shell annual report 08 c
TRANSCRIPT
Annual Report2OO8Shell Pakistan Limited32
Shell Pakistan Limited 12Annual Report2OO7
Highlights Financial Statistical Summary
Sales volume
Sales revenue
Profit before taxation
Profit after taxation
New capital expenditure
Shareholders’ equity
Dividend
Earnings per share - diluted
Tonnes
Rs / mn
Rs / mn
Rs / mn
Rs / mn
Rs / mn
Rs / mn
Rs
2,644,857
130,130
379
707
1,383
9,461
877
12.90
Year endedJune 30, 2008
Year endedJune 30, 2007
2,826,851
157,626
7,723
5,137
934
13,612
2,740
93.76
Share capital
Reserves
Shareholders’ equity
Break up value
Dividend per share
Bonus
Profit before tax
Profit after tax
Earnings per share of Rs.10
Price earnings ratio
Current assets to current liabilities
Number of days stock
Number of days trade debts
Profit after tax as %of average capital employed
Profit after tax as %of average shareholders’ equity
Cost of sales as % of sales
Profit before tax as % of sales
Profit after tax as % of sales
Total debt ratio %
Rs. / mn
Rs. / mn
Rs. / mn
Rs.
Rs.
Rs. / mn
Rs. / mn
Rs.
2008
Work ing Capital
Performance
2006
351
7,952
8,303
237
35.0
1 : 4
3,643
2,451
55.9
9.9
1.1
22
10
31.4
31.8
91.0
3.7
2.5
0.8
351
6,781
7,132
203
35.0
–
2,189
1,508
43.0
8.1
1.0
22
8
21.4
21.7
92.2
2.8
1.9
1.4
351
5,501
5,852
167
35.0
–
1,900
1,255
35.8
11.8
0.9
16
6
21.1
21.5
94.1
2.1
1.4
1.7
351
5,470
5,821
166
18.0
–
1,572
1,063
30.3
7.3
1.2
24
5
18.6
19.0
94.3
2.0
1.3
1.7
351
5,039
5,390
154
12.5
–
1,630
1,056
30.1
9.3
1.2
14
3
20.3
20.8
94.9
2.2
1.4
1.9
351
4,421
4,772
136
16.5
–
2,013
1,299
37.0
7.0
1.2
18
3
28.6
29.4
94.7
3.2
2.1
2.5
351
3,701
4,051
116
12.5
–
1,341
881
25.1
6.4
1.2
18
4
20.8
23.0
94.1
2.7
1.8
5.2
351
3,258
3,609
103
8.5
–
922
592
19.6
8.6
1.2
15
4
18.8
21.3
94.9
2.1
1.4
3.3
438
9,718
10,157
232
30.0
1 : 4
4,640
3,147
57.4
8.4
1.1
28
14
33.9
34.1
91.5
3.9
2.7
0.3
548
8,913
9,461
173
16.0
–
379
707
12.9
31.8
1.0
31
13
7.2
7.2
94.5
0.30
0.6
0.3
2005 2004 2003 2002 2001 2000 1999 1998
Shell Pakistan Limited 33Annual Report2OO8
548
13,064
13,612
248
50.0
1: 4
7,723
5,137
93.76
8.5
1.3
39
11
38.9
44.53
90.7
4.90
3.26
0.40
2007
Annual Report2OO8Shell Pakistan Limited34
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 35Annual Report2OO8
with the Code of Corporate Governance and Best Practices on Transfer Pricing
A. Statement of Compliance w ith the Code of Corporate Governance[As required by the Listing Regulations]
1. The term of office of the Board of Directors ended on June 12, 2008. At an Extraordinary General Meetingof the Company held on May 28, 2008, Mr. Zaiviji Ismail bin Abdullah, Mr. Yousuf Ali, Mr. Leon Menezes,Mr. Saw Choo Boon, Mr. Farrokh K. Captain and Mr. Asif Sindhu were re-elected while Ms. Trudy Bovay,Mr. Imran R. Ibrahim, Mr. Badaruddin Vellani, Ms. Shahnaz Wazir Ali and Mr. Zaffar Khan were electedDirectors of the Company with effect from June 13, 2008 for a term of three years.
The Company encourages representation of independent non-executive Directors and Directors representingminority interests on its Board of Directors. At present the Board includes five independent non-executiveDirectors, two of whom represent minority shareholders.
2. The Directors have confirmed that none of them is serving as a director in more than ten listed companies, including this Company.
3. To the best of our knowledge all the resident Directors of the Company are registered as taxpayers and noneof them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a memberof stock exchange, has been declared as a defaulter by that stock exchange.
4. All casual vacancies occurring in the Board were filled up by the Directors within 30 days thereof.
5. The Company has prepared a ‘Statement of Ethics and Business Practices’, which has been signed by all the Directors and employees of the Company.
6. The Board has developed a vision/mission statement, overall corporate strategy and significant policies of the Company. A complete record of particulars of significant policies along with the dates on which theywere approved or amended has been maintained.
7. All the powers of the Board have been duly exercised and decisions on material transactions, includingappointment and determination of remuneration and terms and conditions of employment of the CEO and other executive Directors, have been taken by the Board.
8. The meetings of the Board were presided over by the Chairman and the Board met at least once in everyquarter. Written notices of the Board meetings, along with agenda, were circulated at least seven days beforethe meetings. The minutes of the meetings were appropriately recorded and circulated.
9. The present Board of Directors has assumed office with effect from June 13, 2008. A comprehensive coursedesigned to apprise the Directors of their duties and responsibilities will be conducted before the end of thecurrent calendar year. The re-elected Directors received appropriate computer-based training during theprevious year.
10. The Board has approved appointment of Head of Internal Audit, including her remuneration and terms andconditions of employment, as determined by the CEO. There was no change in the appointment of CFO andCompany Secretary during the year.
11. The Directors’ report for this year has been prepared in compliance with the requirements of the Code andit fully describes the salient matters required to be disclosed. Matters relating to the risks and uncertaintiessurrounding the Company and significant deviations, if any, in the financial statements from the prior yearhave been highlighted in the Chairman’s review.
12. The financial statements of the Company were duly endorsed by the CEO and the CFO before approval bythe Board.
13. The Directors, CEO and executives do not hold any interest in the shares of the Company other than thatdisclosed in the pattern of shareholding.
14. The Company has complied with all the corporate and financial reporting requirements of the Code.
15. The Board has formed an audit committee. It comprises four members, of whom three are non-executiveDirectors including the Chairman of the committee.
16. The meetings of the audit committee were held at least once every quarter prior to approval of interim andfinal results of the Company and as required by the Code. The terms of reference of the Committee havebeen formulated and advised to the Committee for compliance.
17. The Board has set-up an effective internal audit function.
18. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating underthe quality control review programme of the Institute of Chartered Accountants of Pakistan, that they or anyof the partners of the firm, their spouses and minor children do not hold shares of the Company and thatthe firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelineson code of ethics as adopted by Institute of Chartered Accountants of Pakistan.
