprovedcenterofCity&GuildsUK,aimedatprovidingqualitytechnicaleducationtoyoungstersoflocalandnearbycommunity.TheInstituteiscurrentlyofferingclassesinMechanical,ElectricalandElectronicsbutwillfurtherexpandasphase-II.

Medical Camp

SeveralmedicalcampswereorganizedbyPFLmedicalcentertoprovideawarenessandguidancetoemployeesandtheirfamilies.Thesecampsincludeawarenessondiabetes,BMD,stressmanagement,blooddonationcamps,etc.

Health Safety and Environment Achievements – 201617.0 M Safe Man hours Completion

PFLachieved17.0MillioncombinedSafeManhoursinDecember2016withnorecordableinjuryduringthewholeyear.ThisisthehighestlandmarkeverachievedinPFLhistory.Recognizingcontractors’effortstowardssafety,letters of appreciation were awarded to contractors.

Safe Annual Turn Around – 2016

AnnualTurnaround(ATA)executedachievingsafetyKPIs.Siteworkedformorethan500,000manhourswithoutanyrecordableinjury.AHousekeepingdriveinshapeofcompetitionwasconductedaftercompletionofATA.

Safety Initiatives

Whilestrivingforcontinualimprovementtowardsstrengtheningsafetyculture,off-the-jobsafetyprogramwasformallylaunchedtofocusonsafetyofemployeesandtheirfamiliesoutsideworkplace.

Awards and Merits British Safety Council Award

PFLwontheinternationalsafetyAward(ISA)byBritishSafetyCouncil(BSC)forsixthconsecutivetimebysecuringMERITpositionin2016.

Perfect Record Award

PFLwonPerfectRecordAwardbyNationalSafetyCouncil(NSC)foroperating17.2MillioncombinedsafemanhourswithoutanyLTIsinceyear2010.PFLachievedthisawardforthe1st time.22

ANNUAL REPORT 2016

Safety Leadership Award

PFLalsoachievedSafetyLeadershipaward from National Safety Council as tokenofappreciationforachievingfiveormoreconsecutiveyearswithoutanoccupationalinjuryorillness.

Green Office Re-certification Diploma

PFLgotre-certificationofGreenofficediplomafromWWF(WorldWideFund)organizationaftersuccessfullyqualifyingre-certificationaudit.

23


Code of Corporate GovernanceTheBoardandmanagementarecommittedtoensurethattherequirementsoftheCodeofCorporateGovernancearefullymet.Thoughitisnotapplicablebeinganon-listedcompanybuttheCompanyisvoluntarilycomplyingtheCode.TheCompanyhasadoptedgoodCorporateGovernancepracticeswithanaimtoenhancetheaccuracy,comprehensivenessandtransparencyoffinancialandnon-financialinformation.Pursuanttoandinvoluntarilycompliancewithclause(xvi)oftheCodeofCorporateGovernance,theDirectorsarepleasedtoreportthat:

a) Thefinancialstatements,preparedbythemanagementoftheCompany,presentfairlyitsstateofaffairs,theresultofitsoperations,cashflowsandchangesinequity;

b) ProperbooksofaccountoftheCompanyhavebeenmaintained;

c) Appropriateaccountingpolicieshavebeenconsistentlyappliedinpreparationoffinancialstatementsandaccountingestimatesarebasedonreasonableandprudentjudgment;

d) InternationalFinancialReportingStandards,asapplicableinPakistan,havebeenfollowedinthepreparationoffinancialstatements;

e) Thesystemofinternalcontrolissoundindesignandhasbeeneffectively implemented and monitored;and

f) TherearenosignificantdoubtsupontheCompany’sabilitytocontinueasagoingconcern.

Board and Committees’ Meetings and AttendanceDuringtheyearunderreview,fivemeetingsoftheBoardofDirectorsandfourmeetingsoftheAuditCommitteewereheldfromJanuary01,2016toDecember31,2016.TheattendanceoftheBoardandAuditCommitteememberswasasfollows:

Name of Director Board Audit Meetings Committee Meetings

Mr.ArifHabib 5 N/AMr.FawadAhmedMukhtar 3 N/AMr.FazalAhmedSheikh 4 3Mr.FaisalAhmedMukhtar 1 N/AMr.RehmanNaseem 5 2Mr.NasimBeg 4 4Mr.AbdusSamad 4 N/AMr.MuhammadKashifHabib 4 3

TheleaveofabsencewasgrantedtothemembersnotattendingtheBoardandCommitteemeetings.

Pattern of ShareholdingThedetailedpatternoftheshareholdingandcategoriesofshareholdersoftheCompanyasatDecember31,2016havebeenAnnexedherewith.

Trading in Shares of the Company by Directors and ExecutivesThesharesoftheCompanyarenotlistedonanystockexchangesotheDirectors,CEO,CFO,CompanySecretaryandtheirspousesandminorchildrendidnotcarryoutanytradeinthesharesoftheCompany.

Financial HighlightsKeyoperatingandfinancialdataofpreviousyearshasbeenAnnexedherewith.

Post Balance Sheet Events Therehavebeennomaterialpostbalancesheeteventsthatwouldrequiredisclosureoradjustmenttothesefinancialstatements.

Contribution to National Exchequer and EconomyTheCompany’scontributiontotheNationalExchequerbywayoftaxes,levies,excisedutyandsalestaxamountstoPKR2,059millionasagainstPKR3,144millionlastyear.

Statement as to the Value of Investments of Provident and Gratuity FundsThefundedretirementbenefitsoftheemployeesoftheCompanyareauditedatregularintervalsandareadequatelycoveredbyappropriateinvestments.ThevalueoftheinvestmentsofthetwoprovidentfundsandgratuityfundaggregatedtoPKR350.212millions.Accordingtoactuarialvaluation,fairvalueoftheassetsofthefundeddefinedbenefitgratuityplanforbothmanagementandnon-managementstaffisPKR156.426millionason31st December2016.

Audit CommitteeTheAuditCommitteeoftheBoardcontinued to perform its duties and responsibilitieseffectivelyasperitstermsofreferencedulyapprovedbytheBoard.Thecommitteecompositionanditstermsofreferencehavealsobeenattachedtothisreport.

Code of ConductAspertheCorporateGovernanceguidelines,theCompanyhasprepareda Code of Conduct and communicated throughouttheCompanyapartfromplacingitontheCompany’swebsite.

24

ANNUAL REPORT 2016

AuditorsM/s.A.F.Ferguson&CompanyCharteredAccountantsLahore,retiringauditorsoftheCompany,beingeligibleofferthemselvesforre-appointment.TheBoardAuditCommitteeandtheBoardofDirectorshaverecommendedtheirre-appointmentbytheshareholdersatthe44thAnnualGeneralMeeting,asauditorsoftheCompanyfortheyearendingDecember31,2017atafeetobemutuallyagreed.

Future OutlookIninternationalmarkets,pricesofUreaandDAP,afterwitnessingconsiderabledropin2016havestartedrecoveringatthebeginningof2017.

WithcontinuityoffarmerfriendlyGovernmentpolicies,fertilizerofftakesituation is expected to improve in 2017.ProgressiveproposalsforAnnualBudget2017-18willplayapivotalroletomaintainaffordablepricesandenhancefertilizerapplication.

TheManagementisstrivingtoachievesustainablegassupplyarrangementsthroughamixofsystemgasandimportedRLNGatoptimalprices.PFLiscommittedtoplayitsroleinprovidingrequirednutrientstothefarmsthroughadditionalproductivity,availabilityofinventoriesofalltheproductsandenhancedplantefficiencyandsustainability.

AcknowledgementsTheBoardplacesonrecorditsgratitudeforthehardworkanddedicationofeveryemployeeoftheCompany.

TheBoardalsoappreciatesandacknowledgestheassistance,guidanceandcooperationofallstakeholdersincludingtheGovernmentofPakistan,financialinstitutions,commercialbanks,businessassociates,customersandallotherswhoseeffortsandcontributionsstrengthenedtheCompany.

ForandonbehalfofBoard

Lahore Arif HabibMay04,2017 Chairman

25

Statement of Compliancewith the code of corporate Governance for the year ended December 31, 2016

ThisstatementisbeingpresentedtovoluntarilycomplywiththeCodeofCorporateGovernance(CCG)forthepurposeofestablishingaframeworkofgoodgovernance,wherebyalistedcompanyismanagedincompliancewiththebestpracticesofcorporategovernance.

TheCompanyhasappliedtheprinciplescontainedintheCCGinthefollowingmanner:

1. TheCompanyencouragestherepresentationofindependentnon-executive directors and directors representingminorityinterestsonitsBoardofDirectors.CurrentlythereisnoindependentdirectorontheBoardastheCompanyisvoluntarilycomplyingwiththeCCG.TheCompanyhasalsoconductedannualevaluationoftheBoard’sownperformance.AtpresenttheBoardincludes:

Category NamesExecutiveDirectors 1.Mr.FawadAhmedMukhtar 2.Mr.FazalAhmedSheikh

Non-ExecutiveDirectors 1.Mr.ArifHabib 2.Mr.NasimBeg 3.Mr.FaisalAhmedMukhtar 4.Mr.RehmanNaseem 5.Mr.AbdusSamad 6.Mr.MuhammadKashifHabib2. Thedirectorshaveconfirmedthat

noneofthemisservingasadirectoronmorethansevenlistedcompanies.

3. AlltheresidentdirectorsoftheCompanyareregisteredastaxpayersandnoneofthemhasdefaultedinpaymentofanyloantoabankingCompany,aDFIoranNBFIor,beingamemberofastockexchange,hasbeendeclaredasadefaulterbythatstockexchange.

4. NocasualvacancyoccurredontheBoardduringtheyear.

5. TheCompanyhasprepareda“Code

ofConduct”andhasensuredthatappropriatestepshavebeentakentodisseminateitthroughouttheCompanyalongwithitssupportingpoliciesandprocedures.

6. TheBoardhasdevelopedavision/missionstatement,overallcorporatestrategyandsignificantpoliciesoftheCompany.Acompleterecordofparticularsofsignificantpoliciesalongwiththedatesonwhichtheywereapprovedoramendedhasbeenmaintained.

7. AllthepowersoftheBoardhavebeendulyexercisedanddecisionsonmaterialtransactions,includingappointmentanddetermination of remuneration and terms and conditions of employment oftheCEO,otherexecutiveandnon-executivedirectors,havebeentakenbytheBoard.

8. ThemeetingsoftheBoardwerepresidedoverbythechairmanandtheBoardmetatleastonceineveryquarter.WrittennoticesoftheBoardmeetings,alongwithagendaandworkingpapers,werecirculatedatleastsevendaysbeforethemeetings.Theminutesofthemeetingswere appropriately recorded and circulated.

9. TheBoardarrangedin-houseonetrainingprogramforitsdirectorsduringtheyeartoacquaintthemwiththeCode.

10. TheBoardhasapprovedappointmentofChiefFinancialOfficer(CFO),Company Secretary and Head ofInternalAuditincludingtheirremuneration and terms and conditionsofemployement.Thereis no new appointment of CFO and CompanySecretaryduringtheyear.

11. Thedirectors’reportforthisyearhasbeenpreparedincompliancewiththerequirementsoftheCCGandfullydescribesthesalientmattersrequiredtobedisclosed.

12. ThefinancialstatementsoftheCompanyweredulyendorsedbyCEOandCFObeforeapprovaloftheBoard.

13. Thedirectors,CEOandexecutivesdonotholdanyinterestinthesharesoftheCompanyotherthanthatdisclosedinthepatternofshareholding.

14. TheCompanyhascompliedwithallthecorporateandfinancialreportingrequirementsoftheCCG.

15. TheBoardhasformedanAuditCommittee.Itcomprisesfourmembers,ofwhomthreearenon-executivedirectorsandthechairmanofthecommitteeisanon-executivedirector.

16. Exceptforthefirstquarteroftheyear,themeetingsoftheauditcommitteewereheldonceeveryquarterpriortoapprovalofinterimandfinalresultsoftheCompanyandasrequiredbytheCCG.Thetermsofreferenceofthecommitteehavebeenformedandadvisedtothecommitteeforcompliance.Furthermore,meetingoftheAuditCommitteeheldonApril8,2016,inwhichmattersrelatingtoannual audited accounts and audit werediscussed,wasattendedbytheCFO’snominee.

17. TheBoardhasformedanHRandRemunerationCommittee.Itcomprisesfourmembers,allofwhomarenon-executivedirectorsandthechairmanofthecommitteeisanon-executivedirector.

18. TheBoardhassetupaneffectiveinternalauditfunctionwhichisconsideredsuitablyqualifiedandexperiencedforthepurposeandareconversantwiththepoliciesandproceduresoftheCompany.

19. ThestatutoryauditorsoftheCompanyhaveconfirmedthattheyhavebeengivenasatisfactoryratingunderthequalitycontrolreviewprogramoftheICAP,thattheyoranyofthepartnersofthefirm,theirspousesandminorchildrendonotholdsharesoftheCompanyandthatthefirmandall its partners are in compliance withInternationalFederationofAccountants(IFAC)guidelinesoncodeofethicsasadoptedbytheICAP.

20. ThestatutoryauditorsorthepersonsassociatedwiththemhavenotbeenappointedtoprovideotherservicesexceptinaccordancewiththelistingregulationsandtheauditorshaveconfirmedthattheyhaveobservedIFACguidelinesinthisregard.

21. WeconfirmthatallothermaterialprinciplesenshrinedintheCCGhavebeencompliedwith.

Place:Lahore Fawad Ahmed MukhtarDate:May04,2017 ChiefExecutiveOfficer

26

ANNUAL REPORT 2016

Thepageisleftintentionallyblank

28

ANNUAL REPORT 2016

FINANCIALSTATEMENTSOF

fortheyearendedDecember31,2016

Review Report to the Members On the Statement of Voluntary Compliance with the Code of Corporate Governance for the year ended December 31, 2016

We have reviewed the enclosed Statement of VoluntaryCompliancewith the best practices contained in theCode ofCorporateGovernance(the‘Code’)preparedbytheBoardofDirectorsofPakarabFertilizersLimited(the‘Company’)tovoluntarilycomplywiththerequirementsofListingRegulationno.5.19ofPakistanStockExchange.

TheresponsibilityofVoluntaryCompliancewiththeCodeisthatofBoardofDirectorsoftheCompany.Ourresponsibilityistoreview,totheextentwheresuchVoluntaryCompliancecanbeobjectivelyverified,whethertheStatementofVoluntaryCompliancereflectsthestatusofCompany’sVoluntaryCompliancewiththeprovisionsofCodeandreportifdoesnotandhighlightanynon-compliancewiththerequirementsoftheCode.AreviewislimitedprimarilytoinquiriesoftheCompany’spersonnelandreviewofvariousdocumentspreparedbytheCompanytocomplywiththeCode.

Aspartofourauditoffinancialstatementswearerequiredtoobtainanunderstandingoftheaccountingandinternalcontrolsystemsufficienttoplantheauditanddevelopaneffectiveauditapproach.WearenotrequiredtoconsiderwhethertheBoardofDirectors’statementininternalcontrolcoversallrisksandcontrols,ortoformanopinionontheeffectivenessofsuchinternalcontrols,theCompany’scorporategovernanceproceduresandrisks.

TheCoderequirestheCompanytoplacebeforetheauditcommittee,anduponrecommendationoftheauditcommittee,placebeforetheBoardofDirectorsfortheirconsiderationandapproval,relatedpartytransactionsdistinguishingbetweentransactionscarriedoutontermsequivalenttothosethatprevailinarm’slengthtransactionsandtransactionswhicharenotexecutedatarm’slengthpriceandrecordingproperjustificationforusingsuchalternatepricingmechanism.Further,allsuchtransactionsarealsorequiredtobeseparatelyplacedbeforetheauditcommittee.WeareonlyrequiredandhaveensuredcomplianceofthisrequirementtotheextentoftheapprovaloftherelatedpartytransactionsbytheBoardofDirectorsandplacementofsuchtransactionsbeforetheauditcommittee.Wehavenotcarriedoutanyprocedurestodeterminewhethertherelatedpartytransactionswereundertakenatarm’slengthpriceornot.

Basedonourreview,nothinghascometoourattentionwhichcausedustobelievethatstatementofVoluntaryCompliancedoesnotappropriatelyreflecttheCompany’sVoluntaryCompliance,inallmaterialrespects,withthebestpracticescontainedintheCodeasapplicabletotheCompanyfortheyearendedDecember31,2016.

Further,wehighlighttheinstancesofnon-compliancewiththerequirementsoftheCode,asreflectedintheparagraphsoftheStatementofVoluntaryCompliancementionedbelow:

• Paragraph1whichstatesthattheCompanydoesnothaveanindependentdirectorontheBoardasitisvoluntarilycomplyingwiththeCode;and

• Paragraph16whichstatesthatthemeetingoftheauditcommitteewasnotheldinthefirstquarteroftheyearandmeetingoftheauditcommitteeheldonApril8,2016,inwhichmattersrelatingtoannualauditedaccountsandauditwerediscussed,wasattendedbytheChiefFinancialsOfficer’snominee.

A.F.Ferguson&Co.CharteredAccountantsLahore,May04,2017

Engagementpartner:KhurramAkbarKhan

30

ANNUAL REPORT 2016

Auditors’ Report to the Members

WehaveauditedtheannexedbalancesheetofPakarabFertilizersLimited(the‘Company’)asatDecember31,2016,andtherelatedprofitandlossaccount,statementofcomprehensiveincome,cashflowstatementandstatementofchangesinequitytogetherwiththenotesformingpartthereof,fortheyearendedandwestatethatwehaveobtainedalltheinformationandexplanationswhich,tothebestofourknowledgeandbelief,werenecessaryforthepurposesofouraudit.

ItisresponsibilityoftheCompany’smanagementtoestablishandmaintainasystemofinternalcontrol,andprepareandpresenttheabovesaidstatementsinconformitywiththeapprovedaccountingstandardsandtherequirementsofCompanyOrdinance,1984.Ourresponsibilityistoexpressanopiniononthesestatementsbasedonouraudit.

WeconductedourauditinaccordancewiththeauditingstandardsasapplicableinPakistan.Thesestandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhethertheabovesaidstatementsarefreeofanymaterialmisstatement.Anaudit includes examining, on the test basis, evidence supporting theamounts anddisclosures in theabove said statements.Anauditalso includesassessingtheaccountingpoliciesandsignificantestimatesmadebythemanagement,aswellas,evaluatingtheoverallpresentationoftheabovesaidstatements.Webelievethatourauditprovidesareasonablebasisforouropinionand,afterdueverification,wereportthat:

(a) inouropinion,properbooksofaccounthavebeenkeptbytheCompanyasrequiredbytheCompaniesOrdinance,1984; (b) inouropinion:

(i) thebalancesheetandprofitandlossaccounttogetherwiththenotesthereonhavebeendrawnupinconformitywiththeCompaniesOrdinance, 1984,andare inagreementwith thebooksofaccountand further inaccordancewithaccountingpoliciesconsistentlyapplied;

(ii) theexpenditureincurredduringtheyearwasforthepurposeoftheCompany’sbusiness;and

(iii) thebusiness conducted, investmentsmadeandexpenditure incurredduring the yearwere inaccordancewith theobjectsoftheCompany;

(c) inouropinionandtothebestofourinformationandaccordingtotheexplanationsgiventous,thebalancesheet,profitandlossaccount,statementofcomprehensiveincome,cashflowstatementandstatementofchangesinequity,togetherwiththenotesformingpartthereofconformwiththeapprovedaccountingstandardsasapplicableinPakistan,and,givetheinformationrequiredbytheCompaniesOrdinance,1984,inthemannersorequiredandrespectivelygiveatrueandfairviewofthestateoftheCompany’saffairsasatDecember31,2016andoftheloss,totalcomprehensiveloss,itscashflowsandchangesinequityfortheyearended;and

(d) inouropinion,noZakatwasdeductibleatsourceundertheZakatandUshrOrdinance,1980(XVIIIof1980).

A.F.Ferguson&Co.CharteredAccountantsLahore,May04,2017

Engagementpartner:KhurramAkbarKhan

31

Note 2016 2015 (Rupeesinthousand)

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES

Authorisedsharecapital1,000,000,000(2015:1,000,000,000)ordinarysharesofRs10each 10,000,000 10,000,000

Issued,subscribedandpaidupsharecapital450,000,000(2015:450,000,000)ordinarysharesofRs10each 5 4,500,000 4,500,000Reserves 6 2,630,612 4,388,510

7,130,612 8,888,510SURPLUS ON REVALUATION OF OPERATING FIXED ASSETS 7 14,876,727 15,022,831 NON-CURRENT LIABILITIES

Longtermfinances-secured 8 5,671,920 1,970,139Longtermloansfromrelatedparties-unsecured 9 2,918,722 2,232,952Longtermloanfromrelatedparty-secured 10 2,999,000 –Longtermdeposits 11 36,580 44,860Deferredliabilities 12 113,951 132,980Deferredtaxation 13 6,747,060 7,972,085 18,487,233 12,353,016 CURRENT LIABILITIES

Currentportionoflongtermfinances 8 1,081,747 1,072,022Shorttermborrowingfromrelatedparty-secured 14 – 2,200,000Shorttermborrowings-secured 15 9,173,126 15,151,614PayabletoPrivatizationCommissionofPakistan 16 2,197,901 2,197,901Tradeandotherpayables 17 6,974,443 8,345,123Accruedmarkup 18 638,792 449,423 20,066,009 29,416,083 CONTINGENCIES AND COMMITMENTS 19 60,560,581 65,680,440

Theannexednotes1to46formanintegralpartofthesefinancialstatements.

Balance Sheetas at December 31, 2016

ChiefExecutive

32

ANNUAL REPORT 2016

Director


ASSETS NON-CURRENT ASSETS Property,plantandequipment 20 38,748,690 39,194,084Intangibleassets 21 62,754 94,289Goodwill 22 3,305,163 3,305,163Longterminvestments 23 466,863 404,630Securitydeposits 36,784 28,554

42,620,254 43,026,720

CURRENT ASSETS Storesandspareparts 24 2,501,855 2,560,963Stock-in-trade 25 4,070,067 7,660,745Tradedebts 26 2,898,256 2,624,200Advances,deposits,prepaymentsandotherreceivables 27 8,076,248 9,290,354Cashandbankbalances 28 393,901 517,458

17,940,327 22,653,720 60,560,581 65,680,440

33

Profit and Loss Accountfor the year ended December 31, 2016

ChiefExecutive Director

Note 2016 2015 (Rupeesinthousand) Sales 29 16,175,964 21,920,495

Costofsales 30 (16,206,087) (17,352,799)

Gross (loss)/profit (30,123) 4,567,696

Administrativeexpenses 31 (693,769) (879,397)

Sellinganddistributionexpenses 32 (829,851) (896,542)

(1,553,743) 2,791,757

Financecost 33 (1,801,837) (1,676,988)

Otherexpenses 34 (15,681) (333,189)

(3,371,261) 781,580

Otherincome 35 351,867 332,683

(Loss)/profit before taxation (3,019,394) 1,114,263

Taxation 36 1,092,307 1,345,449

(Loss)/profit for the year (1,927,087) 2,459,712 Theannexednotes1to46formanintegralpartofthesefinancialstatements.

34

ANNUAL REPORT 2016

Statement of Comprehensive Incomefor the year ended December 31, 2016


2016 2015 (Rupeesinthousand)

(Loss)/profitfortheyear (1,927,087) 2,459,712

Other comprehensive income/(loss):

Itemsthatmaybereclassifiedsubsequentlytoprofitorloss:

Surplusonremeasurementoffairvalueofavailable-for-saleinvestment 55,505 38,943

Deferredtaxchargerelatingtoremeasurementofavailable-for-saleinvestmenttofairvalue (12,489) (5,405)

43,016 33,538

Itemsthatwillnotbereclassifiedsubsequentlytoprofitorloss:

Surplusonrevaluationofoperatingfixedassetsrealisedthroughincrementaldepreciationchargedonrelatedassetsfortheyear 146,104 115,832

Remeasurementofpostretirementbenefitobligation (19,931) (2,880)

126,173 112,952

Other comprehensive income - net of tax 169,189 146,490

Total comprehensive (loss)/income for the year - net of tax (1,757,898) 2,606,202 Theannexednotes1to46formanintegralpartofthesefinancialstatements.

35


Cash Flow Statementfor the year ended December 31, 2016


Cash flows from operating activities

Cashgeneratedfrom/(usedin)operations 37 2,990,399 (8,122,881)Financecostpaid (1,607,773) (1,546,614)Taxespaid (509,054) (892,265)Retirementbenefitspaid (44,405) (43,661)Securitydeposits-net (16,510) 2,770

Net cash inflow/(outflow) from operating activities 812,657 (10,602,651)

Cash flows from investing activities

Purchaseofproperty,plantandequipment (220,233) (38,600)Purchaseofintangibleassets – (607)Saleproceedsofproperty,plantandequipmentdisposed 9,746 26,602Investmentsmade (1,470) –Profitonbankdepositsreceived 5,452 62,299

Net cash (outflow)/inflow from investing activities (206,505) 49,694

Cash flows from financing activities

Proceedsfromlongtermfinancesacquired 5,007,000 2,000,000Proceedsfromlongtermloansacquiredfromrelatedparties 1,285,768 2,003,707Proceedsfromshorttermborrowingacquiredfromrelatedparty 799,000 500,000Repaymentoflongtermfinances (1,238,689) (901,192)Repaymentoflongtermloansfromrelatedparties (600,000) (596,723)Paymentofimportbillpayable – (2,539,800)Repaymentofshorttermborrowingfromrelatedparty – (1,300,000)Paymentofinitialtransactioncostonlongtermfinancesacquired (4,300) (23,200)

Net cash inflow/(outflow) from financing activities 5,248,779 (857,208)

Net increase/(decrease) in cash and cash equivalents 5,854,931 (11,410,165)

Cash and cash equivalents at the beginning of the year (14,634,156) (3,223,991)Cash and cash equivalents at the end of the year 38 (8,779,225) (14,634,156) Theannexednotes1to46formanintegralpartofthesefinancialstatements.

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ANNUAL REPORT 2016

Statement of Changes In Equityfor the year ended December 31, 2016

(Rupees in thousand)

Capital Revenue reserves reserve

(Accumulated loss) / un Share Fair value General appropriated capital reserve reserve profit Total

Balance as on January 1, 2015 4,500,000 66,039 2,098,313 (382,044) 6,282,308 Profitfortheyear – – – 2,459,712 2,459,712 Othercomprehensiveincomefortheyear-netoftax – 33,538 – 112,952 146,490 Total comprehensive income for the year – 33,538 – 2,572,664 2,606,202

Balance as on December 31, 2015 4,500,000 99,577 2,098,313 2,190,620 8,888,510 Lossfortheyear – – – (1,927,087) (1,927,087) Othercomprehensiveincomefortheyear-netoftax – 43,016 – 126,173 169,189 Total comprehensive income/(loss) for the year – 43,016 – (1,800,914) (1,757,898) Balance as on December 31, 2016 4,500,000 142,593 2,098,313 389,706 7,130,612 Theannexednotes1to46formanintegralpartofthesefinancialstatements.


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Notesto and forming part of the Financial Statements for the year ended December 31, 2016

1. The company and its activities

PakarabFertilizersLimited(the‘company’)was incorporatedasaprivate limitedcompany inPakistanundertheCompaniesAct,1913,(nowtheCompaniesOrdinance,1984andhereinafterreferredtoasthe‘Ordinance’).Thecompany’sstatuschangedtoanon-listedpubliccompanyfromJune7,2007.ItisprincipallyengagedinthemanufacturingandsaleofchemicalfertilizersandgenerationandsaleofCertifiedEmissionReductions(‘CERs’).TheaddressoftheregisteredofficeofthecompanyisE-110,Khayaban-e-Jinnah,LahoreCanttwhileitsmanufacturingfacilityislocatedinMultan.

Thesefinancialstatementsaretheseparatefinancialstatementsofthecompany.Consolidatedfinancialstatementsareprepared

separately. 2. Basis of preparation

2.1 These financial statements havebeenprepared in accordancewith approvedaccounting standards as applicable in Pakistan.Approvedaccounting standardscompriseof such International FinancialReportingStandards (‘IFRSs’) issuedby the InternationalAccounting Standards Board (‘IASB’) and Islamic Financial Accounting Standards (‘IFASs’) issued by the Institute of CharteredAccountantsofPakistanasarenotifiedundertheOrdinance,provisionsofanddirectivesissuedundertheOrdinance.WherevertherequirementsoftheOrdinanceordirectives issuedbytheSecuritiesandExchangeCommissionofPakistan(‘SECP’)differwiththerequirementsofIFRSsorIFASs,therequirementsoftheOrdinanceortherequirementsofthesaiddirectivesprevail.

2.2 Initial application of standards, amendments or an interpretation to existing standards

The followingamendments toexistingstandardshavebeenpublishedthatareapplicable to thecompany’sfinancial statementscoveringannualperiods,beginningonorafterthefollowingdates:

2.2.1 Standards, amendments and interpretations to approved accounting standards that are effective in current year

Certainstandards,amendmentsandinterpretationstoapprovedaccountingstandardsareeffectiveforaccountingperiodsbeginningonJanuary1,2016butareconsiderednottoberelevantortohaveanysignificanteffectonthecompany’soperations(althoughtheymayaffecttheaccountingforfuturetransactionsandevents)andare,therefore,notdetailedinthesefinancialstatements,exceptforthefollowing:

-InternationalAccountingStandard(‘IAS’)27(Amendment)‘Separatefinancialstatements’.Theamendmentallowsentitiestouse

theequitymethodtoaccountforinvestmentsinsubsidiaries,jointventuresandassociatesintheirseparatefinancialstatements.Thecompany’scurrentaccountingtreatmentisalreadyinlinewiththerequirementsofthisstandard.

-IAS1,‘Presentationoffinancialstatements’(Amendment).Theamendmentsprovideclarificationsonanumberofissues,including:

-Materiality–anentityshouldnotaggregateordisaggregateinformationinamannerthatobscuresusefulinformation.Whereitemsarematerial,sufficientinformationmustbeprovidedtoexplaintheimpactonthefinancialpositionorperformance.

- Disaggregation and subtotals – line items specified in IAS 1may need to be disaggregatedwhere this is relevant to an

understandingoftheentity’sfinancialpositionorperformance.Thereisalsonewguidanceontheuseofsubtotals. -Notes–confirmationthatthenotesdonotneedtobepresentedinaparticularorder. - Other comprehensive income arising from investments accounted for under the equity method – the share of other

comprehensive income arising from equity-accounted investments is grouped based onwhether the items will or will notsubsequentlybereclassifiedtoprofitorloss.Eachgroupshouldthenbepresentedasasinglelineiteminthestatementofothercomprehensiveincome.

- IAS 16 (Amendment), ‘Property,plantandequipment,and IAS 38 (Amendment), ‘Intangibleassets’. Theamendment to IAS 16

clarifies that the use of revenue-basedmethods to calculate the depreciation of an asset is not appropriate because revenuegeneratedbyanactivitythat includestheuseofanassetgenerally reflectsfactorsotherthantheconsumptionoftheeconomicbenefitsembodied intheasset.Thisamendmentalsoclarifiesthatrevenueisgenerallypresumedtobean inappropriatebasis formeasuringtheconsumptionoftheeconomicbenefitsembodiedinanintangibleasset.IAS38nowincludesarebuttablepresumptionthattheamortisationofintangibleassetsbasedonrevenueisinappropriate.Thispresumptioncanbeovercomeifeither:

-Theintangibleassetisexpressedasameasureofrevenue(i.e.whereameasureofrevenueisthelimitingfactoronthevalue

thatcanbederivedfromtheasset),or -Itcanbeshownthatrevenueandtheconsumptionofeconomicbenefitsgeneratedbytheassetarehighlycorrelated.

Thecompany’scurrentaccountingtreatmentisalreadyinlinewiththerequirementsofthesestandards.

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ANNUAL REPORT 2016

-IAS19(Amendment),‘Employeebenefits’.Theamendmentclarifiesthat,whendeterminingthediscountrateforpost-employmentbenefitobligations, it isthecurrencythatthe liabilitiesaredenominatedinthat is important,notthecountrywheretheyarise.Theassessmentofwhether there isadeepmarket inhigh-qualitycorporatebonds isbasedoncorporatebonds in thatcurrency,notcorporatebondsinaparticularcountry.Similarly,wherethereisnodeepmarket inhigh-qualitycorporatebondsinthatcurrency,governmentbondsintherelevantcurrencyshouldbeused.Theamendmentisretrospectivebutlimitedtothebeginningoftheearliestperiodpresented.Thecompany’scurrentaccountingtreatmentisalreadyinlinewiththerequirementofthisstandard.

2.2.2 Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the

company

There are certain standards, amendments to the approved accounting standards and interpretations that are mandatory forcompanies havingaccountingperiods beginning on or after January 1, 2017 but are considered not to be relevant or to haveany significanteffecton thecompany’soperationsandare, therefore,notdetailed in thesefinancial statements,except for thefollowing:

-IFRS9,‘Financialinstruments’(effectiveforperiodsbeginningonorafterJanuary1,2018).Thisstandardisyettobenotifiedbythe

SECP.ThisstandardreplacestheguidanceinIAS39,‘Financialinstruments:Recognitionandmeasurement’.Itincludesrequirementsontheclassificationandmeasurementoffinancialassetsandliabilities;italsoincludesanexpectedcreditlossesmodelthatreplacesthecurrentincurredlossimpairmentmodel.Thecompanyisyettoassessthefullimpactofthestandard.

-IFRS15,‘Revenuefromcontractswithcustomers’(effectiveforperiodsbeginningonorafterJanuary1,2018).Thisstandardisyet

tobenotifiedbytheSECP.Thisstandarddealswithrevenuerecognitionandestablishesprinciplesforreportingusefulinformationtousersofthefinancialstatementsaboutthenature,amount,timinganduncertaintyofrevenueandcashflowsarisingfromanentity’scontractswithcustomers.Revenueisrecognisedwhenacustomerobtainscontrolofagoodorserviceandthushastheabilitytodirecttheuseandobtainthebenefitsfromthegoodorservice.ThestandardreplacesIAS18,‘Revenue’,andIAS11,‘Constructioncontracts’,andrelatedinterpretations.Thecompanyisyettoassessthefullimpactofthestandard.

- IAS 7, ‘Cashflow statements: Disclosure initiative’ (effective for periods beginningonor after January 1, 2017). This amendment

requiresdisclosuretoexplainchanges in liabilitiesforwhichcashflowshavebeen,orwillbeclassifiedasfinancingactivities inthestatementofcashflows.Theamendmentonlycoversbalancesheetitemsforwhichcashflowsareclassifiedasfinancingactivities.Incaseother itemsareincludedwithinthereconciliation,thechanges in liabilitiesarisingfromfinancingactivitieswillbeidentifiedseparately.Areconciliationoftheopeningtoclosingbalanceisnotspecificallyrequiredbutinsteadtheinformationcanbeprovidedinotherways.Inthefirstyearofadoption,comparativeinformationneednotbeprovided.Itisunlikelythattheamendmentwillhaveanysignificantimpactonthecompany’sfinancialstatements.

-AmendmentstoIAS12,‘Incometaxes’,onrecognitionofdeferredtaxassetsforunrealisedlosses(effectiveforperiodsbeginningon

orafterJanuary1,2017).Theseamendmentsontherecognitionofdeferredtaxassetsforunrealisedlossesclarifyhowtoaccountfordeferredtaxassetsrelatedtodebtinstrumentsmeasuredatfairvalue.Itisunlikelythattheamendmentwillhaveanysignificantimpactonthecompany’sfinancialstatements.

-IFRIC22,‘Foreigncurrencytransactionsandadvanceconsideration’(effectiveforperiodsbeginningonorafterJanuary1,2018).

ThisIFRICaddressesforeigncurrencytransactionsorpartsoftransactionswherethereisconsiderationthatisdenominatedorpricedinaforeigncurrency.Theinterpretationprovidesguidanceforwhenasinglepayment/receiptismadeaswellasforsituationswheremultiplepayments/receiptsaremade.Theguidanceaimstoreducediversityinpractice.Itisunlikelythattheinterpretationwillhaveanysignificantimpactonthecompany’sfinancialstatements.

3. Basis of measurement

3.1Thesefinancialstatementshavebeenpreparedunderthehistoricalcostconventionasmodifiedbyrecognitionofcertainoperatingfixedassets,available-for-salefinancialassetsandplanassetsofdefinedbenefitgratuityfundatfairvalueandrecognitionofcertainemployeeretirementbenefitobligationsatpresentvalue.

3.2 Critical accounting estimates and judgments

Thecompany’ssignificantaccountingpoliciesarestatedinnote4tothesefinancialstatements.Notallofthesesignificantpoliciesrequire themanagement tomakedifficult, subjectiveorcomplex judgmentorestimates. The following is intended toprovideanunderstandingof thepolicies themanagementconsiderscriticalbecauseof theircomplexity, judgmentofestimation involved intheirapplicationandtheirimpactonthesefinancialstatements.Estimatesandjudgmentsarecontinuallyevaluatedandarebasedonhistoricalexperience,includingexpectationsoffutureeventsthatarebelievedtobereasonableunderthecircumstances.Thesejudgmentsinvolveassumptionsorestimatesinrespectoffutureeventsandtheactualresultsmaydifferfromtheseestimateswhichhavebeenexplainedasfollows:

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a) Employee retirement benefits

Thecompanyusesthevaluationperformedbyanindependentactuaryasthepresentvalueofitsretirementbenefitobligations.Thevaluationisbasedonassumptionsasmentionedinnote4.2tothesefinancialstatements.

b) Provision for taxation

The company takes into account the current income tax law and the decisions taken by appellate authorities. Instanceswherethecompany’sviewdiffersfromtheviewtakenbytheincometaxdepartmentattheassessmentstageandwherethecompanyconsidersthatitsviewonitemsofmaterialnatureisinaccordancewithlaw,theamountsareshownascontingentliabilities.

c) Useful lives, residual values and depreciation methods of property, plant and equipment

Thecompanyreviewstheusefullives,residualvaluesanddepreciationmethodsofproperty,plantandequipmentonregularbasis,at leastateachyearend.Anymaterialchange inestimates infutureyearsmightaffectthecarryingamountsoftherespectiveitemsofproperty,plantandequipmentwithacorrespondingeffectonthedepreciationchargeandimpairment.

d) Estimated impairment of goodwill

Thecompanytestsannuallywhethergoodwillhassufferedanyimpairment,inaccordancewiththeaccountingpolicystatedinnote4.5tothesefinancialstatements.Therecoverableamountsofcash-generatingunitshavebeendeterminedbasedonvalue-in-usecalculations.Thesecalculationsrequiretheuseofestimatesandassumptionsasfullyexplainedinnote22tothesefinancialstatements.

e) Revaluation surplus on operating fixed assets

CertainoperatingfixedassetsarecarriedundertherevaluationmodelasperIAS16,‘Property,plantandequipment’asstatedinnote4.3.1tothesefinancialstatements.Revaluationiscarriedouttrienniallybyanindependentprofessionalvaluerasfullyexplainedinnote7tothesefinancialstatements.

f) Fair value of investment in subsidiary

Thefairvalueofinvestmentinsubsidiaryisdeterminedbyusingvaluationtechniques.Thecompanyusesitsjudgmenttoselectavarietyofmethodsandmakeassumptionsthataremainlybasedonmarketconditionsexistingattheendofeachreportingperiod.Thecompanyhasuseddiscountedcashflowanalysisforthispurposeasfullyexplainedinnote23.1tothesefinancialstatements.

3.3. Change in accounting estimate

Duringtheyear,thecompany’smanagementhascarriedoutacomprehensivereviewoftheexpectedpatternofconsumptionofthefutureeconomicbenefitsembodiedincertainassetsandasaresultofthisreview,hasreviseditsdepreciationmethodforsuchassets.Previously,thecompanydepreciateditemsrelatedtooneofitsoldpowergenerationplants(includedinplantandmachinery)ontheunitsofproductionmethodovertheirestimatedusefullives.Nowthecompanychargesdepreciationontheseassetsonthestraightlinemethodovertheirestimatedremainingusefullives.SuchachangehasbeenaccountedforasachangeinanaccountingestimateinaccordancewithIAS8,‘Accountingpolicies,changesinaccountingestimatesanderrors’.Hadtherebeennochangeintheaccountingestimate,thelossbeforetaxfortheyearendedDecember31,2016wouldhavebeenlowerbyRs61.47millionandcarryingvalueofoperatingfixedassetsasatthatdatewouldhavebeenhigherbythesameamount.Consequently,duetotheabovechangeinaccountingestimate,futureprofitsbeforetaxwouldincreasebyRs61.47million.

4. Significant accounting policies

Thesignificantaccountingpoliciesadoptedinthepreparationofthesefinancialstatementsaresetoutbelow.Thesepolicieshavebeenconsistentlyappliedtoallyearspresented.

4.1 Taxation

Incometaxcomprisescurrentanddeferredtax.Incometaxisrecognizedintheprofitandlossaccountexcepttotheextentthatitrelatestoitemsrecognizeddirectlyinequityorothercomprehensiveincome,inwhichcaseitisrecognizeddirectlyinequityorothercomprehensiveincome.


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ANNUAL REPORT 2016

Current

Provisionofcurrenttaxisbasedonthetaxableincomefortheyeardeterminedinaccordancewiththeprevailinglawfortaxationofincome.Thechargeforcurrenttaxiscalculatedusingprevailingtaxratesortaxratesexpectedtoapplytotheprofitfortheyearifenacted.Thechargeforcurrenttaxalsoincludesadjustments,whereconsiderednecessary,toprovisionfortaxmadeinpreviousyearsarisingfromassessmentsframedduringtheyearforsuchyears.

Thecompanyanditssubsidiary,RelianceSacksLimited(togetherthe‘Group’)haveoptedforGrouptaxationundersection59AAof

theIncomeTaxOrdinance,2001. Deferred

Deferredtaxisaccountedforusingthebalancesheetliabilitymethodinrespectofalltemporarydifferencesarisingfromdifferencesbetween the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in thecomputationofthetaxableprofit.However,thedeferredtaxisnotaccountedforifitarisesfrominitialrecognitionofanassetorliabilityinatransactionotherthanabusinesscombinationthatatthetimeoftransactionneitheraffectsaccountingnortaxableprofitorloss.Deferredtaxliabilitiesaregenerallyrecognizedforalltaxabletemporarydifferencesanddeferredtaxassetsarerecognizedtotheextentthatitisprobablethattaxableprofitswillbeavailableagainstwhichthedeductibletemporarydifferences,unusedtaxlossesandtaxcreditscanbeutilised.

Deferredtaxliabilitiesareprovidedontaxabletemporarydifferencesarisingfrominvestmentsinsubsidiaries,exceptfordeferredtax

liabilitywherethetimingofthereversalofthetemporarydifferenceiscontrolledbythecompanyanditisprobablethatthetemporarydifferencewillnotreverseintheforeseeablefuture.Deferredtaxassetsarerecognisedondeductibletemporarydifferencesarisingfrominvestments insubsidiariesonlytotheextentthat it isprobablethetemporarydifferencewill reverseinthefutureandthereissufficienttaxableprofitavailableagainstwhichthetemporarydifferencecanbeutilised.

Deferredtaxiscalculatedattheratesthatareexpectedtoapplytotheperiodwhenthedifferencesreversebasedontaxratesthat

havebeenenactedorsubstantivelyenactedbythebalancesheetdate.Deferredtaxischargedorcreditedintheprofitandlossaccount,exceptinthecaseofitemscreditedorchargedtoothercomprehensiveincomeorequityinwhichcaseitisincludedinothercomprehensiveincomeorequity.

4.2 Employee retirement benefits

Themainfeaturesoftheschemesoperatedbythecompanyforitsemployeesareasfollows:

(a) Defined benefit plan - Gratuity

Thecompanyoperatesanapprovedfundeddefinedbenefitgratuityplanforallpermanentemployeeshavingaserviceperiodofmorethanthreeyearsforexecutivesandsixmonthsforworkersandotherstaff.Provisionsaremadeinthefinancialstatementstocoverobligationsonthebasisofactuarialvaluationscarriedoutannually.ThemostrecentvaluationwascarriedoutasatDecember31,2016usingthe“ProjectedUnitCreditMethod”.

