Attock Refinery Limited (annual Report 2008)

Annual Audited Financial Statements

2008

Attock Refinery Limited

Auditors' Report to the Members

We have audited the annexed balance sheet of Attock Refinery Limited as at June 30, 2008 and the related profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the Company's management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and per form the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: (a)

in our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance, 1984;

(b)

in our opinion (i)

the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies consistently applied;

(ii)

the expenditure incurred during the year was for the purpose of the Company's business; and

(iii)

the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Company;

(c)

in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the Company's affairs as at June 30, 2008 and of the profit, its cash flows and changes in equity for the year then ended; and

(d)

in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the Company and deposited in the Central Zakat Fund established under section 7 of that Ordinance.

Chartered Accountants Islamabad: October 08, 2008

Annual Report 2008

47

Balance Sheet

as at June 30, 2008

Note

2008 Rs ‘000

2007 Rs ‘000

SHARE CAPITAL AND RESERVES Share capital Authorised

6

1,000,000

1,000,000

Issued, subscribed and paid-up Reserves and surplus

6 7

710,775 8,988,216

568,620 3,210,045

9,698,991

3,778,665

1,923,339

1,923,339

11,622,330

5,702,004

96,889

85,800

– 36,688,922 1,673,042

– 25,393,520 1,006,629

38,361,964

26,400,149

50,081,183

32,187,953

SURPLUS ON REVALUATION OF FREEHOLD LAND

8

DEFERRED LIABILITIES Provision for staff gratuity

CURRENT LIABILITIES AND PROVISIONS Short term finance Trade and other payables Provision for taxation

CONTINGENCIES AND COMMITMENTS

Attock Refinery Limited

48

9 10

11

Balance Sheet

as at June 30, 2008

Note

2008 Rs ‘000

2007 Rs ‘000

2,459,520 442,431 27,701

2,730,262 217,683 20,190

2,929,652

2,968,135

PROPERTY, PLANT AND EQUIPMENT Operating assets Capital work-in-progress Stores and spares held for capital expenditure

12 13

LONG TERM INVESTMENTS

14

13,135,579

9,261,339

LONG TERM LOANS AND DEPOSITS

15

12,732

10,954

DEFERRED TAXATION

16

219,302

157,756

17 18 19

542,500 4,844,853 9,207,238

630,836 3,852,646 6,234,918

20 21

244,695 18,944,632

191,255 8,880,114

33,783,918

19,789,769

50,081,183

32,187,953

CURRENT ASSETS

49

The annexed notes 1 to 38 form an integral part of these financial statements.

Chief Executive

Director

Annual Report 2008

Stores, spares and loose tools Stock-in-trade Trade debts Loans, advances, deposits, prepayments and other receivables Cash and bank balances

Profit & Loss Account

for the year ended June 30, 2008

2008 Rs ‘000

2007 Rs ‘000

91,910,703 –

59,154,780 46,248

91,910,703

59,108,532

23

1,743,602

355,393

24

93,654,305 89,646,373

59,463,925 58,597,688

4,007,932

866,237

199,336 19,140 1,244,373 235,711

175,108 16,716 246,545 102,151

1,698,560

540,520

Note

Sales Less: Discount Reimbursement due from the Government under import parity pricing formula Less: Cost of sales

22

Gross profit Less: Administration expenses Distribution cost Finance cost Other charges

25 26 27 28

Other income

30

2,309,372 577,851

325,717 635,166

Profit before taxation from refinery operations Provision for taxation

31

2,887,223 879,653

960,883 456,550

2,007,570

504,333

3,762,775 377,429

– 244,652

4,140,204

244,652

6,147,774

748,985

28.24 58.25

7.10 3.44

86.49

10.54

Profit after taxation from refinery operations Profit after taxation from non-refinery operations Gain on sale of shares of an associated company Dividend income

32 33

Profit for the year Earnings per share – Basic (Rs) Refinery operations Non-refinery operations 37

The annexed notes 1 to 38 form an integral part of these financial statements.

Attock Refinery Limited

50

Chief Executive

Director

Cash Flow Statement

for the year ended June 30, 2008

2008 Rs ‘000

2007 Rs ‘000

102,962,499 109,183

72,705,853 98,996

103,071,682

72,804,849

(80,364,440) (11,312,753) (320,261)

(52,789,988) (14,106,632) (231,353)

CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts from – customers – others

Cash paid for operating costs Cash paid to Government for duties, taxes and other levies Income tax paid Net cash flows from operating activities

11,074,228

5,676,876

(361,046) 2,743 4,438,944 (4,542,444) (1,778) 453,471 454,734

(81,160) 954 – (638,425) 659 529,357 277,697

CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment Proceeds from sale of property, plant and equipment Proceeds from sale of shares of an associated company Purchase of shares of associated companies Long term loans and deposits Income on bank deposits received Dividends received Net cash flows from investing activities

444,624

89,082

CASH FLOWS FROM FINANCING ACTIVITIES Long term loans Financial charges paid Dividends paid

– (1,244,374) (226,812)

(4,547,000) (370,678) (30)

Net cash flows from financing activities

(1,471,186)

(4,917,708)

EFFECT OF EXCHANGE RATE CHANGES INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

16,852

270

10,064,518

848,520

8,880,114

8,031,594

18,944,632

8,880,114

The annexed notes 1 to 38 form an integral part of these financial statements.

Chief Executive

Director

Annual Report 2008

51

Statement of Changes in Equity for the year ended June 30, 2008

Share capital

Capital reserve

Special reserve for expansion / modernisation

General reserve

Un-appropriated Profit

Surplus on revaluation of freehold land

Total

Rs ‘000

Balance at June 30, 2006

454,896

5,948

2,187,629

55

381,152

1,923,339

4,953,019

Bonus shares @ 25% related to the year ended June 30, 2006

113,724

–

–

–

(113,724)

–

–

Profit for the year ended June 30, 2007

–

–

–

–

748,985

–

748,985

Transfer to reserve for expansion / modernisation

–

–

358,533

–

(358,533)

–

–

Balance at June 30, 2007

568,620

5,948

2,546,162

55

657,880

1,923,339

5,702,004

Bonus shares @ 25% related to the year ended June 30, 2007

142,155

–

–

–

(142,155)

–

–

Final cash dividend @ 40% related to the year ended June 30, 2007

–

–

–

–

(227,448)

–

(227,448)

Profit for the year ended June 30, 2008

–

–

–

–

6,147,774

–

6,147,774

Transfer to reserve for expansion / modernisation

–

–

1,861,770

– (1,861,770)

–

–

710,775

5,948

4,407,932

Balance at June 30, 2008

55

4,574,281

1,923,339 11,622,330

The annexed notes 1 to 38 form an integral part of these financial statements.

Attock Refinery Limited

52

Chief Executive

Director

Notes to the Financial Statements for the year ended June 30, 2008

1.

LEGAL STATUS AND OPERATIONS Attock Refinery Limited (the Company) was incorporated in Pakistan on November 8, 1978 as a private limited company and was converted into a public limited company on June 26, 1979. The registered office of the company is situated at Morgah, Rawalpindi. Its shares are quoted on the Karachi, Lahore and Islamabad Stock Exchanges in Pakistan. It is principally engaged in the refining of crude oil. The Company is a subsidiary of The Attock Oil Company Limited, UK and its ultimate parent is Bay View International Group S.A.

2.

STATEMENT OF COMPLIANCE These are separate financial statements of the Company. These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail. ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS In the current year, the Company has adopted IAS 1 (Amendment) - 'Presentation of Financial Statements Capital Disclosures'. Adoption of this amendment only impacts the format and extent of disclosures as presented in note 36.6 to the financial statements. The following standards and interpretations which have not been applied in these financial statements were issued by the International Accountancy Standards Board (IASB) but not yet effective: Effective for periods beginning on or after

IFRS 7 IFRS 8 IAS 1 IAS 23 IAS 27 IAS 29 IAS 32 IFRIC 7 IFRIC 12 IFRIC 13 IFRIC 14 IFRIC 15 IFRIC 16

Financial Instruments: Disclosure Operating Segments Presentation of Financial Statements (Revised 2008) Borrowing costs (Revised 2008) Consolidated and separate financial statements (Revised 2008) Financial Reporting in Hyperinflationary Economies Financial Instruments: Presentation (Revised 2008) Applying the Restatement Approach under IAS 29 Service Concession Arrangement Customer Loyalty Programmes IAS 19 - The Limit on a defined benefit asset, minimum funding requirements and their interaction Agreements for the construction of Real Estate Hedges of a Net Investment in a Foreign Operation

April 28,2008 April 28,2008 January 1,2009 January 1,2009 January 1,2009 April 28,2008 January 1,2009 April 28,2008 January 1,2008 July 1,2008 January 1,2008 January 1,2009 October 1,2008

The management anticipates that adoption of these standards and interpretations in future periods will have no material impact on the Company's financial statements except for additional disclosures when IFRS 7, IAS 1 and IFRIC 14 come into effect.

53

Annual Report 2008

3.

Notes to the Financial Statements for the year ended June 30, 2008

4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

4.1

Basis of measurement These financial statements have been prepared under the historical cost convention modified by revaluation of freehold land referred to in note 4.4 and certain other modifications as required by approved accounting standards referred to in the accounting policies given below.

4.2

Dividend Appropriation Dividend is recognised as a liability in the financial statements in the period in which it is declared.

4.3

Taxation Provision for current taxation is based on taxable income at the current rates of taxation or half percent of turnover, whichever is higher. Deferred income tax is accounted for using the balance sheet liability method in respect of all temporary differences arising between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences can be utilised. Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse based on the tax rates that have been enacted. Deferred tax is charged or credited to income except in the case of items credited or charged to equity in which case it is included in equity.

4.4

Property, plant and equipment a)

Cost Operating fixed assets except freehold land are stated at cost less accumulated depreciation. Freehold land is stated at revalued amount. Capital work-in-progress and stores held for capital expenditure are stated at cost. Cost in relation to certain plant and machinery items include borrowing cost related to the financing of major projects during construction phase.

b)

Depreciation Operating assets depreciation is calculated using the straight-line method to allocate their cost over their estimated useful lives at the rates specified in note 12.

c)

Repairs and maintenance Maintenance and normal repairs, including minor alterations, are charged to income as and when incurred. Renewals and improvements are capitalised and the assets so replaced, if any, are retired.

54

d)

Gains and losses on deletion

Attock Refinery Limited

Gains and losses on deletion of assets are included in income currently.

Notes to the Financial Statements for the year ended June 30, 2008

4.5

Impairment of non-financial assets Assets that have an indefinite useful life, for example land, are not subject to amortisation or depreciation and are tested annually for impairment. Assets that are subject to depreciation / amortisation are reviewed for impairment at each balance sheet date or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Reversals of the impairment losses are restricted to the original cost of the asset. An impairment loss or reversal of impairment loss is recognised in the profit and loss account.

4.6

Investments in associated and subsidiary companies These investments are initially valued at cost. At subsequent reporting dates, the Company reviews the carrying amount of the investment to assess whether there is any indication that such investments have suffered an impairment loss. If any such indication exists, the recoverable amount is estimated in order to determine the extent of the impairment loss, if any. Such impairment losses or reversal of impairment losses are recognised in the profit and loss account. The profits and losses of subsidiary and associated companies are carried in the financial statements of the subsidiary and associated company and are not dealt with for the purpose of the financial statements of the Company except to the extent of dividend declared by the subsidiary and associated companies.

4.7

Stores, spares and loose tools These are valued at moving average cost less allowance for obsolete items. Items in transit are stated at invoice value plus other charges paid thereon.

4.8

Stock-in-trade Stock-in-trade is valued at the lower of cost and net realisable value. Crude oil in transit is valued at cost comprising invoice value. Cost in relation to crude oil is determined on the basis of annual average cost of purchases during the year on the principles of import parity and in relation to semi-finished and finished products it represents the cost of crude oil and refining charges consisting of direct expenses and appropriate production overheads. Direct expenses are arrived at on the basis of average cost for the year per barrel of throughput. Production overheads, including depreciation, are allocated to throughput proportionately on the basis of nameplate capacity. Net realisable value in relation to finished product represents selling prices in the ordinary course of business less costs necessarily to be incurred for its sale, as applicable, and in relation to crude oil represents replacement cost at the balance sheet date. Foreign currency translation Transactions in foreign currencies are converted into rupees at the rates of exchange ruling on the date of the transaction. All monetary assets and liabilities denominated in foreign currencies at the year end are translated at exchange rates prevailing at the balance sheet date. Exchange differences are dealt with through the profit and loss account.

4.10 Revenue recognition Revenue is recognised to the extent that it is probable that economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is recognised as follows:

55

Annual Report 2008

4.9

Notes to the Financial Statements for the year ended June 30, 2008

i)

Revenue from sales is recognised on delivery of products ex-refinery to the customers with the exception that Naphtha export sales are recognised on the basis of products shipped to customers.

ii)

The Company is operating under the import parity pricing formula, as modified from time to time, whereby it is charged the cost of crude on 'import parity' basis and is allowed product prices equivalent to the 'import parity' price, calculated under prescribed parameters. Effective July 1, 2007, the Government made certain modifications in the prescribed parameters effectively reducing the price of Kerosene oil, Light Diesel Oil (LDO) and JP-8 in 2007 and 2008. The Government has further modified the refineries pricing formula in August, 2008 whereby the 10% duty included in pricing of HSD has been cut to 7.5% and the motor gasoline pricing has been unilaterally revised by linking its price to Arab Gulf 95 RON prices and calculating the price of 87 RON motor gasoline on a unitary method basis. This revision will adversely affect the pricing of HSD and motor gasoline which are Company's two major products. Earlier in July, 2002, the Government had modified the pricing formula that was applicable to the Company restricting the distribution of net profits after tax (if any) from refinery operations to 50% of paid-up capital as at July 1, 2002 and diverting the surplus profits, if any, to a special reserve to offset any future loss or make investment for expansion or upgradation of Refinery. Further the Government had abolished the minimum rate of return of 10% which continues to be contested by the Company as it represented to the Government that the already existing agreement for guaranteed return could be modified only with the mutual consent of both the parties.

iii)

Dividend income is recognised when the right to receive dividend is established.

iv)

Other income is recognised on accrual basis.