19. The statutory auditors or the persons associated with them have not been appointed to provide other servicesexcept in accordance with the listing regulations and the auditors have confirmed that they have observedIFAC guidelines in this regard.
20. We confirm that all other material principles contained in the Code have been complied with.
B. Statement of Compliance with the Best Practices on Transfer Pricing[As required by the Listing Regulations]
The Company has fully complied with the Best Practices on Transfer Pricing as contained in the Listing Regulationsof the Stock Exchange.
Zaiviji Ismail bin AbdullahChairman & Chief ExecutiveKarachi: August 11, 2008
Statement of Compliance
Annual Report2OO8Shell Pakistan Limited36
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 37Annual Report2OO8
to the Members on Statement of Compliance with Best Practices of theCode of Corporate Governance
Review Report
We have audited the annexed balance sheet of Shell Pak istan Limited as at June 30, 2008 and the relatedprofit and loss account, cash flow statement and statement of changes in equity together with the notes formingpart thereof, for the year then ended and we state that we have obtained all the information and explanationswhich, 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, andprepare and present the above said statement in conformity with the approved accounting standards and therequirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statementsbased on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the above said statementsare free of any material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the above said statements. An audit also includes assessing the accounting policiesand significant estimates made by management, as well as, evaluating the overall presentation of the above saidstatements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, wereport that:
(a) in our opinion, proper books of accounts have been kept by the Company as required by the CompaniesOrdinance, 1984;
(b) in our opinion:
(i) the balance sheet and profit and loss account together with the notes thereon have been drawn up inconformity with the Companies Ordinance, 1984, and are in agreement with the books of account andare 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 accordancewith 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 balancesheet, profit and loss account, cash flow statement and statement of changes in equity together with the notesforming part thereof conform with approved accounting standards as applicable in Pakistan, and, give theinformation required by the Companies Ordinance, 1984, in the manner so required and respectively givea true and fair view of the state of the Company’s affairs as at June 30, 2008 and of the profit, its cash flowsand changes in equity for the year then ended; and
(d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980, was deducted by theCompany and deposited in the Central Zakat Fund established under Section 7 of that Ordinance.
A. F. Ferguson & Co.Chartered Accountants
Karachi: August 20, 2008
We have reviewed the Statement of Compliance with the best practices contained in the Code of CorporateGovernance prepared by the Board of Directors of Shell Pakistan Limited to comply with the Listing RegulationNo. 37 of the Karachi Stock Exchange and Chapter XIII of the Lahore Stock Exchange where the Companyis listed.
The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directorsof the Company. Our responsibility is to review, to the extent where such compliance can be objectivelyverified, whether the Statement of Compliance reflects the status of the Company's compliance with theprovisions of the Code of Corporate Governance and report if it does not. A review is limited primarily toinquiries of the Company personnel and review of various documents prepared by the Company to complywith the Code.
As part of our audit of the financial statements we are required to obtain an understanding of the accountingand internal control systems sufficient to plan the audit and develop an effective audit approach. We havenot carried out any special review of the internal control system to enable us to express an opinion as towhether the Board's statement on internal control covers all controls and the effectiveness of such internalcontrols.
Based on our review, nothing has come to our attention, which causes us to believe that the Statement ofCompliance does not appropriately reflect the Company's compliance, in all material respects, with the bestpractices contained in the Code of Corporate Governance as applicable to the Company for the year endedJune 30, 2008.
A. F. Ferguson & Co.Chartered Accountants
Karachi: August 20, 2008
Auditors’ Report to the Members
Annual Report2OO8Shell Pakistan Limited38
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 39Annual Report2OO8
Note 2008
(Rupees `000)
2007
The annexed notes 1 to 45 form an integral part of these financial statements.
345678
91011121314
15
16
8171819
1720212223
24
25
26
27
2829
30
31
32
4.1
33
34
Appropriations have been reflected in the statement of changes in equity.
Note 2008
(Rupees `000)
2007
The annexed notes 1 to 45 form an integral part of these financial statements.
157,626,491
119,915 20,205
341,349
158,107,960 18,263,271
139,844,689 124,694,471
15,150,218 2,950,422 2,109,289
10,090,507 306,453
10,396,960 1,915,601
8,481,359 970,267
7,511,092 212,248
7,723,340 2,586,246
5,137,094
Rupees
93.76
130,129,844)
141,615) 17,909)
447,517)
130,736,885) 15,691,451)
115,045,434) 108,664,932)
6,380,502)3,366,555)1,716,707)
1,297,240) 215,322)
1,512,562) 377,978)
1,134,584) 878,098)
256,486) 122,250)
378,736) (327,923)
706,659)
Rupees
12.90
as at June 30, 2008
Balance Sheetfor the year ended June 30, 2008
Profit and Loss Account
SalesNon-fuel retail- Sales- Others
Other revenue
Less: Sales tax
Net revenueCost of products sold
Gross profitDistribution expensesAdministrative and marketing expenses
Other operating income
Other operating expenses
Operating profitFinance cost
Share of profit of associate - net of tax
Profit before taxationTaxation
Profit after taxation
Earnings per share
Zaiviji Ismail bin AbdullahChairman & Chief Executive
Farrokh K. CaptainDirector
Zaiviji Ismail bin AbdullahChairman & Chief Executive
Farrokh K. CaptainDirector
ASSETS
Non-current assetsFixed assetsLong-term investmentsLong-term loans and advancesLong-term deposits and prepaymentsLong-term debtorsDeferred taxation - net
Current assetsStores and sparesStock-in-tradeTrade debtsLoans and advancesTrade deposits and short-term prepaymentsOther receivablesTaxationCash and bank balances
Total assets
EQUITY AND LIABILITIES
EQUITY
Share capitalReservesUnappropriated profit
LIABILITIES
Non-current liabilitiesDeferred taxation - netLiabilities against assets subject to finance leaseLong-term loanAsset retirement obligation
Current liabilitiesCurrent maturity of liabilities against assets subject to finance leaseShort-term running finances utilised under mark-up arrangementsShort-term loansTrade and other payablesMark-up accrued Taxation
Total Equity and Liabilities
Contingencies and commitments
Annual Report2OO8Shell Pakistan Limited40
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 41Annual Report2OO8
for the year ended June 30, 2008
Cash Flow Statementfor the year ended June 30, 2008
Statement of Changes in Equity
Zaiviji Ismail bin AbdullahChairman & Chief Executive
Farrokh K. CaptainDirector
Zaiviji Ismail bin AbdullahChairman & Chief Executive
Farrokh K. CaptainDirector
Appropriations made by the Directors subsequent to the year ended June 30, 2008 are disclosed in note 43 of thesefinancial statements.
The annexed notes 1 to 45 form an integral part of these financial statements.The annexed notes 1 to 45 form an integral part of these financial statements.