Theactualreturnonplanassetsrepresentsthedifferencebetweenthefairvalueofplanassetsatthebeginningoftheyearandasat

theendoftheyearafteradjustmentsforcontributionsmadebythecompanyasreducedbybenefitspaidduringtheyear. Theamountrecognizedinbalancesheetrepresentsthepresentvalueofthedefinedbenefitobligationasreducedbythefairvalue

oftheplanassets. Actuarialgainsand lossesarising fromexperienceadjustmentsandchanges inactuarialassumptionsarechargedorcredited to

equityinothercomprehensiveincomeintheyearinwhichtheyarise.Pastservicecostsarerecognizedimmediatelyintheprofitandlossaccount.

Thefuturecontributionrateoftheplanincludesallowancesfordeficitandsurplus.ProjectedUnitCreditMethod,usingthefollowing

significantassumptions,isusedforvaluationofthisscheme: Discountrate 8%p.a. Expectedrateofincreaseinsalarylevelperannum 7%p.a. Durationofplan(years) 9 Expectedmortalityrate SLIC(2001-2005)mortality table(setback1year)

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(b) Defined contribution plan - Provident Fund

Thereisanapproveddefinedcontributoryprovidentfundforallpermanentemployees.Equalmonthlycontributionsaremadebothbythecompanyandemployeestothefundattherateof8.33percentofsalaryfortheexecutivesand10percentofsalaryfortheworkers.

(c) Accumulating compensated absences

Thecompanyprovidesforaccumulatingcompensatedabsences,whentheemployeesrenderservicesthatincreasetheirentitlementtofuturecompensatedabsences.Undertheservicerules,workersandnormalstaffmembersareentitledto18daysleaveperyear.Theleavepolicyformanagementemployeesisasfollows:

Service in the company Annual Leaves Lessthan5Years 18

Lessthan5Years(WorkingonShiftDuties) 22

Morethan5Years 25

Morethan5Years(WorkingonShiftDuties) 29 TheunutilizedAnnualLeavecanbeaccumulateduptoamaximumof2yearsofAnnualLeaves.Anemployeewillbeentitledto

encashtheaccumulatedannualleavesatthetimeofleavingcompanyservice.

Provisionsaremadeannuallytocovertheobligationforaccumulatingcompensatedabsencesbasedonactuarialvaluationandarechargedtoprofitandlossaccount.ThemostrecentvaluationwascarriedoutasatDecember31,2016usingthe“ProjectedUnitCreditMethod”.

Theamountrecognisedinthebalancesheetrepresentsthepresentvalueofthedefinedbenefitobligation.Actuarialgainsandlossesarechargedtotheprofitandlossaccountimmediatelyintheperiodwhentheseoccur.

ProjectedUnitCreditMethod,usingthefollowingsignificantassumptions,hasbeenusedforvaluationofaccumulatingcompensated

absences: Discountrate 8%p.a. Expectedrateofincreaseinsalarylevelperannum 7%p.a. Expectedmortalityrate SLIC(2001-2005)mortality table(setback1year) 4.3 Property, plant and equipment 4.3.1 Operating fixed assets

Operatingfixedassetsexcept freehold land,buildingson freehold land, railway siding,plantandmachineryand toolsandotherequipmentarestatedatcostlessaccumulateddepreciationandanyidentifiedimpairmentloss.Freeholdlandisstatedatrevaluedamountlessanyidentifiedimpairmentlosswhilebuildingsonfreeholdland,railwaysiding,plantandmachineryandtoolsandotherequipmentarestatedatrevaluedamountlessaccumulateddepreciationandanyidentifiedimpairmentloss.Revaluationiscarriedoutwithsufficient regularitytoensurethatthecarryingamountoftheassetdoesnotdiffermaterially fromits fairvalue.Revaluedamounthasbeendeterminedbyanindependentprofessionalvaluer.Anyaccumulateddepreciationatthedateofrevaluationiseliminatedagainstthegrosscarryingamountoftheasset,andthenetamountisrestatedtotherevaluedamountoftheasset.Costinrelationtootheroperatingfixedassetssignifieshistoricalcost,gainsandlossestransferredfromothercomprehensiveincomeonqualifyingcashflowhedgesasreferredtoinnote4.12tothesefinancialstatements.

Increasesinthecarryingamountsarisingonrevaluationofoperatingfixedassetsarecreditedtosurplusonrevaluationofoperating

fixedassets.Decreases thatoffsetprevious increasesof the sameassetsarechargedagainst this surplus,allotherdecreasesarechargedtoprofitor loss.Eachyear thedifferencebetweendepreciationbasedon revaluedcarryingamountsof theassets (thedepreciationchargedtotheprofitor loss)anddepreciationbasedontheoriginalcostsoftheassets istransferredfromsurplusonrevaluationofoperatingfixedassetstoothercomprehensiveincome.Alltransfersto/fromsurplusonrevaluationofoperatingfixedassetsarenetofapplicabledeferredtaxation.

Depreciationonoperatingfixedassetsischargedtoprofitorlossonthefollowingmethodsandratessoastowriteoffthedepreciableamountsoftheassetsovertheirestimatedusefullivesaftertakingintoaccounttheirresidualvalues:


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ANNUAL REPORT 2016

Asset category Depreciation method Annual depreciation rate

Buildingsonfreeholdland Straightline 3.93%to6.32% Buildingsonleaseholdland -do- 10% Aircraft -do- 10%to20% Furnitureandfixtures -do- 10%to41.38% Toolsandotherequipment(otherthanfactoryequipment) -do- 10%to50% Vehicles -do- 20% Plantandmachinery(itemsrelatedtooldpowergenerationsystem) -do- 6.25%to6.90% Plantandmachinery(otherthanitemsrelatedtooldpowergenerationsystem) Units of production Toolsandotherequipment(factoryequipment) -do- Catalyst -do- The assets’ residual values and useful lives are reviewed, at each financial year end, andadjusted if impact on depreciation is

significant. Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamountisgreaterthanits

estimatedrecoverableamountasfullyexplainedinnote4.5tothesefinancialstatements. Subsequentcostsare included in theasset’s carryingamountor recognisedasa separateasset,asappropriate, onlywhen it is

probablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtothecompanyandthecostoftheitemcanbemeasuredreliably.Allotherrepairandmaintenancecostsarechargedtoincomeduringtheperiodinwhichtheyareincurred.

Thegainor lossondisposalor retirementofanasset representedby thedifferencebetweenthesaleproceedsandthecarrying

amountoftheassetisrecognisedasanincomeorexpense. 4.3.2 Capital work-in-progress Capitalwork-in-progressisstatedatcostlessanyidentifiedimpairmentloss.Allexpenditureconnectedwithspecificassetsincurred

duringinstallationandconstructionperiodarecarriedundercapitalwork-in-progress.Thesearetransferredtooperatingfixedassetsasandwhentheseareavailableforuse.

4.3.3 Major spare parts and stand-by equipment Majorsparepartsandstand-byequipmentqualifyasproperty,plantandequipmentwhenanentityexpectstousethemduringmore

thanoneyear.Transfersaremadetooperatingassetscategoryasandwhensuchitemsareavailableforuse. 4.4 Intangible assets 4.4.1 Computer software Expenditureincurredtoacquirecomputersoftwareiscapitalisedasintangibleassetandstatedatcostlessaccumulatedamortisation

andanyidentifiedimpairmentloss.Computersoftwareisamortisedusingthestraightlinemethodoveraperiodoffouryears. Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamountisgreaterthanits

estimatedrecoverableamountasfullyexplainedinnote4.5tothesefinancialstatements. 4.4.2 Mining rights Expenditureincurredtoacquireminingrightsiscapitalisedasintangibleassetandstatedatcostlessaccumulatedamortisationand

anyidentifiedimpairmentloss.Miningrightsareamortisedusingthestraightlinemethodoveraperiodoftenyears. Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamountisgreaterthanits

estimatedrecoverableamount(fullyexplainedinnote4.5tothesefinancialstatements). 4.5 Impairment of non-financial assets Goodwillandintangibleassetsthathaveanindefiniteusefullifearenotsubjecttoamortisationandaretestedannuallyforimpairment,

ormorefrequentlyifeventsorchangesincircumstancesindicatethattheymightbeimpaired.Otherassetsaretestedforimpairmentwhenevereventsorchanges incircumstances indicate that thecarryingamountmaynotbe recoverable.An impairment loss isrecognisedfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableamount.Therecoverableamount isthehigherofanasset’sfairvaluelesscostsofdisposalandvalueinuse.Forthepurposesofassessingimpairment,assetsaregroupedatthelowestlevelsforwhichthereareseparatelyidentifiablecashinflowswhicharelargelyindependentofthecashinflowsfromotherassetsorgroupsofassets(cash-generatingunits).Non-financialassetsotherthangoodwillthatsufferedanimpairmentarereviewedforpossiblereversaloftheimpairmentattheendofeachreportingperiod.

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4.6 Leases

Thecompanyisthelessee. 4.6.1 Operating leases

Leaseswhereasignificantportionoftherisksandrewardsofownershipareretainedbythelessorareclassifiedasoperatingleases.Paymentsmadeunderoperatingleases(netofanyincentivesreceivedfromthelessor)arechargedtoprofitorlossonastraight-linebasisovertheleaseterm.

4.7 Goodwill

Goodwillrepresentstheexcessofthecostofacquisitionoverthefairvalueoftheidentifiableassetsandliabilitiesofthecompany,paidbyRelianceExports(Private)Limitedatthedateofacquisitioni.e.July14,2005.

GoodwilliscarriedatitscarryingvalueasatJune30,2007lessanyidentifiedimpairmentlosses.Impairmentlossesongoodwillarenotreversed.

4.8 Investments

Investmentsintendedtobeheldforlessthantwelvemonthsfromthebalancesheetdateortobesoldtoraiseoperatingcapital,areincludedincurrentassets,allotherinvestmentsareclassifiedasnon-current.Managementdeterminestheappropriateclassificationofitsinvestmentsatthetimeofthepurchaseandre-evaluatessuchdesignationonaregularbasis.

4.8.1 Investment in equity instruments of subsidiary Investmentsinequityinstrumentsofsubsidiaryaredesignateduponinitialrecognitionas‘financialassetsatfairvaluethroughprofitor

loss’or‘available-for-salefinancialassets’.Incaseoffinancialassetsatfairvaluethroughprofitorloss,theseareinitiallyrecognizedat fair valuewhile incaseofavailable-for-sale financialassets, theseare initially recognizedat fair valueandassociateddirectlyattributableacquisitioncosts.Subsequently,thesearemeasuredatfairvalueunlessincaseofavailable-for-salefinancialassetswhosefairvaluecannotbemeasuredreliably,thesearecarriedatcost.Forinvestmentshavingquotedpriceinactivemarket,thequotedpricerepresentsthefairvalue.Inothercases,fairvalueismeasuredusingappropriatevaluationmethodology.

Gainsandlossesonsubsequentre-measurementsoffinancialassetsatfairvaluethroughprofitorlossareincludedintheprofitand

lossaccountwhilethoseonre-measurementofavailable-for-salefinancialassetsareincludedinothercomprehensiveincome.Wheninvestmentsclassifiedasavailable-for-saleare soldor impaired, theaccumulated fairvalueadjustments recognized inequityareincludedintheprofitandlossaccount.

Thecompanyisrequiredtoissueconsolidatedfinancialstatementsalongwithitsseparatefinancialstatementsinaccordancewith

therequirementsofIAS27,‘Separatefinancialstatements’. Ateachbalancesheetdate,thecompanyreviewsthecarryingamountsoftheinvestmentsinsubsidiariestoassesswhetherthereisany

indicationthatsuchinvestmentshavesufferedanimpairmentloss.Ifanysuchindicationexists,therecoverableamountisestimatedinordertodeterminetheextentoftheimpairmentloss,ifany.Inmakinganestimateofrecoverableamountoftheseinvestments,themanagementconsidersfuturedividendstreamandanestimateoftheterminalvalueoftheseinvestments.Impairmentlossesarerecognisedasexpenseintheprofitandlossaccount.

Investmentsinsubsidiaries,thatsufferedanimpairment,arereviewedforpossiblereversalofimpairmentateachreportingdate.

4.8.2 Investments in equity instruments of associate

Investments inassociateswherethecompanyhassignificant influencearemeasuredatcost inthecompany’sseparatefinancialstatements.

Thecompanyisrequiredtoissueconsolidatedfinancialstatementsalongwithitsseparatefinancialstatements,inaccordancewith

therequirementsofIAS27,‘Separatefinancialstatements’.Investmentsinassociates,intheconsolidatedfinancialstatements,arebeingaccountedforusingtheequitymethod.

Ateachbalancesheetdate,thecompanyreviewsthecarryingamountsoftheinvestmentsinassociatestoassesswhetherthereisany

indicationthatsuchinvestmentshavesufferedanimpairmentloss.Ifanysuchindicationexists,therecoverableamountisestimatedinordertodeterminetheextentoftheimpairmentloss,ifany.Inmakinganestimateofrecoverableamountoftheseinvestments,themanagementconsidersfuturestreamofcashflowsandanestimateoftheterminalvalueoftheseinvestments.Impairmentlossesarerecognisedasexpenseintheprofitandlossaccount.

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ANNUAL REPORT 2016

4.9 Financial assets 4.9.1 Classification

Thecompanyclassifiesitsfinancialassetsinthefollowingcategories:atfairvaluethroughprofitorloss,loansandreceivables,available-for-saleandheldtomaturity.Theclassificationdependsonthepurposeforwhichthefinancialassetswereacquired.Managementdeterminestheclassificationofitsfinancialassetsatthetimeofinitialrecognition.

a) Financial assets at fair value through profit or loss

Financialassetsat fairvalue throughprofitor lossarefinancialassetsheld for tradingandfinancialassetsdesignatedupon initialrecognitionasatfairvaluethroughprofitorloss.Derivativesarealsocategorisedasheldfortradingunlesstheyaredesignatedashedges.Afinancialassetisclassifiedasheldfortradingifacquiredprincipallyforthepurposeofsellingintheshortterm.Assetsinthiscategoryareclassifiedascurrentassetsifexpectedtobesettledwithintwelvemonths,otherwise,theyareclassifiedasnon-current.

b) Loans and receivables

Loansand receivablesarenon-derivative financialassetswith fixedordeterminablepayments thatarenotquoted inanactivemarket.Theyareincludedincurrentassets,exceptformaturitiesgreaterthantwelvemonthsafterthebalancesheetdate,whichareclassifiedasnon-currentassets.Loansandreceivablescomprisesecuritydeposits,tradedebts,loansandotherreceivablesandcashandcashequivalentsinthebalancesheet.

c) Available-for-sale financial assets

Available-for-salefinancialassetsarenon-derivativesthatareeitherdesignatedinthiscategoryornotclassifiedinanyoftheothercategories.Theyareincludedinnon-currentassetsunlessmanagementintendstodisposeoftheinvestmentswithintwelvemonthsfromthebalancesheetdate.

d) Held to maturity

Financialassetswithfixedordeterminablepaymentsandfixedmaturity,wheremanagementhastheintentionandabilitytoholdtillmaturityareclassifiedasheldtomaturityandarestatedatamortisedcost.

4.9.2 Recognition and measurement

Allfinancialassetsarerecognisedatthetimewhenthecompanybecomesapartytothecontractualprovisionsoftheinstrument.Regularpurchasesandsalesofinvestmentsarerecognisedontrade-date–thedateonwhichthecompanycommitstopurchaseorselltheasset.Financialassetsareinitiallyrecognisedatfairvalueplustransactioncostsforallfinancialassetsnotcarriedatfairvaluethroughprofitorloss.Financialassetscarriedatfairvaluethroughprofitorlossareinitiallyrecognisedatfairvalueandtransactioncostsareexpensedintheprofitandlossaccount.Financialassetsarederecognisedwhentherightstoreceivecashflowsfromtheassetshaveexpiredorhavebeentransferredandthecompanyhastransferredsubstantiallyalltherisksandrewardsofownership.Available-for-salefinancialassetsandfinancialassetsat fairvaluethroughprofitor lossaresubsequentlycarriedat fairvalue.Available-for-salefinancialassetsarecarriedatcostincasefairvaluecannotbemeasuredreliably.Loansandreceivablesandheld-to-maturityinvestmentsarecarriedatamortisedcostusingtheeffectiveinterestmethod.

Gainsorlossesarisingfromchangesinthefairvalueofthe‘financialassetsatfairvaluethroughprofitorloss’categoryarepresented

intheprofitandlossaccountintheperiodinwhichtheyarise.Dividendincomefromfinancialassetsatfairvaluethroughprofitorlossisrecognisedintheprofitandlossaccountaspartofotherincomewhenthecompany’srighttoreceivepaymentsisestablished.

Changesinthefairvalueofsecuritiesclassifiedasavailable-for-salearerecognisedinothercomprehensiveincome.Whensecurities

classifiedasavailable-for-salearesoldorimpaired,theaccumulatedfairvalueadjustmentsrecognisedinequityareincludedintheprofitand lossaccountasgainsand losses from investmentsecurities. Interestonavailable-for-salesecuritiescalculatedusing theeffectiveinterestmethodisrecognisedintheprofitandlossaccount.Dividendsonavailable-for-saleequityinstrumentsarerecognisedintheprofitandlossaccountwhenthecompany’srighttoreceivepaymentsisestablished.

Thecompanyassessesateachbalancesheetdatewhetherthereisobjectiveevidencethatafinancialassetoragroupoffinancial

assetsis impaired.Ifanysuchevidenceexistsforavailable-for-salefinancialassets,thecumulativelossisremovedfromequityandrecognisedintheprofitandlossaccount.Impairmentlossesrecognisedintheprofitandlossaccountonequityinstrumentsarenotreversedthroughtheprofitandlossaccount.Impairmenttestingoftradedebtsandotherreceivablesisdescribedinnote4.15tothesefinancialsstatements.

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4.10 Financial liabilities

Allfinancialliabilitiesarerecognisedatthetimewhenthecompanybecomesapartytothecontractualprovisionsoftheinstrument.

Afinancial liability isderecognisedwhentheobligationundertheliability isdischargedorcancelledorexpired.Whereanexistingfinancialliabilityisreplacedbyanotherfromthesamelenderonsubstantiallydifferentterms,orthetermsofanexistingliabilityaresubstantiallymodified,suchanexchangeormodificationistreatedasaderecognitionoftheoriginalliabilityandtherecognitionofanewliability,andthedifferenceinrespectivecarryingamountsisrecognisedintheprofitandlossaccount.

4.11 Offsetting of financial assets and financial liabilities

Financialassetsandfinancialliabilitiesareoffsetandthenetamountisreportedinthefinancialstatementsonlywhenthereisalegallyenforceablerighttosetofftherecognizedamountandthecompanyintendseithertosettleonanetbasisortorealizetheassetsandtosettletheliabilitiessimultaneously.

4.12 Derivative financial instruments

Theseareinitiallyrecordedatcostonthedateaderivativecontractisenteredintoandareremeasuredtofairvalueatsubsequentreportingdates.Themethodofrecognizingtheresultinggainorlossdependsonwhetherthederivativeisdesignatedasahedginginstrument,andifso,thenatureoftheitembeinghedged.Thecompanydesignatescertainderivativesascashflowhedges.

Thecompanydocumentsattheinceptionofthetransactiontherelationshipbetweenthehedginginstrumentsandhedgeditems,

aswellasitsriskmanagementobjectiveandstrategyforundertakingvarioushedgetransactions.Thecompanyalsodocumentsitsassessment,bothathedgeinceptionandonanongoingbasis,ofwhetherthederivativesthatareusedinhedgingtransactionsarehighlyeffectiveinoffsettingchangesincashflowofhedgeditems.

Theeffectiveportionofchangesinthefairvalueofderivativesthataredesignatedandqualifyascashflowhedgesisrecognized

inothercomprehensive income.Thegainor loss relatingtothe ineffectiveportion is recognized immediately intheprofitand lossaccount.

Amountsaccumulatedinothercomprehensiveincomearerecognisedinprofitandlossaccountintheperiodswhenthehedged

itemwillaffectprofitorloss.However,whentheforecasthedgedtransactionresultsintherecognitionofanon-financialassetoraliability,thegainsandlossespreviouslydeferredinothercomprehensiveincomearetransferredfromothercomprehensiveincomeandincludedintheinitialmeasurementofthecostoftheassetorliability.Thechangesinfairvalueremeasurementofderivativeswhichthecompanyhasnotdesignatedasahedginginstrumentarerecognisedintheprofitandlossaccount.Tradingderivativesareclassifiedasacurrentassetorliability.

4.13 Stores and spare parts

Thesearevaluedatweightedaveragecostexcept for items in transitwhicharestatedat invoicevalueplusotherchargespaidthereontillthebalancesheetdate.Foritemswhichareslowmovingand/oridentifiedasobsolete,adequateprovisionismadeforanyexcessbookvalueoverestimatedrealisablevalue.Thecompanyreviewsthecarryingamountofstoresandsparesonaregularbasisandprovisionismadeforobsolescence.

4.14 Stock-in-trade

All stocks are valued at the lower of cost andNet Realizable Value (‘NRV’). Cost in relation to raw and packingmaterials andgoodspurchasedforresale,exceptforthoseintransit,signifiesweightedaveragecostandthatrelatingtomidproductsandownmanufactured finished goods, annual average cost comprising cost of direct materials, labour and appropriatemanufacturingoverheads.

Materialsintransitarestatedatcostcomprisinginvoicevalueplusotherchargesincurredthereon. NRV isdeterminedonthebasisofestimatedsellingpriceof theproduct in theordinarycourseofbusiness lessestimatedcostsof

completionandtheestimatedcostsnecessarytomakethesale.Provisionismadeinthefinancialstatementsforobsoleteandslowmovingstock-in-tradebasedonmanagementestimate.

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ANNUAL REPORT 2016

4.15 Trade debts and other receivables

Tradedebtsandotherreceivablesarerecognisedinitiallyatinvoicevalue,whichapproximatesfairvalue,andsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod,lessprovisionfordoubtfuldebts.Aprovisionfordoubtfuldebtsisestablishedwhenthereisobjectiveevidencethatthecompanywillnotbeabletocollectalltheamountdueaccordingtotheoriginaltermsofthereceivable.Significantfinancialdifficultiesofthedebtors,probabilitythatthedebtorwillenterbankruptcyorfinancialreorganisation,anddefaultordelinquencyinpaymentsareconsideredindicatorsthatthetradedebtisimpaired.Theprovisionisrecognisedintheprofitandlossaccount.Whenatradedebtisuncollectible,itiswrittenoffagainsttheprovision.Subsequentrecoveriesofamountspreviouslywrittenoffarecreditedtotheprofitandlossaccount.

4.16 Cash and cash equivalents

Cashandcashequivalents includescash inhand,depositsheldatcallwithbanks,other short-termhighly liquid investmentswithoriginalmaturitiesofthreemonthsorless,andbankoverdrafts/shorttermborrowings.

4.17 Borrowings

Borrowingsarerecognisedinitiallyatfairvalue,netoftransactioncostsincurred.Borrowingsaresubsequentlystatedatamortisedcost,anydifferencebetweentheproceeds(netoftransactioncosts)andtheredemptionvalueisrecognisedintheprofitandlossaccountovertheperiodoftheborrowingsusingtheeffectiveinterestmethod.Financecostsareaccountedforonanaccrualbasisandarereportedasaccruedfinancemarkuptotheextentoftheamountremainingunpaid.

Borrowingsareclassifiedascurrentliabilitiesunlessthecompanyhasanunconditionalrighttodefersettlementoftheliabilityforat

leasttwelvemonthsafterthebalancesheetdate.

4.18 Trade and other payables

Tradeandotherpayablesare recognised initiallyat fair valueand subsequentlymeasuredatamortisedcostusing theeffectiveinterestmethod.Exchangegainsandlossesarisingontranslationinrespectofliabilitiesinforeigncurrencyareaddedtothecarryingamountoftherespectiveliabilities.

4.19 Provisions

Provisionsarerecognizedwhenthecompanyhasapresentlegalorconstructiveobligationasaresultofpastevents,itisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligationandareliableestimateoftheamountcanbemade.Provisionsarenotrecognisedforfutureoperatinglosses.

Where there are a number of similar obligations, the likelihood that an outflow shall be required in settlement is determined by

consideringtheclassofobligationsasawhole.Aprovisionisrecognisedevenifthelikelihoodofanoutflowwithrespecttoanyoneitemincludedinthesameclassofobligationsmaybesmall.

Provisionsaremeasuredatthepresentvalueoftheexpendituresexpectedtoberequiredtosettletheobligationusingapre-taxrate

thatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheobligation.Theincreaseintheprovisionduetopassageoftimeisrecognisedasinterestexpense.

4.20 Foreign currency transactions and translation a) Functional and presentation currency

Itemsincludedinthefinancialstatementsofthecompanyaremeasuredusingthecurrencyoftheprimaryeconomicenvironmentinwhichthecompanyoperates(thefunctionalcurrency).ThefinancialstatementsarepresentedinPakRupees,whichisthecompany’sfunctionalandpresentationcurrency.

b) Transactions and balances

Allmonetaryassetsandliabilities inforeigncurrenciesaretranslatedintoPakRupeesatexchangeratesprevailingatthebalancesheetdate.TransactionsinforeigncurrenciesaretranslatedintoPakRupeesatexchangeratesprevailingatthedateoftransaction.Non-monetaryassetsandliabilitiesthataremeasuredintermsofhistoricalcostinaforeigncurrencyaretranslatedintoPakRupeesatexchangeratesprevailingatthedateoftransaction.Non-monetaryassetsand liabilitiesdenominated in foreigncurrencythatarestatedatfairvaluearetranslatedintoPakRupeesatexchangeratesprevailingatthedatewhenfairvaluesaredetermined.Exchangegainsandlossesareincludedinprofitandlossaccount.

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4.21 Borrowing costs

Generalandspecificborrowingcostsdirectlyattributabletotheacquisition,constructionorproductionofqualifyingassets,whichareassetsthatnecessarilytakeasubstantialperiodoftimetogetreadyfortheirintendeduseorsale,areaddedtothecostofthoseassets,untilsuchtimeastheassetsaresubstantiallyreadyfortheirintendeduseorsale.Investmentincomeearnedonthetemporaryinvestmentof specificborrowingspending theirexpenditureonqualifyingassets isdeducted fromtheborrowingcostseligible forcapitalisation.Allotherborrowingcostsarerecognisedinprofitorlossintheperiodinwhichtheyareincurred.

4.22 Revenue recognition

Revenueisrecognisedwhenitisprobablethattheeconomicbenefitswillflowtothecompanyandtherevenuecanbemeasuredreliably.Revenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivableonthefollowingbasis:

-Revenuefromsaleoffertilizerproductsisrecognizedondispatchtocustomers. -RevenuefromsaleofCERsisrecognisedonthegenerationoftheEmissionReductionswhenafirmcommitmentforsaleofCERsexists

withabuyer. - Returnondeposits isaccruedona timeproportionbasisby reference to theprincipaloutstandingand theapplicable rateof

return. -Dividend incomeandentitlementofbonus sharesare recognisedwhen the right to receive suchdividendandbonus shares is

established. -Governmentsubsidyonsaleoffertilizerisrecognisedwhentherighttoreceivesuchsubsidyhasbeenestablishedandtheunderlying

conditionsaremet. 4.23 Share capital

Ordinarysharesareclassifiedasequityandrecognisedattheirfacevalue.Incrementalcostsdirectlyattributabletotheissueofnewsharesareshowninequityasadeduction,netoftax.

4.24 Dividend

Dividenddistributiontothecompany’smembersisrecognisedasaliabilityintheperiodinwhichthedividendsareapproved. 5. Issued, subscribed and paid up share capital 2016 2015 2016 2015 (Numberofshares) (Rupeesinthousand)

2,791,260 2,791,260 OrdinarysharesofRs10eachfullypaidincash 27,913 27,913 OrdinarysharesofRs10eachissued 447,208,740 447,208,740 asfullypaidbonusshares 4,472,087 4,472,087 450,000,000 450,000,000 4,500,000 4,500,000

2016 2015 (Numberofshares)

Ordinarysharesofthecompanyheldbyassociated undertakingsasatyearendareasfollows: RelianceCommodities(Private)Limited 7,136,613 7,136,613 FatimaHoldingLimited 84,145,872 84,145,872 ArifHabibCorporationLimited 135,000,000 135,000,000 AmirFineExports(Private)Limited 12,895,296 12,895,296 239,177,781 239,177,781

5.1Inaccordancewiththetermsofagreementswithcertainlendersoflongtermfinances,therearecertainrestrictionsonthedistributionofdividendsbythecompany.

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ANNUAL REPORT 2016


6. Reserves Capital: -Fairvaluereserve 142,593 99,577 Revenue: -Generalreserve 2,098,313 2,098,313 -Un-appropriatedprofit 389,706 2,190,620 2,488,019 4,288,933 2,630,612 4,388,510

7. Surplus on revaluation of operating fixed assets

Thisrepresentssurplusoverbookvalueresultingfromtherevaluationoffreeholdland,buildingsonfreeholdland,plantandmachinery,railwaysidingandtoolsandotherequipment,adjustedbyincrementaldepreciationarisingoutofrevaluationofabovementionedassetsexceptforfreeholdland.Thevaluationwascarriedoutbyanindependentprofessionalvaluer,M/sPirsonsChemicalEngineering(Private)Limited,onAugust31,2014.Surpluson revaluationofoperatingfixedassetscanbeutilizedbythecompanyonlyforthepurposesspecifiedinsection235oftheOrdinance.

Therevaluationsurplusrelatingtoabovementionedoperatingfixedassetsexcludingfreeholdlandisnetofapplicabledeferred

incometaxes.Incrementaldepreciationrepresentsthedifferencebetweentheactualdepreciationontheabovementionedassetsexcludingfreeholdlandandtheequivalentdepreciationbasedonthehistoricalcostoftheseassets.Themovementinrevaluation surplus is as follows:


Openingbalance-netoftax 15,022,831 14,491,103 Deferredtaxonrevaluationsurplus -note13 – 647,560 Surplustransferredtoothercomprehensiveincomeforthe yearonaccountofincrementaldepreciation-netoftax (146,104) (115,832) Closingbalance-netoftax -note7.1 14,876,727 15,022,831

7.1IncludessurplusonrevaluationoffreeholdlandamountingtoRs.5,865.66million(2015:Rs.5,865.66million).


8. Long term finances - secured Redeemablecapital-PrivatelyPlacedTerm FinanceCertificates -note8.1 407,000 – Longtermloans -note8.2 2,308,100 3,042,161 Syndicatetermfinance -note8.3 4,038,567 – 6,753,667 3,042,161 Currentportionshownundercurrentliabilities -notes8.2&8.3 (1,081,747) (1,072,022) 5,671,920 1,970,139

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8.1 Privately Placed Term Finance Certificates (‘PPTFCs’)

Openingbalance – – ReceiptagainstissuanceofPPTFCs 407,000 – Closingbalance 407,000 –

This represents longtermfinancefacilityofRs450millionobtainedfromPAIR InvestmentCompanyLimited(hereinafter referredtoas‘PAIR’)tofinancecompany’scapitalexpenditureandalliedexpensestogetherwiththerequirementpertainingtothestoresandspares.Thisfacilityisavailablebywayofsubscribingtothecompany’sPPTFCs.Company’sPPTFCshaveafacevalueofRs1millioneach.OfthetotalfacilityofRs450million,Rs407millionhasbeenavailedbythecompanyasofthebalancesheetdate.

Terms of redemption

Thetenureofcompany’sPPTFCsisfromJuly1,2017toJuly1,2021.Asofthebalancesheetdate,theprincipalamountisredeemableinsixequalsemiannualinstallmentscommencingonJanuary1,2019.

Rate of return

ThereturnonPPTFCsispayablesemi-annuallyandiscalculatedontheoutstandingbalanceattherateofsixmonthsKarachiInterBankOfferedRate(‘KIBOR’)plus1.90%perannum.Themarkupratechargedduringtheyearontheoutstandingbalanceis7.98%perannum.

Trustee

InordertoprotecttheinterestoftheholderofPPTFCs,PakOmanInvestmentCompanyLimited(hereinafterreferredtoas‘POICL’)hasbeenappointedasTrusteeunderatrustdeeddatedJune21,2016.TheTrusteeispaidafeeofRs0.2millionperannum.

Incasethecompanydefaultsonanyofitsobligations,theTrusteemayenforcethecompany’sobligationinaccordancewiththetermsofthetrustdeed.TheproceedsofanysuchenforcementsshallbedistributedtotheholderofPPTFCsatthetimeonaparipassubasisinproportiontotheamountsowedtoitpursuanttothePPTFCs.

Security

ThePPTFCsaresecuredbyafirstparipassuchargeonthecompany’spresentandfuturefixedassets.


8.2 Long term loans Thesehavebeenobtainedfromthefollowingfinancialinstitutions: FaysalBankLimited -note8.2.1 83,333 250,000 PakistanKuwaitInvestmentCompany(Private)Limited -note8.2.2 – 62,500 PAIR -note8.2.3 142,857 285,714 SoneriBankLimited -note8.2.4 – 133,333 StandardCharteredBank(Pakistan)Limited(‘SCB’) -note8.2.5 – 333,332 AlliedBankLimited -note8.2.6 1,581,910 1,977,282 POICL -note8.2.7 500,000 –

2,308,100 3,042,161 Currentportionshownundercurrentliabilities (626,190) (1,072,022) 1,681,910 1,970,139

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ANNUAL REPORT 2016

8.2.1 Thisrepresentsatermfinancefacilityobtainedtofinancethecompany’scapitalexpenditurerequirements.TheoutstandingamountisrepayableonJune14,2017andcarriesmarkupattherateofsixmonthsKIBORplus1.70%perannum,payablesemi-annually.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom7.83%to8.22%peran-num.ItissecuredbyaparipassuchargeonallpresentandfuturefixedassetsexcludingtheassetscomprisingofAmmoniaConverterBasket,theLamontBoilerforNitricAcid,theBombardierChallengeraircraft,theassetscomprisingoftheCleanDevelopmentMechanism(‘CDM’)project, thecompletecarbondioxide recoveryplant/liquefactionplantandthe landandbuildingsoftheexcludedassets.

8.2.2 Thishasbeenrepaidduringtheyear.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom

8.34%to8.76%perannum. 8.2.3 Thisrepresentstermfinancefacilityforbalancesheetrestructuringandcompany’scapitalexpenditurerequirements.Itisre-

payableintwosemi-annualinstallmentsofRs71.429millioneachendingonAugust28,2017andcarriesmarkupattherateofsixmonthsKIBORplus2.25%perannum,payablesemi-annually.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom8.29%to9.32%perannum.Itissecuredbyafirstparipassuchargeonthecompany’spresentandfuturefixedassets.

8.2.4 Thishasbeenrepaidduringtheyear.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom

7.81%to8.22%perannum. 8.2.5 Thishasbeenrepaidduringtheyear.Themarkupratechargedduringtheyearonoutstandingbalancerangesfrom7.85%

to7.99%perannum. 8.2.6 Thisrepresentstermfinancefacilitytomeetcompany’spaymentofimportbillpayable.Itisrepayableineightsemi-annual

installmentsofRs200millioneachendingonNovember24,2020andcarriesmarkupattherateofsixmonthsKIBORplus2%perannum,payablesemi-annualy.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom8.11%to8.52%perannum.ItissecuredbyafirstparipassuchargeoverallpresentandfutureplantandmachineryofthecompanyexcludingassetscomprisingofAmmoniaConverterBasket,theLamontboilerforNitricAcid,theassetscomprisingoftheCDMproject,thecompletecarbondioxiderecoveryplant/liquefactionplantalongwithcarbondioxidestaticstoragetankandanexclusivechargeovertheBombardierChallengeraircraft.Furthermore, longtermloansfromrelatedparties(asreferredtoinnote9tothesefinancialstatements)willremainsub-ordinatedinfavourofAlliedBankLimitedtillcompleterepaymentofthisloan.Thereconciliationofthecarryingamountofloanisasfollows:


Receipt 2,000,000 2,000,000 Initialtransactioncost (23,200) (23,200)

1,976,800 1,976,800 Amortizationofinitialtransactioncost 5,110 482

1,981,910 1,977,282 Repaid (400,000) –

1,581,910 1,977,282 Currentmaturity (400,000) (400,000) 1,181,910 1,577,282

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8.2.7 Thisrepresentsatermfinancefacilitytomeetcompany’scapitalexpenditurerequirements.Itisrepayableinsixsemi-annualinstallmentsofRs83.333millioneachcommencingonNovember9,2018andcarriesmarkupattherateofsixmonthsKIBORplus1.95%perannum,payablesemi-annually.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom8.01%to8.31%perannum.ItissecuredbyaparipassuchargeonallpresentandfuturefixedassetsexcludingtheassetscomprisingofAmmoniaConverterBasket,theLamontBoilerforNitricAcid,theBombardierChallengeraircraft,theassetscomprisingoftheCDMproject,thecompletecarbondioxiderecoveryplant/liquefactionplant.

8.2.8 Asofthebalancesheetdate,inadditiontotheabovementionedfacilities,alongtermfinancefacilityamountingtoRs10

million(2015:Nil)wasavailabletothecompanyfromSummitBankLimited,arelatedparty(associatedcompany)forpur-chaseofvehicleswhichwasnotavailedbythecompany.


8.3 Syndicate term finance Thishasbeenobtainedfromaconsortiumofthefollowingfinancialinstitutions: Receipts from lenders: NationalBankofPakistan 1,500,000 – MCBBankLimited 500,000 – BankIslamiLimited 600,000 – SCB 1,500,000 – 4,100,000 – Initialtransactioncost (61,500) – 4,038,500 – Amortizationofinitialtransactioncost 67 -note8.3.1 4,038,567 – Currentportionshownundercurrentliabilities (455,557) – 3,583,010 –

8.3.1 ThisrepresentslongtermfinancefacilityofRs6billionobtainedfromaconsortiumofbanksledbySCB(the‘LeadArranger’).Theoverallfinancingissecuredbywayofchargeovercompany’slandhavinganareaof2,399Kanals7Marlastogetherwithallbuilding,structure,fitting&fixturepermanentlyfastedtolandanderectionbuildingandoverallpresentandfuturefixedassetsexcludingtheassetscomprisingofAmmoniaConverterBasket,theLamontBoilerforNitricAcid,theBombardierChallengeraircraft, theassetscomprisingof theCDMproject, thecompletecarbondioxide recoveryplant/liquefactionplant.OfthetotalfacilityofRs6billion,Rs4.1billionhasbeenavailedbythecompanyasofthebalancesheetdate.Asofthebalancesheetdate,theprincipalamountisrepayableinnineequalsemi-annualinstallmentscommencingfromDecember30,2017andcarriesmarkupattherateofsixmonthsKIBORplus1.25%perannum,payablesemi-annually.Themarkupratechargedduringtheyearontheoutstandingbalanceis7.40%perannum.


9. Long term loans from related parties - unsecured

Thesehavebeenobtainedfromthefollowingrelatedparties: RelianceCommodities(Private)Limited(associatedcompany) 1,208,693 877,982 InternationalComplexProjectsLimited(associatedcompany) 500,000 – MemberandChairman’sspouse 397,326 371,491 Chairman’schildren 168,581 116,914 Directors 644,122 866,565 -note9.1 2,918,722 2,232,952

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ANNUAL REPORT 2016

9.1 Asperthetermsoftheagreementsoftheseloans,thesewererepayableinaperiodoftwoyearscommencingfromJanuary1,2017ontermsthatweretobemutuallyagreedbetweentheparties.However,asperthetermsofloanagreementwithAlliedBankLimited(asfullyexplainedinnote8.2.6tothesefinancialstatements),theseloanswill remainsub-ordinatedinfavourofAlliedBankLimitedtillcompleterepaymentofitsloanhence,theseloanshavebeenclassifiedasnon-current.Markupispayablesemi-annuallyatarateofsixmonthsKIBORplus1.5%perannum.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom7.58%to8.01%perannum.

10. Long term loan from related party - secured

Asofthebalancesheetdate,thisrepresentsalongtermfinancefacilityofRs3billionobtainedfromFatimaFertilizerCom-panyLimited(‘FATIMA’),arelatedparty(associatedcompany).Duringtheyear,thisfacilitywaschangedfromarenewablelimit, inthenatureofrunningfinancefacility,toalongtermfinancefacility,afterthechangeintermsofthefacilitywereapprovedbythemembersofFATIMAintheirExtraordinaryGeneralMeetingheldonDecember23,2016.

Aspertherevisedterms,theprincipalamountisrepayableinsixequalsemi-annualinstallmentscommencingfromJune23,

2019andcarriesmarkupattherateofsixmonthsKIBORplus2.12%perannum,payablesemi-annually.Themarkupratecharged,duringtheyear,ontheoutstandingbalancerangesfrom8.20%to8.63%perannum.Thisfacilityissecuredagainstrankingchargeoverallpresentandfuturefixedassetsofthecompanyexcludingimmovablepropertyi.elandandbuildings,theLamontboilerfornitricacid,theassetscomprisingoftheCDMprojectandcompletecarbondioxiderecoveryplant.

11. Long term deposits

Theserepresentinterestfreesecuritydepositsfromcustomersandcarriagecontractorsandarerepayableoncancellation/withdrawalofthedealershiporoncessationofthebusinesswiththecompanyrespectively.


12. Deferred liabilities

Accumulatingcompensatedabsences -note12.1 72,336 97,166 Retirementbenefits-gratuityfund -note12.2 41,615 35,814 113,951 132,980

12.1 Accumulating compensated absences

Openingliability 97,166 80,812 Chargetoprofitandlossaccount -note12.1.2 12,841 25,038

110,007 105,850 Paymentsmadeduringtheyear (8,591) (8,684) Provisionwrittenbackduringtheyear -note12.1.3 (29,080) – Liabilityasatyearend 72,336 97,166 12.1.1 Movement in liability for accumulating compensated absences

Openingpresentvalueofaccumulatingcompensatedabsences 97,166 80,812 Currentservicecost 4,403 15,971 Interestcost 8,325 8,029 Benefitspaidduringtheyear (8,591) (8,684) Provisionwrittenbackduringtheyear -note12.1.3 (29,080) – Remeasurementduringtheyear 113 1,038 Closingpresentvalueofaccumulatingcompensatedabsences 72,336 97,166

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12.1.2 Charge for the year

Currentservicecost 4,403 15,971 Interestcost 8,325 8,029 Remeasurementduringtheyear 113 1,038 Expensechargedtotheprofitandlossaccount 12,841 25,038

Amountsforcurrentperiodandpreviousfourannualperiodsofaccumulatingcompensatedabsencesareasfollows:

2016 2015 2014 2013 2012

AsatDecember31 (Rupeesinthousand) Presentvalueofaccumulating compensatedabsences 72,336 97,166 80,812 86,320 84,150

Experienceadjustment arisingonobligation 113 1,038 (13,646) – –

Theaveragenumberofleavesaccumulatedperannumistendaysforexecutivesandfivedaysforworkersandotherstaff.

12.1.3Duringtheyear,employeesofthecompanyrelatingtomarketinganddistributiondepartmentweretransferredtoFatima

AgriSalesandServices(Private)Limited(hereinafterreferredtoas‘FASS’),arelatedparty(groupcompany),witheffectfromJanuary1,2016andnowalltheliabilitiesrelatedtotheseemployeeswillbepaidandbornebyFASS.Hence,thecompanyhaswrittenbackthecorrespondingliabilityoftheseemployeesasthecompanyisnolongerliabletopaytheirliabilities.