4.11 Borrowing cost Borrowing cost related to the financing of major projects during construction phase is capitalised. All other borrowing costs are expensed as incurred. 4.12 Employee retirement benefits The main features of the retirement benefit schemes operated by the Company for its employees are as follows: i)

Defined benefits plans The Company operates a pension plan for its management staff and a gratuity plan for its non-management staff. Pension plan is invested through an approved trust fund while the gratuity plan is book reserve plan. Contributions are made in accordance with actuarial recommendations. Actuarial valuations are conducted through an independent actuary, annually using projected unit credit method. The obligation at the balance sheet date is measured at the present value of the estimated future cash outflows. Unrealised net gains and losses are amortised over the expected remaining service of current members.

ii)

Attock Refinery Limited

56

Defined contribution plans The company operates an approved contributory provident fund for all employees. Equal monthly contribution is made both by the Company and the employee to the fund at the rate of 10% of basic salary.

4.13 Employees compensated absences The Company also provides for compensated absences for all employees in accordance with the rules of the Company.

Notes to the Financial Statements for the year ended June 30, 2008

4.14 Financial Instruments Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument and de-recognised when the Company loses control of the contractual rights that comprise the financial asset and in case of financial liability when the obligation specified in the contract is discharged, cancelled or expired. The particular measurement methods adopted are disclosed in the individual policy statements associated with each item as shown below: a)

Investment in associated and subsidiary companies The measurement methods adopted for investment in associated and subsidiary companies are disclosed in note 4.6.

b)

Trade and other payables Liabilities for trade and other amounts payable including amounts payable to related parties are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received.

c)

Provisions Provisions are recognised when a Company has a legal or constructive obligation as a result of past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made.

d)

Trade debts and other receivables Trade debts and other receivables are recognised and carried at original invoice amount / cost less an allowance for any uncollectible amounts.

e)

Cash and cash equivalents Cash in hand and at banks are carried at fair value. For the purpose of cash flow statement, cash and cash equivalents consist of cash in hand, balances in banks and highly liquid short term investments.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS The preparation of financial statements in conformity with the approved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting policies. Estimates and judgments are continually evaluated and are based on historical experience, including expectation of future events that are believed to be reasonable under the circumstances. The areas where various assumptions and estimates are significant to the Company's financial statements or where judgment was exercised in application of accounting policies are as follows: i)

Estimate of recoverable amount of investment in National Refinery Limited - note 14.1

ii)

Revaluation surplus on freehold land - note 12.1

iii)

Provision for taxation

iv)

Provision for retirement benefits - note 29

57

Annual Report 2008

5.

Notes to the Financial Statements for the year ended June 30, 2008

6.

2008 Rs ‘000

2007 Rs ‘000

1,000,000

1,000,000

80,000

80,000

Shares issued as fully paid bonus shares 63,077,500 (2007: 48,862,000) ordinary shares of Rs 10 each

630,775

488,620

71,077,500 (2007: 56,862,000) ordinary shares of Rs 10 each

710,775

568,620

SHARE CAPITAL Authorised 100,000,000 (2007: 100,000,000) ordinary shares of Rs 10 each Issued, subscribed and paid up Shares issued for cash 8,000,000 ordinary shares of Rs 10 each

The Attock Oil Company Limited held 40,032,687 (2007: 31,274,150) ordinary shares and Attock Petroleum Limited held 1,000,000 (2007: nil) ordinary shares at the year end.

7.

2008 Rs ‘000

2007 Rs ‘000

4,800

4,800

Capital gain on sale of building

654

654

Insurance and other claims realised relating to pre-incorporation period

494

494

5,948

5,948

32,929

32,929

4,375,003

2,513,233

4,407,932

2,546,162

55 4,574,281

55 657,880

4,574,336

657,935

8,988,216

3,210,045

RESERVES AND SURPLUS Capital reserve Liabilities taken over from The Attock Oil Company Limited no longer required

Special reserve for expansion / modernisation - note 7.1 Additional revenue under processing fee formula related to 1990-91 and 1991-92 Surplus profits under the import parity pricing formula

Revenue reserve General reserve Surplus - unappropriated profit

7.1

Represents amounts retained as per stipulations of the Government under the pricing formula and is available only for offsetting any future loss or making investment in expansion or upgradation of the refinery. Transfer to / from special reserve is recognised at each quarter end and is reviewed for adjustment based on profit / loss on an annual basis. The company has incurred capital expenditure of Rs 3,770 million on upgradation and expansion projects from July 1, 1997 to June 30, 2008 (July 1, 1997 to June 30, 2007: Rs 3,496 million).

8.

SURPLUS ON REVALUATION OF FREEHOLD LAND

Attock Refinery Limited

58

This represents surplus over book value resulting from revaluation of freehold land as referred to in note 12.1 and is not available for distribution to shareholders.

Notes to the Financial Statements for the year ended June 30, 2008

9.

SHORT TERM FINANCE During the year, the Company has negotiated running finance facilities with various banks and accepted facility offer letters to the extent of Rs 3.5 billion, which were unutilised at the year end. As and when required, these facilities shall be secured by joint hypothecation by way of 1st registered charges over the Company's current assets.

10.

2008 Rs ‘000

2007 Rs ‘000

24,371,362 256,739

18,020,915 275,108

1,685,628 – 17,429 1,714,975 7,138,356 2,677 1,037,929 196,966 181,441

1,384,104 1,430 5,543 737,635 4,707,073 5,533 7,199 131,989 65,840

376

1,271

TRADE AND OTHER PAYABLES Creditors – note 10.1 Due to The Attock Oil Company Limited – Holding Company Due to associated companies Pakistan Oilfields Limited Attock Petroleum Limited Attock Information Technology Services (Private) Limited Accrued liabilities and provisions – note 10.1 Due to the Government under pricing formula Advance payments from customers Sales tax payable Workers' Welfare Fund Workers' Profit Participation Fund – note 10.2 Deposits from customers adjustable against freight and Government levies payable on their behalf Payable to statutory authorities in respect of petroleum development levy and excise duty Excess crude oil freight recovered through inland freight equalisation margin Security deposits Unclaimed dividends

13,099

–

21,479 48,890 1,576

– 48,940 940

36,688,922

25,393,520

10.1 These balances include amounts retained from payments to crude suppliers for purchase of local crude as per the directives of the Ministry of Petroleum and Natural Resources (the Ministry). Further, as per directive of the Ministry such withheld amounts are being retained in designated 90 days interest bearing accounts. The amounts retained alongwith accumulated profits amounted to Rs 6,630.371 million (2007: Rs 10,173.029 million). 2008 Rs ‘000

2007 Rs ‘000

Balance at the beginning of the year Add: Interest on funds utilised in the Company's business

65,840 3,889

36,869 528

Less: Amount paid to the Fund

69,729 65,959

37,397 37,261

3,770 177,671

136 65,704

181,441

65,840

10.2 Workers' Profit Participation Fund

Annual Report 2008

Add: Amount allocated for the year - notes 28 and 33

59

Notes to the Financial Statements for the year ended June 30, 2008

11.

2008 Rs ‘000

2007 Rs ‘000

–

214,255

300

300

1,300

1,300

–

–

43,959

55,424

172,722

125,775

CONTINGENCIES AND COMMITMENTS Contingencies: i)

ii)

Performance and commitment guarantees arranged by the Company on behalf of Attock Gen Limited (AGL), an associated company, as main sponsors Guarantees issued by banks on behalf of the Company

iii) Claims for land compensation contested by the Company iv) Price adjustment related to crude oil purchases as referred to in note 24.1, the amount of which can not be presently quantified Commitments outstanding:

12.

i)

Capital expenditure

ii)

Letters of credit other than for capital expenditure

OPERATING ASSETS Freehold land (note 12.1)

Buildings on freehold land

Plant & machinery

Computer equipment Rs ‘000

Furniture, fixtures and equipment

Vehicles

Total

As at July 1, 2006 Additions during the year Disposals during the year

1,927,250 – –

70,356 14,375 –

3,795,901 113,947 –

51,877 3,687 –

60,607 1,546 (188)

62,635 7,975 (290)

5,968,626 141,530 (478)

As at June 30, 2007

1,927,250

84,731

– –

16,918 –

3,909,848

55,564

61,965

70,320

6,109,678

98,971 (23,722)

2,356 (10,244)

6,056 (10,075)

4,486 (852)

128,787 (44,893)

1,927,250

101,649

3,985,097

47,676

57,946

73,954

6,193,572

As at July 1, 2006 Charge for the year On disposals

– – –

28,639 3,908 –

2,878,157 330,939 –

39,806 8,999 –

33,117 4,784 (80)

43,198 8,239 (290)

3,022,917 356,869 (370)

As at June 30, 2007

–

32,547

3,209,096

48,805

37,821

51,147

3,379,416

Charge for the year On disposals

– –

5,573 –

368,114 (17,578)

2,983 (10,215)

5,789 (8,225)

9,047 (852)

391,506 (36,870)

As at June 30, 2008

–

38,120

3,559,632

41,573

35,385

59,342

3,734,052

COST

Additions during the year Disposals during the year As at June 30, 2008 DEPRECIATION

WRITTEN DOWN VALUE As at June 30, 2007

1,927,250

52,184

700,752

6,759

24,144

19,173

2,730,262

As at June 30, 2008

1,927,250

63,529

425,465

6,103

22,561

14,612

2,459,520

–

5

10

20

10

20

Annual rate of depreciation (%)

Attock Refinery Limited

60

12.1 Value of freehold land includes revaluation surplus of Rs 1,923.339 million arising from revaluation of freehold land in January 2001 carried out by an independent valuer. Valuation was made on the basis of market value. The original cost of the land as at June 30, 2008 is Rs 3.911 million.

Notes to the Financial Statements for the year ended June 30, 2008

2008 Rs ‘000

2007 Rs ‘000

378,170 12,405 298 633

341,975 13,361 900 633

391,506

356,869

2,191 411,820 28,420

2,487 186,977 28,219

442,431

217,683

12.2 The depreciation charge for the year has been allocated as follows: Cost of sales Administration expenses Distribution cost Desalter operating cost

CAPITAL WORK-IN-PROGRESS Civil works Plant and machinery Pipeline project

14.

LONG TERM INVESTMENTS – AT COST 2008 % age holding

2007 Rs ‘000

% age holding

Rs ‘000

25

8,046,635

25

8,046,635

21.70

4,438,944

21.70

668,204

Attock Gen Limited (AGL) – note 14.3 6,435,000 (2007 : 5,400,000) fully paid ordinary shares of Rs 100 each

30

643,500

30

540,000

Attock Information Technology Services (Private) Limited 450,000 (2007 : 450,000) fully paid ordinary shares of Rs 10 each

10

4,500

10

4,500

Associated companies Quoted National Refinery Limited (NRL) – note 14.1 19,991,640 (2007: 16,659,700 ) fully paid ordinary shares including 3,331,940 (2007 : Nil) bonus shares of Rs 10 each Market value as at June 30, 2008: Rs 5,947 million (June 30, 2007 : Rs 5,681 million) Attock Petroleum Limited (APL) – note 14.2 10,417,680 (2007 : 8,681,400 ) fully paid ordinary shares of Rs 10 each Market value as at June 30, 2008 : Rs 4,503 million (June 30, 2007 : Rs 4,352 million) Unquoted

13,133,579

9,259,339

61

Subsidiary company Unquoted Attock Hospital (Private) Limited 200,000 (2007: 200,000) fully paid ordinary shares of Rs 10 each

100

2,000

13,135,579

All associated and subsidiary companies are incorporated in Pakistan.

100

2,000

9,261,339

Annual Report 2008

13.

Notes to the Financial Statements for the year ended June 30, 2008

14.1 Based on a valuation analysis carried out by an external investment advisor engaged by the Company, the recoverable amount of investment in NRL exceeds its carrying amount. The recoverable amount has been estimated based on a value in use calculation. These calculations have been made on discounted cash flow based valuation methodology which assumes gross profit margin of 5.4% (2007: 6.4%), terminal growth rate of 4% (2007: 5%) and capital asset pricing model based discount rate of 18.64% (2007: 14.30%). Number of shares

Cost Rs ‘000

14.2 Investment in APL As at July 1, 2007 (including 3,500,000 bonus shares) Bonus shares received during the year Disposal of shares during the year Purchase of shares during the year

8,681,400 1,736,280 (10,417,680) 10,417,680

668,204 – (668,204) 4,438,944

10,417,680

4,438,944

As at July 1, 2007 Right shares acquired during the year

5,400,000 1,035,000

540,000 103,500

As at June 30, 2008

6,435,000

643,500

2008 Rs ‘000

2007 Rs ‘000

25,879

21,079

(14,095)

(10,990)

11,784 948

10,089 865

12,732

10,954

As at June 30, 2008 14.3 Investment in AGL

15.