Note 2008
(Rupees `000)
2007
(Rupees ‘000)
Issued,subscribed
and paid-upcapital
Reservefor issueof bonusshares
Capitalreserves-
sharepremium
Generalrevenuereserves
Unappro-priatedprofit
Total
Balance as at June 30, 2006
Final dividend for the year ended June 30, 2006declared subsequent to the year end
Transfer to reserve for issue of bonusshares in respect of stock dividendfor the year ended June 30, 2006declared subsequent to the year end
Issue of bonus shares
Interim dividend declared for the yearended June 30, 2007
Profit after taxation for the yearended June 30, 2007
Balance as at June 30, 2007
Final dividend for the year ended June 30, 2007 declared subsequent to the year end
Interim dividend declared for the yearended June 30, 2008
Profit after taxation for the yearended June 30, 2008
Balance as at June 30, 2008
438,323
–
–
109,581
–
–
547,904
–
–
–
547,904
–
–
109,581
(109,581)
–
–
–
–
–
–
–
2,026,024
–
–
–
–
–
2,026,024
–
–
–
2,026,024
207,002
–
–
–
–
–
207,002
–
–
–
207,002
7,485,397)
(964,311)
(109,581)
–
(438,323)
706,659)
6,679,841)
(438,323)
(547,904)
5,137,094)
10,830,708)
10,156,746)
(964,311)
–
–
(438,323)
706,659)
9,460,771)
(438,323)
(547,904)
5,137,094)
13,611,638)
CASH FLOW FROM OPERATING ACTIVITIES
Cash generated from operationsMark-up on short-term finances and short-term loans paidTaxes paidLong-term loans and advances (net)Long-term deposits and prepayments (net)Mark-up received on short-term depositsLong term debtors (net)
Net cash generated from operating activities
)CASH FLOW FROM INVESTING ACTIVITIES
Fixed capital expenditureProceeds from sale of property, plant and equipmentDividend received from associate
Net cash used in investing activities
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid )Repayment of liability under finance leaseProceeds from long-term loan
Net cash generated from / (used in) financing activities
Net increase / (decrease) in cash and cash equivalentsCash and cash equivalents at July 1
Cash and cash equivalents at June 30
3,033,014) (848,056)
(1,261,536) 36,198)
(90,724) 21,162)
102,785)
992,843)
(933,830) 121,860) 93,000)
(718,970)
(986,257) (32,235)
2,500,000)
1,481,508)
1,755,381) (6,721,306)
(4,965,925)
2,259,708) (729,776)
(1,055,695) (42,939)
(549) 5,807)
(328,227)
108,329)
(1,383,390) 21,080) 28,600)
(1,333,710)
(1,387,277) (59,985)
–
(1,447,262)
(2,672,643) (4,048,663)
(6,721,306)
38
39
Annual Report2OO8Shell Pakistan Limited42
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 43Annual Report2OO8
1. THE COMPANY AND ITS OPERATIONS
The Company is a limited liability Company incorporated in Pakistan and is listed on the Karachi and LahoreStock Exchanges. The address of its registered office is Shell House, 6, Ch. Khaliquzzaman Road,Karachi-75530, Pakistan.
The Company markets petroleum products and compressed natural gas. It also blends and markets variouskinds of lubricating oils.
1.1 The Company has investments in two non-trading subsidiaries, namely Shell Pakistan Provident Trust (Private)Limited and Shell Pakistan Pensions Trust (Private) Limited. The management has decided to liquidate thesubsidiary companies and the process of liquidation in this respect has already commenced. In view of theliquidation process, the Company applied to the Securities and Exchange Commission of Pakistan (SECP)requesting for exemption from preparation of the consolidated financial statements as required under Section237 of the Companies Ordinance, 1984. The exemption was granted by the SECP vide their letter No.EMD/233/411/2002-6489 dated June 17, 2008. The audited financial statements of the subsidiaries willbe annexed in the annual report of the Company.
1.2 The Board of Directors of the Company in its meeting held on February 12, 2008 has decided to changethe financial year of the Company from July - June to January - December to bring it in line with theaccounting year followed by Royal Dutch Shell Plc, the ultimate parent company. Permission for change inthe year end has been obtained from the Commissioner of Income Tax vide their letters CIT/E&C/LTU/2008/63and CIT/E&C/LTU/2008 dated July 10, 2008 and July 15, 2008 respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied in the preparation of these financial statements are set out below.These policies have been consistently applied to all years presented, unless otherwise stated.
2.1 Basis of preparation
a) Statement of compliance
These financial statements have been prepared in accordance with the approved accounting standards asapplicable in Pakistan. Approved accounting standards comprise of such International Financial ReportingStandards (IFRSs) issued by the International Accounting Standards Board as are notified under the CompaniesOrdinance, 1984, the requirements of the Companies Ordinance, 1984 and the directives issued by theSecurities and Exchange Commission of Pakistan (SECP). Where the requirements of the CompaniesOrdinance, 1984 and the directives issued by SECP differ with the requirements of IFRS, the requirementsof the Companies Ordinance, 1984 and the directives issued by SECP prevail.
b) Accounting convention
These financial statements have been prepared under the historical cost convention except that obligationsin respect of certain employee benefit schemes and asset retirement are measured at their present value.
c) Critical accounting estimates and judgements
The preparation of financial statements in conformity with International approved accounting standardsrequires the use of certain critical accounting estimates. It also requires management to exercise its judgementin the process of applying the Company's accounting policies. The areas involving a higher degree ofjudgement or complexity, or areas where assumptions and estimates are significant to the financial statements,are disclosed in note 41 to these financial statements.
d) Standards, interpretations and amendments to published approved accounting standards thatare effective in 2008
The following standards, interpretations and amendments to existing standards have been published thatare mandatory and relevant for the companies accounting period beginning on July 1, 2007:
i. IAS 1 - Presentation of Financial Statements - Capital Disclosures effective from January 1, 2007
Adoption of IAS 1 - Presentation of Financial Statements - Capital Disclosures impacts the extent of disclosurespresented in note 40.3 to the financial statements.
ii. IFRS 2 - Share-based payment effective from January 1, 2007
The Company has adopted IFRS 2 - Share-based payment with effect from July 1, 2007. The accounting policyon share-based payment is disclosed in note 2.18.