12.2 Gratuity fund

Theamountsrecognisedinthebalancesheetareasfollows: Presentvalueofdefinedbenefitobligation 149,213 171,990 Fairvalueofplanassets (107,598) (136,176) Liabilityasatyearend 41,615 35,814

Openingnetliability 35,814 34,977 Chargetoprofitandlossaccount 20,371 24,630 Chargetorelatedparty 1,313 8,304 Netremeasurementsfortheyear 19,931 2,880 Contributionbythecompany (35,814) (34,977) Liabilityasatyearend 41,615 35,814

Themovementinthepresentvalueofdefinedbenefitobligationisasfollows: Openingpresentvalueofdefinedbenefitobligation 171,990 149,293 Currentservicecost 20,127 31,098 Interestcost 14,482 14,620 Benefitspaidtoout-goingmembersduringtheyear (22,160) (20,104) Remeasurementsonobligation 12,388 (2,917) LiabilityrelatingtoemployeestransferredtoFASS -note12.2.1 (47,614) – Presentvalueofdefinedbenefitobligationasatyearend 149,213 171,990

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Themovementinfairvalueofplanassetsisasfollows: Openingfairvalue 136,176 114,316 Contributions 35,814 34,977 Interestincomeonplanassets 12,925 12,784 Benefitspaid (22,160) (20,104) FairvalueofplanassetstransferredtoFASS -note12.2.1 (47,614) – Returnonplanassetsexcludinginterestincome (7,543) (5,797) Fairvalueasatyearend 107,598 136,176

Plan assets are comprised as follows: Fixedincomeinstruments 80,914 110,030 Cash 26,684 26,146 107,598 136,176

Thecompanyfacesthefollowingrisksonaccountofgratuityfund:

-FinalSalaryRisk(linkedtoinflationrisk)–theriskthattheFinalSalaryatthetimeofcessationofserviceisgreaterthanwhatweassumed.SincethebenefitiscalculatedontheFinalSalary(whichwillcloselyreflectinflationandothermacroeconomicfactors),thebenefitamountincreasesasSalaryincreases.

DemographicRisks -MortalityRisk: Theriskthattheactualmortalityexperienceisdifferentthantheassumedmortality.Thiseffectismore pronouncedinschemeswheretheageandservicedistributionisonthehigherside.

-WithdrawalRisk:Theriskofactualwithdrawalsexperienceisdifferentfromassumedwithdrawalprobability.The significanceofthewithdrawalriskvarieswiththeage,serviceandtheentitledbenefitsofthebeneficiary. -InvestmentRisk: Theriskoftheinvestmentunderperformingandbeingnotsufficienttomeettheliabilities. ThecompanyisexpectedtocontributeRs26.779milliontothegratuityfundinthenextyear.

Thepresentvalueofdefinedbenefitobligation,thefairvalueofplanassetsandthesurplusordeficitofgratuityfundisasfollows:

2016 2015 2014 2013 2012

(Rupeesinthousand) Presentvalueofdefinedbenefitobligation (149,213) (171,990) (149,293) (129,962) (115,230) Fairvalueofplanassets 107,598 136,176 114,316 89,810 82,105 Loss (41,615) (35,814) (34,977) (40,152) (33,125)

Experienceadjustmentonobligation 8% -2% -2% 5% 3% Experienceadjustmentonplanassets -7.01% -4.26% -3.64% -1.44% -0.95%

Thesensitivityofthedefinedbenefitobligationtochangesintheweightedprincipalassumptionsis:

Impact on defined benefit obligation Change in Increase in Decrease in assumptions assumption assumption (Rupeesinthousand)

Discountrate 1% 137,014 163,419

Salarygrowthrate 1% 163,623 136,619

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12.2.1Duringtheyear,employeesofthecompanyrelatingtomarketinganddistributiondepartmentweretransferredtoFASS,arelatedparty,witheffectfromJanuary1,2016andnowalltheliabilitiesrelatedtotheseemployeeswillbepaidandbornebyFASShence,thefundhastransferredthecorrespondingportionofthepresentvalueofdefinedbenefitobligationandfairvalueofplanassetsrelatingtotheseemployeesasatDecember31,2015toFASS.


13. Deferred taxation

Liability/(asset)fordeferredtaxationcomprisestemporarydifferencesrelatingto: Acceleratedtaxdepreciation 8,765,361 8,842,825 Accumulatingcompensatedabsences (21,701) (29,150) Provisionfordoubtfulreceivable (2,673) (2,673) Postretirementmedicalbenefitsandotherallowancespayable (3,454) (3,454) Interestreceivable 8,261 6,982 Unrealisedrecoveryofchemicalcatalyst 48,820 48,820 Transactioncostonlongtermloans 6,697 6,815 Investmentinsubsidiary 41,398 28,910 Goodwill 991,549 991,549 Unusedtaxlosses (2,733,380) (1,455,557) Unusedtaxcredits (353,818) (462,982) 6,747,060 7,972,085

Deferredtaxassetontaxlossesavailableforcarryforwardandthoserepresentingminimumtaxavailableforcarryforwardundersection113oftheIncomeTaxOrdinance,2001arerecognizedtotheextentthattherealisationofrelatedtaxbenefitsthroughfuturetaxableprofits isprobable.ThecompanyhasnotrecogniseddeferredtaxassetofRs256.646million(2015:Nil)inrespectofminimumtaxavailableforcarryforwardundersection113oftheIncomeTaxOrdinance,2001,assufficienttaxableprofitswouldnotbeavailabletoutilisetheseintheforeseeablefutureandwouldexpireasfollows:

Accounting year to which Amount of minimum tax Accounting year in which minimum tax relates (Rupees in thousand) minimum tax will expire

2012 40,884 2017 2013 73,207 2018 2014 142,555 2019 256,646

Thegrossmovementinnetdeferredtaxliabilityduringtheyearisasfollows:


Openingbalance 7,972,085 10,187,240 Deferredtaxonrevaluationsurplus -note7 – (647,560) Chargedtoothercomprehensiveincome 12,489 5,405 Creditedtoprofitandlossaccount -note36 (1,237,513) (1,573,000) Closingbalance 6,747,060 7,972,085

14. Short term borrowing from related party - secured

As fullyexplained innote10 to thesefinancial statements, this facilityhasbeenchangedfroma renewable limit, in thenatureofrunningfinancefacility,toalongtermfinancefacilityduringtheyear.

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15. Short term borrowings - secured

Runningfinances -note15.1 7,447,129 10,290,326 Termfinances -note15.2 1,725,997 4,861,288 9,173,126 15,151,614

15.1 Running finances

Short term running finance facilities available fromcommercial banks undermark-uparrangements amount to Rs 9,433million(2015:Rs13,279million).Theratesofmarkuprangefrom6.72%to11.22%ontheoutstandingbalanceorpartthereof.Theaggregaterunningfinancesaresecuredagainstpledgeofstock-in-tradeasreferredtoinnote25.1tothesefinancialstatementsandregisteredhypothecationchargeoncurrentandfixedassetsofthecompanyincludingtheLamontBoilerforNitiricAcid,assetscomprisingtheCDMprojectandthecompletecarbondioxiderecoveryplant/liquefactionplantalongwithcarbondioxidestaticstoragetankofthecompany.IncludedintheaboveisarunningfinanceofRs398.423million(2015:Rs385.504million)[availablelimit:Rs400million(2015:Rs400million)]fromSummitBankLimited,arelatedparty(associatedcompany).

15.2 Term finances

TermfinancefacilitiesavailablefromvariouscommercialbanksunderprofitarrangementsamounttoRs2,524million(2015:Rs5,509million).Theratesofprofitrangefrom6.98%to8.49%ontheoutstandingbalanceorpartthereof.TheaggregatetermfinancesaresecuredagainstfirstparipassuchargeoverallcurrentandfixedassetsofthecompanyincludingtheLamontBoiler,AmmoniaConverterBasket,assetscomprisingtheCDMprojectandthecompletecarbondioxiderecoveryplant/liquefactionplantalongwithcarbondioxidestaticstoragetankofthecompany.

15.3 Letters of credit and guarantees

OftheaggregatefacilitiesofRs3,609million(2015:Rs4,690million)foropeninglettersofcreditandRs1,247million(2015:Rs18million)forguarantees,theamountutilisedatDecember31,2016wasRs1,550million(2015:Rs2,030million)andRs1,247million(2015:Rs17million)respectively.Thefacilitiesforopeninglettersofcreditissecuredagainstimportdocumentsandregisteredjointparipassuchargeovercurrentassetswhereasfacilityforguaranteesissecuredagainstregisteredjointparipassuchargeovercurrentassets.

15.4 Guarantees discounted - secured

Of theaggregate facilitiesofRs3,900million (2015:Rs3,250million) fordiscountingofguaranteesgivenbydebtors, theamountutilisedatDecember31,2016wasRs3,089.441million(2015:Rs1,988.767million).Discountingchargeisfixedaspermutualagreementat thetimeof transaction.Theoutstandingbalanceofguaranteesdiscounted is securedagainst thespecificguaranteesdiscounted.

16. Payable to Privatization Commission of Pakistan

RelianceExports(Private)Limited(‘REL’),underthetermsandconditionsstated inthe‘SharePurchaseAgreement’(‘theAgreement’),acquired100%sharesinthecompanyonJuly14,2005throughtheprocessofprivatization.UnderthetermsoftheAgreement,thepurchaseconsideration,inadditiontolumpsumcashpayment,includedafurtherpaymentequivalentto90%ofthecompany’sclaimoftaxrefundaggregatingtoRs2,814.511millionfortheassessmentyears1993-94,1995-96through2002-2003andtaxyears2003and2004.TheamountispayabletothePrivatizationCommission(hereinafterreferredtoas‘PC’)intheeventofandatthetimeofcashreceiptoftherefundfromtheconcernedtaxauthorities.

TheamountrecognizedinthesefinancialstatementsaspayabletoPCisnetoffRs240.119millionwhich,accordingtothe

managementofthecompany,hasalreadybeenwithdrawnbythePreviousMembersaspartofthedividenddistributionfortheyearendedJune30,2005.ThemanagementofthecompanyfeelsthattheAgreementaspresentlyworded,ifexecuted,wouldresultintodoublepaymentofthesameamounttoPC/PreviousMembers,firstly,aspartoftheprofitsfortheyearendedJune30,2005(computedwithoutrecognitionofthetaxexpensefortheyearsforwhichwhentherefundisissued,anamountequivalentto90%wouldbetherightofPC/PreviousMembers)andsecondly,atthetimetherefundisreceivedfromthetaxauthoritieswhenanamountequivalentto90%ofsuchrefundispaidofftoPC,asagreed.ThemanagementofthecompanyfeelsthatsuchdoublepaymentisneithertheintentionnorwarrantedunderthespecificprovisionsoftheAgreement.

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UpondissolutionofRELanditsamalgamationwiththecompanyonJuly14,2005,thisliabilitywasrecognisedinthebooksofthecompanybeingthesurvivingentityuponREL’samalgamationwiththecompanyinaccordancewiththeSchemeofArrangementforAmalgamation.


17. Trade and other payables

Tradecreditors -note17.1 894,119 2,674,413 Suigasbillpayable -note17.2 309,315 – Securitydeposits 36,507 32,105 Accruedliabilities -notes17.3&17.4 1,714,988 2,387,327 Workers’profitparticipationfund -note17.5 673,760 717,710 Workers’welfarefund -note17.6 20,036 266,787 Customers’balances 162,137 184,712 Bankguaranteesdiscounted 3,089,441 1,987,767 Duetoemployees’providentfundtrust 1,238 1,312 Withholdingtaxpayable 34,112 61,095 Excisedutypayable 1,724 1,724 Electricitydutypayable 37,066 30,171 6,974,443 8,345,123

17.1 IncludesanamountofRs38.933million(2015:Rs76.389million)payabletoRelianceSacksLimited(‘RSL’),arelatedparty(subsidiary).

17.2 This amount is payable to Sui NorthernGas Pipelines Limited (‘SNGPL’), a related party (associated company), against

purchaseofgas. 17.3 AccruedliabilitiesincludeRs1,071million(2015:Rs1,071million)onaccountofGasInfrastructureDevelopmentCess(‘GIDC’).

During theyear, theGIDCAct,2015was struckdownby theHonorableSindhHighCourtbeingultra-vires.However, thecompany’smanagement isof theviewthat theMinistryofPetroleumandNaturalResources(‘MP&NR’),GovernmentofPakistanwill fileanappealagainst theaforementioneddecision inusualappellate forum.Due to theexpectedappealagainst the aforementioned order and other legal uncertainties, the company continues to carry the provision in thisrespect.

17.4 IncludesbonusofRs7.5million(2015:Rs7.5million)payabletotheDirectorsofthecompany.


17.5 Workers’ profit participation fund Openingbalance 717,710 702,148 Provisionfortheyear -note34 – 59,843 717,710 761,991 Paymentsmadeduringtheyear (43,950) (44,281) Closingbalance -note17.5.1 673,760 717,710

17.5.1 IncludesRs614.356millionthatrepresentsthebalanceamountofWorkers’ProfitParticipationFund(‘WPPF’),remainingafterdeductingtheworkers’portionofWPPF,thatisrequiredtobedepositedintheWorkersWelfareFund(‘WWF’).ThecompanyhasanagreementwiththeWWF,MinistryofLabourandManpower,GovernmentofPakistanwherebysuchamountwouldbeusedforestablishingahospitalfortheworkersasperthemechanismdefinedinthatagreement.

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17.6 Workers’ welfare fund

Openingbalance 266,787 244,047 Provisionfortheyear -note34 – 22,740 Provisionwrittenbackduringtheyear -note17.6.1 (246,751) – Closingbalance 20,036 266,787

17.6.1 Duringtheyear,theHonourableSupremeCourtofPakistanthroughitsorderdatedNovember10,2016decidedthatthechanges to theWWFOrdinance,1971madethroughFinanceActs,2006and2008wereultravires to theConstitutionofPakistan.ThecompanywascarryingaprovisionofRs246.751millionrelatingtosuchamendmentsand,asaresultoftheSupremeCourt’sabovementionedorder,suchamounthasbeenwrittenbackasreferredtoinnote35.5tothesefinancialstatements.


18. Accrued mark up

Accrued mark up on: -PPTFCs-secured 15,459 – -longtermloans-secured 23,620 38,259 -syndicatetermfinance 1,660 – -longtermloansfromrelatedparties-unsecured -note18.1 281,955 97,712 -borrowingfromrelatedparty-secured -note18.2 117,601 97,701 -shorttermborrowings-secured -note18.3 198,497 215,751 638,792 449,423

18.1Thisamountispayabletothefollowingrelatedparties:

RelianceCommodities(Private)Limited(associatedcompany) 108,952 39,152 FatimaHoldingLimited(associatedcompany) 7,896 – InternationalComplexProjectsLimited(associatedcompany) 33,768 – MemberandChairman’sspouse 45,000 16,015 Chairman’schildren 14,307 5,067 Directors 72,032 37,478 281,955 97,712

18.2 ThisamountispayabletoFATIMA,arelatedparty(associatedcompany). 18.3 IncludesanamountofRs16.158million(2015:Rs8.314million)payabletoSummitBankLimited,arelatedparty(associated company).

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19. Contingencies and commitments

19.1 Contingencies

(i) ThecompanyhasnettedoffanamountofRs240.119millionfromtheamountpayabletoPC,aspartofpurchaseconsideration,at thetimeand in theevent the refund is receivedfromthetaxauthorities. Incase, thecompany’scontentionrelatingtopossibledoublepaymentisnotaccededtobytheotherpartytotheSharePurchaseAgreement,thecompanyiscontingentlyliabletotheaforesaidamountofRs240.119million.Incase,theamountbecomespayable,thecorrespondingeffectwouldbereflectedinthecomputationofgoodwill.Furthermore,thecompanyhasissuedabankguaranteeamountingtoRs240millioninfavourofPCinthisrespect.

(ii) Thecompanyhasalsoissuedfollowingguaranteesinfavourof:

-SNGPLagainstLNGandnaturalgassaleamountingtoRs1billion(2015:Rs10million).

-PakistanStateOilCompanyLimited(‘PSO’)againstfuelforaircraftamountingtoRs7million(2015:Rs7million).

-Multiplebanksassecurityagainstfinanceobtainedbyitssubsidiary,RSL (iii) As at June 30, 2004, the company had investment of 140,000 ordinary shares of Rs 10 each valuing Rs 100,000 in

NationalFertilizerMarketingLimited,beingtheassociatedcompanyonthatdate.OnMay20,2005,this investmentwastransferredtoNationalFertilizerCorporationofPakistan(Private)Limitedbythemanagementofthecompany.However,thenewbuyer,RELfiledanapplicationbeforePCchallengingthistransferonthegroundsthatsuchtransferhadbeencarriedoutagainstthetermsandconditionsofthebiddocuments.Incaseofapositiveoutcometotheapplication,thisinvestmentwouldbere-instated.

(iv) AnamountofRs 129.169millionwaswithdrawnby thepreviousmembersof thecompanyaspartofdividend for

theyearendedJune30,2005undertheSharePurchaseAgreement.Outoftheaggregateamount,Rs89.39millionrepresents thevalueofcertaincatalysts recovered inconsequenceofcleandownoperationsof theplantprior toundertakingtheprocessofprivatization,whichwasaccountedforasincomeinthefinancialstatementsfortheyearendedJune30,2005inthelightofapplicablefinancialreportingframework.

Themanagementofthecompanyfeelsthatnotwithstandingtheapplicabilityofthefinancialreportingframework,on

thefinancialstatementsfortheyearendedJune30,2005,theamountwasnotdistributableaspartofdividendforthatyearinviewoftheclearunderstandingbehindtheexecutionoftheAgreementascategoricallyconfirmed,inwriting,byPCpriortosigningoftheAgreement.Similarly,thebalanceamountofRs39.779millionisconsideredtobedividenddistributionoutofthethenavailablereserveswhichwasalsonotdistributabletothepreviousmembersintermsofothercovenantsoftheAgreement.

Thecompanyhasfiledaclaimfortherecoveryoftheaforesaidaggregateamountonthegroundsthatinthepresent

form,thedistributionhasbeenmadeoutoftheaccumulatedreserves,fortheyearsuptoJune30,2004,which,underthespecificprovisionsoftheAgreementwerenotdistributabletothepreviousmembersofthecompany.Incaseofapositiveoutcometothecompany’sclaim,theexcessdividendwithdrawnbythepreviousmembersofthecompanywouldberecovered.

(v) Throughashowcausenotice,thetaxdepartmentraisedtheissueofshortpaymentofoutputsalestaxonsuppliesof

thecompany’sfertilizerproduct,CalciumAmmoniumNitrate(‘CAN’)fortheperiodfromApril18,2011toDecember31,2011involvingaprincipalsalestaxdemandofRs500million.SuchissuewasraisedonthegroundsthatnotificationSRO15(I)/2006,providingforlevyofsalestaxonthebasisof‘notifiedprice’ofCAN,waswithdrawnthroughnotificationSRO313(I)/2011datedApril18,2011andhence,thecompanywaslegallyrequiredtorecoveroutputsalestaxonsuppliesofCANon thebasis ofactual consideration received thereagainst. TheCompanyhadalreadyapproached theFederalBoardofRevenue(‘FBR’)ontheissueforcondonationintermsofsection65oftheSalesTaxAct,1990,whichwasnotentertained.TheCompanyhasassailedsuchorderthroughinstitutionofawritpetitionbeforetheHonourable

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LahoreHighCourtonthegroundsthatrelevantpowershavebeenexercisedinanarbitrarymannerwithoutreferringthematter to competentauthority as required under the law.While suchconstitutional petition has not yet beendisposed,sincemanagementconsidersthatthecompany’sstanceisbasedonmeritoriousgroundsandhence,reliefwouldbesecuredfromtheCourt,noprovisiononthisaccounthasbeenmadeinthesefinancialstatements.

(vi) Forassessmentyears1993-94and1995-96through2002-2003andfor taxyears2003through2005, thecompany, in

viewofthepositiontakenbythetaxauthoritiesthattheincomeofthecompanyischargeabletotaxonthebasisof‘netincome’,hadprovidedforinthefinancialstatementsthetaxliabilityonnetincomebasiswhichaggregatedtoRs5,223.343million.Taxliabilitiesadmittedinrespectivereturnsoftotalincomeinrespectoftheseassessment/taxyears,however,aggregated toRs1,947.671millionbeing the liabilities leviableunder thePresumptive TaxRegime (‘PTR’),consideredbythemanagementtobeapplicableinrespectofthecompany’sincomefromsaleofownmanufacturedfertilizerproducts.

TheAppellateTribunal InlandRevenue(‘ATIR’)through itsseparateordersfortheassessmentyears1993-94,1995-96

through 2002-03 upheld the company’s position as taken in respective returns of total incomeand consequently,managementreversedtheexcessprovisionsaggregatingtoRs3,275.673milliononthestrengthofsuch judgments.ATIR’sdecisionsinrespectofcertainassessmentyearshavealsobeenupheldbytheHonourableLahoreHighCourtwhiledisposingdepartmentalappealsagainstrespectiveordersofATIR.IncometaxdepartmenthasstatedlyagitatedtheissuefurtherbeforetheHonourableSupremeCourtofPakistan,whichispendingadjudication.

InviewofthefavorabledisposalofthematteruptothelevelofHighCourt,managementofthecompanyfeelsthat

thedecisionoftheapexcourtwouldalsobeinthefavorofthecompanyandhence,inthesefinancialstatements,taxliabilitiesinrespectofabovereferredassessment/taxyearshavebeenprovidedonthebasisthatthecompany’sincomeduring such yearswas taxable under PTR. In case, theapex court decides thematter otherwise, amountaggregatingtoRs3,275.673millionwillhavetoberecognizedastaxexpenseinrespectofsuchassessment/taxyears.

(vii) IncludedintradedebtsisanamountofRs18.877million(2015:Rs18.877million)whichhasnotbeenacknowledged

asdebtsbyitscustomersduetoadisputeregardingthediscountontheproduct’sprice.Thecompany’scustomershadcollectivelyfiledanappealregardingthepricedisputebeforetheHonourableCivilCourt,Multan,whichdecidedthecaseinfavorofthecompany’scustomers.ThecompanypreferredanappealbeforetheHonourableDistrictandSessionsCourt,MultanwhichsetasidetheorderoftheCivilCourt.Thecompany’scustomersfiledarevisedpetitionbefore theHonourableLahoreHighCourtagainst theorderof theDistrictandSessionsCourt,which ispending foradjudication.Basedontheadviceofthecompany’slegalcounsel,thecompany’smanagementconsidersthattherearemeritoriousgroundstodefendthecompany’sstanceandhence,noprovisionhasbeenmadeinthesefinancialstatementsonthisaccount.

(viii) Duringthepreviousyear,throughashowcausenotice,thetaxdepartmenthadraisedtheissueofnon-paymentof

outputsalestaxonstockoffertilizerproducttransferredtovariouswarehousesofthecompanyinvolvingaprincipalsalestaxdemandofRs909.125million(notincludingdefaultsurchargewhichwillbecalculatedatthetimeofdeposit)alongwithapenaltyequalto100%oftheprincipalsalestaxdemand.Suchissuewasraisedonthegroundsthattheabovementionedtransfersconstitute‘supply’intermsofsection2(44)oftheSalesTaxAct,1990,andhence,thesamehavebeenmadewithoutpaymentofsalestax.ThemanagementhadassailedthesubjectorderinusualappellatecoursebeforetheCommissionerInlandRevenue(Appeals)[‘CIR(A)’]and,duringtheyear,CIR(A)decidedthematterincompany’s favour through itsorderdatedApril 14, 2016whereby theaforementioneddemand stoodannulled.Beingaggrieved, thedepartmenthasfiledanappealagainst theaforementionedorderofCIR(A)before theATIRwhichispendingfixation.Managementconsidersthattherearestronggroundstosupportthecompany’sstanceandthusnoprovisionhasbeenmadeinthesefinancialstatementsfortheabovementionedamount.

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(ix) OnJuly5,2006,PakistanNationalShippingCorporation(‘PNSC’)filedarecoverysuit forUSD1.5millionagainst thecompanybeforetheCivilCourt,Lahoreclaimingthat ithadsufferedlossesasthecompanyunilaterallyterminatedtheCharterPartyAgreement(‘CPA’)betweenthePNSCandthecompany.AsperthetermsoftheCPA,PNSCwasto transport300,000metric tonsof rockphosphate for thecompanybetweenFebruary1,2005 toMay31,2006ata rateofUSD41permetric ton fromCasablancaport toKarachiport.However,PNSCclaimedthat thecompanyhadunilaterallyterminatedtheCPAafteritsprivatizationin2005.ThecompanyalsofiledacountersuitagainstPNSCclaimingthatithadviolatedthetermsoftheCPAbydivertingshipscarryingcompany’scargotootherportscausingthecompany’scargotoarrivelaterthanexpectedresultinginlosstothecompany.TheCourtreferredthemattertothearbitratorwhothroughitsawarddatedApril22,2010decidedthematter inPNSC’sfavourandconfirmeditsclaimatUSD1.3million(equivalenttoRs80.009million)andmarkupattherateof14%tobecalculatedfromthedateofawardtillthetimeofdeposit.ThecompanybeingaggrievedhasfiledanapplicationagainsttheawardofarbitratorbeforetheCivilCourt,Lahorewhichispendingadjudication.Basedontheadviceofthecompany’slegalcounsel,themanagementconsidersthatcompany’sstanceisbasedonmeritoriousgroundsandhencereliefwouldbesecuredfromtheCourt,noprovisiononthisaccounthasbeenmadeinthesefinancialstatements.

(x) During thepreviousyear, thecompanypurchasedLiquefiedNaturalGas (‘LNG’) fromPakistanStateOilCompanyLimited(‘PSO’)underthevariousdirectivesof‘MP&NR,GovernmentofPakistan.ThelastLNGcargopurchasedbythecompanyfromPSOwasfullyconsumedbytheendofFebruary2016.IncludedinthecostbookedduringthepreviousandcurrentyearsrelatingtoLNGareprovisionalchargesofSuiSouthernGasCompanyLimited(‘SSGC’)andSNGPL(hereinaftercollectivelyreferredtoasthe‘GasCompanies’)thatarebasedontheabovementionedGovernmentdirectives,determinationofOilandGasRegulatoryAuthority(‘OGRA’)forotherconsumersthroughitsdecisiondatedMarch18, 2016anddiscussionofcompany’smanagementwith theGasCompanies. Basedon theadviceof thecompany’s legal counsel and management’s abovementioned discussions, it strongly believes that the amountsclaimedbytheGasCompaniesfromthecompanywouldeventuallybeinlinewiththeabovebasis.Consequently,noprovisionhasbeenmadeinthesefinancialstatementsforthedifferentialamountofRs970.168millionthatincludeslatepaymentsurchargeofRs184.166million(2015:Rs662.053millionthatincludeslatepaymentsurchargeofRs36.207million),basedontheadviceofthecompany’slegalcounselthattherearemeritoriousgroundstofollowtheabovebasis.

19.2 Commitments

(i) LettersofcreditotherthanforcapitalexpenditureRs1,017million(2015:Rs66.821million).(ii) Theamountoffuturepaymentsunderoperatingleasesandtheperiodinwhichthesepaymentswillbecomedueare

as follows: 2016 2015 (Rupeesinthousand) Notlaterthanoneyear 66,213 59,854 Laterthanoneyearandnotlaterthanfiveyears 108,257 120,096 174,470 179,950

20. Property, plant and equipment Operatingfixedassets -note20.1 38,662,198 39,126,732 Capitalwork-in-progress -note20.2 54,437 11,588 Capitalstoresandstand-byequipment -note20.3 32,055 55,764 38,748,690 39,194,084

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20.1 Operating fixed assets

(Rupeesinthousand)

Freehold Buildings on Buildings on Railway Plant and Aircrafts Furniture Tools and Vehicles Catalyst Total land freehold leasehold siding machinery and other land fixtures equipment

COST/REVALUED AMOUNT BalanceasatJanuary01,2015 6,777,600 1,794,078 31,400 9,000 28,624,587 2,284,785 46,624 551,582 310,559 217,312 40,647,527Additionsduringtheyear – 6,960 3,519 – – – 234 27,706 – 19,658 58,077Disposalsduringtheyear – – – – – – – (19,123) (59,887) – (79,010)BalanceasatDecember31,2015 6,777,600 1,801,038 34,919 9,000 28,624,587 2,284,785 46,858 560,165 250,672 236,970 40,626,594

BalanceasatJanuary01,2016 6,777,600 1,801,038 34,919 9,000 28,624,587 2,284,785 46,858 560,165 250,672 236,970 40,626,594Additionsduringtheyear 71,901 4,361 – – 22,751 – 164 18,193 – 83,725 201,095Disposalsduringtheyear – (4,288) – – – – – (1,241) (52,651) – (58,180)BalanceasatDecember31,2016 6,849,501 1,801,111 34,919 9,000 28,647,338 2,284,785 47,022 577,117 198,021 320,695 40,769,509

DEPRECIATION BalanceasatJanuary01,2015 – 36,476 262 3,076 22,914 374,381 2,718 18,908 289,504 77,177 825,416Chargefortheyear-note20.1.3 – 109,518 3,522 5,924 413,878 112,480 8,122 48,906 15,696 14,387 732,433Chargeondisposals – – – – – – – (677) (57,310) – (57,987)BalanceasatDecember31,2015 – 145,994 3,784 9,000 436,792 486,861 10,840 67,137 247,890 91,564 1,499,862

BalanceasatJanuary01,2016 – 145,994 3,784 9,000 436,792 486,861 10,840 67,137 247,890 91,564 1,499,862Chargefortheyear-note20.1.3 – 109,657 3,492 – 366,541 112,480 8,003 37,905 2,747 21,023 661,848Chargeondisposals – (565) – – – – – (1,183) (52,651) – (54,399)BalanceasatDecember31,2016 – 255,086 7,276 9,000 803,333 599,341 18,843 103,859 197,986 112,587 2,107,311

BookvalueasatDecember31,2015 6,777,600 1,655,044 31,135 – 28,187,795 1,797,924 36,018 493,028 2,782 145,406 39,126,732

BookvalueasatDecember31,2016 6,849,501 1,546,025 27,643 – 27,844,005 1,685,444 28,179 473,258 35 208,108 38,662,198

20.1.1 Freeholdland,buildingsonfreeholdland,railwaysiding,plantandmachineryandtoolsandotherequipmentwererevalued

byanindependentprofessionalvaluerM/sPirsonsChemicalEngineering(Private)LimitedonAugust31,2014.Therevaluationsurplusnetofdeferredtaxwascreditedtosurplusonrevaluationofoperatingfixedassets.Hadtherebeennorevaluation,thecarryingamountsofthefollowingclassesofassetswouldhavebeenasfollows:

2016 2015 (Rupeesinthousand) Freeholdland 983,841 911,940 Buildingsonfreeholdland 1,170,866 1,252,700 Plantandmachinery 15,719,644 15,896,051 Toolsandotherequipment 326,600 334,285 18,200,951 18,394,976

20.1.2 IncludedinplantandmachineryareassetshavingcarryingamountofRs47.78millionthatareinstalledatthemanufacturingfacilitiesofthecompany’scustomersnamelyIcebergGasCompany,Coca-ColaBeveragesPakistanLimitedandPepsiColaInternational(Private)Limitedastheseassetsareusedforsalestothesecustomers.

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20.1.3 The depreciation charge for the year has been allocated as follows: Costofsales -note30 519,832 528,302 Administrativeexpenses -note31 139,732 194,648 Sellinganddistributionexpenses -note32 2,284 9,483 661,848 732,433

20.1.4 Fair value estimation

Fairvalueistheamountforwhichanassetcouldbeexchanged,orliabilitysettled,betweenknowledgeablewillingpartiesinanarm’slengthtransaction.Underlyingthedefinitionoffairvalueisthepresumptionthatthecompanyisagoingconcernwithoutanyintentionorrequirementtocurtailmateriallythescaleofitsoperationsortoundertakeatransactiononadverseterms.Fairvalueisdeterminedonthebasisofobjectiveevidenceateachreportingdate. Thetablesbelowanalyzethenon-financialassetscarriedatfairvalueasatDecember31,2016andDecember31,2015. Thedifferentlevelshavebeendefinedasfollows:

- Quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities(level1).

- Inputsotherthanquotedpricesincludedwithinlevel1thatareobservablefortheassetorliability,eitherdirectly(thatis,asprices)orindirectly(thatis,derivedfromprices)(level2).

- Inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(thatis,unobservableinputs)(level3).

Thefollowingtablepresentsthecompany’snon-financialassetsthataremeasuredatfairvalueatDecember31,2016.

(Rupeesinthousand)

Level 1 Level 2 Level 3 Total Recurring fair value measurements of certain items of operating fixed assets

Freeholdland – 6,849,501 – 6,849,501 Buildingsonfreeholdland – – 1,546,025 1,546,025 Plantandmachinery – – 27,844,005 27,844,005 Toolsandotherequipment – – 473,258 473,258 – 6,849,501 29,863,288 36,712,789 Thefollowingtablepresentsthecompany’snon-financialassetsthataremeasuredatfairvalueatDecember31,2015.

(Rupeesinthousand)

Level 1 Level 2 Level 3 Total Recurring fair value measurements of certain items of operating fixed assets

Freeholdland – 6,777,600 – 6,777,600 Buildingsonfreeholdland – – 1,655,044 1,655,044 Plantandmachinery – – 28,187,795 28,187,795 Toolsandotherequipment – – 493,028 493,028 – 6,777,600 30,335,867 37,113,467 Movementsoftheabovementionedassetsandsurplusonrevaluationoftheseassetshavebeendisclosedinnote20.1andnote7

respectivelytothesefinancialstatements.Thecompany’spolicyistorecognisetransfersintoandtransfersoutoffairvaluehierarchylevelsasattheendofthereportingperiod.TherewerenotransfersbetweenLevels1and2&Levels2and3duringtheyearandtherewerenochangesinvaluationtechniquesduringtheyears.

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ANNUAL REPORT 2016

Fair value at

Valuation techniques used to determine level 2 and level 3 fair values

The company obtains independent valuations for its freehold land, building on freehold land, railway siding, plant andmachinery,andtoolsandequipments(classifiedasproperty,plantandequipment)atleasteverythreeyears.Attheendofeachreportingperiod,themanagementupdatesitsassessmentofthefairvalueofeachassetmentionedabove,takingintoaccount themost recent independent valuation. Themanagement determines anasset’s valuewithin a rangeofreasonablefairvalueestimates.Level2fairvalueoffreeholdlandhasbeenderivedusingasalescomparisonapproach.Salepricesofcomparablelandincloseproximityareadjustedfordifferencesinkeyattributessuchaslocationandsizeoftheproperty.Themostsignificantinputintothisvaluationapproachispricepersquarefoot.Level3fairvalueofbuildingonfreeholdlandhasbeendeterminedusingadepreciatedreplacementcostapproach,whereby,currentcostofconstructionofasimilarbuilding inasimilar locationhasbeenadjustedusingasuitabledepreciationratetoarriveatpresentmarketvalue.Level3fairvalueofrailwaysiding,plantandmachinery,andtoolsandequipmentshavebeendeterminedusingadepreciatedreplacementcostapproach,whereby,thecurrentreplacementcostofrailwaysiding,plantandmachinery,and toolsandequipmentsof similarmake/origin,capacityand levelof technologyhasbeenadjustedusinga suitabledepreciationrateonaccountofnormalwearandtear.

Valuation inputs and relationship to fair value

Thefollowingtablesummarisesthequantitativeandqualitativeinformationaboutthesignificantunobservableinputsusedinrecurringlevel3fairvaluemeasurements.Seeparagraphaboveforthevaluationtechniquesadopted.

Significant Quantitative Data / Range Description Unobservable and relationship to the

2016 2015 inputs fair value

Buildingsonfreeholdland 1,546,025 1,655,044 Costofconstruction ofanewsimilarbuilding. Suitabledepreciationrate to arrive at depreciated replacementvalue.

Plantandmachinery 27,844,005 28,187,795 Costofacquisitionof similar plant andmachinery withsimilarlevelof technology. Suitabledepreciationrate to arrive at depreciated replacement value

The market value has beendeterminedbyusingadepreciationfactorofapproximately10%-15%oncost of constructing a similar newbuilding.Higher, theestimatedcostof construction of a new building,higher the fairvalue. Further,higherthedepreciationrate,thelowerthefairvalueofthebuilding.

The market value has beendetermined by using cost ofacquisition of similar plant andmachinery with similar level oftechnologyandapplyingasuitabledepreciation factor based onremaining useful lives of plant andmachinery. Remaining useful liveshave been estimated from 20 to25 years. The higher the cost ofacquisition of similar plant andmachinery, higher the fair value ofplantandmachinery.Further,higherthedepreciationrate,thelowerthefairvalueofplantandmachinery.

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Significant Quantitative Data / Range Description Unobservable and relationship to the

2016 2015 inputs fair value

Toolsandotherequipment 473,258 493,028 Costofacquisitionof similartoolsandequipment withsimilarlevelof technology. Suitabledepreciationrate to arrive at depreciated replacementvalue. 2016 2015 (Rupeesinthousand)

20.2 Capital work-in-progress

Plantandmachinery 11,274 9,468 Civilworks 14,844 295 Advancesagainstpurchaseof: -Freeholdland-consideredgood 25,966 – -Plantandmachinery-consideredgood 2,353 1,825 54,437 11,588 20.2.1 The reconciliation of the carrying amount is as follows:

Openingbalance 11,588 12,408 Additionsduringtheyear 165,700 21,383 177,288 33,791 Transfersduringtheyear (122,851) (22,203) Closingbalance 54,437 11,588 20.3 Capital stores and stand-by equipment

Openingbalance 55,764 74,421 Additionsduringtheyear 69,070 19,378 124,834 93,799 Transfersduringtheyear (92,779) (38,035) Closingbalance 32,055 55,764

Fair value at

The market value has beendetermined by using cost ofacquisition of similar tools andequipment with similar levelof technology and applying asuitable depreciation factor basedon remaining useful lives of toolsand equipment. Remaining usefullives have been estimated from4 to 25 years. The higher the costof acquisition of similar tools andequipment, higher the fair value oftoolsandequipment.Further,higherthedepreciationrate,thelowerthefairvalueoftoolsandequipment.

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ANNUAL REPORT 2016

(Rupeesinthousand) Computer Mining rights Total software21. Intangible assets COST BalanceasatJanuary01,2015 44,240 210,000 254,240 Additionsduringtheyear 607 – 607 BalanceasatDecember31,2015 44,847 210,000 254,847 BalanceasatJanuary01,2016 44,847 210,000 254,847 Additionsduringtheyear – – – BalanceasatDecember31,2016 44,847 210,000 254,847 AMORTIZATION BalanceasatJanuary01,2015 16,841 112,000 128,841 Chargefortheyear -note21.2 10,717 21,000 31,717 BalanceasatDecember31,2015 27,558 133,000 160,558 BalanceasatJanuary01,2016 27,558 133,000 160,558 Chargefortheyear -note21.2 10,535 21,000 31,535 BalanceasatDecember31,2016 38,093 154,000 192,093

BookvalueasatDecember31,2015 17,289 77,000 94,289


Annualamortizationrate% 25 10

21.1 MiningrightsrepresentrightsacquiredforextractionofrockphosphatefromablockofareainDistrictAbbottabadfora

tenyearsperiodendingonAugust11,2019.TheaforesaidareaisinthepossessionandcontrolofPakistanMiningCompanyLimited(‘PMCL’),arelatedparty(associatedcompany),whichprovidesrockphosphateextractionservicestothecompanyaspertheServicesAgreement.


21.2 Theamortizationchargefortheyearhasbeenallocatedasfollows: Costofsales(includedinrawmaterialsconsumed) 21,000 21,000 Administrativeexpenses -note31 10,535 10,717

31,535 31,717

22. Goodwill

ThisrepresentsgoodwillonamalgamationofRELandthecompany.

Impairmenttestingofgoodwillhasbeencarriedoutbyallocatingtheamountofgoodwilltorespectiveassetsonwhichitarose.TherecoverableamountoftheCashGeneratingUnithasbeendeterminedbasedonavalueinusecalculation.Thiscalculationusescashflowprojectionsbasedonfinancialplansapprovedbymanagementcoveringafive-yearperiodthathavebeendiscountedusingadiscountrateof11%.Thecashflowsbeyondthefive-yearperiodareextrapolatedusinganestimatedgrowthrateof4%whichisconsistentwiththelong-termaveragegrowthrateforthefertilizerindustry.Alongterm/terminalgrowthrateof1.45%orariseindiscountrateto12.90%would,allchangestakeninisolation,resultintherecoverableamountbeingequaltothecarryingamount.

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Theabovecashflowprojectionsareprincipallybasedontheassumptionthatgassupplywouldcontinuetothecompany’splantinaccordancewiththearrangementwithSNGPLwhereinthegasthatwillbesuppliedtothecompany’splantwillbeamixofdomesticnaturalgasandimportedLNG.ThemixwouldcontributetobetterprofitmarginssincedomesticnaturalgasischeaperthanimportedLNG.Also,duringthecurrentyear,company’ssalesvolumesimprovedsignificantlyascomparedtopreviousyears,however,macro-economicfactorssuchasdownwardtrendininternationalcommoditymarketpricesledtodecreaseinsellingpricesresultinginlossfortheyear.However,managementisconfidentthatthesituationwillimproveastheinternationalcommoditymarketpriceshavestartedtorecover.


23. Long term investments

Subsidiary - unquoted - available for sale (not intended to be sold within next twelve months): RSL(incorporatedinPakistan) 16,863,273(2015:16,863,273)fully paidordinarysharesofRs10each Equityheld100%(2015:100%) BookvaluepershareRs33.91(2015:Rs26.98) -note23.1 352,625 297,120 Associate - unquoted - at cost:

MultanRealEstateCompany(Private)Limited 642,321(2015:642,321)fully paidordinarysharesofRs100each Equityheld29.55%(2015:29.55%) BookvaluepershareRs100.05(2015:Rs100.04) -note23.2 64,232 64,232 Associate - unquoted - at cost:

FatimaElectricCompanyLimited 7,000(2015:Nil)fully paidordinarysharesofRs10each Equityheld20%(2015:Nil) BookvaluepershareRs10(2015:Nil) -note23.3 70 – Held to maturity (not due to mature within next twelve months): -Other -note23.4 48,536 43,278 Advance against purchase of shares in: -FASS,relatedparty(groupcompany) 1,400 –

466,863 404,630

23.1 Investment in RSL - at fair value

Atcost 168,633 168,633 Cumulativefairvaluegainrecognised 183,992 128,487

-note23.1.1 352,625 297,120

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ANNUAL REPORT 2016

This represents investment in the ordinary shares of RSL which is principally engaged in themanufacturing and sale ofpolypropylenesacks,polypropyleneclothandlinerstobeusedinpackingoffertilizers.SinceRSL’sordinarysharesarenotlisted,an investmentadvisor engagedby thecompanyhasestimateda fair valueof Rs 20.91perordinary shareasatDecember31,2016throughavaluationtechniquebasedondiscountedcashflowanalysisofRSL,hence,hasbeenclassifiedunderlevel3offairvaluehierarchyasfurtherexplainedinnote43.2tothesefinancialstatements.

Themainlevel3inputsusedbythecompanyarederivedandevaluatedasfollows: -Discount rate isdeterminedusingacapitalassetpricingmodel tocalculateapre-tax ratethat reflectscurrentmarket

assessmentsofthetimevalueofmoneyandtheriskspecifictoRSL. -LongtermgrowthrateisestimatedbasedonhistoricalperformanceofRSLandcurrentmarketinformationforsimilartype

ofcompanies. Thesignificantassumptionusedinthisvaluationtechniqueareasfollows: -Discountrateof14.73%. -Longtermgrowthrateof2%forcomputationofterminalvalue. -Annualgrowthinsalespriceof5%perannum. -Annualgrowthinvariablecostofinputsof5%perannum. -Annualincrementinsalariesof13%perannum. Sensitivity analysis

Sensitivityanalysisofthesignificantassumptionsusedinthevaluationtechniqueareasfollows: Ifthediscountrateincreasesby1%withallothervariablesheldconstant,theimpactonfairvalueasatDecember31,2016

wouldbeRs20.904millionlower. Ifthelongtermgrowthratedecreasesby1%withallothervariablesheldconstant,theimpactonfairvalueasatDecember

31,2016wouldbeRs45.220millionlower. Ifannualgrowthinsalespricesdecreasesby1%withallothervariablesheldconstant,theimpactonfairvalueasatDecember

31,2016wouldbeRs414.538millionlower. Ifannualgrowthinvariablecostofinputsincreasesby1%withallothervariablesheldconstant,theimpactonfairvalueas

atDecember31,2016wouldbeRs176.851millionlower. Ifincrementinsalariesincreasesby1%withallothervariablesheldconstant,theimpactonfairvalueasatDecember31,2016would

beRs30.341millionlower.