LONG TERM LOANS AND DEPOSITS Loans to employees – considered good – note 15.1 Less: Amounts due within next twelve months shown under current assets – note 20 Security deposits

15.1 Loans to employees are for miscellaneous purposes which are recoverable in 24, 36, and 60 equal monthly installments depending on case to case basis and are secured by a charge on the asset purchased and / or amount due to the employee against provident fund or a third party guarantee. These are interest free loans. These include an amount of Rs 4.366 million (2007: Rs 3.552 million) receivable from Executives of the Company and does not include any amount receivable from Directors or Chief Executive. The maximum amount due from executives of the Company at the end of any month during the year was Rs 4.720 million (2007: Rs 3.805 million).

Attock Refinery Limited

62

2008 Rs ‘000

2007 Rs ‘000

3,552 7,164

2,233 3,922

10,716 6,350

6,155 2,603

4,366

3,552

15.2 Reconciliation of carrying amount of loans to executives: Opening balance as at July 1 Add: Disbursements during the year Less: Repayments during the year Closing balance as at June 30

Notes to the Financial Statements for the year ended June 30, 2008

2008 Rs ‘000

16.

DEFERRED TAXATION Debit balances arising on Provisions for obsolete stores, doubtful debts and gratuity Difference between accounting and tax depreciation Finance lease arrangements

17.

2007 Rs ‘000

54,737 164,565 –

48,980 124,673 (15,897)

219,302

157,756

STORES, SPARES AND LOOSE TOOLS Stores (including items in transit Rs 99.03 million; 2007: Rs 119.67 million) Spares Loose tools

351,123 228,053 624

446,579 219,661 596

Less: Provision for slow moving items – note 17.1

579,800 37,300

666,836 36,000

542,500

630,836

36,000 1,300

34,500 1,500

37,300

36,000

902,525 375,967

1,488,648 176,064

1,278,492 436,792 3,129,569

1,664,712 311,633 1,876,301

4,844,853

3,852,646

17.1. Provision for slow moving items Opening balance Add: Provision for the year

18.

STOCK-IN-TRADE Crude oil – in stock Crude oil – in transit Semi-finished products Finished products – note 18.1

18.1 Finished products include stocks carried at net realisable value of Rs 2 million (2007: Rs 236 million). Adjustments amounting to Rs 1 million (2007: Rs 43.8 million) have been made to closing inventory to write down stocks of finished products to their net realizable value. TRADE DEBTS All debtors are unsecured and considered good. These include amount receivable from associated companies Attock Petroleum Limited Rs 2,327 million (2007: Rs 1,011 million) and Pakistan Oilfields Limited Rs 11 million (2007: Rs nil).

63

Annual Report 2008

19.

Notes to the Financial Statements for the year ended June 30, 2008

20.

2008 Rs ‘000

2007 Rs ‘000

14,095 61,874 2,236

10,990 19,301 1,729

78,205

32,020

286 14,680

286 17,238

–

287

14,966

17,811

1,279

1,966

2,610 9,308 115 5,394 2,992 – 15,404 108,888 – 5,534

4,677 – – 2,415 2,465 155 4,097 78,867 39,221 7,561

151,524

141,424

244,695

191,255

LOANS, ADVANCES, DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES Loans and advances – considered good Current portion of long-term loans to employees – note 15 Advances to suppliers Advances to employees

Deposits, prepayments and current account balances with statutory authorities Trade deposits Short term prepayments Current account balances with statutory authorities in respect of petroleum development levy and excise duty

Other receivables Due from subsidiary company Attock Hospital (Private) Limited Due from associated companies National Refinery Limited Attock Petroleum Limited Attock Leisure and Management Associates (Pvt) Limited Attock Gen Limited National Cleaner Production Centre Foundation Attock Cement Pakistan Limited Due from Staff Pension Fund Income accrued on bank deposits Crude oil freight recoverable through inland freight equalisation margin Other receivables

Loans to employees include Rs 2.852 million (2007: Rs 2.265 million ) due from executives of the Company and does not include any amount receivable from Directors or the Chief Executive.

21.

Attock Refinery Limited

64

2008 Rs ‘000

2007 Rs ‘000

910

292

2,703 6,317,269 12,623,750

2,790 6,081,864 2,795,168

18,944,632

8,880,114

CASH AND BANK BALANCES Cash in hand With banks: Current accounts Deposit accounts Savings accounts (including US $ 366,766; 2007: US $ 379,624)

Notes to the Financial Statements for the year ended June 30, 2008

21.1 Balances with banks include Rs 4,817.269 million (2007: 5,381.864 million) in respect of deposits placed in a 90-day interest-bearing account consequent to directives of the Ministry of Petroleum & Natural Resources on account of amounts withheld alongwith related interest earned thereon, as referred to in note 10.1. 21.2 Bank deposits of Rs. 0.300 million (2007: 0.300 million) were under lien with bank against a bank guarantee issued on behalf of the Company. 21.3 Balances with banks include Rs 48.890 million (2007: Rs 48.940 million) in respect of security deposits received. 21.4 Balances with banks earned weighted average interest / mark-up @ 9.61% (2007: @ 9.73%) per annum.

22.

2008 Rs ‘000

2007 Rs ‘000

Gross sales (excluding Naphtha export sales)

93,428,851

66,083,779

Naphtha export sales Less: Cost of Naphtha purchased from third parties and related handling charges recovered

12,509,719

8,232,840

1,684,095

1,175,285

10,825,624 12,343,772

7,057,555 13,986,554

91,910,703

59,154,780

10,418,456 1,903,321 21,995

8,166,096 5,356,523 463,935

12,343,772

13,986,554

SALES

Less: Duties, taxes and levies - note 22.1

22.1 Duties, taxes and levies Sales tax Development surcharge Custom duties and other levies

REIMBURSEMENT DUE FROM THE GOVERNMENT UNDER IMPORT PARITY PRICING FORMULA This represents amount due from the Government of Pakistan on account of shortfall in ex-refinery prices of certain petroleum products under the import parity pricing formula.

65

Annual Report 2008

23.

Notes to the Financial Statements for the year ended June 30, 2008

24.

2008 Rs ‘000

2007 Rs ‘000

311,633 88,115,513 1,174,592 296,102 1,922 354,582 449,483 6,047 2,283 3,506 52,935

278,876 56,314,521 1,016,615 250,262 1,822 347,235 279,486 6,525 1,602 2,455 46,544

COST OF SALES Opening stock of semi-finished products Crude oil consumed - note 24.1 Transportation and handling charges Salaries, wages and other benefits - note 24.2 Printing and stationery Chemicals consumed Fuel and power Rent, rates and taxes Telephone and telex charges Professional charges for technical services Insurance Repairs and maintenance (including stores and spares consumed Rs 64.345 million; 2007: Rs 65.330 million) Staff transport and traveling Cost of receptacles Research and development Depreciation Closing stock of semi-finished products

Opening stock of finished products Closing stock of finished products

162,555 * 10,449 15,912 749 378,170

118,433 9,815 8,619 109 341,975

91,336,433 (436,792)

59,024,894 (311,633)

90,899,641

58,713,261

1,876,301 (3,129,569)

1,760,728 (1,876,301)

(1,253,268)

(115,573)

89,646,373

58,597,688

* includes consumables wrongly classified as fixed assets written off during the year having book value of Rs 7,269 thousand. 2008 Rs ‘000

2007 Rs ‘000

Stock at the beginning of the year Purchases - note 38.3(i)

1,664,712 87,729,294

1,484,204 56,495,029

Stock at the end of the year

89,394,006 (1,278,493)

57,979,233 (1,664,712)

88,115,513

56,314,521

24.1 Crude oil consumed

Attock Refinery Limited

66

Certain crude purchases have been recorded based on provisional prices notified by the Government and may require adjustment in subsequent periods. Cost of purchases include Rs 706.120 million (2007: Nil) related to purchases in prior years. 24.2 Salaries, wages and other benefits under cost of sales, administration expenses, distribution cost and income from crude desalter operations include the Company's contribution to the Provident Fund amounting to Rs 13.245 million (2007: Rs 11.552 million).

Notes to the Financial Statements for the year ended June 30, 2008

25.

ADMINISTRATION EXPENSES Salaries, wages and other benefits - note 24.2 Staff transport, traveling and entertainment Telephone and telex charges Electricity, gas and water Printing and stationery Auditor's remuneration - note 25.1 Legal and professional charges Repairs and maintenance Subscription Publicity Scholarship scheme Rent, rates and taxes Insurance Donations* Training expenses Other expenses Depreciation

2008 Rs ‘000

2007 Rs ‘000

108,425 12,768 1,521 5,570 3,937 1,074 4,145 33,605 5,214 3,061 1,909 1,766 790 324 2,582 240 12,405

97,666 12,065 1,485 4,430 3,028 986 5,874 21,490 5,272 4,044 2,055 1,273 867 415 745 52 13,361

199,336

175,108

440

350

520 114

553 83

1,074

986

13,426 652 221 1,857 137 2,066 339 144 – 298

11,722 568 210 1,476 81 1,295 317 144 3 900

19,140

16,716

* No director or his spouse had any interest in the donee institutions. 25.1 Auditor's remuneration Statutory audit Review of half yearly accounts, audit of consolidated accounts, staff funds and special certifications Out of pocket expenses

DISTRIBUTION COST Salaries, wages and other benefits - note 24.2 Staff transport, traveling and entertainment Telephone and telex charges Electricity, gas, fuel and water Printing and stationery Repairs and maintenance including packing and other stores consumed Rent, rates and taxes Legal and professional charges Cost of samples Depreciation

67

Annual Report 2008

26.

Notes to the Financial Statements for the year ended June 30, 2008

27.

2008 Rs ‘000

2007 Rs ‘000

– 3,888 241 1,240,244

233,361 528 389 12,267

1,244,373

246,545

20,764

15,321

597 (995)

8,572 (955)

(398) 2,580

7,617 2,202

22,946

25,140

648 1,300 – 154,934 55,883

– 1,500 13 51,819 23,679

235,711

102,151

FINANCE COST Interest / mark-up on Long term loans Workers' Profit Participation Fund - note 10.2 Bank and other charges Exchange loss

28.

OTHER CHARGES Employees' retirement benefits Staff gratuity benefits Staff pension benefits Less: Contribution to subsidiary company Contribution to employees old age benefits scheme

Fixed assets shortages / damages written off Provision for slow moving stores Stores written off Workers' Profit Participation Fund Workers' Welfare Fund

Attock Refinery Limited

68

Notes to the Financial Statements for the year ended June 30, 2008

29.

EMPLOYEES' DEFINED BENEFIT PLANS The latest actuarial valuation of the employees' defined benefit plans was conducted at June 30, 2008 using the projected unit credit method. Details of the defined benefit plans are: Defined benefit Gratuity plan 2008 2007

Rs ‘000

Rs ‘000

The amounts recognised in the profit and loss account: Current service cost Interest on obligation Expected return on plan assets Contribution from an associated company Net actuarial losses / (gains) recognised during the year

13,773 31,449 (39,591) (144) (4,890)

12,263 27,772 (30,235) (127) (1,101)

3,818 12,890 – – 4,056

3,099 10,076 – – 2,146

8,572

20,764

15,321

385,053 (321,136)

359,485 (291,335)

– (152,656)

– (121,894)

63,917 (48,513)

68,150 (64,053)

(152,656) 55,767

(121,894) 36,094

(96,889)

(85,800)

96,058 3,099 10,076 (5,321) 17,982

597 b)

The amounts recognised in the balance sheet: Fair value of plan assets Present value of defined benefit obligations Unrecognised actuarial gains / (losses) Net liability

c)

d)

15,404

4,097

Movement in the present value of defined benefit obligation: Present value of defined benefit obligation as at July 1 Current service cost Interest cost Benefits paid Actuarial (gains) / losses

291,335 13,773 31,449 (11,158) (4,263)

263,054 12,263 27,772 (11,146) (608)

121,894 3,818 12,890 (9,675) 23,729

Present value of defined benefit obligation as at June 30

321,136

291,335

152,656

121,894

Fair value of plan assets as at July 1 Expected return Benefits paid Contributions by employer Contributions by associated company Actuarial gains / (losses)

359,485 39,591 (11,158) 11,904 144 (14,913)

280,495 30,235 (11,146) 10,971 127 48,803

– – – – – –

– – – – – –

Fair value of plan assets as at June 30

385,053

359,485

–

–

24,677

79,038

–

–

Changes in the fair value of plan assets:

Actual return on plan assets

Expected contributions to the defined benefit pension plans for the year ending June 30, 2008 are Rs 12.6 million.

69

Annual Report 2008

a)

Defined benefit Pension plan 2008 2007

Notes to the Financial Statements for the year ended June 30, 2008

Defined benefit Pension plan 2008 2007

Defined benefit Gratuity plan 2008 2007

Rs ‘000

e)

The major categories of plan assets: Investment in equities Investment in mixed funds Cash

f)

Rs ‘000

119,841 103,448 161,764

109,498 136,837 113,150

– – –

– – –

385,053

359,485

–

–

13.25% 13.25% 11.09% 7.86%

11.00% 11.00% 8.89% 5.71%

– – – –

– – – –

Significant actuarial assumptions at the balance sheet date: Discount rate Expected return on plan assets Future salary increases Future pension increases

2008

2007

2006

2005

2004

Rs ‘000

g)

Comparison for five years: Defined Benefit Pension Plan Present value of defined benefit obligation Fair value of plan assets

(321,136) 385,053

(291,335) 359,485

(263,054) 280,495

(215,382) 225,121

(190,998) 196,918

Surplus / (deficit)

63,917

68,150

17,441

9,739

5,920

Actuarial (gains) / losses on plan liabilities Actuarial (gains) / losses on plan assets

(4,262) 14,914

(609) (48,803)

23,265 29,017

9,382 13,388

1,303 9,384

Present value of defined benefit obligation Fair value of plan assets

(152,656) –

(121,894) –

(96,058) –

(88,578) –

(80,832) –

Deficit

(152,656)

(121,894)

(96,058)

(88,578)

(80,832)

Defined Benefit Gratuity Plan

Actuarial (gains) / losses on plan liabilities Actuarial (gains) / losses on plan assets

Attock Refinery Limited

70

23,729 –

17,982 –

(1,087) –

3,611 –

16,991 –

Notes to the Financial Statements for the year ended June 30, 2008

30.