Other new standards, interpretations and amendments to existing standards that are mandatory for accountingperiods beginning on or after July 1, 2007 which are not considered relevant nor have any significant effect onthe Company's operations are not detailed in these financial statements.
e) Standards, interpretations and amendments to published approved accounting standards thatare not yet effective
The following standards, interpretations and amendments of approved accounting standards, effective for theCompany's accounting periods beginning on or after July 1, 2008 are either not relevant to the Company'soperations or are not expected to have a significant impact on the Company's financial statements other thanincreased disclosures in certain cases:
IAS 1 - Presentation of Financial Statements effective from January 1, 2009(Revised September 2007)
IAS 23 - Borrowing Costs (Revised March 2007) effective from January 1, 2009
Amendments to IAS 27 (Revised) - Consolidated andSeparate Financial Statements effective from July 1, 2009
IFRS 3 (Revised) - Business Combinations effective from July 1, 2009
IFRS 7 - Financial Instruments: Disclosures effective from April 28, 2008
IFRS 8 - Operating Segments effective from January 1, 2009
IFRIC 12 - Service Concession Arrangements effective from January 1, 2008
IFRIC 13 - Customer Loyalty Programmes effective from July 1, 2008
IFRIC 14 - IAS 19 - The Limit on a Defined Benefit Asset,Minimum Funding Requirement and their interaction effective from January 1, 2008
IFRIC 15 - Agreements for the Construction of Real Estate effective from January 1, 2009
IFRIC 16 - Hedges of a Net Investment in a Foreign Operation effective from October 1, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
Annual Report2OO8Shell Pakistan Limited44
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 45Annual Report2OO8
Notes to the Financial Statementsfor the year ended June 30, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
Investments in associates
Associates are all entities over which the Company has significant influence but no control, generallyrepresented by a shareholding of 20% to 50% of the voting rights. Investment in associates are accountedfor using the equity method of accounting and are initially recognised at cost in accordance with therequirements of IAS 28: "Investments in Associates".
The Company's share of an associate's post acquisition profits or losses is recognised in the profit and lossaccount and its share in the post acquisition movement of reserves is recognised in reserves. The cumulativepost acquisition movements are adjusted against the carrying value of the investment. When the Company'sshare of losses in an associate equals or exceeds its interest in the associate, including any other unsecuredreceivables, the Company does not recognise future losses, unless it has incurred obligations or madepayments on behalf of the associate.
Unrealised gains on transactions between the Company and its associate are eliminated to the extent of theCompany's interest in the associate.
Investments in subsidiaries
As disclosed in note 1.1, the Company has investment in two non-trading subsidiaries which are in theprocess of liquidation. The investment in these subsidiaries is carried at cost, less any provision for diminution.
2.4 Stores and spares
Stores are valued at the lower of average cost and net realisable value whereas spares are valued at thelower of cost worked out on a first-in first-out basis and net realisable value. Items in transit are stated atcost incurred to date.
Net realisable value signifies the estimated selling price in the ordinary course of business less costs necessarilyto be incurred to make the sale. Provision is made in the financial statements for obsolete and slow movingstores and spares based on the management's best estimate.
2.5 Stock -in-trade
Stock-in-trade is valued at the lower of cost, calculated on a first-in first-out basis, and net realisable value.Charges such as excise and customs duties and similar levies on unsold stock of products are added to thevalue of the stock and carried forward.
Net realisable value signifies the estimated selling price in the ordinary course of business less costs necessarilyto be incurred to make the sale.
Stock-in-transit is valued at cost comprising invoice value plus other charges incurred thereon. Provision ismade in the financial statements for obsolete and slow moving stock-in-trade based on management's bestestimate.
2.6 Trade debts
Trade debts are recognised initially at invoice value, which approximates fair value, and subsequentlymeasured at amortised cost using the effective interest method, less provision for impairment. A provisionfor impairment of trade debts is established when there is objective evidence that the Company will not beable to collect all the amount due according to the original terms of the receivable. Significant financialdifficulties of the debtors, probability that the debtor will enter bankruptcy and default or delinquency inpayments are considered indicators that the trade debt is impaired.
2.2 Fixed assets
Property, plant and equipment - tangible
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairmentlosses, if any, except freehold land and capital work-in-progress which are stated at cost less impairmentlosses, if any.
Subsequent costs are included in the asset's carrying amounts or recognised as a separate asset, asappropriate, only when it is probable that future benefits associated with the item will flow to the Companyand the cost of the item can be measured reliably.
Depreciation is charged to income applying the straight-line method whereby the depreciable amount ofan asset is written off over its estimated useful life at the rates given in note 3.1. The residual values, usefullives and depreciation methods are reviewed and adjusted, if appropriate, at each balance sheet date.
Depreciation on additions is charged from the month in which an asset is put to use while no depreciationis charged for the month in which an asset is disposed of.
Repairs and maintenance are charged to income as and when incurred.
Profit and loss arising on disposal of property, plant and equipment is included in income in the year ofdisposal.
Provision for asset retirement obligation is based on current requirements, technology and price levels andis stated at fair value. The associated asset retirement costs are capitalised as part of the carrying amountof the related property, plant and equipment. The effects of changes resulting from revisions to the timingor the amount of the original estimate of the liability are incorporated on a prospective basis.
Intangible
Costs that are clearly associated with an identifiable non-monetary asset without physical substance, whichhas a probable economic benefit beyond one year, are recognised as intangible assets. Associated costsinclude staff costs of the development team and an appropriate portion of relevant overheads.
Expenditure that enhances and extends the benefits of computer software programmes beyond their originalspecifications and useful lives is recognised as a capital improvement and added to the original cost of thesoftware.
Intangible assets are amortised using the straight-line method over their estimated useful lives.
2.3 Investments
Available for sale
Investment in unlisted equity securities classified as available for sale is carried at cost, in the absence offair market value. Provision is made for any diminution in the carrying amount in the event of any permanentimpairment in the value of investment.
Annual Report2OO8Shell Pakistan Limited46
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 47Annual Report2OO8
Notes to the Financial Statementsfor the year ended June 30, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
2.7 Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flowstatement, cash and cash equivalents include cash in hand, balances with banks in current accounts andshort-term finances.
2.8 Impairment
The carrying amounts of the Company's assets are reviewed at each balance sheet date to determine whetherthere is any indication of impairment loss. If any such indication exists the asset's recoverable amount isestimated in order to determine the extent of impairment loss, if any. Impairment losses are recognised asan expense in the profit and loss account.
2.9 Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result ofpast events, it is probable that an outflow of resources will be required to settle the obligation and a reliableestimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted toreflect the current best estimate.
2.10 Liabilities against assets subject to finance lease
Liabilities against assets subject to finance lease are accounted for at the net present value of minimumpayments under the lease arrangements.
Finance charges under lease arrangements are allocated to periods during the lease term so as to producea constant periodic rate of financial cost on the remaining balance of principal liability for each period.
2.11 Trade and other payables
Trade and other payables are recognised initially at fair value and subsequently measured at amortisedcost.
2.12 Taxation
Current
Provision for current taxation is based on taxable income at the current rates of taxation after taking intoaccount tax credits and rebates available, if any. The charge for current taxation also includes adjustmentswhere necessary, relating to prior years which arise from assessments framed/finalised during the year.
Deferred
Deferred taxation is recognised on all temporary differences between the carrying amounts for financialreporting purposes and the amounts used for taxation purposes. A net deferred tax asset is recognised tothe extent that it is probable that future taxable profits will be available against which the asset can beutilised.
2.13 Dividend distribution
Dividend distribution to the Company's shareholders is recognised as a liability in the financial statementsin the period in which such dividends are declared by the Company and approved by the shareholders.