23.1.1 Thereconciliationofthecarryingamountisasfollows:

Openingbalance 297,120 258,177 Surplus on remeasurement of fair value ofavailable-for-saleinvestmentrecognized asothercomprehensiveincome 55,505 38,943 Closingbalance 352,625 297,120

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23.2 Multan Real Estate Company (Private) Limited - associate - unquoted - at cost

ThisrepresentsinvestmentintheordinarysharesofMultanRealEstateCompany(Private)Limited(‘MREC’).ThemainbusinessofMRECisestablishinganddesigninghousingandcommercialschemes,tocarryonbusinessofcivilengineersforconstructionofprivateandgovernmentalbuildingsandinfrastructureandprovisionoflaborandbuildingmaterial.

23.3 Fatima Electric Company Limited - associate - unquoted - at cost

ThisrepresentsinvestmentintheordinarysharesofFatimaElectricCompanyLimited(‘FECL’).ThemainbusinessofFECListransmitting,manufacturing,supplying,generating,distrubutinganddealinginelectricityandallformsofenergyandpower.

23.4 Investment - Other

ThisrepresentsDefenceSavingCertificatesissuedforaperiodoftenyears,whichwillmatureonSeptember11,2019.Yieldtomaturityonthesecertificatesis12.15%.ThesecertificateshavebeenpledgedassecuritywiththeDirectorGeneral,Mines&Minerals,GovernmentofKhyberPakhtunkhwaasperthetermsoftheminingagreement.


24. Stores and spare parts Chemicalsandcatalysts[includingintransit: -note24.1 795,358 845,155 Rs4.147million(2015:Rs29.554million)] Stores 109,436 114,625 Spareparts[includingintransit:Rs42.514million (2015:Rs37.598million)] 1,673,285 1,677,407

2,578,079 2,637,187

Provisionforobsoleteitems (76,224) (76,224)

2,501,855 2,560,963

24.1 Included inchemicalsandcatalysts isplatinum, rhodiumandpalladiumofRs234.684million (2015:Rs80.327million)heldbyM/sJohnsonMattheyPublicLimitedCompany,UnitedKingdomonbehalfofthecompanyforrefiningpurposes.


25. Stock-in-trade

Rawmaterials -note25.2 191,092 539,316 Packingmaterials 27,199 40,043 Midproducts 173,586 180,135 Finishedgoods: -Ownmanufactured: -notes25.3 Fertilizers &25.4 3,556,004 4,707,754 Emissionreductions -note25.5 – –

3,556,004 4,707,754 -Fertilizerpurchasedforresale 122,186 2,193,497

4,070,067 7,660,745

25.1 RawmaterialsandfinishedgoodsamountingtoRs4,116.050million(2015:Rs4,521.267million)arepledgedwithlendersassecurity

againstshorttermborrowingsasreferredtoinnote15.1tothesefinancialstatements.

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ANNUAL REPORT 2016

25.2 IncludesrockphosphateamountingtoRs114.117million(2015:Rs64.396million)whichisinthepossessionofPMCL,arelatedparty(associatedcompany). The rockphosphate inpossessionof PMCL isdue to the reasonexplained in note 21.1 to these financialstatements.

25.3 ThisincludesstockofCANandUreacostingRs3,543millionandRs285millioncarriedattheirNRVamountingtoRs3,099millionandRs

229millionrespectively.TheNRVwritedownexpenseofRs500millionhasbeenchargedtocostofsales.

25.4 Includescompany’sfertilizerproduct,NitroPhosphate(‘NP’),amountingtoNil(2015:Rs5.748million)whichisinpossessionofFATIMA,a

relatedparty(associatedcompany),forstoragepurposeasthetwocompaniessharestoragespaceatcertainlocations.Furthermore,italsoincludescompany’sfertilizerproduct,SingleSuperPhosphate(‘SSP’),amountingtoRs3.89million(2015:Rs31.365million)whichisinpossessionofM/sFarasFertilizerLimited(‘FARAS’)forstoragepurposeastheproductionofSSPhasbeenoutsourcedtoFARAS.

25.5 ThisrepresentsemissionreductionscostingRs37.137million(2015:Rs37.137million)carriedattheirNRVamountingtoNil(2015:Nil).


26. Trade debts

Consideredgood: -Secured(bywayofbankguaranteesandsecuritydeposits) -note26.1 2,482,285 2,507,978 -Unsecured 415,971 116,222

2,898,256 2,624,200

26.1 Theseareinthenormalcourseofbusinessandcertaindebtscarryinterestrangingfrom8.23%to9.49%perannum. 2016 2015 (Rupeesinthousand)

27. Advances, deposits, prepayments and other receivables Advances - considered good:

-Toemployees -note27.1 5,685 11,022 -Tosuppliers -note27.2 102,338 1,707,632 Prepayments 181,481 163,712 Interestreceivableonbankdeposits – 992 Balanceswithstatutoryauthorities: -Salestax -consideredgood -note27.3 2,617,682 2,206,858 -considereddoubtful 8,911 8,911 2,626,593 2,215,769 -Incometaxrecoverable 4,129,422 3,765,575 -Customdutyrecoverable 9,812 9,812 Securitydepositsandmargins 10,195 18,405 ReceivablefromGovernmentofPakistan -note27.4 812,388 1,302,429 Otherreceivables-consideredgood 207,245 103,917

8,085,159 9,299,265 Provisionfordoubtfulreceivable (8,911) (8,911)

8,076,248 9,290,354 27.1 IncludedinadvancestoemployeesareamountsduefromexecutivesofRs4.469million(2015:Rs7.503million). 27.2 IncludesanamountofRs26.741million(2015:Rs26.741million)andNil(2015:Rs5.895million)asadvancestorelatedparties

(associatedcompanies),PMCLandSNGPLrespectively.

71


27.3 IncludesRs134.022millionwhichprimarilyrepresentstheinputsalestaxpaidbythecompanyinrespectofrawmaterialsacquiredbeforeJune11,2008onwhichdatefertilizerproductsmanufacturedbythecompanywereexemptedfromlevyofsalestaxthroughnotificationSRO535(I)/2008.Theamountstoodrefundabletothecompanytherebeingnooutputsalestaxliabilityremainingpayableonfertilizerproductsmanufacturedbythecompanyagainstwhichsuchinputsalestaxwasadjustable.Thecompany’sclaimofrefundonthisaccountwasnotentertainedbyFederalBoardofRevenue(‘FBR’)onthepremisethatsincesubjectrawmaterialsweresubsequentlyconsumedinmanufactureofaproductexemptfromlevyofsalestax,claimwasnotinaccordancewiththerelevantprovisionsoftheSalesTaxAct,1990.

Company’smanagementbeingaggrievedwiththeinterpretationadvancedbyFBRontheissuehaspreferredawritpetition

beforetheHonourableLahoreHighCourt,whichhasnotyetbeendisposedoff.Sincecompany’smanagementconsidersthat claim of refund is completely in accordancewith relevant statutory framework and expects relief from appellateauthoritiesonthisaccount,itconsidersthatthereceivableamountwasunimpairedatthebalancesheetdate.

27.4 During last year, theGovernmentofPakistan (hereinafter referred toas ‘GoP’)hadnotifiedpaymentof subsidyon sold

productattherateofRs500per50kgbagofDiAmmoniumPhosphate(‘DAP’)andRs217per50kgbagofNPsold.ThissubsidyschemewaseffectivetillMay27,2016.

Duringtheyear,anotherschemewasannouncedbyGoPwhichwaseffectivefromJune25,2016.Throughthisscheme,GoP

hasnotifiedpaymentofsubsidyonsoldproductattherateofRs156per50kgbagofUrea,Rs300per50kgbagofDAP,Rs130per50kgbagofNPandRs88per50kgbagofCANsold.TheamountofsubsidywillbepaidtothecompanyuponverificationbyFBR.


28. Cash and bank balances

Atbankson: -notes28.1 -Savingaccounts &28.2 114,877 382,090 -Currentaccounts -note28.2 26,097 130,399 -Termdeposit -note28.3 250,000 –

390,974 512,489 Inhand 2,927 4,969

393,901 517,458 28.1Profitonbalancesinsavingaccountsrangesfrom5.25%to5.75%perannum. 28.2 IncludedinsavingaccountsisanamountofRs99.868million(2015:Rs217.379million)whichbearsmarkupattherateof

5.25%perannumandincludedincurrentaccountsisanamountofRs0.361million(2015:Rs2.698million),bothplacedwithSummitBankLimited,arelatedparty(associatedcompany).

28.3 Thisbearsmarkupattherateof5.31%perannum.

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ANNUAL REPORT 2016


29. Sales

Fertilizerproducts: -Ownmanufactured 12,379,024 16,193,646 -Purchasedforresale 3,798,627 6,307,780

16,177,651 22,501,426

SubsidyfromGovernmentofPakistan -note27.4 1,444,211 1,302,429 Midproducts 553,608 542,280 Rockphosphate – 40,107

1,997,819 1,884,816

18,175,470 24,386,242 Less: Salestax 1,383,650 2,081,415 Salesincentive 615,856 384,332

1,999,506 2,465,747

16,175,964 21,920,495 30. Cost of sales

Rawmaterialconsumed -notes30.1&30.2 7,416,842 11,898,039 Packingmaterialconsumed 219,534 339,559

7,636,376 12,237,598 Salaries,wagesandotherbenefits -note30.3 791,289 638,150 Fuelandpower -note30.4 1,905,332 2,461,501 Chemicalsandcatalystsconsumed 260,642 408,497 Sparepartsconsumed 267,816 151,981 Storesconsumed 97,450 45,723 Repairsandmaintenance 141,812 73,713 Insurance 85,043 128,412 Depreciationonoperatingfixedassets -note20.1.3 519,832 528,302 Tollmanufacturingchargesandfreight -note30.5 16,467 723,838 Others 69,142 40,310

11,791,201 17,438,025

Openingstockofmidproducts 180,135 19,709 Closingstockofmidproducts (173,586) (180,135) 6,549 (160,426)

Costofgoodsmanufactured 11,797,750 17,277,599 Openingstockoffinishedgoods 4,707,754 9,226 Closingstockoffinishedgoods (3,556,004) (4,707,754)

1,151,750 (4,698,528)

Costofgoodssold-ownmanufactured 12,949,500 12,579,071 Costofgoodssold-purchasedforresale 3,256,587 4,773,728

-note30.6 16,206,087 17,352,799 30.1 IncludesfeedgasconsumedofRs4,120.998million(2015:Nil)purchasedfromSNGPL,arelatedparty(associatedcompany). 30.2 IncludesexpensesofNil(2015:Rs43.459million)forextractionofrockphosphatebyPMCL,arelatedparty(associatedcompany),as

explainedinnote21.1tothesefinancialstatements.

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30.3 Salaries, wages and other benefits Salaries,wagesandotherbenefitsincludethefollowingin respectofretirementbenefits:

Gratuity fund

Currentservicecost 15,217 15,792 Interestcostfortheyear 10,949 7,425 Returnonplanassets (9,772) (6,492)

16,394 16,725

Accumulating compensated absences

Currentservicecost 3,050 8,059 Interestcostfortheyear 5,767 4,052 Remeasurements 79 524

8,896 12,635

Inadditiontotheabove,salaries,wagesandotherbenefitsincludeRs15.581million(2015:Rs13.215million)inrespectof

providentfundcontributionbythecompany. 30.4IncludesfuelgasconsumedofRs1,510.445million(2015:Rs46.907million)purchasedfromSNGPL,arelatedparty(associated

company). 30.5ThisincludesprocessingservicesofNil(2015:Rs658.842million)availedfromFATIMA,arelatedparty(associatedcompany). 30.6IncludesoperatingleaserentalsamountingtoRs32.350million(2015:Rs15.224million). 2016 2015 (Rupeesinthousand)

31. Administrative expenses

Salaries,wagesandotherbenefits -note31.1 250,335 301,435 Travellingandconveyance 12,878 15,546 Telephone,telexandpostage 8,147 14,521 Stationery,printingandperiodicals 5,715 5,194 Rent,ratesandtaxes -note31.2 34,180 59,738 Repairsandmaintenance 24,163 50,130 Aircraftoperatingexpenses -note31.3 120,806 123,161 Insurance 8,883 13,540 Legalandprofessionalcharges 45,317 23,126 Vehiclerunningexpenses 712 2,785 Entertainment 3,304 7,765 Advertisement 443 352 Depreciationonoperatingfixedassets -note20.1.3 139,732 194,648 Amortizationonintangibleassets -note21.2 10,535 10,717 Others 28,619 56,739

-note31.4 693,769 879,397

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ANNUAL REPORT 2016


31.1 Salaries, wages and other benefits

Salaries,wagesandotherbenefitsincludethe followinginrespectofretirementbenefits:

Gratuity fund Currentservicecost 4,910 5,325 Interestcostfortheyear 3,533 2,503 Expectedreturnonplanassets (3,153) (2,189) Amountchargedtorelatedparty (1,313) (1,108)

3,977 4,531

Accumulating compensated absences Currentservicecost 1,352 3,060 Interestcostfortheyear 2,558 1,539 Remeasurements 35 199

3,945 4,798 Inaddition to theabove, salaries,wagesandotherbenefits includeRs4.865million (2015:Rs5.302million) in respectof

providentfundcontributionbythecompany. 31.2IncludesoperatingleaserentalsamountingtoRs14.502million(2015:Rs19.289million). 31.3 IncludesexpensesofRs38.516million(2015:Rs35.120million)forflyingandmaintenanceservicesofthecompany’saircraft

byAirOne(Private)Limited,arelatedparty(associatedcompany)aspertheServicesAgreement. 31.4 IncludesamountofRs145.460million(2015:Rs187.733million)andRs33.807million(2015:Nil)whichrepresentcommoncosts

chargedtothecompanybyFATIMAandFatimafertLimited(‘FFL’),relatedparties(associatedcompanies).Also,theamountisnetofRs77.775million(2015:Rs81.111million)andRs25.484million(2015:Nil)whichrepresentcommoncostschargedbythecompanytoFATIMAandFFL,relatedparties(associatedcompanies).


32. Selling and distribution expenses

Salaries,wagesandotherbenefits -note32.1 30,225 117,712 Travellingandconveyance 1,144 9,655 Telephone,telexandpostage 723 6,772 Stationery,printingandperiodicals 2,328 1,745 Rent,ratesandtaxes -note32.2 61,237 40,662 Repairsandmaintenance 2,132 5,007 Insurance 4,095 3,153 Vehiclerunningexpenses 206 7,436 Entertainment 547 3,966 Advertisementandsalepromotion 41,296 148,982 Depreciationonoperatingfixedassets -note20.1.3 2,284 9,483 Transportationandfreight 564,557 533,238 Utilities 230 1,066 Marketinganddistributionservicesfee -note32.3 113,357 – Others 5,490 7,665

-note32.4 829,851 896,542

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Salaries,wagesandotherbenefitsincludethe followinginrespectofretirementbenefits:

Gratuity fund Currentservicecost – 9,981 Interestcostfortheyear – 4,692 Expectedreturnonplanassets – (4,103) Amountchargedtorelatedparty – (7,196)

– 3,374 Accumulating compensated absences Currentservicecost – 4,851 Interestcostfortheyear – 2,439 Remeasurements – 315

– 7,605 Inadditiontotheabove,salaries,wagesandotherbenefitsincludeNil(2015:Rs9.901million)inrespectofprovidentfund

contributionbythecompany.

32.2IncludesoperatingleaserentalsamountingtoRs39.508million(2015:Rs30.952million).

32.3 ThisexpenseisforthemarketinganddistributionservicesprovidedbyFASS,arelatedparty(associatedcompany)aspertheServicesAgreement.

32.4IncludesamountofRs102.908million(2015:Rs137.458million)whichrepresentscommoncostschargedtothecompanybyFATIMA,arelatedparty(associatedcompany).Also,theamountisnetofRs162.693million(2015:Rs437.373million)andRs22.178million(2015:Nil)whichrepresentcommoncostschargedbythecompanytoFATIMAandFASS,relatedparties(associatedcompanies).


33. Finance cost

Interest/mark up on: -PPTFCs-secured 15,459 – -Longtermloans-secured 236,920 176,732 -Syndicatetermfinance-secured 1,660 – -Longtermloansfromrelatedparties-unsecured -note33.1 184,243 143,592 -Longtermloanfromrelatedparty-secured -note33.2 6,048 – -Shorttermborrowingfromrelatedparty-secured -note33.2 219,972 296,779 -Shorttermborrowings-secured -note33.3 972,710 839,871 Loanarrangementfeesandothercharges 803 605 Commissiononletterofcredit -notes8.2.6 – 137,090 Amortisationoftransactioncost &8.3 4,695 482 Discountingchargesonbankguaranteesdiscounted 104,923 62,496 Latepaymentsurcharge -note33.4 10,839 – Bankcharges 43,565 19,341 1,801,837 1,676,988

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33.1 Thisrelatestothefollowingrelatedparties:

FatimaHoldingLimited(associatedcompany) 7,895 15,931 RelianceCommodities(Private)Limited(associatedcompany) 69,806 41,057 InternationalComplexProjectsLimited(associatedcompany) 33,770 – MemberandChairman’sspouse 28,985 33,402 Chairman’schildren 9,241 5,067 Directors 34,546 48,135

184,243 143,592 33.2TheserelatestoFATIMA,arelatedparty(associatedcompany).

33.3 IncludesinterestexpenseofRs32.546million(2015:Rs36.916million)onaccountofrunningfinancefacilityavailedfromSummitBank

Limited,arelatedparty(associatedcompany).

33.4 ThisrelatestoSNGPL,arelatedparty(associatedcompany)withrespecttothelatepaymentofgasbillsbythecompany.


34. Other expenses

Donations -note34.1 15,681 20,947 Advanceswrittenoff – 2,218 Exchangeloss – 227,441 Workers’profitparticipationfund -note17.5 – 59,843 Workers’welfarefund -note17.6 – 22,740

15,681 333,189

34.1IncludesanamountofRs13.281million(2015:Rs20.947million)donatedtoarelatedparty,MukhtarA.SheikhTrust(associatedundertaking).


35. Other income Income from financial assets: Incomeonbankdeposits -note35.1 4,460 61,589 Unrealisedgainoninvestmentheldtomaturity 5,258 4,689 Markuponcreditsaleoffertilizers 1,823 1,517 Exchangegain 827 –

12,368 67,795 Income from non-financial assets: Rentalincome -note35.2 15,517 17,486 Profitondisposalofoperatingfixedassets 5,965 5,579 Scrapsalesandsundryincome -note35.3 11,979 24,517 -notes35.4 Provisionsandunclaimedbalanceswrittenback &35.5 294,447 148,465 Incomefrombiologicallaboratory 4,406 4,636 Excessinsurancepremiumrefunded 7,185 64,205

339,499 264,888

351,867 332,683

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35.1 IncludesinterestincomeofRs2.782million(2015:Rs7.360million)onaccountofsavingaccountwithSummitBankLimited,arelatedparty(associatedcompany).

35.2Includesrentalincomeforvehiclesinuseofandaccomodationprovidedtotheemployeesofthefollowingrelatedparties

(associatedcompanies):


FATIMA 392 64 FatimaEnergyLimited 1,374 996 RelianceWeavingMillsLimited 694 3,452 FASS 459 – FatimaSugarMillsLimited 18 – 2,937 4,512

35.3 IncludesanamountofNil(2015:Rs1.084million)inrespectofscrapsalestoFATIMA.

35.4 IncludesanamountofNil(2015:Rs132.159million) inrespectof latepaymentsurchargeonGIDCpayable,writtenbackrelatingtotheperiodbeforetheenactmentoftheGIDCAct,2015.

35.5IncludesanamountofRs246.751million(2015:Nil)inrespectofprovisionforWWFwrittenbackasfullyexplainedinnote17.6.1

tothesefinancialstatements. 2016 2015 (Rupeesinthousand)

36. Taxation Current tax -Fortheyear 145,206 206,336 -Prioryears – 21,215 145,206 227,551 Deferredtax -note13 (1,237,513) (1,573,000)

(1,092,307) (1,345,449)

36.1 Asexplainedinnote4.1tothesefinancialstatements,thecompany’sprovisionfortaxation(currentanddeferred)isbased

ontheconsolidatedresultsoftheGroup. 2016 2015 %age %age

36.2 Tax charge reconciliation Numericalreconciliationbetweentheaverageeffectivetaxrate andtheapplicabletaxrate Applicabletaxrate 31.00 32.00 Tax effect of: -Amountsthatarenotdeductiblefortaxpurposes (0.82) 3.18 -Amountsthatarenotchargeablefortaxpurposes 17.59 (37.39) -Allowableastaxcredit 0.08 – -Deferredtaxassetnotrecognizedonminimumtaxavailableforcarryforward (8.50) – -Grouptaxationasexplainedinnote4.1 (1.02) 1.86 -Changeintaxrate (1.50) (75.49) -Changeinprioryears’tax (0.65) (44.91)

5.18 (152.75)

Averageeffectivetaxrate 36.18 (120.75)

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ANNUAL REPORT 2016


37. Cash generated from/(used in) operations (Loss)/profitbeforetaxation (3,019,394) 1,114,263 Adjustmentsfornon-cashchargesandotheritems: -Depreciationonoperatingfixedassets 661,848 732,433 -Advanceswrittenoff – 2,218 -Amortizationonintangibleassets 31,535 31,717 -Retirementbenefitsaccrued 34,525 57,972 -Profitondisposalofoperatingfixedassets (5,965) (5,579) -Provisionsandunclaimedbalanceswrittenback (294,447) (148,465) -Financecost 1,801,837 1,676,988 -Incomeonbankdeposits (4,460) (61,589) -Unrealisedgainoninvestmentheldtomaturity (5,258) (4,689) -NRVwritedown 500,000 – -Exchange(gain)/loss (827) 227,440 (Loss)/profitbeforeworkingcapitalchanges (300,606) 3,622,709 Effectoncashflowduetoworkingcapitalchanges -Decreaseinstoresandspareparts 59,108 70,064 -Decrease/(increase)instock-in-trade 3,090,678 (6,947,585) -Increaseintradedebts (274,056) (2,436,386) -Decrease/(increase)inadvances,deposits prepaymentsandotherreceivables 1,576,961 (4,698,520) -(Decrease)/increaseintradeandotherpayables (1,161,686) 2,266,837

3,291,005 (11,745,590)

2,990,399 (8,122,881)

38. Cash and cash equivalents

Shorttermborrowings -note15 (9,173,126) (15,151,614) Cashandbankbalances -note28 393,901 517,458

(8,779,225) (14,634,156) 39. Transactions with related parties

Therelatedpartiescompriseofsubsidiary,associatedundertakings,otherrelatedparties,keymanagementpersonnelandpostemploymentbenefitplans.Thecompanyinthenormalcourseofbusinesscarriesouttransactionswithvariousrelatedparties.Amountsduefromandduetorelatedpartiesareshownunderreceivablesandpayablesandremunerationofthekeymanagementpersonnelisdisclosedinnote40tothesefinancialstatements.Significantrelatedpartytransactionshavebeendisclosedinrespectivenotesinthesefinancialstatementsexceptforthefollowing:


Relationship with the company Nature of transactions

i.Subsidiary Purchaseofgoods 214,095 457,094 ii.Associatedundertakings Saleofgoods 32,312 – Purchaseofgoods 138,226 88,986 iii.Postemploymentbenefitplans Expensechargedinrespectof retirementbenefitplans 42,017 61,335

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40. Remuneration of Chief Executive, Directors and Executives 40.1 Theaggregateamountchargedinthefinancialstatementsfortheyearforremuneration,includingcertainbenefits,tothe

ChiefExecutive,DirectorsandExecutivesofthecompanyisasfollows: Chief Executive Executive Directors Non-Executive Directors Executives

2016 2015 2016 2015 2016 2015 2016 2015 (Rupeesinthousand)

Short term employee benefits

Managerialremuneration – – – – 5,673 5,673 236,329 320,673 Housingrent – – – – – – 72,729 109,327 Utilities – – – – – – 16,162 24,295 Conveyance – – – – – – 16,162 24,295 Incentive/bonus – – – – – – 22,164 – Medicalexpenses – – – – 567 567 7,505 9,868 Leavepassage – – – – 945 945 26,437 38,169 Others – – – – – – 10,041 15,875

– – – – 7,185 7,185 407,529 542,502 Post employment benefits

Contributiontoprovidentand gratuityfunds – – – – – – 29,051 42,155 Other long term benefits

Accumulatingcompensated absences – – – – – – 10,496 44,358

– – – – 7,185 7,185 447,076 629,015

Number of persons 1 1 1 1 6 6 147 231

40.2 Thecompanyalsoprovidesthechiefexecutive,directorsandsomeofitsexecutiveswithcompanymaintainedcars,travel

facilitiesandclubmembership. 2016 2015

41. Capacity and production

Urea Ratedproductioncapacity M.Tons 92,400 92,400 ActualUreaproduced M.Tons 49,283 –

ThelowproductionofUreaisduetoshortageoffeedgasandperiodicalmaintenance. NP Ratedproductioncapacity M.Tons 304,500 304,500 ActualNPproduced M.Tons 179,124 265,349

ThelowproductionofNPisduetoshortageoffeedgasandperiodicalmaintenance. CAN Ratedproductioncapacity M.Tons 450,000 450,000 ActualCANproduced M.Tons 157,071 287,954

ThelowproductionofCANisduetoshortageoffeedgasandperiodicalmaintenance.

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ANNUAL REPORT 2016

42. Disclosures relating to Provident Fund

Thecompanyoperatestwoprovidentfunds:

(i) Employees’ProvidentFundTrustLahore(ii) Employees’ProvidentFundTrustMultan

The following information isbasedon theunaudited financial statementsof the Fundsasat June30, 2016andaudited

financialstatementsoftheFundsasatJune30,2015: 2016 2015 (Rupeesinthousand)

SizeoftheFunds-totalassets 373,270 350,297 CostofinvestmentsoutoftheProvidentFunds 225,515 270,528 FairvalueofinvestmentsoutoftheProvidentFunds 232,624 300,566 PercentageofinvestmentsoutoftheProvidentFunds 62% 86% BreakupoffairvalueofinvestmentsoutoftheProvidentFunds 2016 2015 (Rupeesin %of (Rupeesin %of thousand) investment thousand) investment

Mutualfunds-listed 68,609 29% 101,539 34% Specialaccountsinascheduledbank 164,015 71% 199,028 66%

InvestmentsoutofProvidentFundshavebeenmadeinaccordancewiththeprovisionsofsection227oftheOrdinanceandtherulesformulatedforthispurpose.

43. Financial risk management 43.1 Financial risk factors

Thecompanyisexposedtoavarietyoffinancialrisks:marketrisk(includingcurrencyrisk,otherpriceriskandinterestraterisk),creditriskandliquidityrisk.Thecompany’soverallriskmanagementprogrammefocusesontheunpredictabilityoffinancialmarketsandseekstominimisepotentialadverseeffectsonthefinancialperformance.

Riskmanagement iscarriedoutby thecompany’sBoardofDirectors (the ‘Board’). Thecompany’sfinancedepartment

evaluatesandhedgesfinancial risks.TheBoardprovideswrittenprinciplesforoverall riskmanagement,aswellaswrittenpolicies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financialinstrumentsandnon-derivativefinancialinstruments,andinvestmentofexcessliquidity.

The company’s overall riskmanagement procedures thatminimize potential adverse effect of financialmarket on thecompany are as follows:

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a) Market risk i) Currency risk Currencyriskistheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchangesin

foreignexchangerates.Currencyriskarisesmainlyfromfuturecommercialtransactionsorreceivablesandpayablesthatexistduetotransactionsinforeigncurrencies.

Thecompanyisexposedtocurrencyriskarisingfromvariouscurrencyexposures,primarilywithrespecttotheUnitedStates

Dollar(USD)andEuro.Currently,thecompany’sforeignexchangeriskexposureisrestrictedtobankbalancesandamountsreceivablefrom/payabletotheforeignentities.

2016 2015

Amountpayable-USD 4,822,026 19,596,344 Cashandbankbalances-USD (11,644) (11,627)

Netliabilityexposure-USD 4,810,382 19,584,717

Cashandbankbalances-Euro (4,295) (5,095)

Netassetexposure-Euro (4,295) (5,095)

AtDecember31,2016iftheRupeehadweakened/strengthenedby5%againsttheUSDwithallothervariablesheldconstant,

theimpactonpretaxlossfortheyearwouldhavebeenRs25.156million(2015:Rs100.863million)higher/lower,mainlyasaresultofexchangelosses/gainsontranslationofUSDdenominatedfinancialinstruments.

At December 31, 2016 if the Rupee hadweakened/strengthened by 5% against the Euro with all other variables held

constant,theimpactonpretaxlossfortheyearwouldnothavebeenmaterial,mainlyasaresultofexchangegains/lossesontranslationofEurodenominatedfinancialinstruments.

ii) Other price risk

Otherpriceriskrepresentstheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchangesinmarketprices(otherthanthosearisingfrominterestrateriskorcurrencyrisk),whetherthosechangesarecausedbyfactorsspecifictotheindividualfinancialinstrumentoritsissuer,orfactorsaffectingallsimilarfinancialinstrumentstradedinthemarket.Thecompanyisnotmateriallyexposedtoequitypricerisksincetherearenosignificantinvestmentsinequityinstrumentstradedinthemarketeitherclassifiedasavailable-for-saleoratfairvaluethroughprofitorlossatthereportingdate.Thecompany isalsonotexposedtocommoditypricerisksince itdoesnotholdanyfinancial instrumentbasedoncommodityprices.

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ANNUAL REPORT 2016

iii) Interest rate risk

Interestrateriskrepresentstheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchangesinmarketinterestrates.

Thecompany’sinterestrateriskarisesfromlongtermfinances/loansandshorttermborrowings.Borrowingsobtainedand

loansprovidedatvariableratesexposethecompanytocashflowinterestraterisk. Atthebalancesheetdate,theinterestrateprofileofthecompany’ssignificantinterestbearingfinancialinstrumentswas:


Fixed rate instruments: Financial assets Investment 48,536 43,278 Tradedebts 2,779,594 2,510,370 Bankbalances-savingaccountsandtermdeposit 364,877 382,090

3,193,007 2,935,738

Financial liabilities – – Netexposure 3,193,007 2,935,738

Floating rate instruments: Financial assets – – Financial liabilities Longtermloansfromrelatedparties 5,917,722 2,232,952 Longtermfinances 6,753,667 3,042,161 Shorttermborrowingfromrelatedparty – 2,200,000 Shorttermborrowings 9,173,126 15,151,614 21,844,515 22,626,727

Netexposure (21,844,515) (22,626,727) Fair value sensitivity analysis for fixed rate instruments

Thecompanydoesnotaccountforanyfixedratefinancialassetsandliabilitiesatfairvaluethroughprofitorloss.Therefore,achangeininterestrateatthebalancesheetdatewouldnotaffectprofitorlossofthecompany.

Cash flow sensitivity analysis for variable rate instruments

If interest ratesonvariable rate financial instruments,at the yearenddate, fluctuatesby 1%higher/lowerwithall othervariablesheldconstant,pretaxlossfortheyearwouldhavebeenRs218.540million(2015:Rs226.306million)higher/lower,mainlyasaresultofhigher/lowerinterestexpenseonfloatingrateinstruments.

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b) Credit risk Creditriskrepresentstheriskoffinanciallossbeingcausedifcounterpartyfailstodischargeanobligation.

Creditriskofthecompanyarisesfromcashandcashequivalentsanddepositswithbanksandfinancialinstitutions,aswell

ascreditexposurestocustomers,includingoutstandingreceivablesandcommittedtransactions.Themanagementassessesthecreditqualityofthecustomers,takingintoaccounttheirfinancialposition,pastexperienceandotherfactors.IndividualrisklimitsaresetbasedoninternalorexternalratingsinaccordancewithlimitssetbytheBoard.Theutilisationofcreditlimitsisregularlymonitoredandmajorsalestocustomersaresettledincash.Forbanksandfinancialinstitutions,onlyindependentlyratedpartieswithastrongcreditratingareaccepted.

Thecompanymonitorsthecreditqualityofitsfinancialassetswithreferencetohistoricalperformanceofsuchassetsand

available external credit ratings. Thecarrying values of financial assetswhichare neither past duenor impairedareasunder:


Longterminvestments 48,536 43,278 Securitydeposits 36,784 28,554 Tradedebts 2,126,227 1,922,564 Advances,depositsandotherreceivables 217,440 123,314 Cashandbankbalances 390,974 512,489

2,819,961 2,630,199

Thecompany’sexposuretocreditriskislimitedtothecarryingamountofunsecuredtradereceivablesandbankbalances.

Theageinganalysisoftradereceivablebalancesisasfollows: 2016 2015 (Rupeesinthousand)

Neitherpastduenorimpaired 2,126,227 1,922,564 Pastduebutnotimpaired: 1to90days 246,100 223,613 91to180days 184,575 167,710 181to270days 212,371 192,816 above270days 128,983 117,497

772,029 701,636

2,898,256 2,624,200

Themanagementestimatestherecoverabilityoftradereceivablesonthebasisoffinancialpositionandpasthistoryofits

customersbasedontheobjectiveevidencethatitwillnotreceivetheamountduefromtheparticularcustomer.Aprovisionfordoubtfuldebtsisestablishedwhenthereisobjectiveevidencethatthecompanywillnotbeabletocollectalltheamountdueaccording to theoriginal termsof the receivable. Significantfinancialdifficultiesof thedebtors,probability that thedebtorwillenterbankruptcyorfinancialreorganisation,anddefaultordelinquencyinpaymentsareconsideredindicatorsthatthetradedebtisimpaired.Theprovisionisrecognisedintheprofitandlossaccount.Theprovisioniswrittenoffbythecompanywhenitexpectsthatitcannotrecoverthebalancedue.Anysubsequentrepaymentsinrelationtoamountwrittenoff,arecrediteddirectlytoprofitandlossaccount.

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ANNUAL REPORT 2016

Thecreditqualityofcompany’sbankbalancescanbeassessedwithreferencetoexternalcreditratingsasfollows:

Rating Rating 2016 2015 Shortterm Longterm Agency (Rupeesinthousand)

AlBarakaIslamicBankLimited A1 A PACRA 3,372 6,973 AlliedBankLimited A1+ AA+ PACRA 100 70 SummitBankLimited A-1 A- JCR-VIS 100,230 220,076 BankAlfalahLimited A1+ AA PACRA 38 45,042 DeutscheBankAG A-2 A- Standard&Poor – 1,738 DubaiIslamicBankLimited A-1 A+ JCR-VIS 2 2 FaysalBankLimited A1+ AA PACRA 3,271 3,701 HabibBankLimited A-1+ AAA JCR-VIS 254,508 100,686 HabibMetropolitanBankLimited A1+ AA+ PACRA 12 99 MCBBankLimited A1+ AAA PACRA 9,626 5,387 MeezanBankLimited A-1+ AA JCR-VIS 7,971 726 NationalBankofPakistan A1+ AAA PACRA 1,706 202 SCB A1+ AAA PACRA 2,029 21,443 UnitedBankLimited A-1+ AAA JCR-VIS 4,865 90,501 ZaraiTaraqiatiBankLimited A-1+ AAA JCR-VIS 60 59 BankIslamiPakistanLimited A1 A+ PACRA 3,135 10,633 SindhBankLimited A-1+ AA JCR-VIS 42 4,879 BurjBankLimited A-2 BBB+ JCR-VIS – 271 CitibankN.A. P-1 A1 MOODY’S 0.3 0.3 BankofKhyber A1 A PACRA 6.5 – 390,974 512,489 Duetothecompany’slongstandingbusinessrelationshipswiththesecounterpartiesandaftergivingdueconsiderationto

theirstrongfinancialstanding,managementdoesnotexpectnon-performancebythesecounterpartiesontheirobligationstothecompany.Accordingly,thecreditriskisminimal.

c) Liquidity risk

Liquidityriskistheriskthatanentitywillencounterdifficultyinmeetingobligationsassociatedwithfinancialliabilities. Thecompany’sapproachtomanagingliquidityistoensurethat,asfaraspossible,italwayshassufficientliquiditytomeetits

liabilitieswhendue,underbothnormalandstressedconditions,withoutincurringunacceptablelossorriskingdamagetothecompany’sreputation.

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ThefollowingarethecontractualmaturitiesoffinancialliabilitiesasatDecember31,2016andDecember31,2015: At December 31, 2016 (Rupeesinthousand) Carrying Lessthan Oneto Morethanfive

amount oneyear fiveyears years

Longtermfinances 6,753,667 1,081,747 5,671,920 – Longtermloanfromrelatedparties 5,917,722 – 5,917,722 – Longtermdeposits 36,580 – – 36,580 Shorttermborrowings 9,173,126 9,173,126 – – Tradeandotherpayables 6,206,507 6,206,507 – – Accruedmarkup 638,792 638,792 – – 28,726,394 17,100,172 11,589,642 36,580 At December 31, 2015 (Rupeesinthousand) Carrying Lessthan Oneto Morethanfive

amount oneyear fiveyears years

Longtermfinances 3,042,161 1,072,022 1,970,139 – Longtermloanfromrelatedparties 2,232,952 – 2,232,952 – Longtermdeposits 44,860 – – 44,860 Shorttermborrowingfromrelatedparty 2,200,000 2,200,000 – – Shorttermborrowings 15,151,614 15,151,614 – – Tradeandotherpayables 7,266,324 7,266,324 – – Accruedmarkup 449,423 449,423 – – 30,387,334 26,139,383 4,203,091 44,860 43.2 Fair value estimation

Fairvalueistheamountforwhichanassetcouldbeexchanged,orliabilitysettled,betweenknowledgeablewillingpartiesinanarm’slengthtransaction.Underlyingthedefinitionoffairvalueisthepresumptionthatthecompanyisagoingconcernwithoutanyintentionorrequirementtocurtailmateriallythescaleofitsoperationsortoundertakeatransactiononadverseterms.Thecarryingvaluesofallfinancialassetsandliabilitiesreflectedinthesefinancialstatementsapproximatetheirfairvalues.Fairvalueisdeterminedonthebasisofobjectiveevidenceateachreportingdate.Thetablebelowanalysesfinancialinstrumentscarriedatfairvalue,byvaluationmethod.Thedifferentlevelshavebeendefinedasfollows:

- Quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities(level1).

- Inputsotherthanquotedpricesincludedwithinlevel1thatareobservablefortheassetorliability,eitherdirectly(thatis,asprices)orindirectly(thatis,derivedfromprices)(level2).

- Inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(thatis,unobservableinputs)(level3).

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ANNUAL REPORT 2016

Thefollowingtablepresentsthecompany’sassetsandliabilitiesthataremeasuredatfairvalueatDecember31,2016.

(Rupeesinthousand) Level 1 Level 2 Level 3 Total

Recurring fair value measurements Available-for-sale OrdinarysharesofRSL – – 352,625 352,625 Total assets – – 352,625 352,625 Total liabilities – – – –

Thefollowingtablepresentsthecompany’sassetsandliabilitiesthataremeasuredatfairvalueatDecember31,2015.

(Rupeesinthousand) Level 1 Level 2 Level 3 Total

Recurring fair value measurements Available-for-sale OrdinarysharesofRSL - - 297,120 297,120 Total assets - - 297,120 297,120 Total liabilities - - - -

Movementintheabovementionedassetshasbeendisclosedinnote23.1.1tothesefinancialstatementsandmovementinfairvaluereservehasbeendisclosedinthestatementofchangesinequity.TherewerenotransfersbetweenLevels1and2&Levels2and3duringtheyearandtherewerenochangesinvaluationtechniquesduringtheyears.SinceRSL’sordinarysharesarenotlisted,aninvestmentadvisorengagedbythecompanyhasestimatedafairvalueofRs20.91perordinaryshareasatDecember31,2016throughavaluationtechniquebasedondiscountedcashflowanalysisofRSL.Thecompany’spolicy is to recognise transfers intoand transfersoutof fair valuehierarchy levelsasat theendof the reportingperiod.Changesinlevel2and3fairvaluesareanalysedattheendofeachreportingperiodduringtheannualvaluationdiscussionbetweentheChiefFinancialOfficerandtheinvestmentadvisor.Aspartofthisdiscussion,theinvestmentadvisorpresentsareportthatexplainsthereasonforthefairvaluemovements.

Thefairvalueoffinancialinstrumentstradedinactivemarketsisbasedonquotedmarketpricesatthebalancesheetdate.Amarketisregardedasactiveifquotedpricesarereadilyandregularlyavailablefromanexchange,dealer,broker,industrygroup,pricingservice,orregulatoryagency,andthosepricesrepresentactualandregularlyoccurringmarkettransactionsonanarm’slengthbasis.Thequotedmarketpriceusedforfinancialassetsheldbythecompanyisthecurrentbidprice.TheseinstrumentsareincludedinLevel1.

Thefairvalueoffinancialinstrumentsthatarenottradedinanactivemarketisdeterminedbyusingvaluationtechniques.

Thesevaluationtechniquesmaximisetheuseofobservablemarketdatawhereitisavailableandrelyaslittleaspossibleonentityspecificestimates.Ifallsignificantinputsrequiredtofairvalueaninstrumentareobservable,theinstrumentisincludedinLevel2.

Ifoneormoreofthesignificantinputsisnotbasedonobservablemarketdata,theinstrumentisincludedinLevel3. Specificvaluationtechniquesusedtovaluefinancialinstrumentsinclude:

-Quotedmarketpricesordealerquotesforsimilarinstruments.

-Thefairvalueofinterestrateswapsiscalculatedasthepresentvalueoftheestimatedfuturecashflowsbasedonobservableyieldcurves.

-Other techniques, suchasdiscountedcash flowanalysis, are used todetermine fair value for the remaining financialinstruments.

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Thecarryingvaluelessimpairmentprovisionoftradeandotherreceivables,andpayablesareassumedtoapproximatetheirfairvalues.Thefairvalueoffinancialliabilitiesfordisclosurepurposesisestimatedbydiscountingthefuturecontractualcashflowsatthecurrentmarketinterestratethatisavailabletothecompanyforsimilarfinancialinstruments.Thecarryingvaluesofallfinancialassetsandliabilitiesreflectedinthefinancialstatementsapproximatetheirfairvalues.