2008 Rs ‘000

2007 Rs ‘000

483,492 16,852

569,024 270

500,344

569,294

15,262 9,715 4,140 6,983 12,930 2,637 2,892 16,586 200 4,816 – 1,346

11,205 9,265 4,719 3,057 10,613 846 3,742 15,901 – 3,888 694 1,942

77,507

65,872

577,851

635,166

51,997

43,928

1,080 8,098 22,889 9,582 633

1,882 7,058 16,828 8,262 633

42,282

34,663

9,715

9,265

OTHER INCOME Income from financial assets Income on bank deposits Exchange gain

Income from non – financial assets Income from crude decanting Income from crude desalter operations – note 30.1 Insurance agency commission Rental income Sale of scrap Profit on disposal of fixed assets Calibration charges Handling and service charges Registration charges from carriage contractors Penalties from carriage contractors Old liabilities written back Miscellaneous

30.1 Income from crude desalter operations Income Less: Operating costs Salaries, wages and other benefits – note 24.2 Chemical consumed Fuel and power Repairs and maintenance Depreciation

PROVISION FOR TAXATION Current – for the year – for prior years Deferred – for the year

1,054,100 (112,900)

476,500 –

941,200 (61,547)

476,500 (19,950)

879,653

456,550

71

Annual Report 2008

31.

Notes to the Financial Statements for the year ended June 30, 2008

2008 %

2007 %

Applicable tax rate

35.00

35.00

Tax effect of: Income chargeable to tax at special rate and other differences Prior years

(0.62) (3.91)

12.51 –

Average effective tax rate charged to profit and loss account

30.47

47.51

2008 Rs ‘000

2007 Rs ‘000

31.1 Reconciliation between the average effective tax rate and the applicable tax rate.

32.

GAIN ON SALE OF SHARES OF AN ASSOCIATED COMPANY Proceeds from sale of shares of Attock Petroleum Limited (net of expenses incurred on disposal) Cost of investment disposed off

33.

4,430,979 (668,204)

– –

3,762,775

–

333,194 121,540

208,247 69,451

454,734

277,698

22,737 9,095 45,473

13,885 5,276 13,885

77,305

33,046

377,429

244,652

DIVIDEND INCOME Dividend income from associated companies National Refinery Limited Attock Petroleum Limited

Less: Related charges Workers' Profit Participation Fund Workers' Welfare Fund Taxation @ 10% ( 2007: 5%)

Attock Refinery Limited

72

Notes to the Financial Statements for the year ended June 30, 2008

RELATED PARTY TRANSACTIONS Attock Oil Company Limited holds 56.32% (2007: 55.00%) shares of the Company at the year end. Therefore, all subsidiaries and associated undertakings of Attock Oil Company Limited are related parties of the Company. The related parties also comprise of directors, major shareholders, key management personnel, entities over which the directors are able to exercise significant influence on financial and operating policy decisions and employees' funds. Amount due from and due to these undertakings are shown under receivables and payables. The remuneration of Chief Executive, directors and executives is disclosed in note 35 to the financial statements. 2008 Rs ‘000

2007 Rs ‘000

24,713,370 92,585

12,941,980 76,773

24,805,955

13,018,753

10,154,897 409,827

7,591,742 311,331

10,564,724

7,903,073

424

285

1,106,675 3,833

1,298,843 3,988

1,110,508

1,302,831

441 22,519

614 18,834

22,960

19,448

23,471

19,653

25,149

22,523

Associated companies Sale of goods Sale of services

Purchase of goods Purchase of services Holding company Sale of services Purchase of goods Purchase of services

Subsidiary company Sale of goods Sale of services

Purchase of services Contribution to employees' pension and provident funds

73

Annual Report 2008

34.

Notes to the Financial Statements for the year ended June 30, 2008

35.

REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES The aggregate amounts charged in the accounts for remuneration, including benefits and perquisites, were as follows: Chief Executive 2008 2007

Directors 2008

2007

Executives 2008 2007

Rs ‘000

Managerial remuneration / honorarium Company's contribution to provident and pension funds Housing and utilities Leave passage

No of person(s)

3,525

3,910 *

1,219

1,219

24,555

22,188

731 2,208 420

789 1,037 330

– – –

– – –

5,503 17,585 2,963

4,739 11,262 2,101

6,884

6,066

1,219

1,219

50,606

40,290

1

1

3

3

22

20

Housing and utilities of executives include cash allowance for fuel and maintenance in respect of limited use of Company's cars provided to 12 executives for the period January 1, 2008 to June 30, 2008. * This includes payments to Chief Executive of Rs 789 thousand representing arrears of salary for the period February 2005 to June 30, 2006. 35.1 In addition, the Chief Executive and 22 (2007: 18) executives were provided with limited use of the Company's cars. The Chief Executive and all executives were provided with medical facilities and 5 (2007: 7) executives were provided with unfurnished accommodation in Company owned bungalows. Limited residential telephone facility was also provided to the Chief Executive and 12 (2007: 11) executives. Fee paid to directors during the year was Rs nil (2007: Rs nil). 36.

FINANCIAL INSTRUMENTS

36.1 Financial assets and liabilities Interest / mark-up bearing

2008 Non-interest / mark-up bearing

2007 Non-interest / mark-up bearing

Total

–

9,207,238

9,207,238

–

6,234,918

6,234,918

–

168,141

168,141

–

154,428

154,428

24,940 18,916,079

702 2,911

25,642 18,918,990

22,815 8,854,217

202 2,880

23,017 8,857,097

– –

13,135,579 12,732

13,135,579 12,732

– –

9,261,339 10,954

9,261,339 10,954

18,941,019

22,527,303

41,468,322

8,877,032

15,664,721

24,541,753

6,630,615

30,055,630

36,686,245

9,471,565

15,916,422

25,387,987

Interest / Total mark-up bearing Rs ‘000

Financial assets: Maturity upto one year Trade debts Loans, advances, deposits and other receivables Cash and bank balances Foreign currency – US $ Local currency Maturity after one year Long term investments Long term loans and deposits

Financial liabilities:

Attock Refinery Limited

74

Maturity upto one year Trade and other payables Maturity after one year Staff gratuity

96,889

–

96,889

85,800

–

85,800

6,727,504

30,055,630

36,783,134

9,557,365

15,916,422

25,473,787

– – –

43,959 172,722 300

43,959 172,722 300

– – –

55,424 125,775 214,555

55,424 125,775 214,555

–

216,981

216,981

–

395,754

395,754

Off balance sheet items: Commitments (other than letters of credit) Letters of credit Bank guarantees

The carrying value of financial assets and liabilities approximates their fair value except for long term investments, which are stated at cost.

Notes to the Financial Statements for the year ended June 30, 2008

36.2 Credit risk The Company's credit risk is primarily attributable to its trade debts and placements with banks. The sales are essentially to six oil marketing companies and reputable foreign customers. The Company's placements are with banks having satisfactory credit rating. Due to the high credit worthiness of corresponding parties the credit risk is considered minimal. 36.3 Currency risk Foreign exchange risk arises mainly from future commercial transactions or receivables and payables that exist due to transactions denominated in foreign currencies. Financial assets include Rs 840.260 million (2007: Rs 726.019 million) and financial liabilities include Rs 18,469.791 million (2007: Rs 10,714.731 million) which were subject to foreign exchange risk. 36.4 Interest / Mark-up risk Financial assets include Rs 18,941 million (2007: Rs 8,877 million) and financial liabilities include Rs 6,727 million (2007: Rs 9,557 million) which were subject to interest rate risk. 36.5 Liquidity risk Liquidity risk reflects an enterprise's inability in raising funds to meet commitments. The Company follows an effective cash management and planning policy to ensure availability of funds and to take appropriate measures for new requirements. 36.6 Capital risk management The Company is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital and the level of dividend to ordinary shareholders. There was no change to the Company's approach to the capital management during the year and the company is not subject to externally imposed capital requirement. 2007 Rs ‘000

2,007,570 4,140,204

504,333 244,652

6,147,774

748,985

71,078

71,078

28.24 58.25

7.10 3.44

86.49

10.54

EARNINGS PER SHARE Profit after taxation from refinery operations Profit after taxation from non-refinery operations

Number of fully paid weighted average ordinary shares (‘000) Earnings per share - Basic (Rs) Refinery operations Non-refinery operations

Basic earnings per share for the year 2007 reported in the previous year was Rs 13.17. This has been restated on account of 14,215,500 bonus shares issued without consideration during the year ended June 30, 2008. There is no dilutive effect on the basic earnings per share of the Company.

75

Annual Report 2008

37.

2008 Rs ‘000

Notes to the Financial Statements for the year ended June 30, 2008

38.

GENERAL

38.1 Capacity and production Against the designed annual refining capacity of 14,320 million (2007: 14,240 million) US barrels the actual throughput during the year was 14,901 million (2007: 14,075 million) US barrels. 38.2 Number of employees Total number of employees at the end of the year was 720 (2007: 731). 38.3 Non adjusting events after the balance sheet date i)

Subsequent to the year end, further exchange loss of Rs 622 million has been realised on payments against crude purchases relating to year ended June 30, 2008.

ii)

Subsequent to the year end, the Government has changed the pricing formula of cer tain products including reduction in deemed duty adversely impacting future selling prices of the products.

iii)

The Board of Directors in its meeting held on October 8, 2008 has approved the transfer of Rs. 3,762.775 million (2007: Rs nil) to Investment Reser ve representing gain on sale of shares of an associated company. The Board of Directors, in its meeting held on October 8, 2008 has also proposed for the approval of members at the next Annual General Meeting (i) a 80% (2007: 40%) cash dividend of Rs 8 (2007: Rs 4) per share and (ii) an issue of bonus share in the proportion of one (2007: one) share for every five (2007: four) shares held i.e. 20% (2007: 25%) out of unappropriated profits. These financial statements do not include the effect of these appropriations which will be accounted for in the financial statements for the year ending June 30, 2009 as follows: Transfer from unappropriated profit to: Proposed dividend Reserve for issue of bonus shares

Rs ‘000

568,620 142,155

38.4 Date of authorisation These financial statements have been authorised for issue by the Board of Directors of the Company on October 08, 2008.

Attock Refinery Limited

76

Chief Executive

Director

Annual Audited Consolidated Financial Statements

2008

Attock Refinery Limited

Auditors' Report to the Members

We have audited the annexed consolidated financial statements comprising consolidated balance sheet of Attock Refinery Limited (ARL) and its subsidiary company, Attock Hospital (Private) Limited as at June 30, 2008 and the related consolidated profit and loss account, consolidated cash flow statement and consolidated statement of changes in equity together with the notes forming part thereof, for the year then ended. We have also expressed separate opinions on the financial statements of ARL and its subsidiary company. These financial statements are the responsibility of ARL's management. Our responsibility is to express an opinion on these financial statements based on our audit. Our audit was conducted in accordance with the International Standards on Auditing and accordingly included such tests of accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the consolidated financial statements present fairly the financial position of ARL and its subsidiary company as at June 30, 2008 and the results of their operations for the year then ended.

Chartered Accountants

Chartered Accountants Islamabad: October 08, 2008

Annual Report 2008

79

Consolidated Balance Sheet as at June 30, 2008

Note

2008 Rs ‘000

2007 Rs ‘000

SHARE CAPITAL AND RESERVES Share capital Authorised

6

1,000,000

1,000,000

Issued, subscribed and paid-up Reserves and surplus

6 7

710,775 10,702,108

568,620 5,371,775

11,412,883

5,940,395

1,923,339

1,923,339

13,336,222

7,863,734

96,889

85,800

– 36,691,014 1,673,042

– 25,394,393 1,006,629

38,364,056

26,401,022

51,797,167

34,350,556

SURPLUS ON REVALUATION OF FREEHOLD LAND

8

DEFERRED LIABILITIES Provision for staff gratuity

CURRENT LIABILITIES AND PROVISIONS Short term finance Trade and other payables Provision for taxation

CONTINGENCIES AND COMMITMENTS

Attock Refinery Limited

80

9 10

11

Consolidated Balance Sheet as at June 30, 2008

Note

2008 Rs ‘000

2007 Rs ‘000

2,462,965 442,431 27,701

2,734,127 217,683 20,190

2,933,097

2,972,000

PROPERTY, PLANT AND EQUIPMENT Operating assets Capital work-in-progress Stores and spares held for capital expenditure

12 13

LONG TERM INVESTMENTS

14

14,842,438

11,416,312

LONG TERM LOANS AND DEPOSITS

15

12,732

10,954

DEFERRED TAXATION

16

219,588

158,008

17 18 19

542,500 4,845,427 9,207,878

630,836 3,853,388 6,235,378

20 21

248,307 18,945,200

192,627 8,881,053

33,789,312

19,793,282

51,797,167

34,350,556

CURRENT ASSETS

81

The annexed notes 1 to 38 form an integral part of these financial statements.

