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Lever Brothers Pakistan Limited
Annual Report 2000
Contents
Company Information
Notice of Annual General Meeting
Statement in Respect of Special Business
Report of the Directors
Auditors' Report
Balance Sheet
Profit and Loss Account
Statement of Changes in Equity
Cash Flow Statement
Notes to the Accounts
Pattern of Shareholdings
Statement and Report under section 237 (1)
of Companies Ordinance, 1984        
Reports & Accounts of Subsidiary Companies
- Lever Chemicals (Private) Limited
- Levers Associated Pakistan Trust (Private) Limited
- Sadiq (Private) Limited
Consolidated Accounts
Board of Directors
Mr. Jean-Marc Delpon de Vaux
Chairman & Chief Executive
Mr. Robert Zoon
Mr. Perwaiz Hasan Khan
Mr. Syed Baber Ali
Mr. Fatehali W. Vellani
Mr. Irtiza Husain
Mr. Pervaiz Mahboob Malik
Mr. Soomro Mohammad Ibrahim
Mr. Omar H. Karim
Company Secretary
Mr. Amar Naseer
Auditors
Messrs A.F. Ferguson & Co
State Life Building No. 1-C
I.I. Chundrigar Road
Karachi.
Registered Office
Avari Plaza
Fatima Jinnah Road
Karachi
Share Registration Office
c / o Ferguson Associates (Pvt) Ltd
State Life Building No. 1-A
I.I. Chundrigar Road
Karachi.
Notice of Annual General Meeting
Notice is hereby given that the 52nd Annual General Meeting of Lever Brothers Pakistan Limited will be held
at Darbar Hall 'C' Hotel Sheraton, Club Road, Karachi, on Tuesday, 15th May 2001 at 11.00 a.m. to transact
the following business:
Ordinary Business
1. To receive and consider the Company's Accounts for the year ended 31 December 2000, together with
  the Reports of the Auditors and Directors.
2. To declare the final dividend on the Ordinary shares of the Company.
The Directors recommend a final dividend of 166% (or Rs. 83 per share). With the interim dividend
of 66% (or Rs. 33 per share) already paid, the total dividend for 2000 will thus amount to 232% (or
Rs. 116 per share).
3. To appoint Auditors for the ensuing year, and fix their remuneration.
(Messrs. A. F. Ferguson & Co., Chartered Accountants, retire, and being eligible, offer themselves for
re-appointment).
Special Business*
4. To approve the remuneration of Executive Directors including the Chief Executive.
5. To approve increase in borrowing limit of the company.
By order of the Board
 
Karachi AMAR NASEER
18 April 2001 Company Secretary
Notes:
1. Share Transfer Books will be closed from 8 to 15 May 2001 (both days inclusive).
2. All Members (whether holding Preference or Ordinary Shares) are entitled to attend and vote at the
meeting. A Member may appoint a proxy who need not be a Member of the Company.
3. The instrument appointing the proxy and the other authority under which it is signed, or a notarially
certified copy thereof, must be lodged at the Company's Registered Office at least 48 hours before the
time of the Meeting.
4. Any change of address should be notified immediately to the Company's Share Registrars, Fergusons
Associates (Pvt) Ltd, State Life Building l-A, I.I. Chundrigar Road, Karachi.
CDC Account Holders will further have to follow the undermentioned guidelines as laid down by the
Securities and Exchange Commission of Pakistan:
A. For Attending the Meeting:
i)  In case of individuals, the account holder or sub-account holder and/or the person whose securities
are in group and their registration details are uploaded as per the Regulations, shall authenticate his
identity by showing his original national Identity Card (NIC) or original passport at the time of
attending the meeting.
ii) In case of corporate entity, the Board of Directors' resolution/power of attorney with specimen
signature of the nominee shall be produced (unless it has been provided earlier) at the time of the
meeting.
B. For Appointing Proxies:
i) In case of individuals, the account holder or sub-account holder and/or the person whose securities
are in group account and their registration details are uploaded as per the Regulations, shall submit
the proxy form as per the above requirement.
ii) The proxy form shall be witnessed by two persons whose names, addresses and NIC numbers shall
be mentioned on the form.
iii) Attested copies of NIC or the passport of the beneficial owners and the proxy shall be furnished with
the proxy form.
iv) The proxy shall produce his original NIC or original passport at the time of the meeting.
v) In case of corporate entity, the Board of Director's resolution/power of attorney with specimen
signature shall be submitted (unless it has been provided earlier) alongwith proxy form to the
Company.