43.3 Financial instruments by categories

Available Assets at fair Held to Loans and Total for sale value through maturity receivables profit or loss As at December 31, 2016 (Rupeesinthousand)

Assets as per balance sheet Securitydeposits – – – 36,784 36,784 Tradedebts – – – 2,898,256 2,898,256 Advances,depositsandother receivables – – – 217,440 217,440 Investments 352,625 – 48,536 – 401,161 Cashandbankbalances – – – 393,901 393,901

352,625 – 48,536 3,546,381 3,947,542

Financial liabilities at amortized cost As at December 31, 2016 (Rupeesinthousand)

Liabilities as per balance sheet Longtermfinances 6,753,667 Longtermloanfromrelatedparties 5,917,722 Longtermdeposits 36,580 Shorttermborrowings 9,173,126 Tradeandotherpayables 6,206,507 Accruedmarkup 638,792

28,726,394

Available Assets at fair Held to Loans and Total for sale value through maturity receivables profit or loss As at December 31, 2015 (Rupeesinthousand)

Assets as per balance sheet Securitydeposits – – – 28,554 28,554 Tradedebts – – – 2,624,200 2,624,200 Advances,depositsandother receivables – – – 123,066 123,066 Investments 297,120 – 43,278 – 340,398 Cashandbankbalances – – – 517,458 517,458

297,120 – 43,278 3,293,278 3,633,676

Financial liabilities at amortized cost As at December 31, 2015 (Rupeesinthousand)

Liabilities as per balance sheet Longtermfinances 3,042,161 Longtermloanfromrelatedparties 2,232,952 Longtermdeposits 44,860 Shorttermborrowingfromrelatedparty 2,200,000 Shorttermborrowings 15,151,614 Tradeandotherpayables 7,266,324 Accruedmarkup 449,423

30,387,334

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ANNUAL REPORT 2016

43.4 Offsetting financial assets and financial liabilities

(a) Financial assets

Thefollowingfinancialassetsaresubjecttooffsetting,enforceablemasternettingarrangementsandsimilaragreements: Gross amounts Gross amount Net amount of Related Net amount Financial assets of recognized of recognized financial assets amounts not not in scope of financial assets financial liabilities presented in the off set in the off setting off set in the balance sheet balance sheet disclosures balance sheet (Rupeesinthousand)

As at 31 December 2016 A B C=A+B D E=C+D

Securitydeposits – – – – – 36,784 Tradedebts – – – – – 2,898,256 Advances,depositsandother receivables – – – – – 217,440 Investments – – – – – 466,863 Cashandbankbalances – – – – – 393,901 – – – – – Gross amounts Gross amount Net amount of Related Net amount Financial assets of recognized of recognized financial assets amounts not not in scope of financial assets financial liabilities presented in the off set in the off setting off set in the balance sheet balance sheet disclosures balance sheet (Rupeesinthousand)


Securitydeposits – – – – – 28,554 Tradedebts – – – – – 2,624,200 Advances,depositsandother receivables – – – – – 123,066 Investments – – – – – 404,630 Cashandbankbalances – – – – – 517,458 – – – – –

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(b) Financial liabilities Thefollowingfinancialliabilitiesaresubjecttooffsetting,enforceablemasternettingarrangementsandsimilaragreements:

Gross amounts Gross amount Net amount of Related Net amount Financial liabilites of recognized of recognized financial liabilites amounts not not in scope of

financial financial assets presented in the off set in the off setting liabilites off set in the balance sheet balance sheet disclosures balance sheet (Rupeesinthousand)

As at 31 December 2016 A B C=A+B D E=C+D Longtermfinances – – – – – 6,753,667 Longtermloansfromrelatedparties – – – – – 5,917,722 Longtermdeposits – – – – – 36,580 Shorttermborrowings – – – – – 9,173,126 Tradeandotherpayables – – – – – 6,206,507 Accruedmarkup – – – – – 638,792 – – – – –

Gross amounts Gross amount Net amount of Related Net amount Financial assets of recognized of recognized financial assets amounts not not in scope of financial assets financial liabilities presented in the off set in the off setting off set in the balance sheet balance sheet disclosures balance sheet (Rupeesinthousand)


Longtermfinances – – – – – 3,042,161 Longtermloansfromrelatedparties – – – – – 2,232,952 Longtermdeposits – – – – – 44,860 Shorttermborrowingfromrelatedparty – – – – – 2,200,000 Shorttermborrowings – – – – – 15,151,614 Tradeandotherpayables – – – – – 7,266,324 Accruedmarkup – – – – – 449,423 – – – – –


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ANNUAL REPORT 2016

43.5 Capital management

Thecompany’sobjectiveswhenmanagingcapitalaretosafeguardthecompany’sabilitytocontinueasagoingconcern inordertoprovidereturnsforshareholdersandbenefitsforotherstakeholdersandtomaintainanoptimalcapitalstructuretoreducethecostofcapital.Inordertomaintainoradjustthecapitalstructure,thecompanymayadjusttheamountofdividendspaidtoshareholders,returncapitaltoshareholdersthroughrepurchaseofshares,issuenewsharesorsellassetstoreducedebt.Consistentwithothersintheindustryandtherequirementsofthelenders,thecompanymonitorsthecapitalstructureonthebasisofgearingratio.This ratio iscalculatedasnetdebtdividedbytotalcapitalemployed.Netdebt iscalculatedastotalborrowings(includingcurrentandnon-currentborrowings)lesscashandcashequivalents.Totalcapitalemployedincludesequityasshowninthebalancesheetplusnetdebt.

ThegearingratiosasatDecember31,2016and2015wereasfollows: 2016 2015 (Rupeesinthousand)

Borrowings-notes8,9,10&14 12,671,389 7,475,113 Less:Cashandcashequivalents-note38 (8,779,225) (14,634,156) Netdebt 21,450,614 22,109,269

Totalequity(includessurplusonrevaluationofoperatingfixedassets) 22,007,339 23,911,341 Gearingratio Percentage 49% 48% Inaccordancewiththetermsofagreementswithcertainlendersoflongtermfinances,thecompanyisrequiredtocomply

withcertainfinancialcovenants.Thecompanyhascompliedwiththesecovenantsthroughoutthereportingperiodexceptforcertaincovenantsforwhichthelendershavegrantedrelaxationtothecompany.

2016 2015

44. Number of employees

TotalnumberofemployeesasatDecember31 677 811 Averagenumberofemployeesduringtheyear 661 741 45. Corresponding figures

Correspondingfigureshavebeenreclassifiedwherevernecessarytoreflectmoreappropriatepresentationofeventsandtransactionsforthepurposeofcomparison.However,nosignificantreclassificationhasbeenmade.

46. Date of authorization for issue

ThesefinancialstatementswereauthorizedforissueonMay04,2017bytheBoardofDirectorsofthecompany.


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CONSOLIDATEDFINANCIALSTATEMENTSOF

fortheyearendedDecember31,2016


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ANNUAL REPORT 2016

Auditors’ Report to the Members on Consolidated Financial Statements

Wehaveaudited theannexedconsolidatedfinancial statementscomprisingconsolidatedbalancesheetofPakarabFertilizers

Limited(theholdingcompany)anditssubsidiarycompany(hereinafterreferredtoas‘theGroup’)asatDecember31,2016and

therelatedconsolidatedprofitandlossaccount,consolidatedstatementofcomprehensiveincome,consolidatedstatementof

changesinequityandconsolidatedcashflowstatementtogetherwiththenotesformingpartthereof,fortheyearthenended.

Wehavealsoexpressedseparateopinionsonthefinancialstatementsoftheholdingcompanyanditssubsidiarycompany.These

financialstatementaretheresponsibilityoftheholdingcompany’smanagement.Ourresponsibilityistoexpressanopiniononthese

financialstatementbasedonouraudit.

Ourauditwasconducted inaccordancewith the International StandardsonAuditingandaccordingly included such testsof

accountingrecordsandsuchotherauditingproceduresasweconsiderednecessaryinthecircumstances.

Inouropinion,theconsolidatedfinancialstatementspresentfairlythefinancialpositionoftheholdingcompanyanditssubsidiary

companyasatDecember31,2016andtheresultsoftheiroperationsfortheyearthenended.

A.F.Ferguson&Co.CharteredAccountantsLahore.May04,2017

EngagementPartner:KhurramAkbarKhan

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ChiefExecutive

Consolidated Balance Sheetas at December 31, 2016


EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES

Authorisedsharecapital1,000,000,000(2015:1,000,000,000)ordinarysharesofRs10each 10,000,000 10,000,000

Issued,subscribedandpaidupsharecapital450,000,000(2015:450,000,000)ordinarysharesofRs10each 5 4,500,000 4,500,000Reserves 6 2,888,645 4,570,202

7,388,645 9,070,202 SURPLUS ON REVALUATION OF OPERATING FIXED ASSETS 7 14,906,826 15,022,831 NON-CURRENT LIABILITIES

Longtermfinances-secured 8 5,671,920 1,970,139Longtermloansfromrelatedparties-unsecured 9 2,918,722 2,232,952Longtermloanfromrelatedparty-secured 10 2,999,000 –Longtermdeposits 11 36,580 44,860Deferredliabilities 12 113,951 132,980Deferredtaxation 13 6,751,550 7,959,368

18,491,723 12,340,299

CURRENT LIABILITIES

Currentportionoflongtermfinances 8 1,081,747 1,143,236Shorttermborrowingfromrelatedparty-secured 14 – 2,200,000Shorttermborrowings-secured 15 9,499,276 15,451,553PayabletoPrivatizationCommissionofPakistan 16 2,197,901 2,197,901Tradeandotherpayables 17 7,174,506 8,491,483Accruedmarkup 18 644,594 455,344

20,598,024 29,939,517 CONTINGENCIES AND COMMITMENTS 19 61,385,218 66,372,849

Theannexednotes1to48formanintegralpartoftheseconsolidatedfinancialstatements.

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ANNUAL REPORT 2016

Director


ASSETS

NON-CURRENT ASSETS

Property,plantandequipment 20 39,204,277 39,624,467Intangibleassets 21 62,754 94,289Goodwill 22 3,305,163 3,305,163Longterminvestments 23 114,238 107,510Securitydeposits 36,783 28,554

42,723,215 43,159,983

CURRENT ASSETS

Storesandspareparts 24 2,514,642 2,573,378Stock-in-trade 25 4,399,194 7,899,332Tradedebts 26 3,094,295 2,793,170Advances,deposits,prepaymentsandotherreceivables 27 8,233,061 9,416,166Shortterminvestments 28 5,176 –Cashandbankbalances 29 415,635 530,820

18,662,003 23,212,866 61,385,218 66,372,849

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Consolidated Profit and Loss Accountfor the year ended December 31, 2016


Sales 30 17,347,042 23,021,808

Costofsales 31 (17,159,935) (18,232,840)

Gross profit 187,107 4,788,968 Administrativeexpenses 32 (710,595) (893,150)

Sellinganddistributionexpenses 33 (841,739) (909,689)

(1,365,227) 2,986,129 Financecost 34 (1,834,999) (1,713,275)

Otherexpenses 35 (23,445) (347,879)

(3,223,671) 924,975

Otherincome 36 352,453 332,683

(Loss)/profit before taxation (2,871,218) 1,257,658

Taxation 37 1,063,488 1,346,651

(Loss)/profit for the year (1,807,730) 2,604,309

(Loss)/profitattributabletoownersoftheparent (1,807,730) 2,604,309


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ANNUAL REPORT 2016


Consolidated Statement of Comprehensive Incomefor the year ended December 31, 2016


(Loss)/profitfortheyear (1,807,730) 2,604,309

Other comprehensive income/(loss):

Itemsthatmaybereclassifiedsubsequentlytoprofitorloss – –

Itemsthatwillnotbereclassifiedsubsequentlytoprofitorloss:

Surplusonrevaluationofoperatingfixedassetsrealisedthrough

incrementaldepreciationchargedonrelatedassetsfortheyear 146,104 115,832

Remeasurementofpostretirementbenefitobligation (19,931) (2,880)

126,173 112,952

Other comprehensive income - net of tax 126,173 112,952

Total comprehensive (loss)/income for the year - net of tax (1,681,557) 2,717,261

Attributabletoownersoftheparent (1,681,557) 2,717,261


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Consolidated Cash Flow Statementfor the year ended December 31, 2016


Cash flows from operating activities

Cashgeneratedfrom/(usedin)operations 38 3,111,033 (7,943,316)Financecostpaid (1,641,054) (1,584,378)Taxespaid (534,203) (966,852)Retirementbenefitspaid (44,405) (43,661)Securitydeposits-net (16,509) 2,770

Net cash inflow/(outflow) from operating activities 874,862 (10,535,437)

Cash flows from investing activities

Purchaseofproperty,plantandequipment (225,480) (53,221)Purchaseofintangibleassets – (607)Saleproceedsofproperty,plantandequipmentdisposed 10,161 26,606Investmentsmade (1,470) –Proceedsfromdisposalofinvestments 3,000 –Paymentsforpurchaseofinvestments (7,128) –Dividendsreceived 130 –Profitonbankdepositsreceived 5,452 62,299

Net cash (outflow)/inflow from investing activities (215,335) 35,077

Cash flows from financing activities

Proceedsfromlongtermfinancesacquired 5,007,000 2,000,000Proceedsfromlongtermfinancesacquiredfromrelatedparties 1,285,768 2,003,707Proceedsfromshorttermborrowingacquiredfromrelatedparty 799,000 500,000Repaymentoflongtermfinances (1,309,903) (972,406)Repaymentoflongtermfinancesfromrelatedparties (600,000) (596,723)Repaymentofshorttermborrowingfromrelatedparty – (1,300,000)Paymentofimportbillpayable – (2,539,800)Paymentofinitialtransactioncostonlongtermfinanceacquired (4,300) (23,200)

Net cash inflow/(outflow) from financing activities 5,177,565 (928,422)

Net increase/(decrease) in cash and cash equivalents 5,837,092 (11,428,782)

Cash and cash equivalents at the beginning of the year (14,920,733) (3,491,951)Cash and cash equivalents at the end of the year 39 (9,083,641) (14,920,733) Theannexednotes1to48formanintegralpartoftheseconsolidatedfinancialstatements.

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ANNUAL REPORT 2016

Consolidated Statement of Changes In Equityfor the year ended December 31, 2016

(Rupeesinthousand) Attributable to the owners of the parent

Revenue reserves

(Accumulated loss) / un Share General appropriated capital reserve profit Total

Balance as on January 1, 2015 4,500,000 2,098,313 (245,372) 6,352,941 Profitfortheyear – – 2,604,309 2,604,309 Othercomprehensiveincomefortheyear-netoftax – – 112,952 112,952 Total comprehensive income for the year – – 2,717,261 2,717,261

Balance as on December 31, 2015 4,500,000 2,098,313 2,471,889 9,070,202 Lossfortheyear – – (1,807,730) (1,807,730) Othercomprehensiveincomefortheyear-netoftax – – 126,173 126,173 Total comprehensive loss for the year – – (1,681,557) (1,681,557) Balance as on December 31, 2016 4,500,000 2,098,313 790,332 7,388,645 Theannexednotes1to48formanintegralpartoftheseconsolidatedfinancialstatements.


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Notesto and forming part of the Consolidated Financial Statements for the year ended December 31, 2016

1. Legal status and nature of business

Pakarab Fertilizers Limited (the ‘parentcompany’)onApril 12, 2011, incorporatedawhollyowned subsidiarycompany,RelianceSacksLimited(together,the‘group’).Theparentcompanyisprincipallyengagedinthemanufacturingandsaleofchemicalfertilizers(hereinafteralsoreferredtoasthe‘fertilizeroperations’)whilethesubsidiarycompanyisprincipallyengagedinthemanufacturingandsaleofpolypropylenesacks,clothandliners(hereinafteralsoreferredtoasthe‘sacksoperations’).

2. Basis of preparation

2.1 Theseconsolidatedfinancialstatementshavebeenprepared inaccordancewithapprovedaccountingstandardsasapplicablein Pakistan. Approvedaccounting standards comprise of such International Financial Reporting Standards (‘IFRSs’) issued by theInternational Accounting Standards Board and Islamic Financial Accounting Standards (‘IFASs’) issued by Institute of CharteredAccountantsofPakistanasarenotifiedundertheCompaniesOrdinance,1984(the‘Ordinance’),provisionsofanddirectivesissuedundertheOrdinance.WherevertherequirementsoftheOrdinanceordirectivesissuedbySecuritiesandExchangeCommissionofPakistan (‘SECP’)differwith the requirementsof IFRSsor IFASs, the requirementsof theOrdinanceor the requirementsof the saiddirectivesprevail.

2.2 Initial application of standards, amendments or an interpretation to existing standards

Thefollowingamendmentstoexistingstandardshavebeenpublishedthatareapplicabletothegroup’sfinancialstatementscoveringannualperiods,beginningonorafterthefollowingdates:

2.2.1 Standards, amendments and interpretations to approved accounting standards that are effective in current year

Certain standards, amendments and interpretations to approved accounting standards are effective for accounting periodsbeginningon January 1, 2016butareconsiderednot tobe relevantor tohaveany significanteffecton thegroup’soperations(althoughtheymayaffecttheaccountingforfuturetransactionsandevents)andare,therefore,notdetailedintheseconsolidatedfinancialstatements,exceptforthefollowing:

- International Accounting Standard (‘IAS’) 1, ‘Presentation of financial statements’ (Amendment). The amendments provideclarificationsonanumberofissues,including: -Materiality–anentityshouldnotaggregateordisaggregateinformationinamannerthatobscuresusefulinformation.Where

itemsarematerial,sufficientinformationmustbeprovidedtoexplaintheimpactonthefinancialpositionorperformance. - Disaggregation and subtotals – line items specified in IAS 1may need to be disaggregatedwhere this is relevant to an

understandingoftheentity’sfinancialpositionorperformance.Thereisalsonewguidanceontheuseofsubtotals. -Notes–confirmationthatthenotesdonotneedtobepresentedinaparticularorder. - Other comprehensive income arising from investments accounted for under the equity method – the share of other

comprehensive income arising from equity-accounted investments is grouped based onwhether the items will or will notsubsequentlybereclassifiedtoprofitorloss.Eachgroupshouldthenbepresentedasasinglelineiteminthestatementofothercomprehensiveincome.

- IAS16 (Amendment), ‘Property,plantandequipment’,and IAS38 (Amendment), ‘Intangibleassets’. Theamendment to IAS16

clarifies that the use of revenue-basedmethods to calculate the depreciation of an asset is not appropriate because revenuegeneratedbyanactivitythat includestheuseofanassetgenerally reflectsfactorsotherthantheconsumptionoftheeconomicbenefitsembodied intheasset.Thisamendmentalsoclarifiesthatrevenueisgenerallypresumedtobean inappropriatebasis formeasuringtheconsumptionoftheeconomicbenefitsembodiedinanintangibleasset.IAS38nowincludesarebuttablepresumptionthattheamortisationofintangibleassetsbasedonrevenueisinappropriate.Thispresumptioncanbeovercomeifeither:

-Theintangibleassetisexpressedasameasureofrevenue(i.e.whereameasureofrevenueisthelimitingfactoronthevalue

thatcanbederivedfromtheasset),or -Itcanbeshownthatrevenueandtheconsumptionofeconomicbenefitsgeneratedbytheassetarehighlycorrelated.

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ANNUAL REPORT 2016

Thegroup’scurrentaccountingtreatmentisalreadyinlinewiththerequirementsofthesestandards. -IAS19(Amendment),‘Employeebenefits’.Theamendmentclarifiesthat,whendeterminingthediscountrateforpost-employment

benefitobligations, it isthecurrencythattheliabilitiesaredenominatedinthat is important,notthecountrywheretheyarise.Theassessmentofwhether there isadeepmarket inhigh-qualitycorporatebonds isbasedoncorporatebonds in thatcurrency,notcorporatebondsinaparticularcountry.Similarly,wherethereisnodeepmarket inhigh-qualitycorporatebondsinthatcurrency,governmentbondsintherelevantcurrencyshouldbeused.Theamendmentisretrospectivebutlimitedtothebeginningoftheearliestperiodpresented.Thegroup’scurrentaccountingtreatmentisalreadyinlinewiththerequirementofthisstandard.

2.2.2 Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the

group

Therearecertainstandards,amendmentstotheapprovedaccountingstandardsandinterpretationsthataremandatoryforentitieshavingaccountingperiodsbeginningonorafterJanuary1,2017butareconsiderednottoberelevantortohaveanysignificanteffectonthegroup’soperationsandare,therefore,notdetailedintheseconsolidatedfinancialstatements,exceptforthefollowing:

-IFRS9,‘Financialinstruments’(effectiveforperiodsbeginningonorafterJanuary1,2018).Thisstandardisyettobenotifiedbythe

SECP.ThisstandardreplacestheguidanceinIAS39,‘Financialinstruments:Recognitionandmeasurement’.Itincludesrequirementsontheclassificationandmeasurementoffinancialassetsandliabilities;italsoincludesanexpectedcreditlossesmodelthatreplacesthecurrentincurredlossimpairmentmodel.Thegroupisyettoassessthefullimpactofthestandard.

-IFRS15,‘Revenuefromcontractswithcustomers’(effectiveforperiodsbeginningonorafterJanuary1,2018).Thisstandardisyet

tobenotifiedbytheSECP.Thisstandarddealswithrevenuerecognitionandestablishesprinciplesforreportingusefulinformationtousersofthefinancialstatementsaboutthenature,amount,timinganduncertaintyofrevenueandcashflowsarisingfromanentity’scontractswithcustomers.Revenueisrecognisedwhenacustomerobtainscontrolofagoodorserviceandthushastheabilitytodirecttheuseandobtainthebenefitsfromthegoodorservice.ThestandardreplacesIAS18,‘Revenue’,andIAS11,‘Constructioncontracts’,andrelatedinterpretations.Thegroupisyettoassessthefullimpactofthestandard.

- IAS 7, ‘Cashflow statements:Disclosure initiative’ (effective for periods beginningonor after January 1, 2017). This amendment

requiresdisclosuretoexplainchanges in liabilitiesforwhichcashflowshavebeen,orwillbeclassifiedasfinancingactivities inthestatementofcashflows.Theamendmentonlycoversbalancesheetitemsforwhichcashflowsareclassifiedasfinancingactivities.Incaseother itemsareincludedwithinthereconciliation,thechangesin liabilitiesarisingfromfinancingactivitieswillbeidentifiedseparately.Areconciliationoftheopeningtoclosingbalanceisnotspecificallyrequiredbutinsteadtheinformationcanbeprovidedinotherways.Inthefirstyearofadoption,comparativeinformationneednotbeprovided.Itisunlikelythattheamendmentwillhaveanysignificantimpactonthegroup’sconsolidatedfinancialstatements.

-AmendmentstoIAS12,‘Incometaxes’,onrecognitionofdeferredtaxassetsforunrealisedlosses(effectiveforperiodsbeginningon

orafterJanuary1,2017).Theseamendmentsontherecognitionofdeferredtaxassetsforunrealisedlossesclarifyhowtoaccountfordeferredtaxassetsrelatedtodebtinstrumentsmeasuredatfairvalue.Itisunlikelythattheamendmentwillhaveanysignificantimpactonthegroup’sconsolidatedfinancialstatements.

-IFRIC22,‘Foreigncurrencytransactionsandadvanceconsideration’(effectiveforperiodsbeginningonorafterJanuary1,2018).

ThisIFRICaddressesforeigncurrencytransactionsorpartsoftransactionswherethereisconsiderationthatisdenominatedorpricedinaforeigncurrency.Theinterpretationprovidesguidanceforwhenasinglepayment/receiptismadeaswellasforsituationswheremultiplepayments/receiptsaremade.Theguidanceaimstoreducediversityinpractice.Itisunlikelythattheinterpretationwillhaveanysignificantimpactonthegroup’sconsolidatedfinancialstatements.

3. Basis of measurement

3.1 Theseconsolidatedfinancial statementshavebeenpreparedunder thehistoricalcostconventionasmodifiedby recognitionofcertainoperatingfixedassets,available-for-salefinancialassets,financialassetsclassifiedas‘atfairvaluethroughprofitorloss’andplanassetsofdefinedbenefitgratuityfundatfairvalueandrecognitionofcertainemployeeretirementbenefitobligationsatpresentvalue.

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3.2 Critical accounting estimates and judgments

Thegroup’ssignificantaccountingpoliciesarestatedinnote4totheseconsolidatedfinancialstatements.Notallofthesesignificantpoliciesrequirethemanagementtomakedifficult,subjectiveorcomplexjudgmentorestimates.Thefollowingisintendedtoprovideanunderstandingofthepoliciesthemanagementconsiderscriticalbecauseoftheircomplexity,judgmentofestimationinvolvedintheirapplicationandtheir impactontheseconsolidatedfinancialstatements.Estimatesandjudgmentsarecontinuallyevaluatedand are based on historical experience, including expectations of future events that are believed to be reasonable under thecircumstances.Thesejudgmentsinvolveassumptionsorestimatesinrespectoffutureeventsandtheactualresultsmaydifferfromtheseestimateswhichhavebeenexplainedasfollows:

a) Employee retirement benefits

Thegroupusesthevaluationperformedbyanindependentactuaryasthepresentvalueofitsretirementbenefitobligations.Thevaluationisbasedonassumptionsasmentionedinnote4.3totheseconsolidatedfinancialstatements.

b) Provision for taxation

Thegrouptakesintoaccountthecurrentincometaxlawandthedecisionstakenbyappellateauthorities.Instanceswherethegroup’sviewdiffersfromtheviewtakenbytheincometaxdepartmentattheassessmentstageandwherethegroupconsidersthatitsviewsonitemsofmaterialnatureisinaccordancewithlaw,theamountsareshownascontingentliabilities.

c) Useful lives, residual values and depreciation methods of property, plant and equipment

Thegroupreviewstheusefullives,residualvaluesanddepreciationmethodsofproperty,plantandequipmentonregularbasis,atleastateachyearend.Anymaterialchangeinestimatesinfutureyearsmightaffectthecarryingamountsoftherespectiveitemsofproperty,plantandequipmentwithacorrespondingeffectonthedepreciationchargeandimpairment.

d) Estimated impairment of goodwill

Thegrouptestsannuallywhethergoodwillhassufferedanyimpairment,inaccordancewiththeaccountingpolicystatedinnote4.8totheseconsolidatedfinancialstatements.Therecoverableamountsofcash-generatingunitshavebeendeterminedbasedonvalue-in-usecalculations.Thesecalculationsrequiretheuseofestimatesandassumptionsasfullyexplainedinnote22totheseconsolidatedfinancialstatements.

e) Revaluation surplus on operating fixed assets

CertainoperatingfixedassetsarecarriedundertherevaluationmodelasperIAS16‘Property,PlantandEquipment’asstatedinnote4.4.1totheseconsolidatedfinancialstatements.Revaluationiscarriedouttrienniallybyanindependentprofessionalvaluerasfullyexplainedinnote7totheseconsolidatedfinancialstatements.

3.3 Change in accounting estimate

Duringtheyear,thegroup’smanagementhascarriedoutacomprehensivereviewoftheexpectedpatternofconsumptionofthefutureeconomicbenefitsembodiedincertainassetsandasaresultofthisreview,hasreviseditsdepreciationmethodforsuchassets.Previously, thegroupdepreciated items related tooneof itsoldpowergenerationplants (included inplantandmachineryandrelatestothefertilizeroperationsofthegroup)ontheunitsofproductionmethodovertheirestimateduseful lives.Nowthegroupchargesdepreciationon theseassetson the straight linemethodover theirestimated remaininguseful lives. SuchachangehasbeenaccountedforasachangeinanaccountingestimateinaccordancewithIAS8,‘Accountingpolicies,changesinaccountingestimatesanderrors’.Hadtherebeennochangeintheaccountingestimate,thelossbeforetaxfortheyearendedDecember31,2016wouldhavebeenlowerbyRs61.47millionandcarryingvalueofoperatingfixedassetsasatthatdatewouldhavebeenhigherbythesameamount.Consequently,duetotheabovechangeinaccountingestimate,futureprofitsbeforetaxwouldincreasebyRs61.47million.

4. Significant accounting policies

Thesignificantaccountingpoliciesadoptedinthepreparationoftheseconsolidatedfinancialstatementsaresetoutbelow.Thesepolicieshavebeenconsistentlyappliedtoallyearspresented.

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4.1 Principles of consolidation

a) Subsidiaries

Subsidiariesareallentities(includingstructuredentities)overwhichthegrouphascontrol.Thegroupcontrolsanentitywhenthegroupisexposedto,orhasrightsto,variablereturnsfromitsinvolvementwiththeentityandhastheabilitytoaffectthosereturnsthroughitspowertodirecttheactivitiesoftheentity.Subsidiariesarefullyconsolidatedfromthedateonwhichcontrolistransferredtothegroup.Theyaredeconsolidatedfromthedatethatcontrolceases.

Theaquisitionmethodofaccounting isusedtoaccountforbusinesscombinationsbythegroup.Theacquisitionmethodof

accounting is used for all business combinations regardless of whether equity instruments or other assets are aquired. Theconsideration transferred for theacquisitionofa subsidiary is the fair valuesof theassets transferred, the liabilities incurredtotheformerownersoftheaquiredbusinessandtheequity interests issuedbythegroup.Theconsiderationtransferredalsoincludesthefairvalueofanyassetorliabilityresultingfromacontingentconsiderationarrangementandfairvalueofanypre-existingequityinterestinthesubsidary.Identifiableassetsacquiredandliabilitiesandcontingentliabilitiesassumedinabusinesscombinationare,with limitedexceptions,measuredinitiallyattheir fairvaluesattheacquisitiondate.Thegrouprecognisesanynon-controllinginterestintheacquireeonanacquisition-by-acquisitionbasiseitheratfairvalueoratthenon-controllinginterest’sproportionateshareoftherecognisedamountsofacquiree’sidentifiablenetassets.

Acquisition-relatedcostsareexpensedasincurred.

Ifthebusinesscombinationisachievedinstages,theacquisitiondatecarryingvalueoftheacquirer’spreviouslyheldequity

interestintheacquireeisremeasuredtofairvalueattheacquisitiondatethroughprofitorloss.

Anycontingentconsiderationtobetransferredbythegroupis recognisedatfairvalueattheacquisitiondate.SubsequentchangestothefairvalueofthecontingentconsiderationthatisdeemedtobeanassetorliabilityisrecognisedinaccordancewithIAS39eitherinprofitorlossorasachangetoothercomprehensiveincome.Contingentconsiderationthatisclassifiedasequityisnotremeasured,anditssubsequentsettlementisaccountedforwithinequity.

Goodwillisinitiallymeasuredastheexcessoftheaggregateoftheconsiderationtransferredandthefairvalueofnon-controlling

interestoverthenetidentifiableassetsacquiredandliabilitiesassumed.Ifthisconsiderationislowerthanthefairvalueofthenetassetsofthesubsidiaryacquired,thedifferenceisrecognisedinprofitorlossasabargainpurchase.

Wherethesettlementofanypartofcashconsiderationisdeferred,theamountspayableinthefuturearediscountedtotheir

presentvaluesasatthedateofexchange.Thediscountrateusedistheentity’sincrementalborrowingrate,beingtherateatwhichasimilarborrowingcouldbeobtainedfromanindependentfinancierundercomparabletermsandconditions.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated.

Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.Accountingpoliciesofsubsidiarieshavebeenchangedwherenecessarytoensureconsistencywiththepoliciesadoptedbythegroup.

Non-controllinginterestsintheresultsandequityofsubsidariesareshownseperatelyintheconsolidatedprofitandlossaccount,

consolidatedstatementofcomprehensiveincome,consolidatedstatementofchangesinequityandconsolidatedbalancesheetrespectively.

b) Changes in ownership interests in subsidiaries without change of control

Transactionswithnon-controllingintereststhatdonotresultinlossofcontrolareaccountedforasequitytransactions–thatis,astransactionswiththeownersintheircapacityasowners.Achangeinownershipinterestsresultsinanadjustmentbetweenthecarryingamountsofthecontrollingandnon-controllingintereststoreflecttheirrelativeinterestsinthesubsidary.Thedifferencebetweenfairvalueofanyconsiderationpaidandtherelevantshareacquiredofthecarryingvalueofnetassetsofthesubsidiaryisrecordedinequity.Gainsorlossesondisposalstonon-controllinginterestsarealsorecordedinequity.

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c) Disposal of subsidiaries

Whenthegroupceasestohavecontrol,anyretainedinterest intheentity is re-measuredto its fairvalueatthedatewhencontrolislost,withthechangeincarryingamountrecognisedinprofitorloss.Thefairvalueistheinitialcarryingamountforthepurposesofsubsequentaccountingfortheretainedinterestasanassociate,jointventureorfinancialasset.Inaddition,anyamountspreviouslyrecognisedinothercomprehensiveincomeinrespectofthatentityareaccountedforasifthegrouphaddirectlydisposedoftherelatedassetsorliabilities.Thismaymeanthatamountspreviouslyrecognisedinothercomprehensiveincomearereclassifiedtoprofitorloss.

d) Associates

Associatesareallentitiesoverwhichthegrouphassignificantinfluencebutnotcontrol,generallyaccompanyingashareholdingofbetween20%and50%ofthevotingrights.Investmentsinassociatesareaccountedforusingtheequitymethodofaccountingafterinitiallybeingrecognizedatcost.Undertheequitymethodofaccounting,theinvestmentsareinitiallyrecognisedatcostandadjustedthereaftertorecognisethegroup’sshareofthepost-acquisitionprofitsorlossesoftheinvesteeinprofitorloss,andthegroup’sshareofmovements inothercomprehensiveincomeoftheinvesteeinothercomprehensiveincome.Dividendsreceivedorreceivablefromassociatesarerecognisedasareductioninthecarryingamountoftheinvestment.Thegroup’sinvestmentincludesgoodwillidentifiedonacquisition.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the

amountspreviouslyrecognised inothercomprehensive incomeis reclassifiedtoconsolidatedprofitandlossaccountwhereappropriate.

Whenthegroup’sshareoflossesinanassociateequalsorexceedsitsinterestintheassociate,includinganyotherunsecured

receivables,thegroupdoesnotrecognisefurtherlosses,unlessithasincurredlegalorconstructiveobligationsormadepaymentsonbehalfoftheassociate.

Thegroupdeterminesateachreportingdatewhetherthere isanyobjectiveevidencethatthe investment intheassociate

is impaired. If this is thecase, thegroupcalculates theamountof impairmentas thedifferencebetween the recoverableamountoftheassociateanditscarryingvalueandrecognisestheamountadjacenttoshareofprofit/(loss)ofassociatesintheconsolidatedprofitandlossaccount.

Profitsandlossesresultingfromupstreamanddownstreamtransactionsbetweenthegroupanditsassociatearerecognised

in thegroup’sfinancial statementsonly to theextentofunrelated investor’s interests in theassociates.Unrealised lossesareeliminatedunlessthetransactionprovidesevidenceofanimpairmentoftheassettransferred.Accountingpoliciesofassociateshavebeenchangedwherenecessarytoensureconsistencywiththepoliciesadoptedbythegroup.

Dilutiongainsandlossesarisingininvestmentsinassociatesarerecognisedintheconsolidatedprofitandlossaccount.

4.2 Taxation

Incometaxcomprisescurrentanddeferredtax.Incometaxisrecognizedintheprofitandlossaccountexcepttotheextentthatitrelatestoitemsrecognizeddirectlyinequityorothercomprehensiveincome,inwhichcaseitisrecognizeddirectlyinequityorothercomprehensiveincome.

Current

Provisionofcurrenttaxisbasedonthetaxableincomefortheyeardeterminedinaccordancewiththeprevailinglawfortaxationofincome.Thechargeforcurrenttaxiscalculatedusingprevailingtaxratesortaxratesexpectedtoapplytotheprofitfortheyearifenacted.Thechargeforcurrenttaxalsoincludesadjustments,whereconsiderednecessary,toprovisionfortaxmadeinpreviousyearsarisingfromassessmentsframedduringtheyearforsuchyears.

ThegrouphasoptedforGrouptaxationundersection59AAoftheIncomeTaxOrdinance,2001.

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Deferred

Deferredtaxisaccountedforusingthebalancesheetliabilitymethodinrespectofalltemporarydifferencesarisingfromdifferencesbetween the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in thecomputationofthetaxableprofit.However,thedeferredtaxisnotaccountedforifitarisesfrominitialrecognitionofanassetorliabilityinatransactionotherthanabusinesscombinationthatatthetimeoftransactionneitheraffectsaccountingnortaxableprofitorloss.Deferredtaxliabilitiesaregenerallyrecognizedforalltaxabletemporarydifferencesanddeferredtaxassetsarerecognizedtotheextentthatitisprobablethattaxableprofitswillbeavailableagainstwhichthedeductibletemporarydifferences,unusedtaxlossesandtaxcreditscanbeutilised.

Deferredtaxiscalculatedattheratesthatareexpectedtoapplytotheperiodwhenthedifferencesreversebasedontaxratesthat

havebeenenactedorsubstantivelyenactedbythebalancesheetdate.Deferredtaxischargedorcreditedintheprofitandlossaccount,exceptinthecaseofitemscreditedorchargedtoothercomprehensiveincomeorequityinwhichcaseitisincludedinothercomprehensiveincomeorequity.

4.3 Employee retirement benefits

Themainfeaturesoftheschemesoperatedbythegroupforitsemployeesareasfollows:

(a) Defined benefit plan - Gratuity

Thegroupoperatesanapprovedfundeddefinedbenefitgratuityplanforallpermanentemployeesofthefertilizeroperationshavingaserviceperiodofmorethanthreeyearsforexecutivesandsixmonthsforworkersandotherstaff.Provisionsaremadeinthefinancialstatementstocoverobligationsonthebasisofactuarialvaluationscarriedoutannually.ThemostrecentvaluationwascarriedoutasatDecember31,2016usingthe“ProjectedUnitCreditMethod”.

Theactualreturnonplanassetsrepresentsthedifferencebetweenthefairvalueofplanassetsatthebeginningoftheyearand

asattheendoftheyearafteradjustmentsforcontributionsmadebythegroupasreducedbybenefitspaidduringtheyear.

Theamountrecognizedinbalancesheetrepresentsthepresentvalueofthedefinedbenefitobligationasreducedbythefairvalueoftheplanassets.

Actuarialgainsandlossesarisingfromexperienceadjustmentsandchangesinactuarialassumptionsarechargedorcredited

toequityinothercomprehensiveincomeintheyearinwhichtheyarise.Pastservicecostsarerecognizedimmediatelyintheprofitandlossaccount.

The futurecontribution rateof theplan includesallowances fordeficitandsurplus.ProjectedUnitCreditMethod,using the

followingsignificantassumptions,isusedforvaluationofthisscheme:

Discountrate 8%p.a. Expectedrateofincreaseinsalarylevelperannum 7%p.a. Durationofplan(years) 9 Expectedmortalityrate SLIC(2001-2005)mortalitytable

(setback1year)

(b) Defined contribution plan - Provident Fund

Thereisanapproveddefinedcontributoryprovidentfundforallpermanentemployeesofthefertilizeroperations.Equalmonthlycontributionsaremadebothbythegroupandemployeestothefundattherateof8.33percentofsalaryfortheexecutivesand10percentofsalaryfortheworkers.

(c) Accumulating compensated absences

Thefertilizeroperationsprovidesforaccumulatingcompensatedabsences,whentheemployeesrenderservicesthatincreasetheirentitlementtofuturecompensatedabsences.Undertheservicerules,workersandnormalstaffmembersareentitledto18daysleaveperyear.Theleavepolicyformanagementemployeesisasfollows:

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Service in the group Annual Leaves Lessthan5Years 18 Lessthan5Years(WorkingonShiftDuties) 22 Morethan5Years 25 Morethan5Years(WorkingonShiftDuties) 29

TheunutilizedAnnualLeavecanbeaccumulateduptoamaximumof2yearsofAnnualLeaves.Anemployeewillbeentitled

toencashtheaccumulatedannualleavesatthetimeofleavinggroupservice.

Provisionsaremadeannuallytocovertheobligationforaccumulatingcompensatedabsencesbasedonactuarialvaluationandarechargedtoprofitand lossaccount.Themost recentvaluationwascarriedoutasatDecember31,2016usingthe“ProjectedUnitCreditMethod”.

Theamountrecognisedinthebalancesheetrepresentsthepresentvalueofthedefinedbenefitobligation.Actuarialgainsand

lossesarechargedtotheprofitandlossaccountimmediatelyintheperiodwhentheseoccur.

Projected unit credit method, using the following significant assumptions, has been used for valuation of accumulatingcompensatedabsences:

Discountrate 8%p.a. Expectedrateofincreaseinsalarylevelperannum 7%p.a. Expectedmortalityrate SLIC(2001-2005)mortalitytable

(setback1year) 4.4 Property, plant and equipment

4.4.1 Operating fixed assets

Operatingfixedassetsexceptfreeholdland,buildingsonfreeholdland,buildingsonleaseholdland,railwaysiding,plantandmachineryandtoolsandotherequipmentarestatedatcostlessaccumulateddepreciationandanyidentifiedimpairmentloss.Freeholdlandisstatedatrevaluedamountlessanyidentifiedimpairmentlosswhilebuildingsonfreeholdland,buildingsonleaseholdland,railwaysiding,plantandmachineryandtoolsandotherequipmentarestatedatrevaluedamountlessaccumulateddepreciationandanyidentified impairment loss.Revaluation iscarriedoutwithsufficient regularitytoensurethatthecarryingamountofassetdoesnotdiffermateriallyfromitsfairvalue.Revaluedamounthasbeendeterminedbyanindependentprofessionalvaluer.Anyaccumulateddepreciationatthedateofrevaluationiseliminatedagainstthegrosscarryingamountoftheasset,andthenetamountisrestatedtotherevaluedamountoftheasset.Costinrelationtootheroperatingfixedassetssignifieshistoricalcost,gainsandlossestransferredfromothercomprehensiveincomeonqualifyingcashflowhedgesasreferredtoinnote4.13totheseconsolidatedfinancialstatements.

Increasesinthecarryingamountarisingonrevaluationofoperatingfixedassetsarecreditedtosurplusonrevaluationofoperating

fixedassets.Decreases thatoffsetprevious increasesof the sameassetsarechargedagainst this surplus,allotherdecreasesarechargedtoprofitor loss.Eachyear thedifferencebetweendepreciationbasedon revaluedcarryingamountsof theassets (thedepreciationchargedtotheprofitor loss)anddepreciationbasedontheoriginalcostof theassets is transferredfromsurplusonrevaluationofoperatingfixedassetstoothercomprehensiveincome.Alltransfersto/fromsurplusonrevaluationofoperatingfixedassetsarenetofapplicabledeferredtaxation.

Depreciationonoperatingfixedassetsischargedtoprofitorlossonthefollowingmethodsandratessoastowriteoffthedepreciable

amountofanassetoveritsestimatedusefullifeaftertakingintoaccounttheirresidualvalues:

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Asset category Depreciation method Annual depreciation rate

Buildingsonfreeholdland Straightline 3.93%to6.32% Buildingsonleaseholdland -do- 4%to10% Aircraft -do- 10%to20% Furnitureandfixtures -do- 10%to41.38% Toolsandotherequipment(otherthanfactoryequipment) -do- 10%to50% Vehicles -do- 20% Plantandmachinery-Sacksoperations -do- 4.35%to4.76% Plantandmachinery-Fertilizeroperations: -Itemsrelatedtooldpowergenerationsystem -do- 6.25%to6.90% -Itemsotherthanthoserelatedtooldpower generationsystem Unitsofproduction Toolsandotherequipment(factoryequipment) -do- Catalyst -do- The assets’ residual values and useful lives are reviewed, at each financial year end, andadjusted if impact on depreciation is

significant. Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamountisgreaterthanits

estimatedrecoverableamountasfullyexplainedinthenote4.6totheseconsolidatedfinancialstatements. Subsequentcostsare included in theasset’s carryingamountor recognisedasa separateasset,asappropriate, onlywhen it is

probablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtothegroupandthecostoftheitemcanbemeasuredreliably.Allotherrepairandmaintenancecostsarechargedtoincomeduringtheperiodinwhichtheyareincurred.

Thegainor lossondisposalor retirementofanasset representedby thedifferencebetweenthesaleproceedsandthecarrying

amountoftheassetisrecognisedasanincomeorexpense. 4.4.2 Capital work-in-progress

Capitalwork-in-progressisstatedatcostlessanyidentifiedimpairmentloss.Allexpenditureconnectedwithspecificassetsincurredduringinstallationandconstructionperiodarecarriedundercapitalwork-in-progress.Thesearetransferredtooperatingfixedassetsasandwhentheseareavailableforuse.

4.4.3 Major spare parts and stand-by equipment

Majorsparepartsandstand-byequipmentqualifyasproperty,plantandequipmentwhenanentityexpectstousethemduringmorethanoneyear.Transfersaremadetooperatingassetscategoryasandwhensuchitemsareavailableforuse.

4.5 Intangible assets 4.5.1 Computer software

Expenditureincurredtoacquirecomputersoftwareiscapitalisedasintangibleassetandstatedatcostlessaccumulatedamortisationandanyidentifiedimpairmentloss.Computersoftwareisamortisedusingthestraightlinemethodoveraperiodoffouryears.

Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamountisgreaterthanits

estimatedrecoverableamountasfullyexplainedinthenote4.6totheseconsolidatedfinancialstatements. 4.5.2 Mining rights

Expenditureincurredtoacquireminingrightsiscapitalisedasintangibleassetandstatedatcostlessaccumulatedamortisationandanyidentifiedimpairmentloss.Miningrightsareamortisedusingthestraightlinemethodoveraperiodoftenyears.

Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamountisgreaterthanits

estimatedrecoverableamountasfullyexplainedinthenote4.6totheseconsolidatedfinancialstatements.