Chief Executive

Director

Annual Report 2008

Stores, spares and loose tools Stock-in-trade Trade debts Loans, advances, deposits, prepayments and other receivables Cash and bank balances

Consolidated Profit & Loss Account for the year ended June 30, 2008

2008 Rs ‘000

2007 Rs ‘000

91,910,703 –

59,154,780 46,248

91,910,703

59,108,532

23

1,743,602

355,393

24

93,654,305 89,646,373

59,463,925 58,597,688

4,007,932

866,237

199,336 19,140 1,244,373 235,711

175,108 16,716 246,545 102,151

1,698,560

540,520

Note

Sales Less: Discount Reimbursement due from the Government under import parity pricing formula Less: Cost of sales

22

Gross profit Less: Administration expenses Distribution cost Finance cost Other charges

25 26 27 28

Other income

30

2,309,372 577,851

325,717 635,166

Profit before taxation from refinery operations Provision for taxation

31

2,887,223 879,653

960,883 456,550

2,007,570

504,333

1,982,679 1,709,687

1,384,628 –

3,692,366

1,384,628

5,699,936

1,888,961

28.24 51.95

7.10 19.48

80.19

26.58

Profit after taxation from refinery operations Profit after taxation from non-refinery operations Share in profit of associated companies Profit / (loss) on investment in associated companies

32 33

Profit for the year Earnings per share – Basic (Rs) Refinery operations Non-refinery operations 37

The annexed notes 1 to 38 form an integral part of these financial statements.

Attock Refinery Limited

82

Chief Executive

Director

Consolidated Cash Flow Statement for the year ended June 30, 2008

2008 Rs ‘000

2007 Rs ‘000

102,999,100 109,183

72,736,844 98,996

103,108,283

72,835,840

(80,399,323) (11,312,753) (321,821)

(52,833,884) (14,106,632) (231,932)

CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts from – customers – others

Cash paid for operating costs Cash paid to Government for duties, taxes and other levies Income tax paid Net cash flows from operating activities

11,074,386

5,663,392

(361,997) 3,149 4,438,944 (4,542,444) (1,778) 453,487 454,734

(81,167) 954 – (638,425) 659 529,386 277,697

CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment Proceeds from sale of property, plant and equipment Proceeds from sale of shares of an associated company Long term investments Long term loans and deposits Income on bank deposits received Dividends received Net cash flows from investing activities

444,095

89,104

CASH FLOWS FROM FINANCING ACTIVITIES Long term loans Financial charges paid Dividends paid

– (1,244,374) (226,812)

(4,547,000) (358,411) (30)

Net cash flows from financing activities

(1,471,186)

(4,905,441)

EFFECT OF EXCHANGE RATE CHANGES INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

16,852

270

10,064,147

847,325

8,881,053

8,033,728

18,945,200

8,881,053

The annexed notes 1 to 38 form an integral part of these financial statements.

Chief Executive

Director

Annual Report 2008

83

Consolidated Statement of Changes in Equity for the year ended June 30, 2008

Share capital

Capital reserve

Special reserve for expansion / modernisation

General Un-appropriated reserve Profit

Surplus on revaluation of freehold land

Total

Rs ‘000

Balance at June 30, 2006

454,896

44,948

2,517,432

55

1,034,103

1,923,339

5,974,773

Bonus shares @ 25% related to the year ended June 30, 2006

113,724

–

–

–

(113,724)

–

–

Profit for the year ended June 30, 2007

–

–

–

–

1,888,961

–

1,888,961

Transfer to special reserve

–

–

358,533

–

(358,533)

–

–

Transfer to special reserve by an associated company

–

–

124,108

–

(124,108)

–

–

568,620

44,948

3,000,073

55

2,326,699

1,923,339

7,863,734

–

–

–

258,825

(258,825)

–

–

Balance at June 30, 2007, as restated

568,620

44,948

3,000,073

258,880

2,067,874

1,923,339

7,863,734

Bonus shares @ 25% related to the year ended June 30, 2007

142,155

–

–

–

(142,155)

–

–

Final cash dividend @ 40% related to the year ended June 30, 2007

–

–

–

–

(227,448)

–

(227,448)

Profit for the year ended June 30, 2008

–

–

–

–

5,699,936

–

5,699,936

Transfer to special reserve

–

–

1,861,770

– (1,861,770)

–

–

Transfer to special reserve by an associated company

–

–

743,781

–

(743,781)

–

–

Transfer to general reserve by an associated company

–

–

–

561,100

(561,100)

–

–

Sale of bonus shares of an associated company

–

(35,000)

–

–

35,000

–

–

Bonus shares issued by an associated company

–

33,320

–

–

(33,320)

–

–

710,775

43,268

5,605,624

819,980

4,233,236

Balance at June 30, 2007, as previously reported Transfer to general reserve by an associated company

Balance at June 30, 2008

1,923,339 13,336,222

The annexed notes 1 to 38 form an integral part of these financial statements.

Attock Refinery Limited

84

Chief Executive

Director

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

1.

LEGAL STATUS AND OPERATIONS Attock Refinery Limited (the Company) was incorporated in Pakistan on November 8, 1978 as a private limited company and was converted into a public limited company on June 26, 1979. The registered office of the company is situated at Morgah, Rawalpindi. Its shares are quoted on the Karachi, Lahore and Islamabad Stock Exchanges in Pakistan. It is principally engaged in the refining of crude oil. The Company is a subsidiary of The Attock Oil Company Limited, UK and its ultimate parent is Bay View International Group S.A. Attock Hospital (Private) Limited (AHL) was incorporated in Pakistan on August 24, 1998 as a private limited company and commenced its operations from September 1, 1998. AHL is engaged in providing medical services. The Company is a wholly owned subsidiary of Attock Refinery Limited. For the purpose of these financial statements, ARL and its above referred wholly owned subsidiary AHL is referred to as the Company.

2.

STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail. ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS In the current year, the Company has adopted IAS 1 (Amendment) - 'Presentation of Financial Statements Capital Disclosures'. Adoption of this amendment only impacts the format and extent of disclosures as presented in note 36.6 to the financial statements. The following standards and interpretations which have not been applied in these financial statements were issued by the International Accountancy Standards Board (IASB) but not yet effective:

Effective for periods beginning on or after

IFRS 7 IFRS 8 IAS 1 IAS 23 IAS 27 IAS 29 IAS 32 IFRIC 7 IFRIC 12 IFRIC 13 IFRIC 14 IFRIC 15 IFRIC 16

Financial Instruments: Disclosure Operating Segments Presentation of Financial Statements (Revised 2008) Borrowing costs (Revised 2008) Consolidated and separate financial statements (Revised 2008) Financial Reporting in Hyperinflationary Economies Financial Instruments: Presentation (Revised 2008) Applying the Restatement Approach under IAS 29 Service Concession Arrangement Customer Loyalty Programmes IAS 19 - The Limit on a defined benefit asset, minimum funding requirements and their interaction Agreements for the construction of Real Estate Hedges of a Net Investment in a Foreign Operation

April 28,2008 April 28,2008 January 1,2009 January 1,2009 January 1,2009 April 28,2008 January 1,2009 April 28,2008 January 1,2008 July 1,2008 85 January 1,2008 January 1,2009 October 1,2008

The management anticipates that adoption of these standards and interpretations in future periods will have no material impact on the Company's financial statements except for additional disclosures when IFRS 7, IAS 1 and IFRIC 14 come into effect.

Annual Report 2008

3.

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

4.1

Basis of measurement These financial statements have been prepared under the historical cost convention modified by revaluation of freehold land referred to in note 4.4 and certain other modifications as required by approved accounting standards referred to in the accounting policies given below.

4.2

Basis of Consolidation The consolidated financial statements include the financial statements of Attock Refinery Limited and its wholly owned subsidiary, Attock Hospital (Private) Limited. Subsidiaries are all entities over which the Company has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights or otherwise has power to elect and appoint more than one half of its directors. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The assets and liabilities of subsidiary company have been consolidated on a line by line basis and the carrying value of investments held by the parent company is eliminated against the subsidiary shareholders' equity in the consolidated financial statements. Material intra-company balances and transactions have been eliminated for consolidation purposes.

4.3

Dividend Appropriation Dividend is recognised as a liability in the financial statements in the period in which it is declared.

4.4

Taxation Provision for current taxation is based on taxable income at the current rates of taxation or half percent of turnover, whichever is higher. Deferred income tax is accounted for using the balance sheet liability method in respect of all temporary differences arising between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences can be utilised. Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse based on the tax rates that have been enacted. Deferred tax is charged or credited to income except in the case of items credited or charged to equity in which case it is included in equity.

4.5

Property, plant and equipment a)

Operating fixed assets except freehold land are stated at cost less accumulated depreciation. Freehold land is stated at revalued amount. Capital work-in-progress and stores held for capital expenditure are stated at cost. Cost in relation to certain plant and machinery items include borrowing cost related to the financing of major projects during construction phase.

86 Attock Refinery Limited

Cost

b)

Depreciation Operating assets depreciation is calculated using the straight-line method to allocate their cost over their estimated useful lives at the rates specified in note 12.

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

c)

Repairs and maintenance Maintenance and normal repairs, including minor alterations, are charged to income as and when incurred. Renewals and improvements are capitalised and the assets so replaced, if any, are retired.

d)

Gains and losses on deletion Gains and losses on deletion of assets are included in income currently.

4.6

Impairment of non-financial assets Assets that have an indefinite useful life, for example land, are not subject to amortisation or depreciation and are tested annually for impairment. Assets that are subject to depreciation / amortisation are reviewed for impairment at each balance sheet date or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Reversals of the impairment losses are restricted to the original cost of the asset. An impairment loss or reversal of impairment loss is recognised in the profit and loss account.

4.7

Investments in associated companies Investments in associated companies are accounted for using the equity method. Under this method investments are stated at cost plus the Company's equity in undistributed earnings and losses after acquisition, less any impairment in the value of individual investments.

4.8

Stores, spares and loose tools These are valued at moving average cost less allowance for obsolete items. Items in transit are stated at invoice value plus other charges paid thereon.

4.9

Stock-in-trade Stock-in-trade is valued at the lower of cost and net realisable value. Crude oil in transit is valued at cost comprising invoice value. Cost in relation to crude oil is determined on the basis of annual average cost of purchases during the year on the principles of import parity and in relation to semi-finished and finished products it represents the cost of crude oil and refining charges consisting of direct expenses and appropriate production overheads. Direct expenses are arrived at on the basis of average cost for the year per barrel of throughput. Production overheads, including depreciation, are allocated to throughput proportionately on the basis of nameplate capacity. Net realisable value in relation to finished product represents selling prices in the ordinary course of business less costs necessarily to be incurred for its sale, as applicable, and in relation to crude oil represents replacement cost at the balance sheet date.

4.10 Foreign currency translation

4.11 Revenue recognition Revenue is recognised to the extent that it is probable that economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is recognised as follows:

87

Annual Report 2008

Transactions in foreign currencies are converted into rupees at the rates of exchange ruling on the date of the transaction. All monetary assets and liabilities denominated in foreign currencies at the year end are translated at exchange rates prevailing at the balance sheet date. Exchange differences are dealt with through the profit and loss account.

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

i)

Revenue from sales is recognised on delivery of products ex-refinery to the customers with the exception that Naphtha export sales are recognised on the basis of products shipped to customers.

ii)

The Company is operating under the import parity pricing formula, as modified from time to time, whereby it is charged the cost of crude on 'import parity' basis and is allowed product prices equivalent to the 'import parity' price, calculated under prescribed parameters. Effective July 1, 2007, the Government made certain modifications in the prescribed parameters effectively reducing the price of Kerosene oil, Light Diesel Oil (LDO) and JP-8 in 2007 and 2008. The Government has further modified the refineries pricing formula in August, 2008 whereby the 10% duty included in pricing of HSD has been cut to 7.5% and the motor gasoline pricing has been unilaterally revised by linking its price to Arab Gulf 95 RON prices and calculating the price of 87 RON motor gasoline on a unitary method basis. This revision will adversely affect the pricing of HSD and motor gasoline which are Company's two major products. Earlier in July, 2002, the Government had modified the pricing formula that was applicable to the Company restricting the distribution of net profits after tax (if any) from refinery operations to 50% of paid-up capital as at July 1, 2002 and diverting the surplus profits, if any, to a special reserve to offset any future loss or make investment for expansion or upgradation of Refinery. Further the Government had abolished the minimum rate of return of 10% which continues to be contested by the Company as it represented to the Government that the already existing agreement for guaranteed return could be modified only with the mutual consent of both the parties.

iii)

Income on investment in associated companies is recognised using the equity method. Under this method, the company's share of post-acquisition profit or loss of the associated company is recognised in the profit and loss account, and its share of post-acquisition movements in reserve is recognised in reserves. Dividend distribution by the associated companies is adjusted against the carrying amount of the investment.

iv)

Dividend income is recognised when the right to receive dividend is established.

v)

Other income is recognised on accrual basis.

4.12 Borrowing cost Borrowing cost related to the financing of major projects during construction phase is capitalised. All other borrowing costs are expensed as incurred. 4.13 Employee retirement benefits The main features of the retirement benefit schemes operated by the Company for its employees are as follows: i)

The Company operates a pension plan for its management staff and a gratuity plan for its non-management staff. Pension plan is invested through an approved trust fund while the gratuity plan is book reserve plan. Contributions are made in accordance with actuarial recommendations. Actuarial valuations are conducted through an independent actuary, annually using projected unit credit method. The obligation at the balance sheet date is measured at the present value of the estimated future cash outflows.

88 Attock Refinery Limited

Defined benefits plans

Unrealised net gains and losses are amortised over the expected remaining service of current members. ii)

Defined contribution plans The company operates an approved contributory provident fund for all employees. Equal monthly contribution is made both by the Company and the employee to the fund at the rate of 10% of basic salary.