*[A Statement in respect of the Special Business to be transacted at the AGM is attached].
Statement in respect of Special Business
and related Draft Resolution
Material facts concerning the Special Business to be transacted at the Annual General Meeting and
the proposed Resolutions related thereto are given below.
Item 4 of the Agenda - Remuneration of Executive Directors including the Chief
Executive
According to law, it is necessary to obtain Shareholders' approval for the holding of office of profit
by any of the Directors as well as of their remuneration. It is therefore proposed to pass the
following as an Ordinary Resolution.
Resolved that approval is hereby granted for the holding of office of profit with the Company
by the Executive Directors including the Chief Executive, and for the payment of remuneration to
them for their respective periods of service in accordance with their individual contracts and the
rules of the Company, amounting in the aggregate to Rs. 28 million actuals for the year January
- December 2000, and Rs. 35.6 million estimated for 1 January to 31 December 2001.
[The Executive Directors, namely, Messrs. Jean-Marc Delpon de Vaux, Robert Zoon and Perwaiz
Hasan Khan, are interested to the extent of the remuneration payable to them individually].
Item 5 of the Agenda - Increase in Borrowing Limit
Shareholders of the Company had approved the Company's borrowing limit upto Rs. five billion
in the E.G.M. held on 26 August 1998. In view of expansion in Company's business over years
coupled with continued inflation and decline in Rupee value, the Company's finance
requirements have increased considerably.
In order to be able to arrange adequate finances for the business as and when required, it is
proposed that the total borrowing limit be increased from Rupees five billion to Rupees seven
billion, to be exercised by the Directors on behalf of the Company. For this purpose the following
Ordinary Resolution is proposed to be passed at the Annual General Meeting.
Resolved that under Article 71(1) of the Company's Articles of Association, the total limit of
the amount remaining undischarged in respect of moneys raised or securities provided by the
Company is hereby raised to Rs.7 billion (Rupees seven thousand million only) [subject to any
restrictions under the Government regulations], to be obtained, as and when required, from the
Company's bankers for the time being, the financial institutions, and / or other sources, as may
be determined by the Company's Board of Directors from time to time, upon such terms and
conditions and with such securities or charges, including hypothecation or mortgages over all or
any of the Company's assets, as may be agreed with the lenders.
Report of the Directors
The Directors have pleasure in presenting their Annual Report together with the Company's
audited accounts for the year ended December 31, 2000.
Results and Dividends
Jan. 2000 - Jan 1999 -
Dec. 2000 Dec. 1999
Rs' 000 Rs' 000
Profit after taxation 1,339,114 763,960
Unappropriated profit brought forward 358,071 259,044
----------- -----------
1,697,185 1,023,004
----------- -----------
Appropriations:
Dividends:
On 5% Cumulative Preference shares 478 239
On Ordinary Shares
- Interim Dividend of Rs.33 (1999:Rs. 25) per share 438,698 332,347
- Final Dividend of Rs. 83 (1999 :Rs. 25 ) per share 1,103,391 332,347
----------- -----------
1,542,567 664,933
----------- -----------
Unappropriated profit carried forward 154,618 358,071
----------- -----------
The Profit after tax grew by 75% over the previous year to a record Rs 1.3 billion benefiting from
sales value growth of 6% and margin improvements as a result of focus on cost reduction. The
financial expenses were lower by more than Rs 100 million due to reduction in stock levels by
Rs 1500 million over last two years. There were no business restructuring charges during the year
(1999: Rs 190 million). The earnings per share increased by 75% to Rs. 100.71 (1999: 57.45).
The Directors propose a final dividend of Rs 83 per share. The Company has already paid an
interim dividend of Rs.33 per share for the year 2000.
Detergents & Personal Products
Growth in sales was achieved through robust performance in Detergents and volume increase of
27% in Personal Products. The Laundry business was restructured, focusing on a smaller number
of brands. A stream of innovation and successful relaunches of Surf Excel, Vim dish wash bar,
Sunsilk, Fair & Lovely and Close Up sachet increased value of our propositions for consumers.
The consumer was engaged through home to home sampling, and promotions at point of
purchase for generating trials.