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4.6 Impairment of non-financial assets

Goodwillandintangibleassetsthathaveanindefiniteusefullifearenotsubjecttoamortisationandaretestedannuallyforimpairment,ormorefrequentlyifeventsorchangesincircumstancesindicatethattheymightbeimpaired.Otherassetsaretestedforimpairmentwhenevereventsorchanges incircumstances indicate that thecarryingamountmaynotbe recoverable.An impairment loss isrecognisedfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableamount.Therecoverableamount isthehigherofanasset’sfairvaluelesscostsofdisposalandvalueinuse.Forthepurposesofassessingimpairment,assetsaregroupedatthelowestlevelsforwhichthereareseparatelyidentifiablecashinflowswhicharelargelyindependentofthecashinflowsfromotherassetsorgroupsofassets(cash-generatingunits).Non-financialassetsotherthangoodwillthatsufferedanimpairmentarereviewedforpossiblereversaloftheimpairmentattheendofeachreportingperiod.

4.7 Leases

Thegroupisthelessee. 4.7.1 Operating leases

Leaseswhereasignificantportionoftherisksandrewardsofownershipareretainedbythelessorareclassifiedasoperatingleases.Paymentsmadeunderoperatingleases(netofanyincentivesreceivedfromthelessor)arechargedtoprofitorlossonastraight-linebasisovertheleaseterm.

4.8 Goodwill

Goodwillonacquisitionsofsubsidiariesisincludedin‘intangibleassets’.Goodwillonacquisitionsofassociatesisincludedin‘investmentsin associates’ and is tested for impairment as part of the overall balance. Separately recognised goodwill is tested annually forimpairmentandcarriedatcostlessaccumulatedimpairmentlosses,ifany.Impairmentlossesongoodwillarenotreversed.Gainsandlossesonthedisposalofanentityincludethecarryingamountofgoodwillrelatingtotheentitysold.

4.9 Investments

Investmentsintendedtobeheldforlessthantwelvemonthsfromthebalancesheetdateortobesoldtoraiseoperatingcapital,areincludedincurrentassets,allotherinvestmentsareclassifiedasnon-current.Managementdeterminestheappropriateclassificationofitsinvestmentsatthetimeofthepurchaseandre-evaluatessuchdesignationonaregularbasis.

4.9.1 Investments in equity instruments of associates

Investmentinequityinstrumentsofassociatesareaccountedforusingequitymethodofaccountingasfullyexplainedinnote4.1(d)totheseconsolidatedfinancialstatements.

4.10 Other financial assets 4.10.1 Classification

Thegroupclassifiesitsfinancialassets,otherthaninvestmentsinequityinstrumentsofassoicates, inthefollowingcategories:atfairvaluethroughprofitorloss,loansandreceivables,available-for-saleandheldtomaturity.Theclassificationdependsonthepurposeforwhich thefinancialassetswereacquired.Managementdetermines theclassificationof itsfinancialassetsat the timeof initialrecognition.

a) Financial assets at fair value through profit or loss

Financialassetsatfairvaluethroughprofitorlossarefinancialassetsheldfortradingandfinancialassetsdesignateduponinitialrecognitionasatfairvaluethroughprofitorloss.Derivativesarealsocategorisedasheldfortradingunlesstheyaredesignatedashedges.Afinancialassetisclassifiedasheldfortradingifacquiredprincipallyforthepurposeofsellingintheshortterm.Assetsinthiscategoryareclassifiedascurrentassetsifexpectedtobesettledwithintwelvemonths,otherwise,theyareclassifiedasnon-current.

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b) Loans and receivables

Loansandreceivablesarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenotquotedinanactivemarket.Theyare includedincurrentassets,exceptformaturitiesgreaterthantwelvemonthsafterthebalancesheetdate,whichareclassifiedasnon-currentassets.Loansandreceivablescompriseofsecuritydeposits,tradedebts,loansandotherreceivablesandcashandcashequivalentsinthebalancesheet.

c) Available-for-sale financial assets

Available-for-salefinancialassetsarenon-derivativesthatareeitherdesignatedinthiscategoryornotclassifiedinanyoftheother categories. Theyare included in non-current assets unlessmanagement intends todisposeof the investmentswithintwelvemonthsfromthebalancesheetdate.

d) Held to maturity

Financialassetswithfixedordeterminablepaymentsandfixedmaturity,wheremanagementhastheintentionandabilitytoholdtillmaturityareclassifiedasheldtomaturityandarestatedatamortisedcost.

4.10.2 Recognition and measurement

Allfinancialassetsarerecognisedatthetimewhenthegroupbecomesapartytothecontractualprovisionsoftheinstrument.Regularpurchasesandsalesofinvestmentsarerecognisedontrade-date–thedateonwhichthegroupcommitstopurchaseorselltheasset.Financialassetsareinitiallyrecognisedatfairvalueplustransactioncostsforallfinancialassetsnotcarriedatfairvaluethroughprofitorloss.Financialassetscarriedatfairvaluethroughprofitorlossareinitiallyrecognisedatfairvalueandtransactioncostsareexpensedintheprofitandlossaccount.Financialassetsarederecognisedwhentherightstoreceivecashflowsfromtheassetshaveexpiredorhavebeentransferredandthegrouphastransferredsubstantiallyalltherisksandrewardsofownership.Available-for-salefinancialassetsandfinancialassetsatfairvaluethroughprofitorlossaresubsequentlycarriedatfairvalue.Available-for-salefinancialassetsarecarriedatcostincasefairvaluecannotbemeasuredreliably.Loansandreceivablesandheld-to-maturityinvestmentsarecarriedatamortisedcostusingtheeffectiveinterestratemethod.

Gainsorlossesarisingfromchangesinthefairvalueofthe‘financialassetsatfairvaluethroughprofitorloss’categoryarepresented

intheprofitandlossaccountintheperiodinwhichtheyarise.Dividendincomefromfinancialassetsatfairvaluethroughprofitorlossisrecognisedintheprofitandlossaccountaspartofotherincomewhenthegroup’srighttoreceivepaymentsisestablished.

Changesinthefairvalueofsecuritiesclassifiedasavailable-for-salearerecognisedinothercomprehensiveincome.Whensecurities

classifiedasavailable-for-salearesoldorimpaired,theaccumulatedfairvalueadjustmentsrecognisedinequityareincludedintheprofitand lossaccountasgainsand losses from investmentsecurities. Interestonavailable-for-salesecuritiescalculatedusing theeffectiveinterestmethodisrecognisedintheprofitandlossaccount.Dividendsonavailable-for-saleequityinstrumentsarerecognisedintheprofitandlossaccountwhenthegroup’srighttoreceivepaymentsisestablished.

Thegroupassessesateachbalancesheetdatewhetherthere isobjectiveevidencethatafinancialassetoragroupoffinancial

assetsis impaired.Ifanysuchevidenceexistsforavailable-for-salefinancialassets,thecumulativelossisremovedfromequityandrecognisedintheprofitandlossaccount.Impairmentlossesrecognisedintheprofitandlossaccountonequityinstrumentsarenotreversedthroughtheprofitandlossaccount.Impairmenttestingoftradedebtsandotherreceivablesisdescribedinnote4.16totheseconsolidatedfinancialstatements.

4.11 Financial liabilities

Allfinancialliabilitiesarerecognisedatthetimewhenthegroupbecomesapartytothecontractualprovisionsoftheinstrument.

Afinancial liability isderecognisedwhentheobligationundertheliability isdischargedorcancelledorexpired.Whereanexistingfinancialliabilityisreplacedbyanotherfromthesamelenderonsubstantiallydifferentterms,orthetermsofanexistingliabilityaresubstantiallymodified,suchanexchangeormodificationistreatedasaderecognitionoftheoriginalliabilityandtherecognitionofanewliability,andthedifferenceinrespectivecarryingamountsisrecognisedintheprofitandlossaccount.

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4.12 Offsetting of financial assets and financial liabilities

Financialassetsandfinancialliabilitiesareoffsetandthenetamountisreportedinthefinancialstatementsonlywhenthereisalegallyenforceablerighttosetofftherecognizedamountandthegroupintendseithertosettleonanetbasisortorealizetheassetsandtosettletheliabilitiessimultaneously.

4.13 Derivative financial instruments

Theseareinitiallyrecordedatcostonthedateaderivativecontractisenteredintoandareremeasuredtofairvalueatsubsequentreportingdates.Themethodofrecognizingtheresultinggainorlossdependsonwhetherthederivativeisdesignatedasahedginginstrument,andifso,thenatureoftheitembeinghedged.Thegroupdesignatescertainderivativesascashflowhedges.

Thegroupdocumentsattheinceptionofthetransactiontherelationshipbetweenthehedginginstrumentsandhedgeditems,aswell

asitsriskmanagementobjectiveandstrategyforundertakingvarioushedgetransactions.Thegroupalsodocumentsitsassessment,bothathedgeinceptionandonanongoingbasis,ofwhetherthederivativesthatareusedinhedgingtransactionsarehighlyeffectiveinoffsettingchangesincashflowofhedgeditems.

Theeffectiveportionofchangesinthefairvalueofderivativesthataredesignatedandqualifyascashflowhedgesisrecognized

inothercomprehensive income.Thegainor loss relatingtothe ineffectiveportion is recognized immediately intheprofitand lossaccount.

Amountsaccumulatedinothercomprehensiveincomearerecognisedinprofitandlossaccountintheperiodswhenthehedged

itemwillaffectprofitorloss.However,whentheforecasthedgedtransactionresultsintherecognitionofanon-financialassetoraliability,thegainsandlossespreviouslydeferredinothercomprehensiveincomearetransferredfromothercomprehensiveincomeandincludedintheinitialmeasurementofthecostoftheassetorliability.Thechangesinfairvalueremeasurementofderivativeswhichthegrouphasnotdesignatedasahedginginstrumentarerecognisedintheprofitandlossaccount.Tradingderivativesareclassifiedasacurrentassetorliability.

4.14 Stores and spare parts

Thesearevaluedatweightedaveragecostexcept for items in transitwhicharestatedat invoicevalueplusotherchargespaidthereontillthebalancesheetdate.Foritemswhichareslowmovingand/oridentifiedasobsolete,adequateprovisionismadeforanyexcessbookvalueoverestimatedrealisablevalue.Thegroupreviewsthecarryingamountofstoresandsparesonaregularbasisandprovisionismadeforobsolescence.

4.15 Stock-in-trade

All stocks are valued at the lower of cost andNet Realizable Value (‘NRV’). Cost in relation to raw and packingmaterials andgoodspurchasedforresale,exceptforthoseintransit,signifiesweightedaveragecostandthatrelatingtomidproductsandownmanufactured finished goods, annual average cost comprising cost of direct materials, labour and appropriatemanufacturingoverheads.

Materialsintransitarestatedatcostcomprisinginvoicevalueplusotherchargesincurredthereon. NRV isdeterminedonthebasisofestimatedsellingpriceof theproduct in theordinarycourseofbusiness lessestimatedcostsof

completionandtheestimatedcostsnecessarytomakethesale.Provisionismadeinthefinancialstatementsforobsoleteandslowmovingstock-in-tradebasedonmanagementestimate.

4.16 Trade debts and other receivables

Tradedebtsandotherreceivablesarerecognisedinitiallyatinvoicevalue,whichapproximatesfairvalue,andsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod, lessprovisionfordoubtfuldebts.Aprovisionfordoubtfuldebts isestablishedwhenthereisobjectiveevidencethatthegroupwillnotbeabletocollectalltheamountdueaccordingtotheoriginaltermsofthereceivable.Significantfinancialdifficultiesofthedebtors,probabilitythatthedebtorwillenterbankruptcyorfinancialreorganisation,anddefaultordelinquencyinpaymentsareconsideredindicatorsthatthetradedebtisimpaired.Theprovisionisrecognisedintheprofitandlossaccount.Whenatradedebtisuncollectible,itiswrittenoffagainsttheprovision.Subsequentrecoveriesofamountspreviouslywrittenoffarecreditedtotheprofitandlossaccount.

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4.17 Cash and cash equivalents

Cashandcashequivalents includescash inhand,depositsheldatcallwithbanks,other short-termhighly liquid investmentswithoriginalmaturitiesofthreemonthsorless,andbankoverdrafts/shorttermborrowings.

4.18 Borrowings

Borrowingsarerecognisedinitiallyatfairvalue,netoftransactioncostsincurred.Borrowingsaresubsequentlystatedatamortisedcost,anydifferencebetweentheproceeds(netoftransactioncosts)andtheredemptionvalueisrecognisedintheprofitandlossaccountovertheperiodoftheborrowingsusingtheeffectiveinterestmethod.Financecostsareaccountedforonanaccrualbasisandarereportedasaccruedmarkuptotheextentoftheamountremainingunpaid.

Borrowingsareclassifiedascurrentliabilitiesunlessthegrouphasanunconditionalrighttodefersettlementoftheliabilityforatleast

twelvemonthsafterthebalancesheetdate. 4.19 Trade and other payables

Tradeandotherpayablesare recognised initiallyat fair valueand subsequentlymeasuredatamortisedcostusing theeffectiveinterestmethod.Exchangegainsandlossesarisingontranslationinrespectofliabilitiesinforeigncurrencyareaddedtothecarryingamountoftherespectiveliabilities.

4.20 Provisions

Provisionsarerecognizedwhenthegrouphasapresentlegalorconstructiveobligationasaresultofpastevents,itisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligationandareliableestimateoftheamountcanbemade.Provisionsarenotrecognisedforfutureoperatinglosses.

Where there are a number of similar obligations, the likelihood that an outflow shall be required in settlement is determined by

consideringtheclassofobligationsasawhole.Aprovisionisrecognisedevenifthelikelihoodofanoutflowwithrespecttoanyoneitemincludedinthesameclassofobligationsmaybesmall.

Provisionsaremeasuredatthepresentvalueoftheexpendituresexpectedtoberequiredtosettletheobligationusingapre-taxrate

thatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheobligation.Theincreaseintheprovisionduetopassageoftimeisrecognisedasinterestexpense.

4.21 Foreign currency transactions and translation

a) Functional and presentation currency

Itemsincludedintheconsolidatedfinancialstatementsofthegrouparemeasuredusingthecurrencyoftheprimaryeconomicenvironmentinwhichthegroupoperates(thefunctionalcurrency).TheconsolidatedfinancialstatementsarepresentedinPakRupees,whichisthegroup’sfunctionalandpresentationcurrency.

b) Transactions and balances

Allmonetary assets and liabilities in foreign currencies are translated into Pak Rupees at exchange rates prevailing at thebalancesheetdate.TransactionsinforeigncurrenciesaretranslatedintoPakRupeesatexchangeratesprevailingatthedateoftransaction.Non-monetaryassetsandliabilitiesthataremeasuredintermsofhistoricalcostinaforeigncurrencyaretranslatedintoPakRupeesatexchangeratesprevailingatthedateoftransaction.Non-monetaryassetsandliabilitiesdenominatedinforeigncurrencythatarestatedatfairvaluearetranslatedintoPakRupeesatexchangeratesprevailingatthedatewhenfairvaluesaredetermined.Exchangegainsandlossesareincludedinprofitandlossaccount.

4.22 Borrowing costs

Generalandspecificborrowingcostsdirectlyattributabletotheacquisition,constructionorproductionofqualifyingassets,whichareassetsthatnecessarilytakeasubstantialperiodoftimetogetreadyfortheirintendeduseorsale,areaddedtothecostofthoseassets,untilsuchtimeastheassetsaresubstantiallyreadyfortheirintendeduseorsale.Investmentincomeearnedonthetemporaryinvestmentof specificborrowingspending theirexpenditureonqualifyingassets isdeducted fromtheborrowingcostseligible forcapitalisation.Allotherborrowingcostsarerecognisedinprofitorlossintheperiodinwhichtheyareincurred.

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4.23 Revenue recognition

Revenue is recognisedwhen it isprobable that theeconomicbenefitswill flow to thegroupand the revenuecanbemeasuredreliably.Revenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivableonthefollowingbasis:

-Revenuefromsaleofgoodsandexportrebateisrecognizedondispatchtocustomers. -RevenuefromsaleofCertifiedEmissionReductions(‘CERs’)isrecognisedonthegenerationoftheEmissionReductionswhenafirm

commitmentforsaleofCERsexistswithabuyer. -Return ondeposits is accruedona timeproportion basis by reference to theprincipal outstandingand theapplicable rate of

return. -Dividend incomeandentitlement of bonus shares are recognisedwhen the right to receive suchdividendandbonus shares is

established. -Governmentsubsidyonsaleoffertilizerisrecognisedwhentherighttoreceivesuchsubsidyhasbeenestablishedandtheunderlying

conditionsaremet. 4.24 Share capital

Ordinarysharesareclassifiedasequityandrecognisedattheirfacevalue.Incrementalcostsdirectlyattributabletotheissueofnewsharesareshowninequityasadeduction,netoftax.

4.25 Dividend

Dividenddistributiontothemembersisrecognisedasaliabilityintheperiodinwhichthedividendsareapproved. 5. Issued, subscribed and paid up share capital 2016 2015 2016 2015 (Numberofshares) (Rupeesinthousand)

2,791,260 2,791,260 OrdinarysharesofRs10eachfullypaidincash 27,913 27,913 447,208,740 447,208,740 OrdinarysharesofRs10eachissuedasfullypaidbonusshares 4,472,087 4,472,087 450,000,000 450,000,000 4,500,000 4,500,000 2016 2015 (Numberofshares)

Ordinarysharesheldbyassociatedundertakings as at year end are as follows: RelianceCommodities(Private)Limited 7,136,613 7,136,613 FatimaHoldingLimited 84,145,872 84,145,872 ArifHabibCorporationLimited 135,000,000 135,000,000 AmirFineExports(Private)Limited 12,895,296 12,895,296

239,177,781 239,177,781 5.1Inaccordancewiththetermsofagreementswithcertainlendersoflongtermfinancestherearecertainrestrictionsondistributionof

dividends.

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6. Reserves

Revenue: -Generalreserve 2,098,313 2,098,313 -Un-appropriatedprofit 790,332 2,471,889

2,888,645 4,570,202 7. Surplus on revaluation of operating fixed assets

Thisrepresentssurplusoverbookvalueresultingfromtherevaluationoffreeholdland,buildingsonfreeholdland,buildingonleaseholdland, plant andmachinery, railway siding and tools and other equipment, adjusted by incremental depreciation arising out ofrevaluationoftheabovementionedassetsexceptforfreeholdland.Thelatestvaluationoftheassetsrelatingtofertilizeroperationswascarriedoutbyanindependentprofessionalvaluer,M/sPirsonsChemicalEngineering(Private)Limited,onAugust31,2014andthelatestvaluationofassetsrelatingtosacksoperationswascarriedoutbyindependentprofessionalvaluer,M/sAnjum,Adil&Associates,onDecember31,2016.Surplusonrevaluationofoperatingfixedassetscanbeutilizedbythegrouponlyforthepurposesspecifiedinsection235oftheOrdinance.

The revaluation surplus relating toabovementionedoperating fixedassetsexcluding freehold land is netofapplicabledeferred

incometaxes.Incrementaldepreciationrepresentsthedifferencebetweentheactualdepreciationontheabovementionedassetsexcludingfreeholdlandandtheequivalentdepreciationbasedonthehistoricalcostoftheseassets.Themovementinrevaluationsurplus is as follows:


Openingbalance-netoftax 15,022,831 14,491,103 Revaluationsurplusduringtheyear -note20.1 42,998 – Deferredtaxonrevaluationsurplus -note13 (12,899) 647,560 Surplustransferredtoothercomprehensiveincomefortheyear onaccountofincrementaldepreciation-netoftax (146,104) (115,832)

Closingbalance-netoftax -note7.1 14,906,826 15,022,831 7.1 IncludessurplusonrevaluationoffreeholdlandamountingtoRs5,865.66million(2015:Rs5,865.66million). 2016 2015 (Rupeesinthousand)

8. Long term finances - secured

Redeemablecapital-PrivatelyPlacedTermFinanceCertificates -note8.1 407,000 – Longtermloans -note8.2 2,308,100 3,113,375 Syndicatetermfinance -note8.3 4,038,567 –

6,753,667 3,113,375 Currentportionshownundercurrentliabilities -notes8.2&8.3 (1,081,747) (1,143,236)

5,671,920 1,970,139 8.1 Privately Placed Term Finance Certificates (‘PPTFCs’)

Openingbalance – – ReceiptagainstissuanceofPPTFCs 407,000 –

ClosingBalance 407,000 –

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ThisrepresentslongtermfinancefacilityofRs450millionobtainedfromPAIRInvestmentCompanyLimited(hereinafterreferredtoas‘PAIR’)tofinancegroup’scapitalexpenditureandalliedexpensestogetherwiththerequirementpertainingtothestoresandspares.ThisfacilityisavailablebywayofsubscribingtothePPTFCs.PPTFCshaveafacevalueofRs1millioneach.OfthetotalfacilityofRs450million,Rs407millionhasbeenavailedbythegroupasofthebalancesheetdate.

Terms of redemption

ThetenureofPPTFCsisfromJuly1,2017toJuly1,2021.Asofthebalancesheetdate,theprincipalamountisredeemableinsixequalsemiannualinstallmentscommencingonJanuary1,2019.

Rate of return

ThereturnonPPTFCsispayablesemi-annuallyandiscalculatedontheoutstandingbalanceattherateofsixmonthsKarachiInterBankOfferedRate(‘KIBOR’)plus1.90%perannum.Themarkupratechargedduringtheyearontheoutstandingbalanceis7.98%perannum.

Trustee

InordertoprotecttheinterestoftheholderofPPTFCs,PakOmanInvestmentCompanyLimited(hereinafterreferredtoas‘POICL’)hasbeenappointedasTrusteeunderatrustdeeddatedJune21,2016.TheTrusteeispaidafeeofRs0.2millionperannum.

Incasethegroupdefaultsonanyofitsobligations,theTrusteemayenforcethegroup’sobligationinaccordancewiththetermsofthetrustdeed.TheproceedsofanysuchenforcementsshallbedistributedtotheholderofPPTFCsatthetimeonaparipassubasisinproportiontotheamountsowedtoitpursuanttothePPTFCs.

Security

ThePPTFCsaresecuredbyafirstparipassuchargeonthepresentandfuturefixedassetsoffertilizeroperations. 2016 2015 (Rupeesinthousand)

8.2 Long term loans

Thesehavebeenobtainedfromthefollowingfinancialinstitutions: StandardCharteredBank(Pakistan)Limited(‘SCB’) -note8.2.1 – 333,332 FaysalBankLimited -note8.2.2 83,333 250,000 PakistanKuwaitInvestmentCompany(Private)Limited -note8.2.3 – 62,500 PAIR -note8.2.4 142,857 285,714 SoneriBankLimited -note8.2.5 – 133,333 AlliedBankLimited -note8.2.6 1,581,910 1,977,282 MeezanBankLimited -note8.2.7 – 71,214 POICL -note8.2.8 500,000 –

2,308,100 3,113,375 Currentportionshownundercurrentliabilities (626,190) (1,143,236)

1,681,910 1,970,139 8.2.1 Thishasbeenrepaidduringtheyear.Themarkupratechargedduringtheyearonoutstandingbalancerangesfrom7.85%to7.99%

perannum. 8.2.2 Thisrepresentsatermfinancefacilityobtainedtofinancethegroup’scapitalexpenditurerequirements.Theoutstandingamountis

repayableonJune14,2017andcarriesmarkupattherateofsixmonthsKIBORplus1.70%perannum,payablesemi-annually.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom7.83%to8.22%perannum.ItissecuredbyaparipassuchargeonallpresentandfuturefixedassetsexcludingtheassetscomprisingofAmmoniaConverterBasket,theLamontBoilerforNitricAcid,theBombardierChallengeraircraft,theassetscomprisingoftheCleanDevelopmentMechanism(‘CDM’)project,thecompletecarbondioxiderecoveryplant/liquefactionplantandthelandandbuildingsoftheexcludedassets.

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8.2.3 Thishasbeenrepaidduringtheyear.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom8.34%to8.76%perannum.

8.2.4 Thisrepresentstermfinancefacilityforbalancesheetrestructuringandgroup’scapitalexpenditurerequirements.Itisrepayableintwo

semi-annualinstallmentsofRs71.429millioneachendingonAugust28,2017andcarriesmarkupattherateofsixmonthsKIBORplus2.25%perannum,payablesemi-annually.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom8.29%to9.32%perannum.Itissecuredbyafirstparipassuchargeonthepresentandfuturefixedassetsoffertilizeroperations.

8.2.5 Thishasbeenrepaidduringtheyear.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom7.81%to

8.22%perannum. 8.2.6 Thisrepresentstermfinancefacilitytomeetgroup’spaymentofimportbillpayable.Itisrepayableineightsemi-annualinstallments

ofRs200millioneachendingonNovember24,2020andcarriesmarkupattherateofsixmonthsKIBORplus2%perannum,payablesemi-annualy. Themarkup ratechargedduring theyearon theoutstandingbalance ranges from8.11% to 8.52%perannum. ItissecuredbyafirstparipassuchargeoverallpresentandfutureplantandmachineryofthefertilizeroperationsexcludingassetscomprisingofAmmoniaConverterBasket,theLamontboilerforNitricAcid,theassetscomprisingoftheCDMproject,thecompletecarbondioxiderecoveryplant/liquefactionplantalongwithcarbondioxidestaticstoragetankandanexclusivechargeovertheBombardierChallengeraircraft. Furthermore, long term loans from relatedparties (as referred to innote9 to theseconsolidatedfinancialstatements)willremainsub-ordinatedinfavourofAlliedBankLimitedtillcompleterepaymentofthisloan.Thereconciliationofthecarryingamountofloanisasfollows:


Receipt 2,000,000 2,000,000 Initialtransactioncost (23,200) (23,200)

1,976,800 1,976,800 Amortizationofinitialtransactioncost 5,110 482

1,981,910 1,977,282 Repaid (400,000) –

1,581,910 1,977,282 Currentmaturity (400,000) (400,000)

1,181,910 1,577,282 8.2.7 Thishasbeenrepaidduringtheyear.Themark-upratechargedduringtheyearontheoutstandingbalancerangesfrom7.72%to

8.12%perannum. 8.2.8 Thisrepresentsatermfinancefacilitytomeetgroup’scapitalexpenditurerequirements.Itisrepayableinsixsemi-annualinstallments

ofRs83.333millioneachcommencingNovember9,2018andcarriesmarkupattherateofsixmonthsKIBORplus1.95%perannum,payablesemi-annually.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom8.01%to8.31%perannum.ItissecuredbyaparipassuchargeonallpresentandfuturefixedassetsofthefertilizeroperationsexcludingtheassetscomprisingofAmmoniaConverterBasket,theLamontBoilerforNitricAcid,theBombardierChallengeraircraft,theassetscomprisingoftheCDMproject,thecompletecarbondioxiderecoveryplant/liquefactionplant.

8.2.9 Asofthebalancesheetdate,inadditiontotheabovementionedfacilities,alongtermfinancefacilityamountingtoRs10million

(2015:Nil)wasavailabletothegroupfromSummitBankLimited,arelatedparty(associatedcompany)forpurchaseofvehicleswhichwasnotavailedbythegroup.

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8.3 Syndicate term finance

Thishasbeenobtainedfromaconsortiumofthefollowingfinancialinstitutions:

Receipts from lender: NationalBankofPakistan 1,500,000 – MCBBankLimited 500,000 – BankIslamiLimited 600,000 – SCB 1,500,000 –

4,100,000 – Initialtransactioncost (61,500) –

4,038,500 – Amortizationofinitialtransactioncost 67

-note8.3.1 4,038,567 – Currentportionshownundercurrentliabilities (455,557) –

3,583,010 – 8.3.1 ThisrepresentslongtermfinancefacilityofRs6billionobtainedfromaconsortiumofbanksledbySCB(the‘LeadArranger’).

Theoverallfinancing is securedbywayofchargeover fertilizeroperations’ landhavinganareaof2,399Kanals7Marlastogetherwithallbuilding,structure,fitting&fixturepermanentlyfastedtolandanderectionbuildingandoverallpresentandfuturefixedassetsofthefertilizeroperationsexcludingtheassetscomprisingofAmmoniaConverterBasket,theLamontBoilerforNitricAcid,theBombardierChallengeraircraft,theassetscomprisingoftheCDMproject,thecompletecarbondioxiderecoveryplant/liquefactionplant.OfthetotalfacilityofRs6billion,Rs4.1billionhasbeenavailedbythegroupasofthebalancesheetdate.Asofthebalancesheetdate,theprincipalamountisrepayableinnineequalsemi-annualinstallmentscommencingfromDecember30,2017andcarriesmarkupattherateofsixmonthsKIBORplus1.25%perannum,payablesemi-annually.Themarkupratechargedduringtheyearontheoutstandingbalanceis7.40%perannum.


9. Long term loans from related parties - unsecured

Thesehavebeenobtainedfromthefollowingrelatedparties:

RelianceCommodities(Private)Limited(associatedcompany) 1,208,693 877,982 InternationalComplexProjectsLimited(associatedcompany) 500,000 – MemberandChairman’sspouse 397,326 371,491 Chairman’schildren 168,581 116,914 Directors 644,122 866,565 -note9.1 2,918,722 2,232,952 9.1 Asperthetermsoftheagreementsfortheseloans,thesewererepayableinaperiodoftwoyearscommencingfromJanuary

1,2017ontermsthatweretobemutuallyagreedbetweentheparties.However,asperthetermsofloanagreementwithAlliedBankLimited(asfullyexplainedinnote8.2.6totheseconsolidatedfinancialstatements),theseloanswillremainsub-ordinatedinfavourofAlliedBankLimitedtillcompleterepaymentofitsloanhence,theseloanshavebeenclassifiedasnon-current.Markupispayablesemi-annuallyatarateofsixmonthsKIBORplus1.5%perannum.Themarkupratechargedduringtheyearontheoutstandingbalancerangesfrom7.58%to8.01%perannum.

10. Long term loan from related party - secured

Asofthebalancesheetdate,thisrepresentsalongtermfinancefacilityofRs3billionobtainedfromFatimaFertilizerCompanyLimited(‘FATIMA’),arelatedparty(associatedcompany).Duringtheyear,thisfacilitywaschangedfromarenewablelimit,inthenatureofrunningfinancefacility,toalongtermfinancefacility,afterthechangeintermsofthefacilitywereapprovedbythemembersofFATIMAintheirExtraordinaryGeneralMeetingheldonDecember23,2016.

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Aspertherevisedterms,theprincipalamountisrepayableinsixequalsemi-annualinstallmentscommencingfromJune23,2019andcarriesmarkupattherateofsixmonthsKIBORplus2.12%perannum,payablesemi-annually.Themarkupratecharged,duringtheyear,ontheoutstandingbalancerangesfrom8.20%to8.63%perannum.Thisfacilityissecuredagainstrankingchargeoverallpresentandfuturefixedassetsofthefertilizeroperationsexcludingimmovablepropertyi.elandandbuildings,theLamontboilerfornitricacid,theassetscomprisingoftheCDMprojectandcompletecarbondioxiderecoveryplant.

11. Long term deposits

Theserepresentinterestfreesecuritydepositsfromcustomersandcarriagecontractorsandarerepayableoncancellation/withdrawalofthedealershiporoncessationofthebusinesswiththegrouprespectively.


12. Deferred liabilities

Accumulatingcompensatedabsences -note12.1 72,336 97,166 Retirementbenefits-gratuityfund -note12.2 41,615 35,814

113,951 132,980 2016 2015 (Rupeesinthousand)

12.1 Accumulating compensated absences

Openingbalance 97,166 80,812 Chargetoprofitandlossaccount -note12.1.2 12,841 25,038

110,007 105,850 Paymentsmadeduringtheyear (8,591) (8,684) Provisionwrittenbackduringtheyear -note12.1.3 (29,080) –

Liabilityasatyearend 72,336 97,166 12.1.1 Movement in liability for accumulating compensated absences

Openingpresentvalueofaccumulatingcompensatedabsences 97,166 80,812 Currentservicecost 4,403 15,971 Interestcost 8,325 8,029 Benefitspaidduringtheyear (8,591) (8,684) Provisionwrittenbackduringtheyear -note12.1.3 (29,080) – Remeasurementduringtheyear 113 1,038

Closingpresentvalueofaccumulatingcompensatedabsences 72,336 97,166 12.1.2 Charge for the year

Currentservicecost 4,403 15,971 Interestcost 8,325 8,029 Remeasurementduringtheyear 113 1,038

Expensechargedtotheprofitandlossaccount 12,841 25,038 Amountsforcurrentperiodandpreviousfourannualperiodsofaccumulatingcompensatedabsencesareasfollows: 2016 2015 2014 2013 2012 As at December 31 (Rupeesinthousand) Presentvalueofaccumulating compensatedabsences 72,336 97,166 80,812 86,320 84,150 Experienceadjustment arisingonobligation 113 1,038 (13,646) – –

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Theaveragenumberofleavesaccumulatedperannumistendaysforexecutivesandfivedaysforworkersandotherstaff. 12.1.3Duringtheyear,employeesofthefertilizeroperationsrelatingtomarketinganddistributiondepartmentweretransferredto

FatimaAgriSalesandServices(Private)Limited(hereinafter referredtoas ‘FASS’),a relatedparty(groupcompany),witheffectfromJanuary1,2016andnowalltheliabilitiesrelatedtotheseemployeeswillbepaidandbornebyFASS.Hence,thegrouphaswrittenbackthecorrespondingliabilityoftheseemployeesasthegroupisnolongerliabletopaytheirliabilities.


12.2 Gratuity fund Theamountsrecognisedinthebalancesheetareasfollows: Presentvalueofdefinedbenefitobligation 149,213 171,990 Fairvalueofplanassets (107,598) (136,176)

Liabilityasatyearend 41,615 35,814 Openingnetliability 35,814 34,977 Chargetoprofitandlossaccount 20,371 24,630 Chargetorelatedparty 1,313 8,304 Netremeasurementsfortheyear 19,931 2,880 Contributionbythegroup (35,814) (34,977)

Liabilityasatyearend 41,615 35,814 Themovementinthepresentvalueofdefinedbenefitobligationisasfollows:

Openingpresentvalueofdefinedbenefitobligation 171,990 149,293 Currentservicecost 20,127 31,098 Interestcost 14,482 14,620 Benefitspaidtoout-goingmembersduringtheyear (22,160) (20,104) Remeasurementsonobligation 12,388 (2,917) LiabilityrelatingtoemployeestransferredtoFASS -note12.2.1 (47,614) -

Presentvalueofdefinedbenefitobligationasatyearend 149,213 171,990 Themovementinfairvalueofplanassetsisasfollows:

Openingfairvalue 136,176 114,316 Interestincomeonplanassets 12,925 12,784 Contributions 35,814 34,977 Benefitspaid (22,160) (20,104) FairvalueofplanassetstransferredtoFASS -note12.2.1 (47,614) - Returnonplanassetsexcludinginterestincome (7,543) (5,797)

Fairvalueasatyearend 107,598 136,176 Plan assets are comprised as follows:

Mixedfunds 80,914 110,030 Cash 26,684 26,146

107,598 136,176 Thegroupfacesthefollowingrisksonaccountofgratuityfund:

-FinalSalaryRisk(linkedtoinflationrisk)–TheriskthattheFinalSalaryatthetimeofcessationofserviceisgreaterthanwhatweassumed.SincethebenefitiscalculatedontheFinalSalary(whichwillcloselyreflectinflationandothermacroeconomicfactors),thebenefitamountincreasesasSalaryincreases.

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DemographicRisks

-MortalityRisk: Theriskthattheactualmortalityexperienceisdifferentthantheassumedmortality.Thiseffectismore pronouncedinschemeswheretheageandservicedistributionisonthehigherside. -WithdrawalRisk:Theriskofactualwithdrawalsexperienceisdifferentfromassumedwithdrawalprobability.Thesignificance ofthewithdrawalriskvarieswiththeage,serviceandtheentitledbenefitsofthebeneficiary. -InvestmentRisk: Theriskoftheinvestmentunderperformingandbeingnotsufficienttomeettheliabilities.

ThegroupisexpectedtocontributeRs26.779milliontothegratuityfundinthenextyear. Thepresentvalueofdefinedbenefitobligation,thefairvalueofplanassetsandthesurplusordeficitofgratuityfundisasfollows: 2016 2015 2014 2013 2012 (Rupeesinthousand)

Presentvalueofdefinedbenefitobligation (149,213) (171,990) (149,293) (129,962) (115,230) Fairvalueofplanassets 107,598 136,176 114,316 89,810 82,105

Loss (41,615) (35,814) (34,977) (40,152) (33,125)

Experienceadjustmentonobligation 8% -2% -2% 5% 3%

Experienceadjustmentonplanassets -7.01% -4.26% -3.64% -1.44% -0.95%

Thesensitivityofthedefinedbenefitobligationtochangesintheweightedprincipalassumptionsis:

Impact on defined benefit obligation

Change in Increase in Decrease in assumptions assumption assumption (Rupeesinthousand)

Discountrate 1% 137,014 163,419 Salarygrowthrate 1% 163,623 136,619 12.2.1Duringtheyear,employeesofthefertilizeroperationsrelatingtomarketinganddistributiondepartmentweretransferredto

FASS,arelatedparty,witheffectfromJanuary1,2016andnowalltheliabilitiesrelatedtotheseemployeeswillbepaidandbornebyFASShence,thefundhastransferredthecorrespondingportionofthepresentvalueofdefinedbenefitobligationandfairvalueofplanassetsrelatingtotheseemployeesasatDecember31,2015toFASS.


13. Deferred taxation

Liability/(asset)fordeferredtaxationcomprisestemporarydifferencesrelatingto:

Acceleratedtaxdepreciation 8,834,203 8,894,066 Accumulatingcompensatedabsences (21,701) (29,150) Provisionfordoubtfulreceivable (2,673) (2,673) Postretirementmedicalbenefitsandotherallowancespayable (3,454) (3,454) Interestreceivable 8,261 6,982 Unrealisedrecoveryofchemicalcatalyst 48,820 48,820 Transactioncostonlongtermloans 6,697 6,815 Goodwill 991,549 991,549 Unrealisedgainonshortterminvestments 163 – Unusedtaxlosses (2,733,512) (1,455,557) Unusedtaxcredits (376,803) (498,030)

6,751,550 7,959,368

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Deferredtaxassetontaxlossesavailableforcarryforwardandthoserepresentingminimumtaxavailableforcarryforwardundersection113oftheIncomeTaxOrdinance,2001arerecognizedtotheextentthattherealisationofrelatedtaxbenefitsthroughfuturetaxableprofitsisprobable.ThegrouphasnotrecogniseddeferredtaxassetofRs280,496million(2015:Nil)inrespectofminimumtaxavailableforcarryforwardundersection113oftheIncomeTaxOrdinance,2001,assufficienttaxableprofitswouldnotbeavailabletoutilisetheseintheforeseeablefutureandwouldexpireasfollows:

Accounting year to which Amount of minimum tax Accounting year in which minimum tax relates (Rupees in thousand) minimum tax will expire

2012 40,884 2017 2013 82,697 2018 2014 156,915 2019 280,496


Thegrossmovementindeferredtaxliabilityduringtheyearisasfollows: Openingbalance 7,959,368 10,192,205 Deferredtaxonrevaluationsurplus -note7 12,899 (647,560) Creditedtoprofitandlossaccount -note37 (1,220,717) (1,585,277)

Closingbalance 6,751,550 7,959,368 14. Short term borrowing from related party - secured

Asfullyexplainedinnote10totheseconsolidatedfinancialstatements,thisfacilityhasbeenchangedfromarenewablelimit,inthenatureofrunningfinancefacility,toalongtermfinancefacilityduringtheyear.


15. Short term borrowings - secured

Runningfinances -note15.1 7,637,470 10,501,915 Termfinances -note15.2 1,861,806 4,949,638

9,499,276 15,451,553

15.1 Running finances

ShorttermrunningfinancefacilitiesavailablefromcommercialbanksundermarkuparrangementsamounttoRs9,763million(2015:Rs13,559million).Theratesofmarkuprangefrom6.72%to11.22%ontheoutstandingbalanceorpartthereof.Theaggregaterunningfinancesaresecuredagainstpledgeofstock-in-tradeasreferredtoinnote25.1totheseconsolidatedfinancial statementsand registeredhypothecationchargeoncurrentassetsof thegroupandfixedassetsof the fertilizeroperationsincludingtheLamontBoiler,AmmoniaConverterBasket,assetscomprisingCDMprojectandcompletecarbondioxiderecoveryplantofthefertilizeroperations. IncludedintheaboveisarunningfinanceofRs398.423million(2015:Rs385.504million) [available limit:Rs400million(2015:Rs400million)] fromSummitBankLimited,a relatedparty(associatedcompany).

15.2 Term finances

TermfinancefacilitiesavailablefromcommercialbanksunderprofitarrangementsamounttoRs3,259million(2015:Rs6,504million).Theratesofprofitrangefrom6.98%to8.49%ontheoutstandingbalanceorpartthereof.TheaggregatetermfinancesaresecuredagainstfirstparipassuchargeoverallcurrentandfixedassetsofthefertilizeroperationsincludingtheLamontBoiler,AmmoniaConverterBasket,assetscomprisingCDMprojectandcompletecarbondioxiderecoveryplant/liquificationplantalongwithcarbondiaoxidestaticstoragetankofthefertilizeroperationsandpledgeofrawmaterials,stock-in-trade,hypothecationchargeonallcurrentassetsofthesacksoperations.

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15.3 Letters of credit and guarantees

OftheaggregatefacilityofRs4,324million(2015:Rs5,405million)foropeninglettersofcreditandRs1,517million(2015:Rs288million)forguarantees,theamountutilisedatDecember31,2016wasRs1,686million(2015:2,240million)andRs1,247million(2015:Rs17million)respectively.Thefacilityforopeninglettersofcreditissecuredagainstimportdocumentsandregisteredjointparipassuchargeovercurrentassetswhereasfacilityforguaranteesissecuredagainstregisteredjointparipassuchargeovercurrentassets.

15.4 Guarantees discounted - secured

Of theaggregate facilitiesof Rs 3,900million (2015: Rs 3,250million) fordiscountingofguaranteesgivenbydebtors, theamountutilisedatDecember31,2016wasRs3,089.441million(2015:Rs1,988.767million).Discountingchargeisfixedaspermutualagreementat the timeof transaction. Theoutstandingbalanceofguaranteesdiscounted is securedagainst thespecificguaranteesdiscounted.

16. Payable to Privatization Commission of Pakistan

RelianceExports (Private)Limited(‘REL’),under the termsandconditions stated in the ‘SharePurchaseAgreement’ (‘theAgreement’),acquired100%sharesof(‘PFL’)onJuly14,2005throughtheprocessofprivatization.UnderthetermsoftheAgreement,thepurchaseconsideration,inadditiontolumpsumcashpayment,includedafurtherpaymentequivalentto90%ofthegroup’sclaimoftaxrefundaggregatingtoRs2,814.511millionfortheassessmentyears1993-94,1995-96through2002-2003andtaxyears2003and2004.Theamount ispayabletothePrivatizationCommission(hereinafterreferredtoas‘PC’)intheeventofandatthetimeofcashreceiptoftherefundfromtheconcernedtaxauthorities.

The amount recognized in these consolidated financial statements as payable to PC is net off Rs 240.119millionwhich,

accordingtothemanagementofthegroup,hasalreadybeenwithdrawnbythePreviousMembersaspartofthedividenddistributionfortheyearendedJune30,2005.ThemanagementofthegroupfeelsthattheAgreementaspresentlyworded,ifexecuted,wouldresultintodoublepaymentofthesameamounttoPC/PreviousMembers,firstly,aspartoftheprofitsfortheyearendedJune30,2005(computedwithoutrecognitionofthetaxexpensefortheyearsforwhichwhentherefundis issued,anamountequivalentto90%wouldbetherightofPC/PreviousMembers)andsecondly,atthetimetherefundis received from the taxauthoritieswhenanamountequivalent to90%of such refund ispaidoff toPC,asagreed. ThemanagementofthegroupfeelsthatsuchdoublepaymentisneithertheintentionnorwarrantedunderthespecificprovisionsoftheAgreement.

UpondissolutionofRELanditsamalgamationwithPFLonJuly14,2005,thisliabilitywasrecognisedinthebooksofPFLbeing

thesurvivingentityuponREL’samalgamationwithPFLinaccordancewiththeSchemeofArrangementforAmalgamation.