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

4.14 Employees compensated absences The Company also provides for compensated absences for all employees in accordance with the rules of the Company. 4.15 Financial Instruments Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument and de-recognised when the Company loses control of the contractual rights that comprise the financial asset and in case of financial liability when the obligation specified in the contract is discharged, cancelled or expired. The particular measurement methods adopted are disclosed in the individual policy statements associated with each item as shown below: a)

Investment in associated companies The measurement methods adopted for investment in associated and subsidiary companies are disclosed in note 4.6.

b)

Trade and other payables Liabilities for trade and other amounts payable including amounts payable to related parties are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received.

c)

Provisions Provisions are recognised when a Company has a legal or constructive obligation as a result of past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made.

d)

Trade debts and other receivables Trade debts and other receivables are recognised and carried at original invoice amount / cost less an allowance for any uncollectable amounts.

e)

Cash and cash equivalents Cash in hand and at banks are carried at fair value. For the purpose of cash flow statement, cash and cash equivalents consist of cash in hand, balances in banks and highly liquid short term investments.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS The preparation of financial statements in conformity with the approved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting policies. Estimates and judgments are continually evaluated and are based on historical experience, including expectation of future events that are believed to be reasonable under the circumstances. The areas where various assumptions and estimates are significant to the Company's financial statements or where judgment was exercised in application of accounting policies are as follows: i)

Estimate of recoverable amount of investment in National Refinery Limited - note 14.1

ii)

Revaluation surplus on freehold land - note 12.1

iii)

Provision for taxation

iv)

Provision for retirement benefits - note 29

89

Annual Report 2008

5.

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

6.

2008 Rs ‘000

2007 Rs ‘000

1,000,000

1,000,000

80,000

80,000

Shares issued as fully paid bonus shares 63,077,500 (2007: 48,862,000) ordinary shares of Rs 10 each

630,775

488,620

71,077,500 (2007: 56,862,000) ordinary shares of Rs 10 each

710,775

568,620

SHARE CAPITAL Authorised 100,000,000 (2007: 100,000,000) ordinary shares of Rs 10 each Issued, subscribed and paid up Shares issued for cash 8,000,000 (2007: 8,000,000) ordinary shares of Rs 10 each

The Attock Oil Company Limited held 40,032,687 (2007: 31,274,150) ordinary shares and Attock Petroleum Limited held 1,000,000 (2007: nil) ordinary shares at the year end.

7.

Special reserve for expansion / modernisation Additional revenue under processing fee formula related to 1990-91 and 1991-92 – note 7.1 Surplus profits under the import parity pricing formula -note 7.1 Surplus profits of associate under the import parity pricing formula Revenue reserve General reserve Surplus – unappropriated profit

7.1

Attock Refinery Limited

8.

2007 Rs ‘000

4,800 654

4,800 654

494 4,000 33,320

494 4,000 35,000

43,268

44,948

32,929 4,375,003 1,197,692

32,929 2,513,232 453,912

5,605,624

3,000,073

819,980 4,233,236

258,880 2,067,874

5,053,216

2,326,754

10,702,108

5,371,775

RESERVES AND SURPLUS Capital reserve Liabilities taken over from The Attock Oil Company Limited no longer required Capital gain on sale of building Insurance and other claims realised relating to pre-incorporation period Donations received for purchase of hospital equipment Bonus shares issued by associated company

90

2008 Rs ‘000

Represents amounts retained as per stipulations of the Government under the pricing formula and is available only for offsetting any future loss or making investment in expansion or upgradation of the refinery. Transfer to / from special reserve is recognised at each quarter end and is reviewed for adjustment based on profit / loss on an annual basis. The company has incurred capital expenditure of Rs 3,770 million on upgradation and expansion projects from July 1, 1997 to June 30, 2008 (July 1, 1997 to June 30, 2007: Rs 3,496 million).

SURPLUS ON REVALUATION OF FREEHOLD LAND This represents surplus over book value resulting from revaluation of freehold land as referred to in note 12.1 and is not available for distribution to shareholders.

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

9.

SHORT TERM FINANCE During the year, the Company has negotiated running finance facilities with various banks and accepted facility offer letters to the extent of Rs 3.5 Billion, which were unutilised at the year end. As and when required, these facilities shall be secured by joint hypothecation by way of 1st registered charges over the Company's current assets.

10.

2008 Rs ‘000

2007 Rs ‘000

24,371,972 256,723

18,021,734 275,089

1,684,783 – 17,429 72 1,717,026 7,138,356 2,677 1,037,929 196,966 181,441

1,383,271 1,046 5,543 – 738,703 4,707,073 5,533 7,197 131,989 65,840

376

1,271

TRADE AND OTHER PAYABLES Creditors – note 10.1 Due to The Attock Oil Company Limited – Holding Company Due to associated companies Pakistan Oilfields Limited Attock Petroleum Limited Attock Information Technology Services (Private) Limited Attock Cement Pakistan Limited Accrued liabilities and provisions – note 10.1 Due to the Government under pricing formula Advance payments from customers Sales tax payable Workers' Welfare Fund Workers' Profit Participation Fund – note 10.2 Deposits from customers adjustable against freight and Government levies payable on their behalf Payable to statutory authorities in respect of petroleum development levy and excise duty Excess crude oil freight recovered through inland freight equalisation margin Security deposits Unclaimed dividends

13,099

–

21,479 49,110 1,576

– 49,165 939

36,691,014

25,394,393

10.1 These balances include amounts retained from payments to crude suppliers for purchase of local crude as per the directives of the Ministry of Petroleum and Natural Resources (the Ministry). Further, as per directive of the Ministry such withheld amounts are being retained in designated 90 days interest bearing accounts. The amounts retained alongwith accumulated profits amounted to Rs 6,630.371 million (2007: Rs 10,173.029 million). 2008 Rs ‘000

2007 Rs ‘000

Balance at the beginning of the year Add: Interest on funds utilised in the Company's business

65,840 3,889

36,869 528

Less: Amount paid to the Fund

69,729 65,959

37,397 37,261

3,770 177,671

136 65,704

181,441

65,840

10.2 Workers' Profit Participation Fund

Annual Report 2008

Add: Amount allocated for the year – notes 28 and 33

91

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

11.

2008 Rs ‘000

2007 Rs ‘000

–

214,255

300

300

1,300

1,300

–

–

667,950

242,192

43,959

55,424

172,722

125,775

CONTINGENCIES AND COMMITMENTS Contingencies: i)

ii)

Performance and commitment guarantees arranged by the Company on behalf of Attock Gen Limited (AGL), an associated company, as main sponsors Guarantees issued by banks on behalf of the Company

iii) Claims for land compensation contested by the Company iv) Price adjustment related to crude oil purchases as referred to in note 24.1, the amount of which can not be presently quantified v)

Corporate guarantees and indemnity bonds issued by an associated company to the collector sales tax and Federal Excise, Islamabad

Commitments outstanding:

12.

i)

Capital expenditure

ii)

Letters of credit other than for capital expenditure

OPERATING ASSETS Freehold land (note 12.1)

Buildings on freehold land

Plant & machinery

Furniture, Computer fixtures equipment and equipment Rs ‘000

As at July 1, 2006 Additions during the year Disposals during the year

1,927,250 – –

70,356 14,375 –

3,804,719 113,953 –

52,464 3,687 –

62,036 1,547 (188)

62,635 7,974 (290)

5,979,460 141,536 (478)

As at June 30, 2007

1,927,250

84,731

3,918,672

56,151

63,395

70,319

6,120,518

– –

16,918 –

99,922 (24,703)

2,356 (10,244)

6,056 (10,084)

4,486 (852)

129,738 (45,883)

1,927,250

101,649

3,993,891

48,263

59,367

73,953

6,204,373

As at July 1, 2006 Charge for the year On disposals

– – –

28,639 3,908 –

2,882,892 331,821 –

40,323 9,047 –

33,767 4,927 (80)

43,198 8,239 (290)

3,028,819 357,942 (370)

As at June 30, 2007 Charge for the year On disposals

– – –

32,547 5,573 –

3,214,713 368,993 (18,222)

49,370 2,994 (10,215)

38,614 5,931 (8,232)

51,147 9,047 (852)

3,386,391 392,538 (37,521)

As at June 30, 2008

–

38,120

3,565,484

42,149

36,313

59,342

3,741,408

As at June 30, 2007

1,927,250

52,184

703,959

6,781

24,781

19,172

2,734,127

As at June 30, 2008

1,927,250

63,529

428,407

6,114

23,054

14,611

2,462,965

–

5

10

20

10

20

Vehicles

Total

COST

Additions during the year Disposals during the year As at June 30, 2008 DEPRECIATION

Attock Refinery Limited

92

WRITTEN DOWN VALUE

Annual rate of depreciation (%)

12.1 Value of freehold land includes revaluation surplus of Rs 1,923.339 million arising from revaluation of freehold land in January 2001 carried out by an independent valuer. Valuation was made on the basis of market value. The original cost of the land as at June 30, 2008 is Rs 3.911 million.

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

2008 Rs ‘000

2007 Rs ‘000

378,170 12,405 298 633 1,032

341,975 13,361 900 633 1,073

392,538

357,942

2,191 411,820 28,420

2,487 186,977 28,219

442,431

217,683

12.2 The depreciation charge for the year has been allocated as follows: Cost of sales Administration expenses Distribution cost Desalter operating cost Depreciation of subsidiary company

CAPITAL WORK-IN-PROGRESS Civil works Plant and machinery Pipeline project

14.

LONG TERM INVESTMENTS Investment in associated companies Beginning of the year Sale of investment in associated company Purchase of shares of associated companies Share of profit of associated companies Impairment loss against investment in NRL Dividend from associated companies received

11,416,312 (1,550,881) 4,542,444 2,059,708 (1,170,411) (454,734) 14,842,438

9,637,407 – 638,425 1,418,177 – (277,697) 11,416,312

93

Annual Report 2008

13.

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

2008

14.1

% age holding

2007 Rs ‘000

% age holding

Rs ‘000

25

9,556,004

25

9,558,251

21.70

4,627,293

21.70

1,311,091

30

653,754

30

542,054

10

5,387

10

4,916

Long term investments Associated companies Quoted National Refinery Limited (NRL) – note 14.2 19,991,640 (2007: 16,659,700 ) fully paid ordinary shares including 3,331,940 (2007 : Nil) bonus shares of Rs 10 each Market value as at June 30, 2008: Rs 5,947 million (June 30, 2007 : Rs 5,681 million) Attock Petroleum Limited (APL) – note 14.3 10,417,680 (2007 : 8,681,400 ) fully paid ordinary shares of Rs 10 each Market value as at June 30, 2008 : Rs 4,503 million (June 30, 2007 : Rs 4,352 million) Unquoted Attock Gen Limited (AGL) – note 14.4 6,435,000 (2007 : 5,400,000) fully paid ordinary shares of Rs 100 each Attock Information Technology Services (Private) Limited – note 14.5 450,000 (2007 : 450,000) fully paid ordinary shares of Rs 10 each

14,842,438

11,416,312

All associated and subsidiary companies are incorporated in Pakistan. 14.2 The carrying value of investment in National Refinery Limited at June 30, 2008 is net of impairment loss of Rs 1,170,411 thousand (2007: Nil). The carrying value is based on a valuation analysis carried out by an external investment advisor engaged by the Company. The recoverable amount has been estimated based on a value in use calculation. These calculations have been made on discounted cash flow based valuation methodology which assumes gross profit margin of 5.4% (2007: 6.4%), terminal growth rate of 4% (2007: 5%) and capital asset pricing model based discount rate of 18.64% (2007: 14.30%).

Attock Refinery Limited

94

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

Number of shares

Carrying value Rs ‘000

14.3 Investment in APL As at July 1, 2007 (including 3,500,000 bonus shares) Bonus shares received during the year Share in pre-disposal profit of APL Dividend received Disposal of shares during the year Purchase of shares during the year Share in post acquisition profit of APL

8,681,400 1,736,280 – – (10,417,680) 10,417,680 –

1,311,091 – 361,330 (121,540) (1,550,881) 4,438,944 188,349

10,417,680

4,627,293

As at July 1, 2007 Right shares acquired during the year Share in profit of Attock Gen Limited (AGL)

5,400,000 1,035,000 –

542,054 103,500 8,200

As at June 30, 2008

6,435,000

653,754

As at June 30, 2008 14.4 Investment in AGL

14.5 Although the Company has less than 20 percent shareholding in Attock Information Technology Services (Private) Limited, this company has been treated as associates since the Company has representation on its Board of Directors.

15.

2008 Rs ‘000

2007 Rs ‘000

25,879

21,079

(14,095)

(10,990)

11,784 948

10,089 865

12,732

10,954

LONG TERM LOANS AND DEPOSITS Loans to employees – considered good – note 15.1 Less: Amounts due within next twelve months shown under current assets – note 20 Security deposits

15.1 Loans to employees are for miscellaneous purposes which are recoverable in 24, 36, and 60 equal monthly installments depending on case to case basis and are secured by a charge on the asset purchased and/or amount due to the employee against provident fund or a third party guarantee. These are interest free loans. These include an amount of Rs 4.366 million (2007: Rs 3.552 million) receivable from Executives of the Company and does not include any amount receivable from Directors or Chief Executive. The maximum amount due from executives of the Company at the end of any month during the year was Rs 4.720 million (2007: Rs 3.805 million). 2008 Rs ‘000

2007 Rs ‘000

3,552 7,164

2,233 3,922

10,716 6,350

6,155 2,603

4,366

3,552

95

Opening balance as at July 1 Add: Disbursements during the year Less: Repayments during the year Closing balance as at June 30

Annual Report 2008

15.2 Reconciliation of carrying amount of loans to executives:

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

2008 Rs ‘000

16.

DEFERRED TAXATION Debit balances arising on Provisions for obsolete stores, doubtful debts, gratuity and others Difference between accounting and tax depreciation Finance lease arrangements

17.