During the year a compromise between the company and International Laboratories (Private)
Limited (ILL) was reached in the Sindh High Court. Under the terms of the compromise all
counter suits have been withdrawn by both the parties, and the company is now free to import,
manufacture, market, sell and distribute in Pakistan, any products under any of the trade marks
including Pond's, and Vaseline owned by Conopco Inc., USA (formerly Chesebrough Ponds Inc.,
USA). An amount of Rs. 343 million was paid to ILL during the year in terms of the compromise.
Efficient sourcing, reinforced by a downward trend in international prices of materials and
rigorous cost effectiveness programmes contributed towards a substantial growth of 69% in
HPC's operating profit over last year. Profitable growth will be sustained through focused brand
building, innovation and superior management of the supply chain to achieve cost
competitiveness. This will enable the business to expand its share of consumer spending despite
the increasing level of competition.
The business continues to deal with an uneven playing field on account of influx of smuggled
products in the country. The company will persist in its efforts with the Government for improved
business environment and competition from bonafide market players, which will also result in
increased realisation of taxes for the exchequer.
Foods
Cooking Fats and Oils showed 5% volume growth as a result of focused marketing activities.
Introduction of low unit price pack was a success and contributed significantly to volume growth.
However, the sales value dropped due to lower international oil prices. The Operating Margins
have improved from 4% in 1999 to 10% in 2000 because of a very aggressive cost effectiveness
program and low raw material costs as compared to 1999.
The pressure on consumer disposable income due to economic stagnancy coupled with inflation
is the main cause for decline in non-essential foods market. This led to decline in Ice Cream sales
revenue; however, the operating margin in 2000 is a healthy 9% compared to -1% in 1999. This
turnaround was achieved by carrying out an intensive cost effectiveness programme. The
integration of Walls' and Polka has been successfully completed and the synergies from
restructuring also had a positive impact on margins.
For 2001, Ice Cream business will focus on growth through strengthening of its distribution
network, which will increase market penetration. There will be enhanced support and focus on
key brands. A number of new products are planned for launch.
Beverages
The Beverages business grew by 11% in value and maintained its profitability despite a very
difficult external environment and severe competition. These good results have been achieved
through major efforts to reconnect with consumers, focus on key Brands, improvement in the
quality of the products, excelling in communication contents and the use of a broad spectrum of
communication channels.
At the same time an intensive cost saving programme has been implemented to cover all aspects
from sourcing of tea, processing, packaging and distribution. This has enabled the business to
keep the prices competitive, despite rupee devaluation and increased international tea prices due
to drought in East Africa.
The business is facing major threat from smuggled tea, counterfeits and infringinement of brands
which are on the increase due to high duties / taxes, and lack of effective laws and mechanism to
check these nefarious activities.
The tea-growing project is progressing well at Shinkiari despite low rainfall, and the Tea
Processing plant is expected to be commissioned in June 2001.
Expansion and Finance
The company has invested Rs 325M in capital assets during the year (1999: Rs 259M), which
includes expenditure on modernising the production and IT facilities. The capital expenditure has
been incurred keeping in view product innovations and expansion in the business.
Prospects
The company is committed to achieving growth in its core business by offering improved value
and product innovations to meet the changing needs of consumers as well as venturing in new
business that compliments in its core business strength. The continuing drive for cost effectiveness
is aimed at sustaining competitive edge in the market.
Staff Relations
The company is committed to building a high performance team with a passion for winning by
providing an enterprise culture, and recognition of talent and performance. The company
continues to benefit from the efforts and dedication of all its employees, and the directors are once
more pleased to record their appreciation in this respect.
Directors
Since the last Report, the following changes have taken place in the Board of Directors.
Mr. Rai Ijaz Ali Zaigam, the Punjab Government nominee was replaced by Mr. Pervaiz Mehboob
Malik on the Board. The Board wishes to place on record its appreciation of the valuable services
rendered to the Company by Mr. Rai Ijaz Ali Zaigam.
The term of office of present directors will expire on 28.06.2002.
Holding Company
Through its wholly-owned subsidiary, Unilever Overseas Holdings, U.K., Unilever PLC, a
company incorporated in the United Kingdom, is the ultimate holding company of Lever Brothers
Pakistan Limited.
Auditors
The Auditors, Messrs A. F. Ferguson & Co., Chartered Accountants, retire at the conclusion of the
meeting. Being eligible, they have offered themselves for re-appointment.