17. Trade and other payables

Tradecreditors 1,053,188 2,785,913 Suigasbillpayable -note17.1 309,315 – Securitydeposits 36,507 32,105 Accruedliabilities -notes17.2&17.3 1,729,322 2,400,261 Workers’profitparticipationfund -note17.4 691,008 731,012 Workers’welfarefund -note17.5 26,050 273,040 Customers’balances 163,049 186,333 Bankguaranteesdiscounted 3,089,441 1,987,767 Duetoemployees’providentfundtrust 1,641 1,312 Withholdingtaxpayable 35,942 61,540 Excisedutypayable 1,724 1,724 Electricitydutypayable 37,066 30,171 Retentionmoney 253 245 Duetoemployees – 60

7,174,506 8,491,483

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17.1 This amount is payable to Sui Northern Gas Pipelines Limited (‘SNGPL’), a related party (associated company) againstpurchaseofgas.

17.2 AccruedliabilitiesincludeRs1,071million(2015:Rs1,071million)onaccountofGasInfrastructureDevelopmentCess(‘GIDC’).

During theyear, theGIDCAct, 2015was struckdownby theHonorable SindhHighCourtbeingultra-vires.However, themanagementofthegroupisoftheviewthattheMinistryofPetroleumandNaturalResources(‘MP&NR’),GovernmentofPakistanwill fileanappealagainst theaforementioneddecision in usualappellate forum.Due to theexpectedappealagainsttheaforementionedorderandotherlegaluncertainties,thegroupcontinuestocarrytheprovisioninthisrespect.

17.3 IncludesbonusofRs7.5million(2015:Rs7.5million)payabletothedirectors. 2016 2015 (Rupeesinthousand)

17.4 Workers’ profit participation fund

Openingbalance 731,012 711,097 Provisionfortheyear -note35 7,653 67,543 Interestfortheyear -note34 809 695

739,474 779,335 Paymentsmadeduringtheyear (48,466) (48,323)

Closingbalance -note17.4.1 691,008 731,012 17.4.1IncludesRs614.356millionthatrepresentsthebalanceamountofWorkers’ProfitParticipationFund(‘WPPF’)remainingafter

deductingtheworkers’portionofWPPF,that is requiredtobedeposited intheWorkersWelfareFund(‘WWF’).TheparentcompanyhasanagreementwiththeWWF,MinistryofLabourandManpower,GovernmentofPakistanwherebysuchamountwouldbeusedforestablishingahospitalfortheworkersasperthemechanismdefinedinthatagreement.


17.5 Workers’ welfare fund

Openingbalance 273,040 247,376 Provisionfortheyear -note34 – 25,664 Provisionwrittenbackduringtheyear -note17.5.1 (246,990) –

Closingbalance 26,050 273,040 17.5.1Duringtheyear, theHonourableSupremeCourtofPakistanthrough itsorderdatedNovember10,2016decidedthatthe

changes to theWWFOrdinance,1971made throughFinanceActs,2006and2008wereultravires to theConstitutionofPakistan.ThegroupwascarryingaprovisionofRs246.990millionrelatingtosuchamendmentsandasaresultoftheSupremeCourt’sabovementionedorder,suchamounthasbeenwrittenbackasreferredtoinnote36.5totheseconsolidatedfinancialstatements.


18. Accrued mark up

Accrued mark up on: -PPTFCs-secured 15,459 – -longtermloans-secured 23,620 38,593 -syndicatetermfinance 1,660 – -longtermloansfromrelatedparties-unsecured -note18.1 281,955 97,712 -borrowingfromrelatedparty-secured -note18.2 117,601 97,701 -shorttermborrowings-secured -note18.3 204,299 221,338

644,594 455,344

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18.1 Thisamountispayabletothefollowingrelatedparties:

RelianceCommodities(Private)Limited(associatedcompany) 108,952 39,152 FatimaHoldingLimited(associatedcompany) 7,896 – InternationalComplexProjectsLimited(associatedcompany) 33,768 – MemberandChairman’sspouse 45,000 16,015 Chairman’schildren 14,307 5,067 Directors 72,032 37,478

281,955 97,712

18.2 ThisamountispayabletoFATIMA,arelatedparty(associatedcompany). 18.3 IncludesanamountofRs16.158million(2015:Rs8.314million)payabletoSummitBankLimited,arelatedparty(associated

company). 19. Contingencies and commitments 19.1 Contingencies

(i) The group has netted off an amount of Rs 240.119 million from the amount payable to PC, as part of purchaseconsideration, at the time and in the event the refund is received from the tax authorities. In case, the group’scontentionrelatingtopossibledoublepaymentisnotaccededtobytheotherpartytotheSharePurchaseAgreement,thegroupiscontingentlyliabletotheaforesaidamountofRs240.119million.Incase,theamountbecomespayable,thecorrespondingeffectwouldbereflectedinthecomputationofgoodwill.Furthermore,thegrouphasissuedabankguaranteeamountingtoRs240millioninfavourofPCinthisrespect.

(ii) Thegrouphasalsoissuedfollowingguaranteesinfavourof:

- SNGPLagainstLNGandnaturalgassaleamountingtoRs1billion(2015:Rs10million).- PakistanStateOilCompanyLimited(‘PSO’)againstfuelforaircraftamountingtoRs7million(2015:Rs7million).

(iii) AsatJune30,2004,thegrouphadinvestmentof140,000ordinarysharesofRs10eachvaluingRs100,000inNational

Fertilizer Marketing Limited, being the associated company on that date. On May 20, 2005, this investment wastransferredtoNationalFertilizerCorporationofPakistan(Private)Limitedbythemanagementofthegroup.However,thenewbuyer,RELfiledanapplicationbeforePCchallengingthistransferonthegroundsthatsuchtransferhadbeencarriedoutagainstthetermsandconditionsofthebiddocuments.Incaseofapositiveoutcometotheapplication,thisinvestmentwouldbere-instated.

(iv) AnamountofRs129.169millionwaswithdrawnbythepreviousmembersoftheparentcompanyaspartofdividend

fortheyearendedJune30,2005undertheSharePurchaseAgreement.Outoftheaggregateamount,Rs89.39millionrepresentsthevalueofcertaincatalystsrecoveredinconsequenceofcleandownoperationsofthefertilizerplantpriortoundertakingtheprocessofprivatization,whichwasaccountedforasincomeinthefinancialstatementsfortheyearendedJune30,2005inthelightofapplicablefinancialreportingframework.

Themanagementofthegroupfeelsthatnotwithstandingtheapplicabilityofthefinancialreportingframework,onthe

financialstatementsfortheyearendedJune30,2005,theamountwasnotdistributableaspartofdividendforthatyearinviewoftheclearunderstandingbehindtheexecutionoftheAgreementascategoricallyconfirmed,inwriting,byPCpriortosigningoftheAgreement.Similarly,thebalanceamountofRs39.779millionisconsideredtobedividenddistributionoutofthethenavailablereserveswhichwasalsonotdistributabletothepreviousmembersintermsofothercovenantsoftheAgreement.

Thegrouphasfiledaclaimfortherecoveryoftheaforesaidaggregateamountonthegroundsthatinthepresentform,

thedistributionhasbeenmadeoutoftheaccumulatedreserves,fortheyearsuptoJune30,2004,which,underthespecificprovisionsoftheAgreementwerenotdistributabletothepreviousmembersoftheparentcompany.Incaseofapositiveoutcometothegroup’sclaim, theexcessdividendwithdrawnbythepreviousmembersof theparentcompanywouldberecovered.

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(v) Throughashowcausenotice,thetaxdepartmentraisedtheissueofshortpaymentofoutputsalestaxonsuppliesofthegroup’sfertilizerproduct,CalciumAmmoniumNitrate(‘CAN’)fortheperiodfromApril18,2011toDecember31,2011involvingaprincipalsalestaxdemandofRs500million.SuchissuewasraisedonthegroundsthatnotificationSRO15(I)/2006,providingforlevyofsalestaxonthebasisof‘notifiedprice’ofCAN,waswithdrawnthroughnotificationSRO313(I)/2011datedApril18,2011andhence,thegroupwaslegallyrequiredtorecoveroutputsalestaxonsuppliesofCANon thebasisofactualconsideration received thereagainst. Thegrouphadalreadyapproached theFederalBoardofRevenue(‘FBR’)ontheissueforcondonationintermsofsection65oftheSalesTaxAct,1990,whichwasnotentertained.ThegrouphasassailedsuchorderthroughinstitutionofawritpetitionbeforetheHonourableLahoreHighCourtonthegroundsthatrelevantpowershavebeenexercised inanarbitrarymannerwithoutreferringthemattertocompetentauthorityasrequiredunderthelaw.Whilesuchconstitutionalpetitionhasnotyetbeendisposed,sincemanagementconsidersthatthegroup’sstanceisbasedonmeritoriousgroundsandhence,reliefwouldbesecuredfromtheCourt,noprovisiononthisaccounthasbeenmadeintheseconsolidatedfinancialstatements.

(vi) Forassessmentyears1993-94and1995-96through2002-2003andfortaxyears2003through2005,thegroup,inviewof

thepositiontakenbythetaxauthoritiesthattheincomeofthegroupischargeabletotaxonthebasisof‘netincome’,hadprovidedforinthefinancialstatementsthetaxliabilityonnetincomebasiswhichaggregatedtoRs5,223.343million.Taxliabilitiesadmittedinrespectivereturnsoftotalincomeinrespectoftheseassessment/taxyears,however,aggregatedtoRs1,947.671millionbeingtheliabilitiesleviableunderthePresumptiveTaxRegime(‘PTR’),consideredbythemanagementtobeapplicableinrespectofthegroup’sincomefromsaleofownmanufacturedfertilizerproducts.

The Appellate Tribunal Inland Revenue (‘ATIR’) through its separate orders for the assessment years 1993-94, 1995-

96 through 2002-03 upheld the group’s position as taken in respective returns of total income and consequently,management reversed theexcessprovisionsaggregating toRs3,275.673millionon the strengthof such judgments.ATIR’sdecisions inrespectofcertainassessmentyearshavealsobeenupheldbytheHonourableLahoreHighCourtwhiledisposingdepartmentalappealsagainstrespectiveordersofATIR.IncometaxdepartmenthasstatedlyagitatedtheissuefurtherbeforetheHonourableSupremeCourtofPakistan,whichispendingadjudication.

Inviewof the favorabledisposalof thematterup to the levelofHighCourt,managementof thegroup feels that

thedecisionof theapexcourtwouldalsobe in the favorof thegroupandhence, in theseconsolidatedfinancialstatements,taxliabilitiesinrespectofabovereferredassessment/taxyearshavebeenprovidedonthebasisthatthegroup’sincomeduringsuchyearswastaxableunderPTR.Incase,theapexcourtdecidesthematterotherwise,amountaggregatingtoRs3,275.673millionwillhavetoberecognizedastaxexpenseinrespectofsuchassessment/taxyears.

(vii) IncludedintradedebtsisanamountofRs18.877million(2015:Rs18.877million)whichhasnotbeenacknowledged

asdebtsbyitscustomersduetoadisputeregardingthediscountontheproduct’sprice.Thegroup’scustomershadcollectivelyfiledanappealregardingthepricedisputebeforetheHonourableCivilCourt,Multan,whichdecidedthecase in favorof thegroup’scustomers. Thegrouppreferredanappealbefore theHonourableDistrictandSessionsCourt,Multanwhichsetaside theorderof theCivilCourt. Thegroup’scustomersfileda revisedpetitionbefore theHonourableLahoreHighCourtagainsttheorderoftheDistrictandSessionsCourt,whichispendingforadjudication.Basedontheadviceofthegroup’slegalcounsel,thegroup’smanagementconsidersthattherearemeritoriousgroundstodefendthegroup’sstanceandhence,noprovisionhasbeenmadeintheseconsolidatedfinancialstatementsonthisaccount.

(viii) Duringthepreviousyear,throughashowcausenotice,thetaxdepartmenthadraisedtheissueofnon-paymentof

outputsalestaxonstockoffertilizerproducttransferredtovariouswarehousesofthegroupinvolvingaprincipalsalestaxdemandofRs909.125million(notincludingdefaultsurchargewhichwillbecalculatedatthetimeofdeposit)alongwithapenaltyequalto100%oftheprincipalsalestaxdemand.Suchissuewasraisedonthegroundsthattheabovementionedtransfersconstitute‘supply’intermsofsection2(44)oftheSalesTaxAct,1990,andhence,thesamehavebeenmadewithoutpaymentofsalestax.Themanagementhadassailedthesubjectorderinusualappellatecoursebefore theCommissioner InlandRevenue (Appeals) [‘CIR (A)’]and,during theyear,CIR (A)decided thematter ingroup’s favour through its order datedApril 14, 2016whereby theaforementioneddemand stoodannulled. Beingaggrieved, thedepartmenthasfiledanappealagainst theaforementionedorderofCIR(A)beforetheATIRwhichispendingfixation.Managementconsidersthattherearestronggroundstosupportthegroup’sstanceandthusnoprovisionhasbeenmadeintheseconsolidatedfinancialstatementsfortheabovementionedamount.

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(ix) OnJuly5,2006,PakistanNationalShippingCorporation (‘PNSC’)fileda recovery suit forUSD1.5millionagainst thegroupbeforetheCivilCourt,LahoreclaimingthatithadsufferedlossesasthegroupunilaterallyterminatedtheCharterPartyAgreement(‘CPA’)betweenthePNSCandthegroup.AsperthetermsoftheCPA,PNSCwastotransport300,000metrictonsofrockphosphateforthegroupbetweenFebruary1,2005toMay31,2006atarateofUSD41permetrictonfromCasablancaporttoKarachiport.However,PNSCclaimedthatthegrouphadunilaterallyterminatedtheCPAaftertheprivatizationoftheparentcompanyin2005.ThegroupalsofiledacountersuitagainstPNSCclaimingthatithadviolatedthetermsoftheCPAbydivertingshipscarryingcompany’scargotootherportscausingthegroup’scargotoarrivelaterthanexpectedresultinginlosstothegroup.TheCourtreferredthemattertothearbitratorwhothroughitsawarddatedApril22,2010decidedthematterinPNSC’sfavourandconfirmeditsclaimatUSD1.3million(equivalenttoRs80.009million)andmarkupattherateof14%tobecalculatedfromthedateofawardtillthetimeofdeposit.ThegroupbeingaggrievedhasfiledanapplicationagainsttheawardofarbitratorbeforetheCivilCourt,Lahorewhich ispendingadjudication.Basedontheadviceofthegroups’s legalcounsel,themanagementconsidersthatgroup’sstanceisbasedonmeritoriousgroundsandhencereliefwouldbesecuredfromtheCourt,noprovisiononthisaccounthasbeenmadeintheseconsolidatedfinancialstatements.

(x) During thepreviousyear, thegrouppurchasedLiquefiedNaturalGas (‘LNG’) fromPSOunder thevariousdirectives

of ‘MP&NR,GovernmentofPakistan. The lastLNGcargopurchasedby thegroup fromPSOwas fullyconsumedbythe end of February 2016. Included in the cost bookedduring the previous and current years relating to LNGareprovisional charges of Sui SouthernGasCompany Limited (‘SSGC’) and SNGPL (hereinafter collectively referred toasthe‘GasCompanies’)thatarebasedontheabovementionedGovernmentdirectives,determinationofOilandGasRegulatoryAuthority(‘OGRA’)forotherconsumersthrough itsdecisiondatedMarch18,2016anddiscussionofgroup’smanagementwiththeGasCompanies.Basedontheadviceofthegroup’slegalcounselandmanagement’sabovementioneddiscussions, it stronglybelieves that theamountsclaimedby theGasCompanies from thegroupwouldeventuallybe in linewiththeabovebasis.Consequently,noprovisionhasbeenmade in theseconsolidatedfinancialstatementsforthedifferentialamountofRs970.168millionthatincludeslatepaymentsurchargeofRs184.166million(2015:Rs662.053millionthatincludeslatepaymentsurchargeofRs36.207million),basedontheadviceofthegroup’slegalcounselthattherearemeritoriousgroundstofollowtheabovebasis.

19.2 Commitments

(i) LettersofcreditotherthanforcapitalexpenditureRs1,025million(2015:Rs98million). (ii) Theamountoffuturepaymentsunderoperatingleasesandtheperiodinwhichthesepaymentswillbecomedueare

as follows: 2016 2015 (Rupeesinthousand)

Notlaterthanoneyear 68,295 61,932 Laterthanoneyearandnotlaterthanfiveyears 108,257 122,178

176,552 184,110 2016 2015 (Rupeesinthousand)

20. Property, plant and equipment

Operatingfixedassets -note20.1 39,116,044 39,538,136 Capitalwork-in-progress -note20.2 56,174 30,567 Capitalstoresandstand-byequipment -note20.3 32,055 55,764

39,204,273 39,624,467

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20.1 Operating fixed assets (Rupeesinthousand) Freehold Buildings on Buildings on Railway Plant and Aircrafts Furniture Tools and Vehicles Catalyst Total land freehold leasehold siding machinery and other land land fixtures equipment

COST/REVALUED AMOUNT BalanceasatJanuary01,2015 6,777,600 1,794,078 164,022 9,000 28,931,877 2,284,785 50,262 555,012 316,601 217,312 41,100,549 Additionsduringtheyear – 6,960 22,828 – 1,440 – 678 28,017 207 19,658 79,788 Disposalsduringtheyear – – – – – – – (19,138) (59,887) – (79,025) BalanceasatDecember31,2015 6,777,600 1,801,038 186,850 9,000 28,933,317 2,284,785 50,940 563,890 256,921 236,970 41,101,311 BalanceasatJanuary01,2016 6,777,600 1,801,038 186,850 9,000 28,933,317 2,284,785 50,940 563,890 256,921 236,970 41,101,311 Additionsduringtheyear 71,901 4,361 9,153 – 33,884 – 164 18,824 1,567 83,725 223,579 Revaluationduringtheyear-note20.1.1 – – 29,387 – 13,611 – – – – – 42,998 Disposalsduringtheyear – (4,288) – – – – – (1,448) (53,686) – (59,422) Eliminationofaccumulateddepreciation againstcostonrevaluation – – (22,085) – (53,633) – – – – – (75,718) BalanceasatDecember31,2016 6,849,501 1,801,111 203,305 9,000 28,927,179 2,284,785 51,104 581,266 204,802 320,695 41,232,748

DEPRECIATION BalanceasatJanuary01,2015 – 36,477 10,652 3,076 49,198 374,381 3,315 20,617 292,367 77,177 867,260 Chargefortheyear-note21.1.3 – 109,518 8,984 5,924 427,317 112,480 8,513 49,872 16,917 14,387 753,912 Chargeondisposals – – – – – – – (688) (57,310) – (57,998) BalanceasatDecember31,2015 – 145,995 19,636 9,000 476,515 486,861 11,828 69,801 251,974 91,564 1,563,174 BalanceasatJanuary01,2016 – 145,995 19,636 9,000 476,515 486,861 11,828 69,801 251,974 91,564 1,563,174 Chargefortheyear-note21.1.3 – 109,657 9,725 – 380,450 112,480 8,411 38,740 3,972 21,023 684,458 Chargeondisposals – (565) – – – – – (1,356) (53,289) – (55,210) Eliminationofaccumulateddepreciation againstcostonrevaluation – – (22,085) – (53,633) – – – – – (75,718) BalanceasatDecember31,2016 – 255,086 7,276 9,000 803,332 599,341 20,239 107,185 202,657 112,587 2,116,704 BookvalueasatDecember31,2015 6,777,600 1,655,044 167,214 – 28,456,802 1,797,924 39,112 494,089 4,947 145,406 39,538,136 BookvalueasatDecember31,2016 6,849,501 1,546,025 196,029 – 28,123,847 1,685,444 30,865 474,081 2,145 208,108 39,116,044

20.1.1 Freeholdland,buildingsonfreeholdland,railwaysiding,plantandmachineryandtoolsandotherequipmentrelatingtofertilizeroperationswererevaluedbyanindependentprofessionalvaluerM/sPirsonsChemicalEngineering(Private)LimitedonAugust31,2014whereas,buildingsonleaseholdlandandplantandmachineryrelatingtosacksoperationswasrevaluedbyandindependentprofessionalvaluer,M/sAnjumAdil&AssociatesonDecember31,2016.Therevaluationsurplusnetofdeferredtaxwascreditedtosurplusonrevaluationofoperatingfixedassets.Hadtherebeennorevaluation,thecarryingamountsofthefollowingclassesofassetswouldhavebeenasfollows:


Freeholdland 983,841 911,940 Buildingsonfreeholdland 1,170,866 1,252,700 Buildingsonleaseholdland 139,000 136,080 Plantandmachinery 15,985,874 16,165,056 Toolsandotherequipment 326,600 334,285 18,606,181 18,800,061 20.1.2 IncludedinplantandmachineryareassetshavingcarryingamountofRs47.78millionthatareinstalledatthemanufacturing

facilitiesofthegroup’scustomersnamelyIcebergGasCompany,Coca-ColaBeveragesPakistanLimitedandPepsiColaInternational(Private)Limitedastheseassetsareusedforsalestothesecustomers.


20.1.3 Thedepreciationchargefortheyearhasbeenallocatedasfollows: Costofsales -note31 541,656 549,012 Administrativeexpenses -note32 140,310 195,203 Sellinganddistributionexpenses -note33 2,492 9,697 684,458 753,912

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20.1.4 Disposal of operating fixed assets 2016 (Rupeesinthousand) Accumulated Mode of

Particulars Sold to Cost depreciation Book value Sale proceeds disposal Building on Demolished for reconstruction 4,288 565 3,723 – Demolishedfor

freehold land reconstruction Tools and other Ex-employee equipments Mr Faheem 1,035 587 448 387 AsperGroup’s Policy Other assets with book value less than Rs 50,000 54,099 54,058 41 9,774 59,422 55,210 4,212 10,161 2015 (Rupeesinthousand) Accumulated Mode of

Particulars Sold to Cost depreciation Book value Sale proceeds disposal

Vehicles Ex - employees AsperGroup’s SagheerAhmad 899 764 135 131 Policy SyedBilalHassan 903 768 135 184 -do- AdnanAshraf 530 432 98 117 -do- MuhammadKamran 914 777 137 160 -do- QaiserAbbasKhan 914 807 107 117 -do- HafizAtta-ur-Mustafa 716 633 83 307 -do- AdnanKashifUmar 934 840 94 123 -do- AbdulKhaliqueShaukat 934 871 63 123 -do- BabarJamil 934 871 63 79 -do-

Employees ArifHameedDar(KeyManagementPersonel) 1,913 1,817 96 13 -do- MuhammadTahirSherazi 1,477 1,231 246 290 -do- M.QadeerAli 949 838 111 214 -do- IftikharMahmoodBaig(KeyManagementPersonel) 1,958 1,893 65 – -do- GhulamRasool 927 866 61 128 -do-

Employees of associated company and related party (FATIMA) AbdulGhani 1,478 1,256 222 188 -do- M.TariqJaved 1,858 1,517 341 733 -do- ShakeelAhmad 572 458 114 – -do- Outside Party Mrs.ZahiaShafqat 1,975 1,843 132 1,215 Auction Tools and other equipment Transfer FirstHabibModaraba 18,376 – 18,376 20,604 agreement Other assets with book value less than Rs 50,000 39,864 39,516 348 1,880 79,025 57,998 21,027 26,606

20.1.5 Fair value estimation

Fairvalueistheamountforwhichanassetcouldbeexchanged,orliabilitysettled,betweenknowledgeablewillingpartiesinanarm’slengthtransaction.Underlyingthedefinitionoffairvalueisthepresumptionthatthegroupisagoingconcernwithoutanyintentionorrequirementtocurtailmateriallythescaleofitsoperationsortoundertakeatransactiononadverseterms.Fairvalueisdeterminedonthebasisofobjectiveevidenceateachreportingdate.

Thetablesbelowanalyzethenon-financialassetscarriedatfairvalueasatDecember31,2016andDecember31,2015.

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Thedifferentlevelshavebeendefinedasfollows:

- Quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities(level1). - Inputsotherthanquotedpricesincludedwithinlevel1thatareobservablefortheassetorliability,eitherdirectly(that

is,asprices)orindirectly(thatis,derivedfromprices)(level2). - Inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(thatis,unobservableinputs)(level3).

Thefollowingtablepresentsthegroup’snon-financialassetsthataremeasuredatfairvalueatDecember31,2016. (Rupeesinthousand)

Level 1 Level 2 Level 3 Total Recurringfairvaluemeasurementsof certainitemsofoperatingfixedassets Freeholdland – 6,849,501 – 6,849,501 Buildingsonfreeholdland – – 1,546,025 1,546,025 Buildingsonleaseholdland – – 196,029 196,029 Plantandmachinery – – 28,123,847 28,123,847 Toolsandequipment – – 474,081 474,081

– 6,849,501 30,339,982 37,189,483

Thefollowingtablepresentsthegroup’snon-financialassetsthataremeasuredatfairvalueatDecember31,2015. (Rupeesinthousand)

Level 1 Level 2 Level 3 Total Recurringfairvaluemeasurementsof certainitemsofoperatingfixedassets Freeholdland – 6,777,600 – 6,777,600 Buildingsonfreeholdland – – 1,655,044 1,655,044 Buildingsonleaseholdland – – 167,214 167,214 Plantandmachinery – – 28,456,802 28,456,802 Toolsandequipment – – 494,089 494,089

– 6,777,600 30,773,149 37,550,749

Movementsoftheabovementionedassetsandsurplusonrevaluationoftheseassetshavebeendisclosedinnote20.1and

note7respectivelytotheseconsolidatedfinancialstatements.Thegroup’spolicyistorecognisetransfersintoandtransfersoutoffairvaluehierarchylevelsasattheendofthereportingperiod.TherewerenotransfersbetweenLevels1and2&Levels2and3duringtheyearandtherewerenochangesinvaluationtechniquesduringtheyears.

Valuation techniques used to determine level 2 and level 3 fair values Thegroupobtainsindependentvaluationsforitsfreeholdland,buildingsonfreeholdlandandleaseholdland,railwaysiding,

plantandmachinery,andtoolsandequipments(classifiedasproperty,plantandequipment)atleasteverythreeyears.Attheendofeachreportingperiod,themanagementupdatesitsassessmentofthefairvalueofeachassetmentionedabove,takingintoaccountthemostrecentindependentvaluation.Themanagementdeterminesanasset’svaluewithinarangeofreasonablefairvalueestimates.Level2fairvalueoffreeholdlandhasbeenderivedusingasalescomparisonapproach.Salepricesofcomparablelandincloseproximityareadjustedfordifferencesinkeyattributessuchaslocationandsizeoftheproperty.Themostsignificantinputintothisvaluationapproachispricepersquarefoot.Level3fairvalueofbuildingsonfreeholdlandandleaseholdlandhasbeendeterminedusingadepreciatedreplacementcostapproach,whereby,currentcostofconstructionofasimilarbuildinginasimilarlocationhasbeenadjustedusingasuitabledepreciationratetoarriveatpresentmarketvalue.Level3fairvalueofrailwaysiding,plantandmachinery,andtoolsandequipmentshavebeendeterminedusingadepreciatedreplacementcostapproach,whereby,thecurrentreplacementcostofrailwaysiding,plantandmachinery,andtoolsandequipmentsofsimilarmake/origin,capacityandleveloftechnologyhasbeenadjustedusingasuitabledepreciationrateonaccountofnormalwearandtear.

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ANNUAL REPORT 2016

Valuation inputs and relationship to fair value Thefollowingtablesummarisesthequantitativeandqualitativeinformationaboutthesignificantunobservableinputsused

inrecurringlevel3fairvaluemeasurements.Seeparagraphaboveforthevaluationtechniquesadopted. Significant Quantitative Data / Range and Description Fair value at Unobservable relationship to the fair value 2016 2015 inputs (Rupeesinthousand)

Buildingsonfreeholdland 1,546,0251,655,044 Costofconstruction ofanewsimilarbuilding.

Buildingonleaseholdland 196,029 167,214 Costofconstruction ofanewsimilarbuilding. Suitabledepreciationrate to arrive at depreciated replacementvalue.

Plantandmachinery 28,123,84728,456,802 Costofacquisitionof similar plant andmachinery withsimilarlevelof technology. Suitabledepreciationrate to arrive at depreciated replacementvalue.

Toolsandotherequipment 474,081 494,089 Costofacquisitionof similartoolsandequipment withsimilarlevelof technology. Suitabledepreciationrate to arrive at depreciated replacementvalue.

The market value has beendeterminedbyusingadepreciationfactorofapproximately10%-15%oncost of constructing a similar newbuilding.Higher, theestimatedcostof construction of a new building,higher the fairvalue. Further,higherthedepreciationrate,thelowerthefairvalueofthebuilding.The market value has beendetermined by using a suitabledepreciation factor on cost of constructing a similar newbuilding.The higher, the estimated cost ofconstructionof a newbuilding, thehigherthefairvalueofthebuilding.Further, thehigher thedepreciationrate, the lower the fairvalueof thebuilding.The market value has beendetermined by using cost ofacquisition of similar plant andmachinery with similar level oftechnologyandapplyingasuitabledepreciation factor based onremaining useful lives of plant andmachinery. Remaining useful liveshave been estimated from 20 to25 years. The higher the cost ofacquisition of similar plant andmachinery, higher the fair value ofplantandmachinery.Further,higherthedepreciationrate,thelowerthefairvalueofplantandmachinery.The market value has beendetermined by using cost ofacquisition of similar tools andequipment with similar levelof technology and applying asuitable depreciation factor basedon remaining useful lives of toolsand equipment. Remaining usefullives have been estimated from4 to 25 years. The higher the costof acquisition of similar tools andequipment, higher the fair value oftoolsandequipment.Further,higherthedepreciationrate,thelowerthefairvalueoftoolsandequipment.

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20.2 Capital work-in-progress Civilworks 15,023 16,192 Plantandmachinery 11,274 9,468 Advances-consideredgood: -againstpurchaseofplantandmachinery 2,353 1,825 -againstpurchaseoffreeholdland 25,966 – -tocontractor 175 175 -tosuppliers 1,035 2,559 Intangibleassetunderdevelopment-computersoftware 348 348

-note20.2.1 56,174 30,567

20.2.1 The reconciliation of the carrying amount is as follows: Openingbalance 30,567 38,477 Additionsduringtheyear 169,618 33,603

200,185 72,080 Adjustmentsduringtheyear (1,458) – Transfersduringtheyear (142,553) (41,513)

Closingbalance 56,174 30,567 20.3 Capital stores and stand-by equipment Openingbalance 55,764 74,421 Additionsduringtheyear 69,070 19,378

124,834 93,799 Transfersduringtheyear (92,779) (38,035)

Closingbalance 32,055 55,764 (Rupeesinthousand) Computer Mining rights Total21. Intangible assets software COST

BalanceasatJanuary01,2015 44,240 210,000 254,240 Additionsduringtheyear 607 – 607 BalanceasatDecember31,2015 44,847 210,000 254,847 BalanceasatJanuary01,2016 44,847 210,000 254,847 Additionsduringtheyear – – – BalanceasatDecember31,2016 44,847 210,000 254,847 AMORTIZATION BalanceasatJanuary01,2015 16,841 112,000 128,841 Chargefortheyear -note21.2 10,717 21,000 31,717 BalanceasatDecember31,2015 27,558 133,000 160,558 BalanceasatJanuary01,2016 27,558 133,000 160,558 Chargefortheyear -note21.2 10,535 21,000 31,535 BalanceasatDecember31,2016 38,093 154,000 192,093



Annualamortizationrate% 25 10

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ANNUAL REPORT 2016

21.1 MiningrightsrepresentrightsacquiredforextractionofrockphosphatefromablockofareainDistrictAbbottabadforatenyearsperiodendingonAugust11,2019.TheaforesaidareaisinthepossessionandcontrolofPakistanMiningCompanyLim-ited(‘PMCL’),arelatedparty(associatedcompany),whichprovidesrockphosphateextractionservicestothegroupaspertheServicesAgreement.


21.2 Theamortizationchargefortheyearhasbeenallocatedasfollows:

Costofsales(includedinrawmaterialsconsumed) 21,000 21,000 Administrativeexpenses -note32 10,535 10,717

31,535 31,717

22. Goodwill

Thisrepresentsgoodwillonamalgamationasreferredtoinnote16totheseconsolidatedfinancialstatements.

Impairmenttestingofgoodwillhasbeencarriedoutbyallocatingtheamountofgoodwilltorespectiveassetsonwhichitarose.TherecoverableamountoftheCashGeneratingUnithasbeendeterminedbasedonavalueinusecalculation.Thiscalculationusescashflowprojectionsbasedonfinancialplansapprovedbymanagementcoveringafive-yearperiodthathavebeendiscountedusingadiscountrateof11%.Thecashflowsbeyondthefive-yearperiodareextrapolatedusinganestimatedgrowthrateof4%whichisconsistentwiththelong-termaveragegrowthrateforthefertilizer industry.Alongterm/terminalgrowthrateof1.45%orarise indiscountrateto12.90%would,allchangestakeninisolation,resultintherecoverableamountbeingequaltothecarryingamount.

Theabovecashflowprojectionsareprincipallybasedontheassumptionthatgassupplywouldcontinuetothecompany’splantin

accordancewiththearrangementwithSNGPLwhereinthegasthatwillbesuppliedtothecompany’splantwillbeamixofdomesticnaturalgasandimportedLNG.ThemixwouldcontributetobetterprofitmarginssincedomesticnaturalgasischeaperthanimportedLNG.Also,duringthecurrentyear,company’ssalesvolumesimprovedsignificantlyascomparedtopreviousyears,however,macro-economicfactorssuchasdownwardtrendininternationalcommoditymarketpricesledtodecreaseinsellingpricesresultinginlossfortheyear.However,managementisconfidentthatthesituationwillimproveastheinternationalcommoditymarketpriceshavestartedtorecover.


23. Long term investments

Held to maturity (not due to mature within next twelve months): -Other -note23.1 48,536 43,278 Associates - unquoted:

-MultanRealEstateCompany(Private)Limited 642,321(2015:642,321)fully paidordinarysharesofRs100each Equityheld29.55%(2015:29.55%) -note23.2 64,232 64,232 -FatimaElectricCompanyLimited 7,000(2015:Nil)fully paidordinarysharesofRs10each Equityheld20%(2015:Nil) -note23.2 70 – Advanceagainstpurchaseofsharesin: -FASS,relatedparty(groupcompany) 1,400 –

114,238 107,510

23.1 Investment - Other

ThisrepresentsDefenceSavingCertificatesissuedforaperiodoftenyears,whichwillmatureonSeptember11,2019.Yieldtomaturityonthesecertificatesis12.15%.ThesecertificateshavebeenpledgedassecuritywiththeDirectorGeneral,Mines&Minerals,GovernmentofKhyberPakhtunkhwaasperthetermsoftheminingagreement.

133


23.2 Associates - unquoted

These represent investments in theordinary sharesofMultanRealEstateCompany (Private) Limited (‘MREC’)andFatimaElectricCompanyLimited(‘FECL’).ThemainbusinessofMRECisestablishinganddesigninghousingandcommercialschemes,tocarryonbusinessofcivilengineersforconstructionofprivateandgovernmentalbuildingsandinfrastructureandprovisionoflaborandbuildingmaterialandthemainbusinessofFECListransmitting,manufacturing,supplying,generating,distrubutinganddealinginelectricityandallformsofenergyandpower.

Theinvestmentsaremeasuredatcostastheassociateshavenotyetstartedtheircommercialoperationsandthebreakupvaluesfor

thepurposesofequitymethodofaccountingarenotsignificantlydifferentfromtheircosts. Thegroup’sshareoftheresultofitsassociates,whichareincorporatedinPakistan,anditsshareoftheassets,liabilitiesandrevenue

basedonun-auditedfinancialstatementsasatDecember31,2016isasfollows: Percentage (Rupeesinthousand)

Name Interest held Assets Liabilities Revenue Loss MultanRealEstateCompany(Private)Limited 29.55% 217,542 80 – 110 FatimaElectricCompanyLimited 20.00% 350 – – –


24. Stores and spare parts

Chemicalsandcatalysts[includingintransit:Rs4.147million -note24.1 808,145 857,570 (2015:Rs29.554million)] Stores 109,436 114,625 Spareparts[includingintransit:Rs42.514million (2015:Rs37.598million)] 1,673,285 1,677,407

2,590,866 2,649,602 Provisionforobsoleteitems (76,224) (76,224)

2,514,642 2,573,378 24.1 Included inchemicalsandcatalysts isplatinum, rhodiumandpalladiumofRs234.684million (2015:Rs80.327million)heldbyM/s

JohnsonMattheyPublicLimitedCompany,UnitedKingdomonbehalfofthegroupforrefiningpurposes.


25. Stock-in-trade

Rawmaterials[includingintransitofRs48.182million (2015:Rs24.917million)] -note25.2 499,422 753,458 Packingmaterials 24,569 34,895 Midproducts 173,586 180,135 Work-in-process 12,561 25,664 Finishedgoods: -Ownmanufactured: -notes25.3 Fertilizers &25.4 3,556,004 4,707,754 Emissionreductions -note25.5 – – Polypropylenesacksandcloth -note25.6 10,866 3,930 3,566,870 4,711,684 -Fertilizerpurchasedforresale 122,186 2,193,497

4,399,194 7,899,332 25.1 RawmaterialsandfinishedgoodsamountingtoRs4,116.050million(2015:Rs4,521.267million)arepledgedwithlendersassecurity

againstshorttermborrowingsasreferredtoinnote15.1totheseconsolidatedfinancialstatements. 25.2 IncludesrockphosphateamountingtoRs114.117million(2015:Rs64.396million)whichisinthepossessionofPMCL,arelatedparty

(associatedcompany).TherockphosphateinpossessionofPMCLisduetothereasonexplainedinnote21.1totheseconsolidatedfinancialstatements.

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25.3 ThisincludesstockofCANandUreacostingRs3,543millionandRs285millioncarriedattheirNRVamountingtoRs3,099millionandRs229millionrespectively.TheNRVwritedownexpenseofRs500millionhasbeenchargedtocostofsales.

25.4 Includesgroup’sfertilizerproduct,NitroPhosphate(‘NP’),amountingtoNil(2015:Rs5.748million)whichisinpossessionofFATIMA,a

relatedparty(associatedcompany),forstoragepurposeasitsharesstoragespaceatcertainlocations.Furthermore,italsoincludesgroups’sfertilizerproduct,SingleSuperPhosphate(‘SSP’),amountingtoRs3.89million(2015:Rs31.365million)whichisinpossessionofM/sFarasFertilizerLimited(‘FARAS’)forstoragepurposeastheproductionofSSPhasbeenoutsourcedtoFARAS.

25.5 ThisrepresentsemissionreductionscostingRs37.137million(2015:Rs37.137million)carriedattheirNRVamountingtoNil(2015:Nil). 25.6 ThisincludesstockofPolypropylenesacksandclothcarriedattheirNRVofRs1.565million(2015:Rs0.709million) 2016 2015 (Rupeesinthousand)

26. Trade debts

Considered good:

-Secured(bywayofbankguaranteesandsecuritydeposits) 2,482,285 2,507,978 -Unsecured 612,010 285,192 -notes26.1&26.2 3,094,295 2,793,170 26.1 Theseareinthenormalcourseofbusinessandcertaindebtscarryinterestrangingfrom8.23%to9.49%perannum. 26.2 Includesthefollowingamountsduefromrelatedparties(associatedcompanies): 2016 2015 (Rupeesinthousand)

FATIMA 77,303 64,343 FatimaSugarMillsLimited 16,938 23,270 RelianceWeavingMillsLimited 1,181 3,262 RelianceCommodities(Private)Limited 13,989 14,018 FazalClothMillsLimited 875 43 FazalRehmanFabricsLimited 8 8 FatimafertLimited(‘FFL’) 11,970 466

122,264 105,410 Theageanalysisoftradedebtsduefromrelatedpartiesisasfollows: Neitherpastduenorimpaired 64,873 80,396 Pastduebutnotimpaired: 1to30days 44,589 21,701 31to60days 947 – Above60days 11,855 3,313

122,264 105,410

135



27. Advances, deposits, prepayments and other receivables

Advances-consideredgood: -Toemployees -note27.1 5,914 11,054 -Tosuppliers -note27.2 132,102 1,716,123 Prepayments 184,457 165,948 Interestreceivableonbankdeposits – 992 Balanceswithstatutoryauthorities: -Salestax -consideredgood -note27.3 2,620,394 2,216,408 -considereddoubtful 8,911 8,911

2,629,305 2,225,319 -Incometaxrecoverable 4,238,899 3,861,925 -Customdutyrecoverable 9,812 9,812 -Exportrebaterecoverable 377 1,663 Securitydepositsandmargins 18,427 23,910 ReceivablefromGovernmentofPakistan -note27.4 812,388 1,302,429 Otherreceivables-consideredgood -note27.5 210,291 105,902

8,241,972 9,425,077 Provisionfordoubtfulreceivable (8,911) (8,911)

8,233,061 9,416,166 27.1 IncludedinadvancestoemployeesareamountsduefromexecutivesofRs4.669million(2015:Rs7.503million). 27.2 IncludesanamountofRs26.741million(2015:Rs26.741million)andNil(2015:Rs5.895million)asadvancestorelatedparties,PMCL

(associatedcompany)andSNGPL(associatedcompany)respectively. 27.3 IncludesRs134.022millionwhichprimarilyrepresentstheinputsalestaxpaidbythegroupinrespectofrawmaterialsacquiredbefore

June11,2008onwhichdatefertilizerproductsmanufacturedbythegroupwereexemptedfromlevyofsalestaxthroughnotificationSRO535(I)/2008.Theamountstoodrefundabletothegrouptherebeingnooutputsalestaxliabilityremainingpayableonfertilizerproductsmanufacturedbythegroupagainstwhichsuchinputsalestaxwasadjustable.Thegroup’sclaimofrefundonthisaccountwasnotentertainedbyFBRonthepremisethatsincesubjectrawmaterialsweresubsequentlyconsumedinmanufactureofaproductexemptfromlevyofsalestax,claimwasnotinaccordancewiththerelevantprovisionsoftheSalesTaxAct,1990.

Group’smanagementbeingaggrievedwiththeinterpretationadvancedbyFBRontheissuehaspreferredawritpetitionbeforetheHonourableLahoreHighCourt,whichhasnotyetbeendisposedoff.Sincegroup’smanagementconsidersthatclaimofrefundiscompletelyinaccordancewithrelevantstatutoryframeworkandexpectsrelieffromappellateauthoritiesonthisaccount,itconsidersthatthereceivableamountwasunimpairedatthebalancesheetdate.

27.4 Duringlastyear,theGovernmentofPakistan(hereinafterreferredtoas‘GoP’)hadnotifiedpaymentofsubsidyonsoldproductatthe

rateofRs500per50kgbagofDiAmmoniumPhosphate(‘DAP’)andRs217per50kgbagofNPsold.ThissubsidyschemewaseffectivetillMay27,2016.

Duringtheyear,another schemewasannouncedbyGoPwhichwaseffective fromJune25,2016.Throughthis schemeGoPhas

notifiedpaymentofsubsidyonsoldproductattherateofRs156per50kgbagofUrea,Rs300per50kgbagofDAP,Rs130per50kgbagofNPandRs88per50kgbagofCANsold.TheamountofsubsidywillbepaidtothegroupuponverificationbyFBR.

28. Thisrepresentsinvestmentsinlistedequitysecuritieswhichareclassifiedas‘heldfortradingthroughprofitorloss’.

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29. Cash and bank balances

Atbankson: -Savingaccounts -notes29.1&29.2 114,877 382,090 -Currentaccounts -note29.2 47,811 143,758 -Termdeposit -note29.3 250,000 –

412,688 525,848 Inhand 2,947 4,972

415,635 530,820 29.1 Profitonbalancesinsavingaccountsrangesfrom5.25%to5.75%perannum. 29.2 IncludedinsavingaccountsisanamountofRs99.868million(2015:Rs217.379million)whichbearsmarkupattherateof5.25%per

annumandincludedincurrentaccountsisanamountofRs0.791million(2015:Rs7.158million),bothplacedwithSummitBankLimited,arelatedparty(associatedcompany).

29.3Thisbearsmarkupattherateof5.31%perannum.