2.14 Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Companyand the revenue can be measured reliably. Revenue is measured at the fair value of consideration receivedor receivable on the following basis:
- Sales are recorded when significant risks and rewards of ownership of the goods have passed to thecustomers which coincides with despatch of goods to customers.
- Non-fuel retail income and other revenue (including licence fee) is recognised on an accrual basis.
- Dividend income is recognised when the Company's right to receive the dividend is established.
2.15 Operating leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating leases. Payments made under operating leases are charged to the profit and lossaccount on a straight-line basis over the period of the lease.
2.16 Staff retirement benefits
Except for certain expatriates for whom benefits are provided by membership of their respective Shellretirement benefit funds, staff retirement benefits include:
i) Approved funded gratuity schemes for management and unionised staff and contributory pension schemefor management and non-contributory pension scheme for unionised staff. Contributions are made tothese schemes on the basis of actuarial recommendations. The actuarial valuations are carried out usingthe Projected Unit Credit Method. Actuarial gains and losses are amortised over the expected futureservice of the current members;
ii) Approved contributory provident funds for all employees; and
iii) Un-funded post retirement medical benefits for all management staff. Annual provision is made in thefinancial statements for this scheme on the basis of actuarial recommendation. The actuarial valuationis carried out using the Projected Unit Credit Method. Actuarial gains and losses are amortised over theexpected future service of the current employees.
Retirement benefits are payable to staff on completion of prescribed qualifying periods of service underthese schemes.
2.17 Employees' compensated absences
The Company accounts for the liability in respect of employees' compensated absences in the year in whichthese are earned. Provision to cover the obligation under the scheme is made based on the current leaveentitlements of the employees and by using the current salary levels of employees.
2.18 Employee share-based payment
The Shell Group awards shares under a Performance Share Plan (PSP) to certain employees from time totime. The fair value of these shares, which is eventually recharged by the parent company to Shell PakistanLimited, is recognised as an expense, with a corresponding increase in liabilities, over the period that theemployees become entitled to the award. The liability is remeasured at each reporting date and at settlementdate. These are recognised as salaries, wages and benefits in the profit and loss account.
Annual Report 2OO8Shell Pakistan Limited 48
Shell Pakistan Limited 12 Annual Report 2OO7Shell Pakistan Limited 49 Annual Report 2OO8
Not
es to
the
Fina
ncia
l Sta
tem
ents
for
the
year
end
ed J
une
30,
2008
Not
es to
the
Fina
ncia
l Sta
tem
ents
2.1
9
Fore
ign c
urr
enci
es
Tran
sact
ions
in fo
reig
n cu
rren
cies
are
acc
ount
ed fo
r in
Pak
ista
ni R
upee
s at
the
rate
s pr
evai
ling
on th
e da
teof
tran
sact
ion.
Mon
etar
y as
sets
and
liab
ilitie
s in
for
eign
cur
renc
ies
are
tran
slat
ed in
to R
upee
s at
the
rate
sof
exc
hang
e w
hich
app
roxi
mat
e th
ose
prev
ailin
g at
the
bala
nce
shee
t dat
e. E
xcha
nge
diffe
renc
es a
re ta
ken
to th
e pr
ofit
and
loss
acc
ount
.
2.2
0
Financi
al in
stru
ments
Fina
ncia
l ins
trum
ents
car
ried
on
the
bala
nce
shee
t inc
lude
inve
stm
ents
, loa
ns a
nd a
dvan
ces,
dep
osits
, deb
tors
,ot
her
rece
ivab
les,
cas
h an
d ba
nk b
alan
ces,
long
-term
loan
, lia
bilit
ies
agai
nst a
sset
s su
bjec
t to
finan
ce le
ase,
shor
t-ter
m r
unni
ng fi
nanc
es u
tilis
ed u
nder
mar
k-up
arr
ange
men
ts, s
hort
-term
loan
s, tr
ade
and
othe
r pa
yabl
esan
d m
ark-
up a
ccru
ed.
At t
he ti
me
of in
itial
rec
ogni
tion,
all
the
finan
cial
ass
ets
and
liabi
litie
s ar
e m
easu
red
at c
ost,
whi
ch is
the
fair
val
ue o
f co
nsid
erat
ion
give
n or
rec
eive
d fo
r it.
The
car
ryin
g am
ount
of
the
asse
tsis
rev
iew
ed a
t eac
h ba
lanc
e sh
eet d
ate
to d
eter
min
e w
heth
er th
ere
is a
ny in
dica
tion
of im
pair
men
t of
any
asse
t or
a gr
oup
of a
sset
s. If
suc
h in
dica
tion
exis
ts,
the
reco
vera
ble
amou
nt o
f suc
h as
sets
is e
stim
ated
and
the
impa
irm
ent l
oss
is r
ecog
nise
d in
the
prof
it an
d lo
ss a
ccou
nt.
2.2
1
Borr
ow
ings
Borr
owin
gs a
re r
ecog
nise
d in
itial
ly a
t fai
r va
lue,
net
of t
rans
actio
n co
sts
incu
rred
. Bor
row
ings
are
sub
sequ
ently
stat
ed a
t am
ortis
ed c
ost,
any
diffe
renc
e be
twee
n th
e pr
ocee
ds (ne
t of t
rans
actio
n co
sts)
and
the
rede
mpt
ion
valu
e is
rec
ogni
sed
in th
e in
com
e st
atem
ent o
ver
the
peri
od o
f th
e bo
rrow
ings
usi
ng th
e ef
fect
ive
inte
rest
met
hod.
Borr
owin
gs a
re c
lass
ified
as
curr
ent
liabi
litie
s un
less
the
Com
pany
has
an
unco
nditi
onal
rig
ht t
o de
fer
settl
emen
t of t
he li
abili
ty fo
r at
leas
t 12 m
onth
s af
ter
the
bala
nce
shee
t dat
e.
Borr
owin
g co
sts
incu
rred
for
the
cons
truc
tion
of a
ny q
ualif
ying
ass
et a
re c
apita
lised
dur
ing
the
peri
od o
ftim
e th
at i
s re
quir
ed t
o co
mpl
ete
and
prep
are
the
asse
t fo
r its
int
ende
d us
e. O
ther
bor
row
ing
cost
s ar
eex
pens
ed in
the
prof
it an
d lo
ss a
ccou
nt in
the
peri
od in
whi
ch th
ey a
rise
.
2.2
2
Off
sett
ing
Fina
ncia
l ass
ets
and
liabi
litie
s ar
e of
fset
whe
n th
e C
ompa
ny h
as a
lega
lly e
nfor
ceab
le r
ight
to o
ffse
t and
inte
nds
to s
ettle
eith
er o
n a
net b
asis
or
to r
ealis
e th
e as
set o
r se
ttle
the
liabi
lity
sim
ulta
neou
sly.