2007 Rs ‘000

55,014 164,574 –

48,980 124,925 (15,897)

219,588

158,008

STORES, SPARES AND LOOSE TOOLS Stores (including items in transit Rs 99.03 million; 2007: Rs 119.67 million) Spares Loose tools

351,123 228,053 624

446,579 219,661 596

Less: Provision for slow moving items – note 17.1

579,800 37,300

666,836 36,000

542,500

630,836

36,000 1,300

34,500 1,500

37,300

36,000

902,525 375,967

1,488,648 176,064

1,278,492 436,792 3,129,569 574

1,664,712 311,633 1,876,301 742

4,845,427

3,853,388

17.1. Provision for slow moving items Opening balance Add: Provision for the year

18.

STOCK-IN-TRADE Crude oil – in stock Crude oil – in transit Semi-finished products Finished products – note 18.1 Medical supplies

18.1 Finished products include stocks carried at net realisable value of Rs 2 million (2007: Rs 236 million). Adjustments amounting to Rs 1 million (2007: Rs 43.8 million) have been made to closing inventory to write down stocks of finished products to their net realizable value. 19.

Attock Refinery Limited

96

TRADE DEBTS All debtors are unsecured and considered good. These include amount receivable from associated companies Attock Petroleum Limited Rs 2,327 million (2007: Rs 1,011 million) and Pakistan Oilfields Limited Rs 11 million (2007: Rs nil).

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

20.

2008 Rs ‘000

2007 Rs ‘000

14,095 61,874 2,236

10,990 19,301 1,729

78,205

32,020

286 14,705

286 17,266

–

287

14,991

17,839

2,610 9,436 115 5,394 2,992 – 15,404 108,888 4,738 – 5,534

4,677 – – 2,415 2,465 103 4,097 78,867 3,362 39,221 7,561

155,111

142,768

248,307

192,627

LOANS, ADVANCES, DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES Loans and advances – considered good Current portion of long-term loans to employees – note 15 Advances to suppliers Advances to employees

Deposits, prepayments and current account balances with statutory authorities Trade deposits Short term prepayments Current account balances with statutory authorities in respect of petroleum development levy and excise duty

Other receivables Due from associated companies National Refinery Limited Attock Petroleum Limited Attock Leisure and Management Associates (Pvt) Limited Attock Gen Limited National Cleaner Production Centre Foundation Attock Cement Pakistan Limited Due from Staff Pension Fund Income accrued on bank deposits Income tax refundable Crude oil freight recoverable through inland freight equalisation margin Other receivables

Loans to employees include Rs 2.852 million (2007: Rs 2.265 million ) due from executives of the Company and does not include any amount receivable from Directors or the Chief Executive. 2007 Rs ‘000

955

339

CASH AND BANK BALANCES Cash in hand With banks: Current accounts Deposit accounts Savings accounts (including US $ 366,766; 2007: US $ 379,624)

97 2,731 6,317,269 12,624,245

2,805 6,081,864 2,796,045

18,945,200

8,881,053

Annual Report 2008

21.

2008 Rs ‘000

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

21.1 Balances with banks include Rs 4,817.269 million (2007: 5,381.864 million) in respect of deposits placed in a 90-day interest-bearing account consequent to directives of the Ministry of Petroleum & Natural Resources on account of amounts withheld alongwith related interest earned thereon, as referred to in note 10.1. 21.2 Bank deposits of Rs. 0.300 million (2007: 0.300 million) were under lien with bank against a bank guarantee issued on behalf of the Company. 21.3 Balances with banks include Rs 48.890 million (2007: Rs 49.165 million) in respect of security deposits received. 21.4 Balances with banks earned weighted average interest / mark-up @ 9.61% (2007: @ 9.73%) per annum.

22.

2008 Rs ‘000

2007 Rs ‘000

Gross sales (excluding Naphtha export sales)

93,428,851

66,083,779

Naphtha export sales Less: Cost of Naphtha purchased from third parties and related handling charges recovered

12,509,719

8,232,840

1,684,095

1,175,285

10,825,624

7,057,555

12,343,772

13,986,554

91,910,703

59,154,780

10,418,456 1,903,321 21,995

8,166,096 5,356,523 463,935

12,343,772

13,986,554

SALES

Less: Duties, taxes and levies – note 22.1

22.1 Duties, taxes and levies Sales tax Development surcharge Custom duties and other levies

23.

REIMBURSEMENT DUE FROM THE GOVERNMENT UNDER IMPORT PARITY PRICING FORMULA This represents amount due from the Government of Pakistan on account of shortfall in ex-refinery prices of certain petroleum products under the import parity pricing formula.

Attock Refinery Limited

98

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

24.

2008 Rs ‘000

2007 Rs ‘000

311,633 88,115,513 1,174,592 296,102 1,922 354,582 449,483 6,047 2,283 3,506 52,935

278,876 56,314,521 1,016,615 250,262 1,822 347,235 279,486 6,525 1,602 2,455 46,544

COST OF SALES Opening stock of semi-finished products Crude oil consumed – note 24.1 Transportation and handling charges Salaries, wages and other benefits – note 24.2 Printing and stationery Chemicals consumed Fuel and power Rent, rates and taxes Telephone and telex charges Professional charges for technical services Insurance Repairs and maintenance (including stores and spares consumed Rs 64.345 million; 2007: Rs 65.330 million) Staff transport and traveling Cost of receptacles Research and development Depreciation Closing stock of semi-finished products

Opening stock of finished products Closing stock of finished products

162,555 * 10,449 15,912 749 378,170

118,433 9,815 8,619 109 341,975

91,336,433 (436,792)

59,024,894 (311,633)

90,899,641

58,713,261

1,876,301 (3,129,569)

1,760,728 (1,876,301)

(1,253,268)

(115,573)

89,646,373

58,597,688

* includes consumables wrongly classified as fixed assets written off during the year having book value of Rs 7,269 thousand. 2008 Rs ‘000

2007 Rs ‘000

Stock at the beginning of the year Purchases – note 38.3(i)

1,664,712 87,729,294

1,484,204 56,495,029

Stock at the end of the year

89,394,006 (1,278,493)

57,979,233 (1,664,712)

88,115,513

56,314,521

24.1 Crude oil consumed

24.2 Salaries, wages and other benefits under cost of sales, administration expenses, distribution cost and income from crude desalter operations include the Company's contribution to the Provident Fund amounting to Rs 13.245 million (2007: Rs 11.552 million).

99

Annual Report 2008

Certain crude purchases have been recorded based on provisional prices notified by the Government and may require adjustment in subsequent periods. Cost of purchases include Rs 706.120 million (2007: Nil) related to purchases in prior years.

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

25.

ADMINISTRATION EXPENSES Salaries, wages and other benefits – note 24.2 Staff transport, traveling and entertainment Telephone and telex charges Electricity, gas and water Printing and stationery Auditor's remuneration – note 25.1 Legal and professional charges Repairs and maintenance Subscription Publicity Scholarship scheme Rent, rates and taxes Insurance Donations* Training expenses Other expenses Depreciation

2008 Rs ‘000

2007 Rs ‘000

108,425 12,768 1,521 5,570 3,937 1,074 4,145 33,605 5,214 3,061 1,909 1,766 790 324 2,582 240 12,405

97,666 12,065 1,485 4,430 3,028 986 5,874 21,490 5,272 4,044 2,055 1,273 867 415 745 52 13,361

199,336

175,108

440

350

520 114

553 83

1,074

986

13,426 652 221 1,857 137 2,066 339 144 – 298

11,722 568 210 1,476 81 1,295 317 144 3 900

19,140

16,716

* No director or his spouse had any interest in the donee institutions. 25.1 Auditor's remuneration Statutory audit Review of half yearly accounts, audit of consolidated accounts, staff funds and special certifications Out of pocket expenses

26.

Attock Refinery Limited

100

DISTRIBUTION COST Salaries, wages and other benefits – note 24.2 Staff transport, traveling and entertainment Telephone and telex charges Electricity, gas, fuel and water Printing and stationery Repairs and maintenance including packing and other stores consumed Rent, rates and taxes Legal and professional charges Cost of samples Depreciation

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

27.

2008 Rs ‘000

2007 Rs ‘000

– 3,888 241 1,240,244

233,361 528 389 12,267

1,244,373

246,545

20,764

15,321

597 (995)

8,572 (955)

(398) 2,580

7,617 2,202

22,946

25,140

648 1,300 – 154,934 55,883

– 1,500 13 51,819 23,679

235,711

102,151

FINANCE COST Interest / mark-up on Long term loans Workers' Profit Participation Fund – note 10.2 Bank and other charges Exchange loss

OTHER CHARGES Employees' retirement benefits Staff gratuity benefits Staff pension benefits Less: Contribution to subsidiary company Contribution to employees old age benefits scheme

Fixed assets shortages / damages written off Provision for slow moving stores Stores written off Workers' Profit Participation Fund Workers' Welfare Fund

101

Annual Report 2008

28.

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

29.

EMPLOYEES' DEFINED BENEFIT PLANS The latest actuarial valuation of the employees' defined benefit plans was conducted at June 30, 2008 using the projected unit credit method. Details of the defined benefit plans are:

a)

Defined benefit Pension plan 2008 2007

Defined benefit Gratuity plan 2008 2007

Rs ‘000

Rs ‘000

The amounts recognised in the profit and loss account: Current service cost Interest on obligation Expected return on plan assets Contribution from an associated company Net actuarial losses / (gains) recognised during the year

13,773 31,449 (39,591) (144) (4,890)

12,263 27,772 (30,235) (127) (1,101)

3,818 12,890 – – 4,056

3,099 10,076 – – 2,146

8,572

20,764

15,321

385,053 (321,136)

359,485 (291,335)

– (152,656)

– (121,894)

63,917 (48,513)

68,150 (64,053)

(152,656) 55,767

(121,894) 36,094

(96,889)

(85,800)

96,058 3,099 10,076 (5,321) 17,982

597 b)

The amounts recognised in the balance sheet: Fair value of plan assets Present value of defined benefit obligations Unrecognised actuarial gains / (losses) Net liability

c)

d)

Attock Refinery Limited

102

15,404

4,097

Movement in the present value of defined benefit obligation: Present value of defined benefit obligation as at July 1 Current service cost Interest cost Benefits paid Actuarial (gains) / losses

291,335 13,773 31,449 (11,158) (4,263)

263,054 12,263 27,772 (11,146) (608)

121,894 3,818 12,890 (9,675) 23,729

Present value of defined benefit obligation as at June 30

321,136

291,335

152,656

Fair value of plan assets as at July 1 Expected return Benefits paid Contributions by employer Contributions by associated company Actuarial gains / (losses)

359,485 39,591 (11,158) 11,904 144 (14,913)

280,495 30,235 (11,146) 10,971 127 48,803

– – – – – –

– – – – – –

Fair value of plan assets as at June 30

385,053

359,485

–

–

24,677

79,038

–

–

121,894

Changes in the fair value of plan assets:

Actual return on plan assets

Expected contributions to the defined benefit pension plans for the year ending June 30, 2008 are Rs 12.6 million.

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

Defined benefit Pension plan 2008 2007

Defined benefit Gratuity plan 2007 2008

Rs ‘000

e)

The major categories of plan assets: Investment in equities Investment in mixed funds Cash

f)

Rs ‘000

119,841 103,448 161,764

109,498 136,837 113,150

– – –

– – –

385,053

359,485

–

–

13.25% 13.25% 11.09% 7.86%

11.00% 11.00% 8.89% 5.71%

– – – –

– – – –

2006

2005

Significant actuarial assumptions at the balance sheet date: Discount rate Expected return on plan assets Future salary increases Future pension increases

2008

2007

2004

Rs ‘000

Comparison for five years: Defined Benefit Pension Plan Present value of defined benefit obligation Fair value of plan assets

(321,136) 385,053

(291,335) 359,485

(263,054) 280,495

(215,382) 225,121

(190,998) 196,918

Surplus /(deficit)

63,917

68,150

17,441

9,739

5,920

Actuarial (gains) /losses on plan liabilities Actuarial (gains) / losses on plan assets

(4,262) 14,914

(609) (48,803)

23,265 29,017

9,382 13,388

1,303 9,384

Present value of defined benefit obligation Fair value of plan assets

(152,656) –

(121,894) –

(96,058) –

(88,578) –

(80,832) –

Deficit

(152,656)

(121,894)

(96,058)

(88,578)

(80,832)

Defined Benefit Gratuity Plan

Actuarial (gains) / losses on plan liabilities Actuarial (gains) / losses on plan assets

23,729 –

17,982 –

(1,087) –

3,611 –

16,991 –

103

Annual Report 2008

g)

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

30.

2008 Rs ‘000

2007 Rs ‘000

483,492 16,852

569,024 270

500,344

569,294

15,262 9,715 4,140 6,983 12,930 2,637 2,892 16,586 200 4,816 – 1,346

11,205 9,265 4,719 3,057 10,613 846 3,742 15,901 – 3,888 694 1,942

77,507

65,872

577,851

635,166

51,997

43,928

1,080 8,098 22,889 9,582 633

1,882 7,058 16,828 8,262 633

42,282

34,663

9,715

9,265

OTHER INCOME Income from financial assets Income on bank deposits Exchange gain

Income from non – financial assets Income from crude decanting Income from crude desalter operations – note 30.1 Insurance agency commission Rental income Sale of scrap Profit on disposal of fixed assets Calibration charges Handling and service charges Registration charges from carriage contractors Penalties from carriage contractors Old liabilities written back Miscellaneous

30.1 Income from crude desalter operations Income Less: Operating costs Salaries, wages and other benefits – note 24.2 Chemical consumed Fuel and power Repairs and maintenance Depreciation

31.