On behalf of the Board
Karachi: Jean-MarcDelpon de Vaux
20March, 2001 Chairman & Chief Executive
A GOOD CORPORATED CITIZEN
As part of its commitment to
society, Lever Brothers regularly
contributes to social and charitable
activities. During the year 2000,
substantial product donations were
given for the drought affected
people. Contributions were also
extended to Marie Adelaide
Leprosy Centre, IBP-School of
Special Education, Layton
Rahmatullah Benevolent Trust,
Kidney Centre, and others.
LOCAL PRODUCTION OF TEA
The foundation stone of the first
ever tea-processing plant was laid
by the Minister of Commerce and
Industries, NWFP in 2000. The tea
processing plant is part of the tea
growing project being sponsored
by Lever Brothers. Local
production of tea will ease import
burden for the country. The project
also supports the local agrarian
community.
CONTINUED INVESTMENT IN PAKISTAN
Lever Brothers is committed to
investment in modern production
facilities thereby contributing to
economic growth and employment
opportunities. A new production
line was recently added to the
Walls factory near Lahore, which
was inaugurated by the Governor
of Punjab. The move also signifies
Lever Brothers' efforts to produce
world-renowned products locally.
PEPSODENT SCHOOL HEALTH PROGRAMME
In order to enhance awareness
regarding dental health and
hygiene, Lever Brothers in
collaboration with Pakistan Dental
Association initiated a School
Health Programme. Over a period
of two years, 400,000 school
children benefited from the
programme.
SURF CLOTHS BANK
Recently, a Clothes Bank, the first
of its kind, was jointly launched by
Lever Brothers and Edhi Trust. The
Clothes Bank operates to collect,
wash and redo used clothes. A
warm response was received from
all sections of the society,
especially school children.
LIFE BUOY AT THE CENTER OF SOCIAL PROGRAMS
Lifebouy Karachi to Khyber (K2K) Rural
Drive Programme targeted 1 million
children nationwide. This drive organized
specialised Health Education Programme
for schools in rural areas.
Lever Brothers also organized the
Lifebouy Gold Hospital Programme.
SAFER AND GREENER ENVIRONMENT
Committed towards a safer and
greener environment, Lever
Brothers invested over Rs 100
million for effluent facilities and
environmental upgradation. The
Company is among the first group
of volunteers for the self-monitoring
programme sponsored by
Environment Protection Agency of
Pakistan.
AWARDS FOR LEVER BROTHERS
Lever Brothers was the recipient of
Management Association of Pakistan (MAP)
and Karachi Stock Exchange Awards, in
recognition of its performance. For the
purpose of MAP Award it was judged the
best among the companies that have
performed well in the areas of financial
discipline, management practices such as
Risk Management, Corporate Governance,
Social Responsibility, and Research and
Development.
Accounts
LEVER BROTHERS PAKISTAN LIMITED
Auditors' Report to the Members
We have audited the annexed balance sheet of Lever Brothers Pakistan Limited as at December
31, 2000 and the related profit and loss account, statement of changes in equity and cash flow
statement together with the notes forming part thereof, for the year then ended and we state that
we have obtained all the information and explanations which, to the best of our knowledge and
belief, were necessary for the purposes of our audit.
It is the responsibility of the company's management to establish and maintain a system of
internal control, and prepare and present the above said statements in conformity with the
approved accounting standards and the requirements of the Companies Ordinance, 1984. Our
responsibility is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan.
These standards require that we plan and perform the audit to obtain reasonable assurance about
whether the above said statements are free of any material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the above said
statements. An audit also includes assessing the accounting policies and significant estimates
made by management, as well as, evaluating the overall presentation of the above said statements.
We believe that our audit provides a reasonable basis for our opinion and, after due verification,
we report that:
(a) in our opinion, proper books of accounts 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, statement of changes in equity and cash
flow statement together with the notes forming part thereof conform with approved
accounting standards as applicable in Pakistan, and, give the information required by the
Companies Ordinance, 1984, in the manner so required and respectively give a true and fair
view of the state of the Company's affairs as at December 31, 2000 and of the profit,
changes in equity and its cash flows 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.