2.2
3
Funct
ional and p
rese
nta
tion c
urr
ency
Item
s in
clud
ed i
n th
e fin
anc
ial
state
men
ts a
re m
easu
red u
sing
the
cur
renc
y of
the
pri
mary
eco
nom
icen
viro
nmen
t in
whi
ch th
e C
ompa
ny o
pera
tes.
The
fin
anci
al s
tate
men
ts a
re p
rese
nted
in P
akis
tani
Rup
ees,
whi
ch is
the
Com
pany
’s fu
nctio
nal a
nd p
rese
ntat
ion
curr
ency
.
3.
FIX
ED A
SSET
S
Pro
pert
y, pla
nt and e
quip
ment
Ope
ratin
g fix
ed a
sset
sC
apita
l wor
k-in
-pro
gres
s
Inta
ngib
le a
ssets
Note
2008 (R
upee
s `0
00
)200
7
3.1
3.6
3.1
9,854,6904,846,227 5,008,463
5,008,463 1,102,961
125,817 89,232 36,585
578,296 5,496,543
10,831,8345,335,291 5,496,543
291,123 253,234 37,889
37,889 –
10,102 1,776 8,326
10,378 19,185
281,021261,836 19,185
20
Buildings onleasehold
land
2,860,952868,394
1,992,558
1,992,558 256,121
2,810 1,811
999
145,483 2,102,197
3,114,2631,012,066 2,102,197
5
Tanks andpipelines
1,500,213739,427 760,786
760,786 79,137
3,164 1,747 1,417
48,989 789,517
1,576,186786,669 789,517
4
Plant andmachinery
230,974188,211 42,763
42,763 5
1,092 646 446
2,833 39,489
229,887190,398 39,489
5
Aircondi-tioningplant
39,39330,367 9,026
9,026 1,166
– – –
1,058 9,134
40,55931,425 9,134
6.67
Dispensingpumps
1,291,458709,412 582,046
582,046 88,489
89,098 60,785 28,313
55,865 586,357
1,290,849704,492 586,357
6.67
Rollingstock andvehicles
198,210168,021 30,189
30,189 66,567
5,739 4,711 1,028
11,829 83,899
259,038175,139 83,899
5 to 20
Electrical,mechanical
and firefighting
equipment
1,441,610621,137 820,473
820,473 442,254
5,156 3,956 1,200
110,866 1,150,661
1,878,708728,047
1,150,661
5 to 10
Furniture,office
equipmentand other
assets
1,156,468783,809 372,659
372,659 108,738
2,097 1,192
905
136,428 344,064
1,263,109919,045 344,064
5 to 20
Computersauxiliaries
336,016318,995 17,021
17,021 1,248
– – –
6,385 11,884
337,264325,380 11,884
33.33
Mainframe
84,70272,295 12,407
12,407 –
– – –
4,014 8,393
84,70276,309 8,393
25
Plant andMachinery
152,37148,668
103,703
103,703 551
– – –
14,507 89,747
152,92263,175
89,747
5
Vehicles
287,261207,061 80,200
80,200 58,685
16,61714,360 2,257
35,011 101,617
329,329227,712
101,617
20
At July 1, 2007
CostAccumulated depreciation / amortisationNet book value
Year ended June 30, 2008
Opening net book valueAdditions
Disposals / write - off (Note 3.5)CostAccumulated Depreciation
Depreciation / amortisationcharge for the yearClosing net book value
At June 30, 2008
CostAccumulated depreciation / amortisationNet book value
Depreciation rate % per annum
At July 1, 2006
CostAccumulated depreciation / amortisationNet book value
Year ended June 30, 2007
Opening net book valueAdditions
DisposalsCostAccumulated Depreciation
Depreciation / amortisationcharge for the yearClosing net book value
At June 30, 2007
CostAccumulated depreciation / amortisationNet book value
Depreciation rate % per annum
10,831,8345,335,291
5,496,543
5,496,543 1,253,444
331,974 218,203 113,771
670,918 5,965,298
11,753,3045,788,006
5,965,298
281,021261,836 19,185
19,185 –
– ––
8,714 10,471
281,021270,550 10,471
20
Totaloperating
fixedassets
Computersoftware
(Rupees in ‘000)
Owned assets
Year ended June 30, 2008
Leased assets Intangible
Totaloperating
fixedassets
Computersoftware
Owned assets
Year ended June 30, 2007
Leased assets Intangible
3.1 The follow ing is a statement of operating tangible and intangible fixed assets:
98,125–
98,125
98,125–
1,047––
–97,078
97,078–
97,078
–
Freeholdland
62,53836,462 26,076
26,076–
– – –
3,017 23,059
62,53839,479 23,059
5
Leaseholdland
3,114,2631,012,066 2,102,197
2,102,197 354,799
34,187 4,823
29,364
183,944 2,243,688
3,434,8751,191,187 2,243,688
5
Buildings onleasehold
land
1,576,186786,669
789,517
789,517 88,540
6,614 1,067 5,547
48,911 823,599
1,658,112834,513
823,599
4
Tanks andpipelines
229,887190,398 39,489
39,489
–4,0373,313 724
3,338 35,427
225,850 190,423 35,427
5
Plant andmachinery
40,55931,425 9,134
9,134 –
– – –
1,200 7,934
40,55932,625 7,934
6.67
Aircondi-tioningplant
8,1814,679 3,502
3,502 –
– – –
294 3,208
8,1814,973 3,208
6.67
Lifts Dispensingpumps
1,290,849704,492
586,357
586,357 33,722
52,603 27,577 25,026
54,336 540,717
1,271,968731,251
540,717
6.67
259,038175,139 83,899
83,899 127,703
28,326 25,280 3,046
23,957 184,599
358,415173,816 184,599
5 to 20
Rollingstock andvehicles
1,878,708728,047
1,150,661
1,150,661 474,690
36,811 9,186
27,625
143,011 1,454,715
2,316,587 861,872
1,454,715
5 to 10
Electrical,mechanical
and firefighting
equipment
1,263,109919,045 344,064
344,064 100,197
61,036 48,153 12,883
136,576 294,802
1,302,2701,007,468 294,802
5 to 20
Furniture,office
equipmentand other
assets
337,264325,380 11,884
11,884 9,018
10,329 10,329
–
7,288 13,614
335,953322,339 13,614
33.33
Computersauxiliaries
84,70276,309 8,393
8,393 6,332
– – –
4,926 9,799
91,03481,235 9,799
25
Mainframe
152,92263,175 89,747
89,747 -
130 22
108
14,518 75,121
152,79277,671 75,121
5
Plant andMachinery
329,329227,712
101,617
101,617 58,443
95,462 88,340 7,122
43,922 109,016
292,310 183,294 109,016
20
Vehicles
106,17454,293 51,881
51,881 –
1,392 113
1,279
1,680 48,922
104,78255,860 48,922
2.50
Buildingson freehold
land
(Rupees in ‘000)
Freeholdland
98,125–
98,125
98,125–
–––
–98,125
98,125–
98,125
–
Leaseholdland
62,53833,442 29,096
29,096–
–––
3,020 26,076
62,53836,462 26,076
5
Buildingson freehold
land
106,21852,603 53,615
53,615–
44 24 20
1,714 51,881
106,17454,293 51,881
2.50
Lifts
8,1814,385
3,796
3,796–
– – –
294 3,502
8,1814,679
3,502
6.67
5,9
65,2
98
851,0
79
6,8
16,3
77
10,4
71
6,8
26,8
48
5,4
96,5
43
1,0
64
,26
5 6
,56
0,8
08
19
,18
5
6,5
79
,99
3
Annual Report2OO8Shell Pakistan Limited50
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 51Annual Report2OO8
Notes to the Financial Statementsfor the year ended June 30, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
3.2 The depreciation and amortisation charge for the year has been allocated as follow s:
Cost of products sold
Administrative and marketing expenses- Depreciation - tangible assets - Amortisation - intangible assets
3.3 Company assets include tanks, dispensing pumps and electrical equipments having a cost of Rs 1,358.669million (2007: Rs 1,250.512 million) which have been installed at dealer sites. Due to the significant numberof dealers involved, the particulars of the assets not in the possession of the Company as required by theFourth Schedule to the Companies Ordinance, 1984 have not been disclosed here.