Attock Refinery Limited

104

PROVISION FOR TAXATION Current – for the year – for prior years Deferred – for the year

1,054,100 (112,900)

476,500 –

941,200 (61,547)

476,500 (19,950)

879,653

456,550

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

2008 %

2007 %

Applicable tax rate

35.00

35.00

Tax effect of: Income chargeable to tax at special rate and other differences Prior years

(0.62) (3.91)

12.51 –

Average effective tax rate charged to profit and loss account

30.47

47.51

2008 Rs ‘000

2007 Rs ‘000

1,501,358

1,050,664

563,407

375,107

13,728

9,940

31.1 Reconciliation between the average effective tax rate and the applicable tax rate.

32.

SHARE IN PROFIT OF ASSOCIATED COMPANIES National Refinery Limited Attock Petroleum Limited Less: Unrealised profit from intra-group transactions included in closing stock in trade Attock Gen Limited Attock Information Technology Services (Private) Limited Less: Related charges Workers' Profit Participation Fund – note 9.4 Workers' Welfare Fund Taxation @ 10% (2007: 5%)

Profit/(loss) of Attock Hospital (Private) Limited, a wholly owned subsidiary – note 33.1

549,679 8,200* 471

365,167 2,054 292

2,059,708

1,418,177

22,737 9,095 45,473

13,885 5,276 13,885

77,305

33,046

1,982,403

1,385,131

276

(503)

1,982,679

1,384,628

* net of restatement of 2007 profit by Rs 7,744 thousands PROFIT / (LOSS) ON INVESTMENT IN ASSOCIATED COMPANIES Gain on sale of shares of Attock Petroleum Limited Proceeds from sale of shares (net of expenses incurred on disposal) Carrying value of investment

4,430,979 (1,550,881)

– –

Impairment loss on investment in National Refinery Limited

2,880,098 (1,170,411)

– –

1,709,687

–

105

Annual Report 2008

33.

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

2008 Rs ‘000

2007 Rs ‘000

36,615

31,329

22,451 3,157 617 2,388 6,470 75 1,032

17,499 2,953 571 3,433 6,332 65 1,074

36,190

31,927

Profit/(Loss) before taxation

425

(598)

Provision for taxation – Current – Deferred

183 (34)

157 (252)

149

(95)

276

(503)

33.1 Profit/(loss) from Attock Hospital (Private) Limited Revenue* Less: Operating expenses Salaries, wages and other benefits (including employees' retirement benefits of Rs 1,168 thousands (2007: Rs 1,064 thousands) Medical supplies Dietary cost Sanitation and general services Utilities and other office expenses Audit fee Depreciation

Profit/(Loss) after taxation

* The revenue includes inter – company billings amounting to Rs 26,588 thousands (2007 : Rs 22,703 thousands) which have not been eliminated from revenue and costs. It is considered that this gives a fairer view of the operating results of the Group. The revenue also includes income on bank deposits Rs 83 thousands (2007: Rs 21 thousands).

Attock Refinery Limited

106

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

33.2 Summarised financial information of associated companies: The aggregate assets, liabilities, revenue and profit / (loss) of associated companies based on their audited financial statements are as follows:

Assets National Refinery Limited Attock Petroleum Limited Attock Gen Limited Attock Information Technology Services (Private) Limited Liabilities National Refinery Limited Attock Petroleum Limited Attock Gen Limited Attock Information Technology Services (Private) Limited Revenue National Refinery Limited Attock Petroleum Limited Attock Gen Limited Attock Information Technology Services (Private) Limited Profit/(loss) National Refinery Limited Attock Petroleum Limited Attock Gen Limited Attock Information Technology Services (Private) Limited The Company's share in shareholders' equity National Refinery Limited Attock Petroleum Limited Attock Gen Limited Attock Information Technology Services (Private) Limited

2007 Rs ‘000

46,604,615 15,513,336 10,658,986 60,852

32,641,559 8,983,767 1,820,220 52,541

29,185,570 9,977,487 8,479,805 6,982

19,895,170 5,529,470 13,375 3,378

129,385,816 53,242,330 69,848 19,515

91,326,538 44,130,536 10,531 13,642

6,005,432 2,641,552 53,147 4,707

4,202,654 1,728,606 6,845 2,923

25.00% 21.70% 30.00% 10.00%

25.00% 21.70% 30.00% 10.00%

RELATED PARTY TRANSACTIONS Attock Oil Company Limited holds 56.32% (2007: 55.00%) shares of the Company at the year end. Therefore, all subsidiaries and associated undertakings of Attock Oil Company Limited are related parties of the Company. The related parties also comprise of directors, major shareholders, key management personnel, entities over which the directors are able to exercise significant influence on financial and operating policy decisions and employees' funds. Amount due from and due to these undertakings are shown under receivables and payables. The remuneration of Chief Executive, directors and executives is disclosed in note 35 to the financial statements.

107

Annual Report 2008

34.

2008 Rs ‘000

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

2008 Rs ‘000

2007 Rs ‘000

24,713,370 95,703

12,941,980 76,773

24,809,073

13,018,753

10,154,897 409,827

7,591,742 311,331

10,564,724

7,903,073

424

285

1,106,675 3,833

1,298,843 3,988

1,110,508

1,302,831

25,149

22,523

Associated companies Sale of goods Sale of services

Purchase of goods Purchase of services Holding company Sale of services Purchase of goods Purchase of services

Contribution to employees' pension and provident funds

35.

REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES The aggregate amounts charged in the accounts for remuneration, including benefits and perquisites, were as follows: Chief Executive 2008 2007

Directors 2008

2007

Executives 2008 2007

Rs ‘000

Managerial remuneration / honorarium Company's contribution to provident and pension funds Housing and utilities Leave passage

No of person(s)

3,525

3,910 *

1,219

1,219

28,020

24,673

731 2,208 420

789 1,037 330

– – –

– – –

6,150 18,728 3,328

5,209 11,586 2,324

6,884

6,066

1,219

1,219

56,226

43,792

1

1

3

3

25

22

Housing and utilities of executives include cash allowance for fuel and maintenance in respect of limited use of Company's cars provided to 12 executives for the period January 1, 2008 to June 30, 2008. * This includes payments to Chief Executive of Rs 789 thousand representing arrears of salary for the period February 2005 to June 30, 2006.

Attock Refinery Limited

108

35.1 In addition, the Chief Executive and 23 (2007: 19) executives were provided with limited use of the Company's cars. The Chief Executive and all executives were provided with medical facilities and 8 (2007: 9) executives were provided with unfurnished accommodation in Company owned bungalows. Limited residential telephone facility was also provided to the Chief Executive and 15 (2007: 13) executives. Fee paid to directors during the year was Rs nil (2007: Rs nil).

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

36.

FINANCIAL INSTRUMENTS

36.1 Financial assets and liabilities Interest / mark-up bearing

2008 Non-interest / mark-up bearing

Total

Interest / mark-up bearing Rs ‘000

2007 Non-interest / mark-up bearing

Total

–

9,208,809

9,208,809

–

6,235,379

6,235,379

–

166,990

166,990

155,773

155,773

24,940 18,916,574

702 2,984

25,642 18,919,558

22,816 8,855,093

201 2,942

23,017 8,858,035

– –

14,842,438 12,732

14,842,438 12,732

– –

11,416,312 10,954

11,416,312 10,954

18,941,514

24,234,655

43,176,169

8,877,909

17,821,561

26,699,470

6,630,615

30,059,862

36,688,337

9,471,565

15,917,291

25,388,856

Financial assets: Maturity upto one year Trade debts Loans, advances, deposits and other receivables Cash and bank balances Foreign currency – US $ Local currency Maturity after one year Long term investments Long term loans and deposits

Financial liabilities: Maturity upto one year Trade and other payables Maturity after one year Staff gratuity

96,889

–

96,889

85,800

–

85,800

6,727,504

30,059,862

36,785,226

9,557,365

15,917,219

25,474,656

– – –

43,959 172,722 300

43,959 172,722 300

– – –

55,424 125,775 214,555

55,424 125,775 214,555

–

216,981

216,981

–

395,754

395,754

Off balance sheet items: Commitments (other than letters of credit) Letters of credit Bank guarantees

The carrying value of financial assets and liabilities approximates their fair value except for long term investments which are stated at cost. 36.2 Concentration of credit risk The Company's credit risk is primarily attributable to its trade debts and placements with banks. The sales are essentially to six oil marketing companies and reputable foreign customers. The Company's placements are with banks having satisfactory credit rating. Due to the high credit worthiness of corresponding parties the credit risk is considered minimal. 36.3 Currency risk Foreign exchange risk arises mainly from future commercial transactions or receivables and payables that exist due to transactions denominated in foreign currencies. Financial assets include Rs 840.260 million (2007: Rs 726.019 million) and financial liabilities include Rs 18,469.791 million (2007: Rs 10,714.731 million) which were subject to foreign exchange risk. 36.4 Interest / Mark-up risk Financial assets include Rs 18,941 million (2007: Rs 8,877 million) and financial liabilities include Rs 6,727 million (2007: Rs 9,557 million) which were subject to interest rate risk. Liquidity risk reflects an enterprise's inability in raising funds to meet commitments. The Company follows an effective cash management and planning policy to ensure availability of funds and to take appropriate measures for new requirements. 36.6 Capital risk management The Company is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital and the level of dividend to ordinary shareholders. There was no change to the Company's approach to the capital management during the year and the company is not subject to externally imposed capital requirement.

109

Annual Report 2008

36.5 Liquidity risk

Notes to the Consolidated Financial Statements for the year ended June 30, 2008

37.

EARNINGS PER SHARE Profit after taxation from refinery operations Profit after taxation from non-refinery operations Number of fully paid weighted average ordinary shares ('000) Earnings per share - Basic (Rs) Refinery operations Non-refinery operations

2008 Rs ‘000

2007 Rs ‘000

2,007,570 3,692,366 5,699,936

504,333 1,384,628 1,888,961

71,078

71,078

28.24 51.95 80.19

7.10 19.48 26.58

Basic earnings per share for the year 2007 reported in the previous year was Rs 33.22. This has been restated on account of 14,215,500 bonus shares issued without consideration during the year ended June 30, 2008. There is no dilutive effect on the basic earnings per share of the Company. 38.

GENERAL

38.1 Capacity and production Against the designed annual refining capacity of 14.320 million (2007: 14.240 million) US barrels the actual throughput during the year was 14.901 million (2007: 14.075 million) US barrels. 38.2 Number of employees Total number of employees at the end of the year was 751 (2007: 763). 38.3 Non adjusting events after the balance sheet date i)

Subsequent to the year end, further exchange loss of Rs 622 million has been realised on payments against crude purchases relating to year ended June 30, 2008.

ii)

Subsequent to the year end, the Government has changed the pricing formula of certain products including reduction in deemed duty adversely impacting future selling prices of the products.

iii)

The Board of Directors in its meeting held on October 8, 2008 has approved the transfer of Rs. 3,762.775 million (2007: Rs nil) to Investment Reser ve representing gain on sale of shares of an associated company. The Board of Directors, in its meeting held on October 8, 2008 has also proposed for the approval of members at the next Annual General Meeting (i) a 80% (2007: 40%) cash dividend of Rs 8 (2007: Rs 4) per share and (ii) an issue of bonus share in the proportion of one (2007: one) share for every five (2007: four) shares held i.e. 20% (2007: 25%) out of unappropriated profits. These financial statements do not include the effect of these appropriations which will be accounted for in the financial statements for the year ending June 30, 2009 as follows: Transfer from unappropriated profit to: Proposed dividend Reserve for issue of bonus shares

Rs ‘000

568,620 142,155

38.4 Corresponding figures

Attock Refinery Limited

110

Comparative figures of general reserve and unappropriated profit for the year ended June 30, 2007 have been restated for transfer to general reserve by an associated company, as shown in the statement of changes in equity. 38.5 Date of authorisation These financial statements have been authorised for issue by the Board of Directors of the Company on October 08, 2008.

Chief Executive

Director

Form of Proxy

I/ We of being member(s) of Attock Refinery Limited holding ordinary shares hereby appoint Mr. / Mrs./ Miss of

another member of the Company or failing him / her of

another member of the Company as my / our proxy in my / our absence to attend and vote for me / us and on my / our behalf at the 30th Annual General Meeting of the Company to be held on Friday, 31st October, 2008 at 11:00 a.m. at Pearl Continental Hotel, Rawalpindi and at any adjournment thereof.

As witness my / our hands seal this

day of

2008.

Signed by in the presence of

Folio No.

CDC Account No. Participant I.D. Account No.

Signature on Five Rupees Revenue Stamp

. The Signature should agree with the specimen registered with the Company

Important:

2. If a member appoints more than one proxy and more than one instruments of proxy are deposited by a member with the Company, all such instruments of proxy shall be rendered invalid. 3. For CDC Account Holders / Corporate Entities In addition to the above the following requirements have to be met.

i. Attested copies of CNIC or the passport of the beneficial owners and the proxy shall be provided with the proxy form. ii. The proxy shall produce his original CNIC or original passport at the time of the meeting. iii. In case of a corporate entity, the Board of Directors resolution / power of attorney with specimen signature shall be submitted (unless it has been provided earlier) alongwith proxy form to the Company.

111

Annual Report 2008

1. This Proxy Form, duly completed and signed, must be received at the Shares Depar tment of M/s. Noble Computer Ser vices (Pvt) Limited, 2nd Floor, Sohni Centre, BS 5&6, Main Karimabad, Block-4, Federal B Area, Karachi-75950, Pakistan, not less than 48 hours before the time of holding the meeting.

AFFIX CORRECT POSTAGE

The Company Secretary

ATTOCK REFINERY LIMITED P.O. Refinery, Morgah, Rawalpindi - 46600.