A. E FERGUSON & CO.
Karachi: 20 March 2001 Chartered Accountants
Balance Sheet
as at December 31, 2000
Note 2000 1999
(Rupees in thousand)
SHARE CAPITAL AND RESERVES
Share capital
Authorised 3 800,000 800,000
========== ==========
Issued, subscribed and paid up capital 4 669,477 669,477
Reserves 5 434,507 433,124
Unappropriated profit 154,618 358,071
------------ ------------
1,258,602 1,460,672
SURPLUS ON REVALUATION OF FIXED ASSETS 6 103,325 104,708
REDEEMABLE CAPITAL
Long term finance under mark-up
arrangements - secured 7 1,000,000 300,000
LIABILITIES AGAINST ASSETS SUBJECT TO
FINANCE LEASE 8 -- 2,870
DEFERRED LIABILITIES
Deferred taxation 9 92,493 65,394
Staff retirement benefits 56,376 89,164
148,869 154,558
CURRENT LIABILITIES
Current maturity of redeemable capital 7 300,000 --
Current maturity of liabilities against assets
subject to finance lease 8 2,371 3,796
Finance under mark-up arrangements 10 194,062 626,399
Creditors, accrued and other liabilities 11 2,352,947 3,555,605
Dividends 12 1,142,906 355,438
----------- -----------
3,992,286 4,541,238
CONTINGENCY AND COMMITMENTS 13
----------- -----------
6,503,082 6,564,046
========== ==========
TANGIBLE FIXED ASSETS   
Operating assets 14 1,753,313 1,726,334
Capital work-in-progress- at cost 15 35,837 101,209
----------- -----------
1,789,150 1,827,543
INTANGIBLE FIXED ASSETS
Trade marks 34 34
LONG TERM INVESTMENTS - at cost 16 95,202 95,202
LONG TERM LOANS 17 30,161 32,800
LONG TERM DEPOSITS AND PREPAYMENTS 18 214,629 81,031
DEFERRED COST 19 343,000 --
CURRENT ASSETS
Stores and spares 20 177,273 187,486
Stock-in-trade 21 2,331,757 2,843,762
Trade debts 22 253,041 217,501
Loans and advances 23 68,659 89,914
Trade deposits and short-term prepayments 24 93,322 312,643
Other receivables 25 216,870 187,240
Taxation - payments less provisions 393,173 619,381
Cash and bank balances 26 496,811 69,509
----------- -----------
4,030,906 4,527,436
----------- -----------
6,503,082 6,564,046
========== ==========
The annexed notes form an integral part of these accounts.
JEAN-MARC DELPON DE VAUX IRTIZA HUSAIN
Chairman & Chief Executive Director
Profit and Loss Account
for the year ended December 31, 2000
Note 2000 1999
(Rupees in thousand)
Sales 27 20,508,216 19,366,254
Cost of goods sold 28 15,390,723 15,001,028
----------- -----------
Trading profit 5,117,493 4,365,226
Administration and selling expenses 29 2,721,116 2,705,767
----------- -----------
Operating profit 2,396,377 1,659,459
Other income 30 44,306 35,885
----------- -----------
2,440,683 1,695,344
Financial expenses 31 141,660 247,135
Auditors' remuneration 32 8,154 6,230
Workers' welfare fund 43,620 23,322
Workers' profits participation fund 114,790 62,816
----------- -----------
308,224 339,503
----------- -----------
Profit before taxation and restructuring costs 2,132,459 1,355,841
Restructuring costs 33 -- 190,000
----------- -----------
Profit before taxation and after restructuring costs 2,132,459 1,165,841
Taxation 34 793,345 401,881
----------- -----------
Profit after taxation 1,339,114 763,960
Unappropriated profit brought forward 358,071 259,044
----------- -----------
1,697,185 1,023,004
Appropriations
On cumulative preference shares 478 239
Interim dividend on ordinary shares @ Rs. 33 per share
(1999: Rs. 25 per share) 438,698 332,347
Proposed final dividend @ Rs. 83 per share
(1999: Rs. 25 per share) 1,103,391 332,347
----------- -----------
1,542,567 664,933
----------- -----------
Unappropriated profit carried forward 154,618 358,071
========== ==========
Basic earnings per share 35 Rs. 100.71 Rs. 57.45
========== ==========
The annexed notes form an integral part of these accounts.