3.4 The following assets with a book value exceeding Rs.50,000 were disposed off during the year:
Note 2008
(Rupees `000)
2007
2929
15,517
655,4018,714
664,115
679,632
13,890
564,406 10,378
574,784
588,674
Freehold land
Buildings on freehold land
Buildings on leasehold land
Tanks and pipelines
Plant and machinery
Dispensing pumps
Rolling stock and vehicles
19,165
15,282
571
14,641
90
5,607
2,942
469
536
377
348
377
437
698
Press advertisement
Press advertisement
Press advertisement
Press advertisement
Press advertisement
Press advertisement
Press advertisement
Press advertisement
Company policy
Company policy
Company policy
Company policy
Company policy
Company policy
Shams Petrochemical, Karachi
Shams Petrochemical, Karachi
M/s Gulzar & Co, Karachi
Shams Petrochemical, Karachi
M/s Gulzar & Co, Karachi
Shams Petrochemical, Karachi
Shams Petrochemical, Karachi
M/s Gulzar & Co, Karachi
Omar Malik - Executive
Yousuf Ali -Key management personnel
Ali Rizvi - Executive
Hassan - Executive
Mustaq Khan - Executive
Khalid Siddiq - Executive
(Rupees `000)
SalesProceeds
AccumulatedDepreciationCost
BookValue
Mode of Disposal Particulars of Buyers
1,047
1,378
3,208
4,171
256
1,548
838
14,344
943
943
795
943
795
1,576
-
112
390
571
64
170
115
8,189
786
810
656
822
654
771
1,047
1,266
2,818
3,600
192
1,378
723
6,155
157
133
139
121
141
805
Electrical, mechanical and fire fighting equipment
435
377
318
318
318
318
569
705
858
2,590
532
840
Company policy
Company policy
Company policy
Company policy
Company policy
Company policy
Company policy
Press advertisement
Press advertisement
Press advertisement
Press advertisement
Negotiation
Munir Ahmad - Executive
Ejaz Alam - Executive
Zarak Khan - Executive
Adnan Sadiq - Executive
Asfandyar - Executive
Amir Millwala - Executive
Anwar Shami - Executive
M. Siddique Awan, Karachi
M/s Gulzar & Co, Karachi
Shams Petrochemical, Karachi
M/s Gulzar & Co, Karachi
Pak-Arab Refinery Limited,Karachi
(Rupees `000)
SalesProceeds
AccumulatedDepreciationCost
BookValue
Mode of Disposal Particulars of Buyers
1,088
373
381
381
795
795
795
1,675
12,131
738
765
847
963
277
250
250
663
688
670
977
1,864
101
279
158
125
96
131
131
132
107
125
698
10,267
637
486
689
M/s Gulzar & Co, Karachi
Shams Petrochemical, Karachi
Kamran Ahmed, Karachi
Wasim Mirza, Karachi
Syed Ahmed Ali, Karachi
Commercial Union, Karachi
Raja Baber - Executive
S. A. Salahuddin - Executive
Usman Najeeb - Executive
Ijaz A. Khan -Key management personnel
Zahra Ahmed - Executive
Jawad Bari, Karachi
Adnan Bhatti, Karachi
Wasim Mirza, Karachi
Zulfiqar Shaikh - Executive
Furniture and office equipment
Assets held under finance lease - vehicles
165
408
926
632
650
798
659
823
695
969
471
856
611
572
318
Press advertisement
Press advertisement
Press advertisemen
Press advertisement
Press advertisement
Insurance claim
Company policy
Company policy
Company policy
Company policy
Company policy
Press advertisement
Press advertisement
Press advertisement
Company policy
186
127
1,219
835
1,002
969
879
886
1,189
4,257
1,178
1,225
835
795
795
47
27
406
408
461
343
330
332
463
3,192
903
558
390
557
623
139
100
813
427
541
626
549
554
726
1,065
275
667
445
238
172
3.5 Disposal of fixed assets include assets written - off having a cost of Rs 96.268 million (2007: Rs Nil) and a net book value of Rs 62.141 million (2007: Rs Nil).
Annual Report2OO8Shell Pakistan Limited52
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 53Annual Report2OO8
Notes to the Financial Statementsfor the year ended June 30, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
3.6 Capital w ork -in-progress
Buildings on leasehold landTanks and pipelinesPlant and machineryAirconditioning plantDispensing pumpsRolling stock and vehiclesElectrical, mechanical and fire fighting equipmentFurniture, office equipment and other assetsComputer auxiliariesComputer software and consultancy costsCapital stores and spares
2008
(Rupees `000)
2007
4. LONG-TERM INVESTMENTS
Investment in associate - unquotedPak-Arab Pipeline Company Limited (PAPCO)18,720,000 (2007: 18,720,000) ordinaryshares of Rs 100 each
Others - held as available for sale - at costNon-trading subsidiariesArabian Sea Country Club Limited 500,000(2007: 500,000) ordinary shares of Rs 10 each
Note
4.1
4.2
2008 2007
PercentageHolding
26
100
–
PercentageHolding
26
100
–
194,004 44,869 1,986
162 9,010
101,271 356,623 30,854 5,459 6,556
100,285
851,079
145,968 82,438 1,641
162 9,292
104,656 493,802
38,576 111
6,556 181,063
1,064,265
Amount(Rupees '000)
2,010,534
1
5,000
2,015,535
Amount(Rupees '000)
2,129,782
1
5,000
2,134,783
Pak-Arab Pipeline Company Limited (PAPCO) commenced its commercial operations in Pakistan in March 2005 asa joint venture between PARCO and oil marketing companies to provide transportation services of petroleum productsthrough the white oil pipeline.