30. Sales

Fertilizerproducts: -Ownmanufactured 12,379,024 16,193,646 -Purchasedforresale 3,798,627 6,307,780

16,177,651 22,501,426

SubsidyfromGovernmentofPakistan -note27.4 1,444,211 1,302,429 Midproducts 553,608 542,280 Rockphosphate – 40,107

1,997,819 1,884,816

Salesoffertilizeroperations 18,175,470 24,386,242 Polypropylenesacksandcloth -note30.1 1,370,523 1,283,617 Exportsales – 2,177 Exportrebate – 232

Salesofsacksoperations 1,370,523 1,286,026

19,545,993 25,672,268 Less: Salestax 1,583,095 2,266,129 Salesincentive 615,856 384,331

2,198,951 2,650,460

17,347,042 23,021,808

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30.1 Includessalestothefollowingrelatedparties(associatedcompanies):

FATIMA 723,559 639,731 FatimaSugarMillsLimited 37,473 55,401 RelianceWeavingMillsLimited 2,593 4,591 RelianceCommodities(Private)Limited 11,921 18,749 FazalClothMillsLimited 3,046 2,486 FazalRehmanFabricsLimited 276 – FFL 128,150 27,418 FatimaEnergyLimited 88 – MukhtarA.SheikhTrust 41 –

907,147 748,376 31. Cost of sales

Rawmaterialconsumed -notes31.1&31.2 8,060,857 12,652,716 Packingmaterialconsumed 12,404 4,817 Linersconsumed 278,206 290,050 Linerinsertioncost 23,025 21,747

8,374,492 12,969,330 Salaries,wagesandotherbenefits -note31.3 870,841 703,528 Fuelandpower -note31.4 1,905,332 2,461,501 Chemicalsandcatalystsconsumed 260,642 408,497 Sparepartsconsumed 267,816 151,981 Storesconsumed 107,482 55,782 Travellingandconveyance 1,877 2,133 Telephone,telexandpostage 245 182 Stationery,printingandperiodicals – 336 Repairsandmaintenance 141,812 73,714 Rent,ratesandtaxes -note31.5 2,552 2,587 Insurance 89,817 132,438 Vehiclerunningexpenses 1,239 1,700 Entertainment 314 1,870 Depreciationonoperatingfixedassets -note20.1.3 541,656 549,012 Tollmanufacturingchargesandfreight -note31.6 18,926 726,671 Utilities -note31.5 91,085 81,486 Feesandsubscription 1,230 1,475 Others 71,009 40,522

12,748,367 18,364,745

Openingstockofmidproductsandwork-in-process 205,799 53,732 Closingstockofmidproductsandwork-in-process (186,147) (205,799)

19,652 (152,067)

Costofgoodsmanufactured 12,768,019 18,212,678 Openingstockoffinishedgoods 4,711,684 14,077 Closingstockoffinishedgoods (3,566,870) (4,711,684)

1,144,814 (4,697,607)

Costofgoodssold-ownmanufactured 13,912,833 13,515,071 Costofgoodssold-purchasedforresale 3,247,102 4,717,769

-note31.7 17,159,935 18,232,840 31.1 Includes feed gas consumed of Rs 4,120.998 million (2015: Nil) purchased from SNGPL, a related party (associated

company).

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ANNUAL REPORT 2016

31.2 Includes expenses ofNil (2015: Rs 43.459million) for extractionof rockphosphateby PMCL, a relatedparty (associatedcompany),asexplainedinnote21.1totheseconsolidatedfinancialstatements.



Salaries,wagesandotherbenefitsincludethefollowinginrespectofretirementbenefits:

Gratuity Currentservicecost 15,217 15,792 Interestcostfortheyear 10,949 7,425 Returnonplanassets (9,772) (6,492)

16,394 16,725


8,896 12,635 Inadditiontotheabove,salaries,wagesandotherbenefits includeRs15.581million(2015:Rs13.215million) inrespectof

providentfundcontributionbythegroup. 31.4 IncludesfuelgasconsumedofRs1,510.445million(2015:Rs46.907million)purchasedfromSNGPL,arelatedparty(associated

company). 31.5 IncludesexpenseschargedbyFATIMA,arelatedparty(associatedcompany): 2016 2015 (Rupeesinthousand)

Rentagainstleaseofland 769 699 Utilities 91,085 81,486

91,854 82,185 31.6 ThisincludesprocessingservicesofNil(2015:Rs658.842million)availedfromFATIMA,arelatedparty(associatedcompany). 31.7 IncludesoperatingleaserentalsamountingtoRs32.350million(2015:Rs15.224million). 2016 2015 (Rupeesinthousand)

32. Administrative expenses

Salaries,wagesandotherbenefits -note32.1 259,179 310,436 Travellingandconveyance 12,971 15,647 Telephone,telexandpostage 8,433 14,634 Stationery,printingandperiodicals 5,790 5,323 Rent,ratesandtaxes -note32.2 35,439 60,405 Feeandsubscription 3,057 493 Repairsandmaintenance 24,163 50,130 Aircraftoperatingexpenses -note32.3 120,806 123,160 Insurance 9,163 13,764 Legalandprofessionalcharges -note32.4 46,413 24,128 Vehiclerunningexpenses 1,377 3,441 Entertainment 3,637 7,765 Advertisement 443 635 Depreciationonoperatingfixedassets -note20.1.3 140,310 195,203 Amortizationonintangibleassets -note21.2 10,535 10,717 Others 28,879 57,269

-note32.5 710,595 893,150

139




Salaries,wagesandotherbenefitsincludefollowinginrespectofgratuity:

Gratuity Currentservicecost 4,910 5,325 Interestcostfortheyear 3,533 2,503 Returnonplanassets (3,153) (2,189) Amountchargedtorelatedparty (1,313) (1,108)

3,977 4,531


3,945 4,798 Inaddition to theabove, salaries,wagesandotherbenefits includeRs 4.865million (2015: Rs 5.302million) in respectof

providentfundcontributionbythegroup. 32.2 IncludesoperatingleaserentalsamountingtoRs14.502million(2015:Rs19.289million). 32.3 IncludesexpensesofRs38.516million(2015:Rs35.120million)forflyingandmaintenanceservicesofthecompany’saircraft

byAirOne(Private)Limited,arelatedparty(associatedcompany)aspertheServicesAgreement. 2016 2015 (Rupeesinthousand)

32.4 Professional services

Thechargesforprofessionalservicesincludethefollowing inrespectofauditors’servicesfor: -Statutoryaudit 3,470 3,470 -Taxservices 6,784 16,529 -Assuranceandothercertificationservices 84 – -Outofpocketexpenses 185 179

10,523 20,178 32.5 IncludesamountofRs147.847million(2015:Rs189.383million)andRs33.807million(2015:Nil)whichrepresentcommoncosts

chargedtothegroupbyFATIMAandFFL,relatedparties(associatedcompanies).Also,theamountisnetofRs77.775million(2015:Rs81.111million)andRs25.484million(2015:Nil)whichrepresentcommoncostschargedbythegrouptoFATIMAandFFL,relatedparties(associatedcompanies).

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ANNUAL REPORT 2016


33. Selling and distribution expenses

Salaries,wagesandotherbenefits -note33.1 33,339 120,228 Travellingandconveyance 1,691 10,824 Telephone,telexandpostage 744 6,806 Stationery,printingandperiodicals 2,328 1,745 Rent,ratesandtaxes -note33.2 61,237 40,662 Repairsandmaintenance 2,132 5,007 Insurance 4,134 3,190 Vehiclerunningexpenses 421 7,705 Entertainment 547 3,966 Advertisementandsalepromotion 41,296 148,982 Depreciationonoperatingfixedassets -note20.1.3 2,492 9,697 Transportationandfreight 572,132 542,016 Feesandsubscription 169 130 Utilities 230 1,066 Marketinganddistributionservicesfee 113,357 – Others -note33.3 5,490 7,665

-note33.4 841,739 909,689 33.1 Salaries, wages and other benefits

Salaries,wagesandotherbenefitsincludethefollowinginrespectofretirementbenefits:

Gratuity Currentservicecost – 9,981 Interestcostfortheyear – 4,692 Returnonplanassets – (4,103) Amountchargedtorelatedparty – (7,196)

– 3,374

Accumulating compensated absences Currentservicecost – 4,851 Interestcostfortheyear – 2,439 Remeasurements – 315

– 7,605

Inadditiontotheabove,salaries,wagesandotherbenefitsincludeNil(2015:Rs9.901million)inrespectofprovidentfund

contributionbythegroup. 33.2 IncludesoperatingleaserentalsamountingtoRs39.508million(2015:Rs30.952million). 33.3 ThisexpenseisforthemarketinganddistributionservicesprovidedbyFASS,arelatedparty(associatedcompany)aspertheServices

Agreement. 33.4 IncludesamountofRs102.908million (2015:Rs137.458million)which representscommoncostschargedto thegroupby

FATIMA,arelatedparty(associatedcompany).Also,theamountisnetofRs162.693million(2015:Rs437.373million)andRs22.178million(2015:Nil)whichrepresentcommoncostschargedbythegrouptoFATIMAandFASS,relatedparties(associatedcompanies).

141



34. Finance cost

Interest/mark up on: -PPTFCs-secured 15,459 – -Longtermloans-secured 240,160 188,022 -Syndicatedtermfinance-secured 1,660 – -Longtermloanfromrelatedparties-unsecured -note34.1 184,243 143,592 -Longtermloanfromrelatedparty-secured -note34.2 6,048 – -Shorttermloanfromrelatedparty-secured -note34.2 219,972 296,779 -Shorttermborrowings-secured -note34.3 998,282 861,518 -Workers’ProfitParticipationFund -note17.4 809 695 Loanarrangementfeesandothercharges 803 605 Commissiononletterofcredit – 137,090 Amortisationoftransactioncost -notes8.2.6&8.3 4,695 482 Discountingchargesonbankguaranteesdiscounted 104,923 62,496 Latepaymentsurcharge -note34.4 10,839 – Bankcharges 47,106 21,996

1,834,999 1,713,275 34.1 Thisrelatestothefollowingrelatedparties:

FatimaHoldingLimited(associatedcompany) 7,895 15,931 RelianceCommodities(Private)Limited(associatedcompany) 69,806 41,057 InternationalComplexProjectsLimited(associatedcompany) 33,770 – MemberandChairman’sspouse 28,985 33,402 Chairman’schildren 9,241 5,067 Directors 34,546 48,135

184,243 143,592 34.2 TheserelatetoFATIMA,arelatedparty(associatedcompany).

34.3 IncludesinterestexpenseofRs32.546million(2015:Rs36.916million)onaccountofrunningfinancefacilityavailedfromSummitBank

Limited,arelatedparty(associatedcompany).

34.4 ThisrelatestoSNGPL,arelatedparty(associatedcompany)withrespecttothelatepaymentofgasbillsbythegroup.


35. Other expenses

Donations -note35.1 15,681 20,947 Advanceswrittenoff – 2,218 Exchangeloss 111 231,507 Workers’profitparticipationfund -note17.4 7,653 67,543 Workers’welfarefund -note17.5 – 25,664

23,445 347,879 35.1 IncludesanamountofRs13.201million(2015:Rs20.947million)donatedtoMukhtarA.SheikhTrustandfollowingistheinterestofthe

directors in it:

Name and address of donee Directors Directors’ interest

MukhtarA.SheikhTrust,2ndFloor, Mr.FawadAhmadMukhtar& Trustees TrustPlaza,L.M.QRoad,Multan. Mr.FaisalAhmadMukhtar

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36. Other income

Income from financial assets: Incomeonbankdeposits -note36.1 4,460 61,589 Unrealisedgainoninvestmentheldtomaturity 5,258 4,689 Markuponcreditsaleoffertilizers 1,823 1,517 Dividendincome 130 – Gainondisposalofshortterminvestments 505 – Gainoninvestmentsatfairvaluethroughprofitorloss 543 –

12,719 67,795 Income from non-financial assets:

Rentalincome -note36.2 15,517 17,486 Profitondisposalofoperatingfixedassets 5,949 5,579 Scrapsalesandsundryincome -note36.3 11,979 24,517 Provisionsandunclaimedbalanceswrittenback -notes36.4&36.5 294,686 148,465 Incomefrombiologicallaboratory 4,406 4,636 Excessinsurancepremiumrefunded 7,197 64,205 339,734 264,888

352,453 332,683 36.1 IncludesinterestincomeofRs2.782million(2015:Rs7.360million)onaccountofsavingaccountwithSummitBankLimited,arelated

party(associatedcompany). 36.2 Includesrentalincomeforvehiclesinuseofandaccomodationprovidedtotheemployeesofthefollowingrelatedparties(associated

companies): 2016 2015 (Rupeesinthousand)

FATIMA 392 64 FatimaEnergyLimited 1,374 996 RelianceWeavingMillsLimited 694 3,452 FASS 459 – FatimaSugarMillsLimited 18 –

2,937 4,512 36.3 IncludesanamountofNil(2015:Rs1.084million)inrespectofscrapsalestoFATIMAarelatedparty(associatedcompany).

36.4 IncludesanamountofNil(2015:132.159million)inrespectoflatepaymentsurchargeonGIDCpayable,writtenbackrelatingtothe

periodbeforetheenactmentoftheGIDCAct,2015.

36.5 IncludesanamountofRs246.770million(2015:Nil)inrespectofprovisionwrittenbackforWWFasexplainedinnote17.5.1tothese

consolidatedfinancialstatements.


37. Taxation

Current tax -Fortheyear 157,085 217,411 -Prioryears 144 21,215

157,229 238,626 Deferred -note13 (1,220,717) (1,585,277)

(1,063,488) (1,346,651)

143


2016 2015 %age %age

37.1 Tax charge reconciliation

Numericalreconciliationbetweentheaverageeffectivetaxrate andtheapplicabletaxrate

Applicabletaxrate 31.00 32.00

Tax effect of: -Amountsthatarenotdeductiblefortaxpurposes (0.87) 3.26 -Amountsthatarenotchargeablefortaxpurposes 18.36 (33.13) -Chargeableatlowerrateoftax – (0.44) -Chargeableatdifferentrateoftax 0.17 0.07 -Deferredtaxassetnotrecognizedonminimumtaxavailableforcarryforward (9.58) – -Allowableastaxcredit 0.08 (0.01) -Changeintaxrate (1.46) (67.51) -Changeinprioryears’tax (0.66) (41.32)

6.04 (139.08)

Averageeffectivetaxrate 37.04 (107.08) 2016 2015 (Rupeesinthousand)

38. Cash generated from operations

(Loss)/profitbeforetaxation (2,871,218) 1,257,658

Adjustmentsfornon-cashchargesandotheritems:

-Depreciationonoperatingfixedassets 684,458 753,912 -Amortizationonintangibleassets 31,535 31,717 -Retirementbenefitsaccrued 34,525 57,972 -Profitondisposalofoperatingfixedassets (5,949) (5,579) -Gainondisposalofshortterminvestments (505) – -Gainoninvestmentsatfairvaluethroughprofitorloss (543) – -Provisionsandunclaimedbalanceswrittenback (294,686) (148,465) -Financecost 1,834,999 1,713,275 -Incomeonbankdeposits (4,460) (61,589) -NRVwritedown 501,563 – -Unrealisedgainoninvestmentheldtomaturity (5,258) (4,689) -Exchangeloss 111 231,507 -Advanceswrittenoff – 2,218 -Dividendincome (130) –

Profitbeforeworkingcapitalchanges (95,558) 3,827,937 Effectoncashflowduetoworkingcapitalchanges -Decreaseinstoresandspareparts 58,736 65,317 -Decrease/(increase)instock-in-trade 2,998,575 (7,021,568) -Increaseintradedebts (301,125) (2,387,472) -Decrease/(increase)inadvances,deposits prepaymentsandotherreceivables 1,559,087 (4,706,404) -(Decrease)/increaseintradeandotherpayables (1,108,682) 2,278,874 3,206,591 (11,771,253)

3,111,033 (7,943,316)

39. Cash and cash equivalents

Shorttermborrowings -note15 (9,499,276) (15,451,553) Cashandbankbalances -note29 415,635 530,820

(9,083,641) (14,920,733)

Notesto and forming part of the Consolidated Financial Statements for the year ended December 31, 2015Notesto and forming part of the Consolidated Financial Statements for the year ended December 31, 2015Notesto and forming part of the Consolidated Financial Statements for the year ended December 31, 2016

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ANNUAL REPORT 2016

40. Transactions with related parties

The relatedpartiescompriseofassociates,associatedundertakings,other relatedparties, keymanagementpersonnelandpostemploymentbenefitplans.Thegroupinthenormalcourseofbusinesscarriesouttransactionswithvariousrelatedparties.Amountsduefromandduetorelatedpartiesareshownunderreceivablesandpayablesandremunerationofthekeymanagementpersonnelis disclosed in note 41 to these consolidated financial statements. Significant related party transactions have been disclosed inrespectivenotesintheseconsolidatedfinancialstatementsexceptforthefollowing:


Relationship with the group Nature of transactions

i.Associatedundertakings Saleofgoods 32,312 – Purchaseofgoods 138,226 88,986 ii.Postemploymentbenefitplans Expensechargedinrespectof 42,017 61,335 retirementbenefitplans iii.Keymanagementpersonnel Saleoffixedassetshaving 836 1,460 carryingvaluelessthan Rs50,000 41. Remuneration of Chief Executive, Directors and Executives

41.1 Theaggregateamountchargedintheconsolidatedfinancialstatementsfortheyearforremuneration, includingcertainbenefits,totheChiefExecutive,DirectorsandExecutivesofthegroupisasfollows:

Chief Executive Executive Directors Non-Executive Executives

Directors

2016 2015 2016 2015 2016 2015 2016 2015 (Rupeesinthousand)

Short term employee benefits

Managerialremuneration – – – – 5,673 5,673 247,921 329,956 Incentive/bonus – – – – – – 23,401 1,042 Housingrent – – – – – – 72,729 109,327 Utilities – – – – – – 16,162 24,295 Conveyance – – – – – – 16,162 24,295 Medicalexpenses – – – – 567 567 7,505 9,868 Leavepassage – – – – 945 945 26,437 38,169 Reimbursableexpenses – – – – – – 947 1,283 Others – – – – – – 11,988 17,715

– – – – 7,185 7,185 423,252 555,950 Post employment benefits

Contributiontoprovidentandgratuityfunds – – – – – – 29,051 42,155

Other long term benefits Accumulatingcompensated absences – – – – – – 10,496 44,358

– – – – 7,185 7,185 462,799 642,463

Numberofpersons 1 1 1 1 6 6 154 236 41.2 Thegroupalsoprovides thechiefexecutive,directorsand someof itsexecutiveswithcompanymaintainedcars, travel

facilitiesandclubmembership.

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2016 2015

42. Capacity and production

Urea

Ratedproductioncapacity M.Tons 92,400 92,400 ActualUreaproduced M.Tons 49,283 – ThelowproductionofUreaisduetoshortageoffeedgasandperiodicalmaintenance. NP

Ratedproductioncapacity M.Tons 304,500 304,500 ActualNPproduced M.Tons 179,124 265,349 ThelowproductionofNPisduetoshortageoffeedgasandperiodicalmaintenance. CAN

Ratedproductioncapacity M.Tons 450,000 450,000 ActualCANproduced M.Tons 157,071 287,954 ThelowproductionofCANisduetoshortageoffeedgasandperiodicalmaintenance. Polypropylene sacks

Ratedproductioncapacity Kilograms 5,280,000 5,280,000 Actualproduction Kilograms 5,272,041 5,154,779 Thelowproductionofpolypropylenesacksisduetotheproductmix. 43. Disclosures relating to Provident Fund

Thegroupoperatestwoprovidentfunds:

(i) Employees’ProvidentFundTrustLahore(ii) Employees’ProvidentFundTrustMultan

The following information isbasedon theunauditedfinancial statementsof theFundsasat June30,2016andauditedfinancial

statementsoftheFundsasatJune30,2015:


SizeoftheFunds-totalassets 373,270 350,297 CostofinvestmentsoutoftheProvidentFunds 225,515 270,528 FairvalueofinvestmentsoutoftheProvidentFunds 232,624 300,566 PercentageofinvestmentsoutoftheProvidentFunds 62% 86% BreakupoffairvalueofinvestmentsoutoftheProvidentFunds

2016 2015

(Rupeesin %of (Rupeesin thousand) investment thousand) %ofinvestment Mutualfunds-listed 68,609 29% 101,539 34% Specialaccountsinascheduledbank 164,015 71% 199,028 66% InvestmentsoutofProvidentFundshavebeenmadeinaccordancewiththeprovisionsofsection227oftheOrdinanceandtherules

formulatedforthispurpose.

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ANNUAL REPORT 2016

44. Financial risk management

44.1 Financial risk factors

Thegroupisexposedtoavarietyoffinancialrisks:marketrisk(includingcurrencyrisk,otherpriceriskandinterestraterisk),creditriskandliquidityrisk.Thegroup’soverallriskmanagementprogrammefocusesontheunpredictabilityoffinancialmarketsandseekstominimisepotentialadverseeffectsonthefinancialperformance.

Riskmanagement iscarriedoutby thegroup’sBoardofDirectors (the ‘Board’). Thegroup’s financedepartmentevaluatesand

hedgesfinancialrisks.TheBoardprovideswrittenprinciplesforoverallriskmanagement,aswellaswrittenpoliciescoveringspecificareas,suchasforeignexchangerisk,interestraterisk,creditrisk,useofderivativefinancialinstrumentsandnon-derivativefinancialinstruments,andinvestmentofexcessliquidity.

Thegroup’soverall riskmanagementprocedures thatminimizepotentialadverseeffectof financialmarketon thegroupareas

follows:

a) Market risk i) Currency risk

Currencyriskistheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchangesinforeignexchange rates. Currency risk arises mainly from future commercial transactions or receivables and payables that exist due totransactionsinforeigncurrencies.

Thegroupisexposedtocurrencyriskarisingfromvariouscurrencyexposures,primarilywithrespecttotheUnitedStatesDollar(USD)

andEuro.Currently,thegroup’sforeignexchangeriskexposureisrestrictedtobankbalancesandamountsreceivablefrom/payabletotheforeignentities.


Amountpayable-USD 4,822,026 19,601,027 Cashandbankbalances-USD (11,644) (11,627)

Netliabilityexposure-USD 4,810,382 19,589,400 Cashandbankbalances-Euro (4,295) (5,095)

Netassetexposure-Euro (4,295) (5,095) AtDecember31,2016iftheRupeehadweakened/strengthenedby5%againsttheUSDwithallothervariablesheldconstant,the

impactonpretax loss for theyearwouldhavebeenRs25.156million(2015:Rs100.885million)higher/lower,mainlyasa resultofexchangelosses/gainsontranslationofUSDdenominatedfinancialinstruments.

AtDecember31,2016iftheRupeehadweakened/strengthenedby5%againsttheEurowithallothervariablesheldconstant,the

impactonpretaxlossfortheyearwouldnothavebeenmaterial,mainlyasaresultofexchangegains/lossesontranslationofEurodenominatedfinancialinstruments.

ii) Other price risk

Otherpriceriskrepresentstheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchangesinmarketprices(otherthanthosearisingfrominterestrateriskorcurrencyrisk),whetherthosechangesarecausedbyfactorsspecifictotheindividualfinancial instrumentor its issuer,orfactorsaffectingallsimilarfinancial instrumentstradedinthemarket.Sincetheinvestmentinequitysecuritiesislessthan1%ofthegroup’stotalassetsthepreferanceofinvestmentswillnothaveanymaterialimpactonthegroup’sperformance.Thegroupisalsonotexposedtocommoditypricerisksinceitdoesnotholdanyfinancialinstrumentbasedoncommodityprices.

147


iii) Interest rate risk

Interestrateriskrepresentstheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchangesinmarketinterestrates.

Thegroup’sinterestrateriskarisesfromlongtermfinances/loansandshorttermborrowings.Borrowingsobtainedandloansprovided

atvariableratesexposethegrouptocashflowinterestraterisk. Atthebalancesheetdate,theinterestrateprofileofthegroup’ssignificantinterestbearingfinancialinstrumentswas: 2016 2015 (Rupeesinthousand)

Fixed rate instruments:

Financial assets Longterminvestment 48,536 43,278 Tradedebts 2,779,594 2,510,370 Bankbalances-savingaccountsandtermdeposit 364,877 382,090

3,193,007 2,935,738 Financial liabilities – –

Net exposure 3,193,007 2,935,738

Floating rate instruments:

Financial assets – – Financial liabilities Longtermloansfromrelatedparties 5,917,722 2,232,952 Longtermfinances 6,753,667 3,113,375 Shorttermborrowingfromrelatedparty – 2,200,000 Shorttermborrowings 9,499,276 15,451,553

22,170,665 22,997,880

Net exposure (22,170,665) (22,997,880)

Fair value sensitivity analysis for fixed rate instruments

Thegroupdoesnotaccountforanyfixedratefinancialassetsandliabilitiesatfairvaluethroughprofitorloss.Therefore,achangeininterestrateatthebalancesheetdatewouldnotaffectprofitorlossofthegroup.

Cash flow sensitivity analysis for variable rate instruments

If interest ratesonvariable ratefinancial instruments,at theyearenddate,fluctuatesby1%higher/lowerwithallothervariablesheldconstant,pretaxlossfortheyearwouldhavebeenRs221.652million(2015:Rs230.056million)higher/lower,mainlyasaresultofhigher/lowerinterestexpenseonfloatingrateinstruments.

b) Credit risk

Creditriskrepresentstheriskoffinanciallossbeingcausedifcounterpartyfailstodischargeanobligation. Credit riskof thegrouparises fromcashandcashequivalentsanddepositswithbanksandfinancial institutions,aswellascredit

exposurestocustomers,includingoutstandingreceivablesandcommittedtransactions.Themanagementassessesthecreditqualityofthecustomers,takingintoaccounttheirfinancialposition,pastexperienceandotherfactors.IndividualrisklimitsaresetbasedoninternalorexternalratingsinaccordancewithlimitssetbytheBoard.Theutilisationofcreditlimitsisregularlymonitoredandmajorsalestocustomersaresettledincash.Forbanksandfinancialinstitutions,onlyindependentlyratedpartieswithastrongcreditratingareaccepted.

Thegroupmonitors thecreditqualityof its financialassetswith reference tohistoricalperformanceof suchassetsandavailable

externalcreditratings.Thecarryingvaluesoffinancialassetswhichareneitherpastduenorimpairedareasunder:

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ANNUAL REPORT 2016


Longterminvestments 48,536 43,278 Securitydeposits 36,783 28,554 Tradedebts 2,236,626 2,004,830 Advances,depositsandotherreceivables 228,718 130,556 Cashandbankbalances 415,635 530,820 2,966,298 2,738,038

Thegroup’sexposuretocreditriskislimitedtothecarryingamountofunsecuredtradereceivablesandbankbalances.Theageing

analysisoftradereceivablebalancesisasfollows: 2016 2015 (Rupeesinthousand)

Neitherpastduenorimpaired 2,236,626 2,004,830 Pastduebutnotimpaired: 1to90days 313,546 271,405 91to180days 184,575 176,205 181to270days 228,673 223,171 above270days 130,875 117,559

857,669 788,340 3,094,295 2,793,170

Themanagementestimatestherecoverabilityoftradereceivablesonthebasisoffinancialpositionandpasthistoryofitscustomersbasedontheobjectiveevidencethatitwillnotreceivetheamountduefromtheparticularcustomer.Aprovisionfordoubtfuldebtsisestablishedwhenthereisobjectiveevidencethatthegroupwillnotbeabletocollectalltheamountdueaccordingtotheoriginaltermsofthereceivable.Significantfinancialdifficultiesofthedebtors,probabilitythatthedebtorwillenterbankruptcyorfinancialreorganisation,anddefaultordelinquencyinpaymentsareconsideredindicatorsthatthetradedebtis impaired.Theprovisionisrecognisedintheprofitandlossaccount.Theprovisioniswrittenoffbythegroupwhenitexpectsthatitcannotrecoverthebalancedue.Anysubsequentrepaymentsinrelationtoamountwrittenoff,arecrediteddirectlytoprofitandlossaccount.

Thecreditqualityofgroup’sbankbalancescanbeassessedwithreferencetoexternalcreditratingsasfollows: Rating Rating 2016 2015 Short term Long term Agency (Rupeesinthousand)

AlBarakaIslamicBankLimited A1 A PACRA 3,372 6,973 AlliedBankLimited A1+ AA+ PACRA 100 70 SummitBankLimited A-1 A- JCR-VIS 100,660 224,536 BankAlfalahLimited A1+ AA PACRA 38 45,042 DeutscheBankAG A-2 A- Standard&Poor’s – 1,738 DubaiIslamicBankLimited A-1 A+ JCR-VIS 2 2 FaysalBankLimited A1+ AA PACRA 3,271 3,701 HabibBankLimited A-1+ AAA JCR-VIS 259,945 100,690 HabibMetropolitanBankLimited A1+ AA+ PACRA 12 99 MCBBankLimited A1+ AAA PACRA 9,626 5,387 MeezanBankLimited A-1+ AA JCR-VIS 7,985 1,865 NationalBankofPakistan A1+ AAA JCR-VIS 3,495 605 SCB A1+ AAA PACRA 2,029 21,443 UnitedBankLimited A-1+ AAA JCR-VIS 4,941 90,577 ZaraiTaraqiatiBankLimited A-1+ AAA JCR-VIS 60 59 BankIslamiPakistanLimited A1 A+ PACRA 3,202 10,701 SindhBankLimited A-1+ AA JCR-VIS 42 4,879 BurjBankLimited A-2 BBB+ JCR-VIS – 271 CitibankN.A. P-1 A1 MOODY’S 0.3 0.3 TheBankofPunjab A1+ AA- PACRA 13,901 7,210 BankofKhyber A1 A PACRA 6.5 –

412,688 525,848

149


Duetothegroup’slongstandingbusinessrelationshipswiththesecounterpartiesandaftergivingdueconsiderationtotheirstrongfinancialstanding,managementdoesnotexpectnon-performancebythesecounterpartiesontheirobligationstothegroup.Accordingly,thecreditriskisminimal.

c) Liquidity risk

Liquidityriskistheriskthatanentitywillencounterdifficultyinmeetingobligationsassociatedwithfinancialliabilities. Thegroup’sapproachtomanagingliquidityistoensurethat,asfaraspossible, italwayshassufficientliquiditytomeetits

liabilitieswhendue,underbothnormalandstressedconditions,withoutincurringunacceptablelossorriskingdamagetothegroup’sreputation.

ThefollowingarethecontractualmaturitiesoffinancialliabilitiesasatDecember31,2016andDecember31,2015: Carrying Less than One to More than amount one year five years five years As at December 31, 2016 (Rupeesinthousand)

Longtermfinances 6,753,667 1,081,747 5,671,920 – Longtermloansfromrelatedparties 5,917,722 – 5,917,722 – Longtermdeposits 36,580 – – 36,580 Shorttermborrowings 9,499,276 9,499,276 – – Tradeandotherpayables 6,381,075 6,381,075 – – Accruedmarkup 644,594 644,594 – –

29,232,914 17,606,692 11,589,642 36,580

Carrying Less than One to More than amount one year five years five years As at December 31, 2015 (Rupeesinthousand)

Longtermfinances 3,113,375 1,143,236 1,970,139 – Longtermloansfromrelatedparties 2,232,952 – 2,232,952 – Longtermdeposits 44,860 – – 44,860 Shorttermborrowingfromrelatedparty 2,200,000 2,200,000 – – Shorttermborrowings 15,451,553 15,451,553 – – Tradeandotherpayables 7,392,684 7,392,684 – – Accruedmarkup 455,344 455,344 – –

30,890,768 26,642,817 4,203,091 44,860

44.2 Fair value estimation

Fairvalueistheamountforwhichanassetcouldbeexchanged,orliabilitysettled,betweenknowledgeablewillingpartiesinanarm’slengthtransaction.Underlyingthedefinitionoffairvalueisthepresumptionthatthegroupisagoingconcernwithoutanyintentionorrequirementtocurtailmateriallythescaleofitsoperationsortoundertakeatransactiononadverseterms.Thecarryingvaluesofallfinancialassetsandliabilitiesreflectedintheseconsolidatedfinancialstatementsapproximatetheirfairvalues.Fairvalueisdeterminedonthebasisofobjectiveevidenceateachreportingdate.Thetablebelowanalysesfinancialinstrumentscarriedatfairvalue,byvaluationmethod.Thedifferentlevelshavebeendefinedasfollows:

-Quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities(Level1). -Inputsotherthanquotedpricesincludedwithinlevel1thatareobservablefortheassetorlaibility,eitherdirectly(thatis,as

prices)orindirectly(thatis,derivedfromprices)(Level2). -Inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(thatis,unobservableinputs)(Level3).

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ANNUAL REPORT 2016

Thefollowingtablepresentsthegroup’sfinancialassetsthataremeasuredatfairvalue:

As at December 31, 2016 Level 1 Level 2 Level 3 Total (Rupeesinthousand)

Assets Investmentsatfairvaluethrough profitorloss 5,176 – – 5,176 Thefairvalueoffinancialinstrumentstradedinactivemarketsisbasedonquotedmarketpricesatthebalancesheetdate.

Amarketisregardedasactiveifquotedpricesarereadilyandregularlyavailablefromanexchange,dealer,broker,industrygroup,pricingservice,orregulatoryagency,andthosepricesrepresentactualandregularlyoccurringmarkettransactionsonanarm’slengthbasis.Thequotedmarketpriceusedforfinancialassetsheldbythegroupisthecurrentbidprice.TheseinstrumentsareincludedinLevel1.

Thefairvalueoffinancialinstrumentsthatarenottradedinanactivemarketisdeterminedbyusingvaluationtechniques.

Thesevaluationtechniquesmaximizetheuseofobservablemarketdatawhereitisavailableandrelyaslittleaspossibleonentityspecificestimates.Ifallsignificantinputsrequiredtofairvalueaninstrumentareobservable,theinstrumentisincludedinLevel2.

Ifoneormoreofthesignificantinputsisnotbasedonobservablemarketdata,theinstrumentisincludedinLevel3. Specificvaluationtechniquesusedtovaluefinancialinstrumentsinclude: -Quotedmarketpricesordealerquotesforsimilarinstruments.

-Thefairvalueofinterestrateswapsiscalculatedasthepresentvalueoftheestimatedfuturecashflowsbasedonobservableyieldcurves.

- Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financialinstruments.

44.3 Financial instruments by categories At fair value through profit Held to Loans and or loss maturity receivables Total

As at December 31, 2016 (Rupeesinthousand)

Assets as per balance sheet Securitydeposits - - 36,783 36,783 Tradedebts - - 3,094,295 3,094,295 Advances,depositsandotherreceivables - - 228,718 228,718 Investments 5,176 48,536 - 53,712 Cashandbankbalances - - 415,635 415,635

5,176 48,536 3,775,431 3,829,143

Financial Liabilities at amortized cost


Liabilities as per balance sheet Longtermfinances 6,753,667 Longtermloansfromrelatedparties 5,917,722 Longtermdeposits 36,580 Shorttermborrowings 9,499,276 Tradeandotherpayables 6,381,075 Accruedmarkup 644,594

29,232,914

151


At fair value through profit Held to Loans and or loss maturity receivables Total


Assets as per balance sheet Securitydeposits – – 28,554 28,554 Tradedebts – – 2,793,170 2,793,170 Advances,depositsandotherreceivables – – 130,556 130,556 Investments – 43,278 – 43,278 Cashandbankbalances – – 530,820 530,820

– 43,278 3,483,100 3,526,378

Financial Liabilities at amortized cost


Liabilities as per balance sheet Longtermfinances 3,113,375 Longtermloansfromrelatedparties 2,232,952 Longtermdeposits 44,860 Shorttermborrowingfromrelatedparty 2,200,000 Shorttermborrowings 15,451,553 Tradeandotherpayables 7,392,684 Accruedmarkup 455,344

30,890,768

44.4 Offsetting financial assets and financial liabilities (a) Financial assets

Thefollowingfinancialassetsaresubjecttooffsetting,enforceablemasternettingarrangementsandsimilaragreements:


As at 31 December 2016 A B C = A + B D E = C + D Securitydeposits – – 36,783 Tradedebts 3,094,295 – 3,094,295 – 3,094,295 – Advances,depositsandother

receivables – – – – – 228,718 Investments – – – – – 53,712 Cashandbankbalances – – – – – 415,635

3,094,295 – 3,094,295 – 3,094,295

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ANNUAL REPORT 2016


As at 31 December 2015 A B C = A + B D E = C + D Securitydeposits – – – – – 28,554 Tradedebts 2,793,170 – 2,793,170 – 2,793,170 – Advances,depositsandother receivables – – – – – 130,556 Investments – – – – – 43,278 Cashandbankbalances – – – – – 530,820

2,793,170 – 2,793,170 – 2,793,170

(b) Financial liabilities

Thefollowingfinancialliabilitiesaresubjecttooffsetting,enforceablemasternettingarrangementsandsimilaragreements:


As at 31 December 2016 A B C = A + B D E = C + D Longtermfinances – – – – – 6,753,667 Longtermloanfromrelatedparties – – – – – 5,917,722 Longtermdeposits – – – – – 36,580 Shorttermborrowingfromrelatedparty – – – – – – Shorttermborrowings – – – – – 9,499,276 Tradeandotherpayables 6,381,075 – 6,381,075 – 6,381,075 – Accruedfinancecost – – – – – 644,594

6,381,075 – 6,381,075 – 6,381,075


As at 31 December 2015 A B C = A + B D E = C + D Longtermfinances – – – – – 3,113,375 Longtermloanfromrelatedparties – – – – – 2,232,952 Longtermdeposits – – – – – 44,860 Shorttermborrowingfromrelatedparty – – – – – 2,200,000 Shorttermborrowings – – – – – 15,451,553 Tradeandotherpayables 7,392,684 – 7,392,684 – 7,392,684 – Accruedfinancecost – – – – – 455,344

7,392,684 – 7,392,684 – 7,392,684

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44.5 Capital management

Thegroup’sobjectiveswhenmanagingcapitalaretosafeguardthegroup’sabilitytocontinueasagoingconcerninordertoprovidereturnsforshareholdersandbenefitsforotherstakeholdersandtomaintainanoptimalcapitalstructuretoreducethecostofcapital.Inordertomaintainoradjustthecapitalstructure,thegroupmayadjusttheamountofdividendspaidtoshareholders,returncapitaltoshareholdersthroughrepurchaseofshares,issuenewsharesorsellassetstoreducedebt.Consistentwithothersintheindustryandtherequirementsofthelenders,thegroupmonitorsthecapitalstructureonthebasisofgearingratio.Thisratioiscalculatedasnetdebtdividedbytotalcapitalemployed.Netdebtiscalculatedastotalborrowings(includingcurrentandnon-currentborrowings)lesscashandcashequivalents.Totalcapitalincludesequityasshownintheconsolidatedbalancesheetplusnetdebt.ThegearingratiosasatDecember31,2016and2015wereasfollows:


Borrowings-notes8,9,10&14 12,671,389 7,546,327 Cashandcashequivalents-note39 (9,083,641) (14,920,733)

Netdebt 21,755,030 22,467,060 Totalequity(includessurplusonrevaluationofoperatingfixedassets) 22,295,471 24,093,033 Gearingratio Percentage 49% 48% Inaccordancewiththetermsofagreementswithcertainlendersoflongtermfinances,thegroupisrequiredtocomplywithcertain

financialcovenants.Thegrouphascompliedwiththesecovenantsthroughoutthereportingperiodexceptforcertaincovenantsforwhichthelendershavegrantedrelaxationtothegroup.

2016 2015

45. Number of employees

TotalnumberofemployeesasatDecember31 933 1,065 Averagenumberofemployeesduringtheyear 916 995 46. Details of subsidiary

Nameofsubsidiary Accountingyearend Percentageofholding Countryofincorporation RelianceSacksLimited December31,2016 100% Pakistan 47. Corresponding figures

Correspondingfigureshavebeenreclassifiedwherevernecessarytoreflectmoreappropriatepresentationofeventsandtransactionsforthepurposeofcomparison.However,nosignificantreclassificationhasbeenmade.

48. Date of authorization for issue

TheseconsolidatedfinancialstatementswereauthorizedforissueonMay04,2017bytheBoardofDirectors.

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ANNUAL REPORT 2016

Pattern of Shareholding as at December 31, 2016Disclosure requirement under the code of corporate governance

Details of holding as on December 31, 2016: Shares held

1. Associated Companies, Undertakings and Related Parties RelianceCommodities(Pvt)Limited 7,136,613

FazalHoldings(Pvt)Limited(formerlyAmirFineExports(Pvt)Limited) 12,895,296 FatimaHoldingLimited 84,145,872 ArifHabibCorporationLimited 135,000,000

2. Mutual Funds –3. Directors and their spouse(s) and minor children

Mr.ArifHabib-Chairman 50,624,877 Mr.FawadAhmedMukhtar-CEO 12,499,995 Mr.RehmanNaseem 13,820,522 Mr.FazalAhmedShekih 30,943,236 Mr.FaisalAhmedMukhtar 30,943,236 Mr.NasimBeg 1 Mr.AbdusSamad 1 Mr.MuhammadKashifHabib 1 Mrs.ZetunArif 39,375,120 Mrs.AmbreenFawad 3,577,410 4. Executives –

5. Public Sector companies and corporations –

6. Banks, Development Finance Institutions, Non-Banking Finance Companies, Insurance Companies, Takaful, Modarabas and Pension Funds –

7. Shareholders holding five percent or more voting rights ArifHabibCorporationLimited 135,000,000

FatimaHoldingLimited 84,145,872 Mr.ArifHabib 50,624,877 Mrs.ZetunArif 39,375,120 Mr.FaisalAhmedMukhtar 30,943,236 Mr.FazalAhmedSheikh 30,943,236

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ANNUAL REPORT 2016

Pattern of shareholding as at December 31, 2016 Category-Wise

Shareholding No. of Shareholders Total Shares held Percentage

From To

1 100 3 3 0.00

3,575,001 3,580,000 1 3,577,410 0.79

4,030,001 4,035,000 4 16,121,724 3.58

6,455,001 6,460,000 2 12,916,096 2.87

7,135,001 7,140,000 1 7,136,613 1.59

12,495,001 12,500,000 1 12,499,995 2.78

12,895,001 12,900,000 1 12,895,296 2.87

13,820,001 13,825,000 1 13,820,522 3.07

30,940,001 30,945,000 2 61,886,472 13.75

39,375,001 39,380,000 1 39,375,120 8.75

50,620,001 50,625,000 1 50,624,877 11.25

84,145,001 84,150,000 1 84,145,872 18.70

134,995,001 135,000,000 1 135,000,000 30.0

Total 20 450,000,000 100

CategoriesofShareholders SharesHeld Percentage

Directors,ChiefExecutiveOfficer,andtheirspouseandminorchildren 181,784,399 40.40

AssociatedCompanies,undertakingsandrelatedparties 239,177,781 53.15

Executives – –

PublicSectorCompaniesandCorporation – –

Banks,DevelopmentFinancialInstitutions,NonBankingFinancialInstitutions,

InsuranceCompanies,Takaful,ModarabasandPensionFunds – –

MutualFunds – –

GeneralPublic

a.Local – –

b.Foreign – –

Others 29,037,820 6.45

Total 450,000,000 100.00

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Financial Calendar

Thefinancialresultswillbeannouncedasperthefollowingtentativeschedule:

AnnualGeneralMeeting May30,2017

1stQuarterendingMarch31,2017 ThirdweekofApril,2017

2nd QuarterendingJune30,2017 ThirdweekofAugust,2017

3rdQuarterendingSeptember30,2017 ThirdweekofOctober,2017

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ANNUAL REPORT 2016

44th Annual General Meeting

44th May 30, 2017

2017.

The Company Secretary

HIGHNOON LABORATORIES LIMITED

17.5 Kilometer, Multan Road,

Lahore - 53700 Pakistan.

AFFIXCORRECTPOSTAGE

Annual Report

2016

PAKARAB FERTILIZERS LIMITEDE-110, Khayaban-e-Jinnah,Lahore Cantt. Lahore. 54000Pakistan.

www.fatima-group.com

Client: Pakarab Job Name: Pakarab Annual Report Cover | Color: CMYK | Date: 14-12-2017

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