JEAN-MARC DELPON DE VAUX IRTIZA HUSAIN
Chairman & Chief Executive Director
Statement of Changes in Equity
for the year ended December 31, 2000
Share Reserves Unappropriated  Total
Capital Capital  Revenue Profit
--------------------------------(Rupees in thousand)--------------------------------
Balance as at December 31, 1998 669,477 104,734 324,179 259,044 1,357,434
Net profit for the year -- -- -- 763,960 763,960
Transferred from Surplus on
Revaluation of Fixed Assets -- 4,211 -- -- 4,211
Dividends -- -- -- (664,933) (664,933)
------------ ------------ ------------ ------------ ------------
Balance as at December 31, 1999 669,477 108,945 324,179 358,071 1,460,672
Net profit for the year -- -- -- 1,339,114 1,339,114
Transferred from Surplus on
Revaluation of Fixed Assets -- 1,383 -- -- 1,383
Dividends -- -- -- (1,542,567) (1,542,567)
------------ ------------ ------------ ------------ ------------
Balance as at December 31, 2000 669,477 110,328 324,179 154,618 1,258,602
========== ========== ========== ========== ==========
The annexed notes form an integral part of these accounts
JEAN-MARC DELPON DE VAUX IRTIZA HUSAIN
Chairman & Chief Executive Director
Cash Flow Statement
for the year ended December 31, 2000
Note 2000 1999
(Rupees in thousand)
CASH FLOW FROM OPERATING ACTIVITIES
Cash generated from operations 40 2,062,449 3,187,993
Financial expenses paid (124,572) (281,709)
Taxes paid (540,038) (491,264)
Staff retirement benefits paid (82,863) (103,055)
Long Term Loans (net) 2,639 (6,515)
Long-term deposits and prepayments (net) (133,598) 20,131
Deferred cost (343,000) --
----------- -----------
Net cash inflow from operating activities 841,017 2,325,581
CASH FLOW FROM INVESTING ACTIVITIES
Fixed capital expenditure (259,370) (290,973)
Sale proceeds of fixed assets 33,659 24,956
Return received on deposits 3,715 4,088!
Dividend received 12 12
----------- -----------
Net cash outflow from investing activities (221,984) (261,917)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issue of redeemable capital 1,000,000 300,000
Liabilities against assets subject to finance lease (net) (4,295) (2,576)
Repayment of short term loans -- (68,000)
Dividends paid (755,099) (858,719)
----------- -----------
Net cash inflow/(outflow) from financing activities 240,606 (629,295)
----------- -----------
Net increase in cash and cash equivalents 859,639 1,434,369
Cash and cash equivalents at the
beginning of the year 41 (556,890) (1,991,259)
----------- -----------
Cash and cash equivalents at the
end of the year 41 302,749 (556,890)
========== ==========
The annexed notes form an integral part of these accounts.
JEAN-MARC DELPON DE VAUX IRTIZA HUSAIN
Chairman & Chief Executive Director
Notes to the Accounts
for the year ended December 31, 2000
1. THE COMPANY AND ITS OPERATIONS
The company is incorporated in Pakistan and is listed on the Karachi, Lahore and Islamabad
Stock Exchanges. It manufactures and markets foods, beverages and detergents & personal
products.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Basis of preparation
These accounts have been prepared in accordance with the requirements of the
Companies Ordinance, 1984 and International Accounting Standards as applicable in
Pakistan.
b) Overall valuation policy
These accounts have been prepared under the historical cost convention except that
certain fixed assets have been included at revaluation referred to in sub-paragraph (e)
below.
c) Staff retirement benefits
The Company's retirement plan comprises provident funds, gratuity plans, a pension
plan and a post-retirement medical plan. These include benefit plans for employees
of merged companies. The gratuities promised to Polka employees and the post-
retirement medical plan are book reserve plans. All other plans are funded through
approved trust funds.
Provident funds are defined contribution plans. All other plans are defined benefit
plans. The gratuity plans and the pension plan are final salary plans. The post-
retirement medical plan reimburses medical expenses to pensioners.
Actuarial valuations are conducted annually and the last valuation is conducted at
the balance sheet date (December 31, 2000). The net liability of the Company for
retirement and post-retirement benefits is Rs. 56 million.
During 2000, the Company contributed Rs. 33 million to the provident funds. Expense
movement for the defined benefit plans are as follows.
Pension  Gratuity  Unfunded 
Fund Funds Plans
------------(Rupees in thousand)---------------
Cost for 2000
Current service cost 22.400 19.262 1.893
Interest cost 109.133 48.588 9.253
Expected return on assets (125.563) (37.878) --
Transition cost -- -- 7.286
Prior service cost (2.752) 2.673 --
Recognition of (gain) / loss (2.612) (1.596) (0.012)
----------- ----------- -----------
Expense 0.606 31.049 18.420
========== ========== ==========
Prepayment or (Liability) in 2000
Prepayment at January 1 38.120 (90.304) (36.773)
Expense (0.606) (31.049) (18.420)
Contributions 50.481 26.528 5.647
----------- ----------- -----------
Prepayment at December 31 87.995 (94.825) (49.546)
========== ========== ==========
Balance Sheet Reconciliation
at December 31, 2000
Fair value of assets 939.785 285.690 --
Defined benefit obligation (834.759) (391.930) (66.862)
----------- ----------- -----------
Funded status 105.026 (106.240) (66.862)
Unrecognised transition cost -- -- 20.530
Unrecognised prior service cost (8.258) 8.019 --
Unrecognised net (gain) or loss (8.773) 3.396 (3.214)
----------- ----------- -----------
Recognised asset/(liability) 87.995 (94.825) (49.546)
========== ========== ==========
Actuarial gains and losses are amortized over the expected future service of current
members.
The Projected Unit Credit Method was used to generate actuarial values, as specified by IAS
19. The rate of return on assets and the discount rate were taken as 15.5%. Salary increases
were assumed to average 13.2%. Pension increases and medical cost trends were taken as
9.2%.
Actual return on the funds' assets during 2000 was Rs. 141 million.
d) Taxation
The provision for current taxation is based on taxable income at the current rates of
taxation. The company accounts for deferred taxation using the liability method on
all significant timing differences.
e) Fixed assets
Certain land, buildings and plant and machinery were revalued in 1973, 1975, 1978
and 1981 by independent valuers, which are shown at such revalued figures,
additions subsequent to that date are at cost. All other assets are stated at cost.
Depreciation is charged on the straight-line method on all assets in use at the
beginning of each quarter.
During the year the company revised the estimate of useful life of Computers,
classified under "Electrical and mechanical equipment", from 5 years to 3 years. Had
the estimate not been revised, the depreciation charge for the year would have been
lower by Rs. 11.45 million.
Maintenance and normal repairs are charged to income as and when incurred. Major
renewals and improvements are capitalised and assets so replaced, if any are retired.
Profit and loss on sale or retirement of fixed assets is included in income currently.
f) Investments
These are stated at cost.
g) Stores and spares
These are valued at average cost less provision for obsolescence.
h) Stock-in-trade
All stocks are stated at the lower of cost and estimated net realisable value. Cost is
determined by average method except for those in transit where it represents invoice
value and other charges paid thereon. Cost of work-in-process includes direct cost of
materials whereas that of finished goods also includes direct cost of labour,
production overheads, excise duty and sales tax, if applicable, paid thereon. Net
realisable value signifies the estimated selling price in the ordinary course of business
less cost necessarily to be incurred in order to make the sale.
By-product (glycerine) is valued at estimated cost except for the stock covered by a
firm forward sale contract, which is valued at the contracted price.
i) Trade debts
Debts considered irrecoverable are written off and provision is made against those
considered doubtful of recovery.
j) Rates of exchange
Assets and liabilities in foreign currencies are translated at the rate of exchange which
approximate to those prevalent on the balance sheet date except where forward
exchange purchases have been made for payment of liabilities, in which case the
contracted rates are applied. Exchange gains and losses on translation are included
in income currently.
k) Revenue recognition
Sales are recorded on despatch of goods.
2000 1999
(Rupees in thousand)
3. AUTHORISED SHARE CAPITAL
47,835 5% cumulative preference
shares of Rs 100 each 4,783 4,783
15,904,330 ordinary shares of Rs 50 each 795,217 795,217
----------- -----------
800,000 800,000
========== ==========
4. ISSUED, SUBSCRIBED AND PAID UP CAPITAL
5% cumulative preference shares of Rs. 100 each
43,835 fully paid in cash 4,383 4,383
4,000 issued for consideration other than cash 400 400
----------- ----------- -----------
47,835 4,783 4,783
Ordinary shares of Rs 50 each
467,704 fully paid in cash 23,385 23,385
4,979,208 issued for consideration other than cash 248,961 248,961
7,846,957 issued as fully paid bonus shares 392,348 392,348
----------- ----------- -----------
13,293,869 664,694 664,694
----------- -----------
669,477 669,477