4.1 Movement of investment in associate
Beginning of the yearShare of profitsShare of taxationDividend received
End of the year 5.2 Loans to staff are unsecured and are given for housing, purchase of motor cars / motorcycles and for generalpurpose in accordance with the Company's policy and are repayable over a period of two to five years.Interest is charged on loans given for housing and purchase of motor cars at 1% per annum.
The maximum aggregate amounts due from the Chief Executive, Directors and Executives at the end ofany month during the year were Rs Nil, Rs 1.246 million and Rs 66.010 million respectively (2007: Rs Nil,Rs 2.997 million and Rs 69.971 million). The loan to Director is the only key management personnel loanoutstanding at year end.
5.3 These represent advances in respect of various Company operated outlets which are primarily given in theform of petroleum products for meeting the working capital requirements of these sites.
2008
(Rupees `000)
2007
2,010,534) 342,043)
(129,795) (93,000)
2,129,782)
1,916,884) 188,231) (65,981) (28,600)
2,010,534)
The summarised financial information of the PAPCO, based on the audited financial statementsfor the year ended June 30, 2008 is as follows:
Note 2008
(Rupees `000)
2007
12
12
12
5.3
23,884,637
15,693,168
4,553,922
631,352
623) (623)
– 49,929)
(24,343)
25,586)
54,215) (18,148)
36,067) 84,728)
146,381)
24,631,263)
16,713,448)
4,352,199)
596,164)
1,303) (680)
623) 69,971)
(30,532)
39,439)
34,244) (11,508)
22,736)119,781)
182,579)
Total assets
Total liabilities
Revenues
Profit after taxation
5. LONG-TERM LOANS AND ADVANCES - Considered good
Due from DirectorsLess: Receivable within one year
Due from ExecutivesLess: Receivable within one year
Due from EmployeesLess: Receivable within one year
)
Advances to contractors
4.2 Investments in non-trading subsidiaries consist of:
- Shell Pakistan Provident Trust (Private) Limited - 2 (2007: 2) fully paid ordinary shares of Rs 100 each.- Shell Pakistan Pensions Trust (Private) Limited - 2 (2007: 2) fully paid ordinary shares of Rs 100 each.
The subsidiaries have not commenced operations to date and the Company is in the process of liquidating these companies (as disclosed in note 1.1).
5.1 Reconciliation of loans and advances (long-term and short-term)
(Rupees `000)
2008 2007
Directors Executives Directors Executives
1,303–
680
623
69,97120,51740,559
49,929
–4,8003,497
1,303
59,77650,25540,060
69,971
Opening balanceDisbursementsRepayments
Closing balance
Note 2008
(Rupees `000)
2007
Annual Report2OO8Shell Pakistan Limited54
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 55Annual Report2OO8
Notes to the Financial Statementsfor the year ended June 30, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
7.1 These represent amounts due from customers in respect of which the Company has entered into agreementsfor recovery of outstanding balances over a period of 1 to 7 years. These balances carry interest at the rateof 15% per annum.
Note 2008
(Rupees `000)
2007
59,009 142,709
201,718
134,920
29,390) 81,604)
110,994
328,227
Note 2008
(Rupees `000)
2007
9. STORES AND SPARES
StoresSparesLess: Provision for obsolete stores
10. STOCK-IN-TRADE
Raw and packing materials
Finished goods In hand and in pipeline system In White Oil Pipeline
Less: Provision for impairment
10.1
16,885) 2,321)
(5,878)
13,328)
34,755) 1,409)
(5,878)
30,286)
1,036,141)
6,638,675) 10,430,149)
17,068,824) (9,442)
17,059,382)
18,095,523)
581,580)
3,706,394) 3,962,799)
7,669,193) (6,719)
7,662,474)
8,244,054)
6. LONG-TERM DEPOSITS AND PREPAYMENTS
DepositsPrepayments
7. LONG - TERM DEBTORS
Long-term debtors 11
10.1 Stock in White Oil Pipeline includes 55,750 MT (2007: 65,167 MT) of High Speed Diesel oil which hasbeen maintained as line fill necessary for the pipeline to operate. The aggregate cost of the inventoryamounted to Rs 4,987.516 million (2007: Rs 2,793.905 million).
10.2 The above amounts include Rs 167.230 million (2007: Rs 145.640) in respect of stock-in-transit as atJune 30, 2008.
8. DEFERRED TAXATION - NET
This is composed of the following:
Taxable temporary difference arising in respect of -accelerated tax depreciation -investment in associate
Deductible temporary difference arising in respect of -short-term provisions -carry forward tax losses -add backs to taxable income expected to be reversed in future periods
(620,287) (25,778)
594,491) – –
(51,574)
(451,305) (13,853)
283,978) 384,799) 77,348)
280,967)
Note 2008
(Rupees `000)
2007
11.1
11.2
11.3
2,867,826) 2,172,034)
5,039,860) 907,157)
5,947,017) (907,157)
5,039,860)
304,355) 4,275,197)
4,579,552) 517,173)
5,096,725) (517,173)
4,579,552)
(Rupees `000)
Long-term(note 7)
Short-term Total
2008
(Rupees `000)
Long-term(note 7)
Short-term Total2007
11. TRADE DEBTS
Considered good- Secured- Unsecured
Considered doubtfulTrade debts - grossLess: Provision for impairment
Trade debts - net
The above trade debts are classified as follows:
Trade debts - grossLess: Provision for impairment of trade debts
Trade debts - grossLess: Provision for impairment of trade debts
11.1 These debts are secured by way of letters of credit, bank guarantees and security deposits.
11.2 This includes amounts due from related parties at the year end amounting to Rs 12.406 million(2007: Rs 953.968 million). Particulars of the amounts due from related parties are as follows:
2008
(Rupees `000)
2007
– 12,360 )
46)
12,406)
946,084) 4,690) 3,194)
953,968)
Shell Aviation LimitedShell Gas LPG (Pakistan) LimitedShell Development & Offshore Pakistan
5,721,575)(816,635)
4,904,940)
225,442)(90,522)
134,920)
5,947,017)(907,157)
5,039,860)
4,768,498)(517,173)
4,251,325)
328,227)–
328,227)
5,096,725)(517,173)
4,579,552)
Annual Report2OO8Shell Pakistan Limited56
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 57Annual Report2OO8
Notes to the Financial Statementsfor the year ended June 30, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
14.114.2
35.1.11
22.3
14.3
63,006) 3,133)
66,139) 141,725)
207,864)
278,492) 295,733)
3,403,744) 81,194) 3,438)
41,270) 616,971) 143,329)
894) 1,410,516)
– 9,536)
6,285,117) (206,006)
6,079,111)
47,937) 3,133)
51,070) 89,169)
140,239)
197,342) 295,733)
3,291,827) 121,906)
2,088) 38,017)
450,009) 197,174)
291) 1,367,855)
4,963) 11,360)
5,978,565) (7,802)
5,970,763)
Balances with statutory authorities - Customs duty - Excise duty
Short-term prepayments
14. OTHER RECEIVABLES
Excise and customs duties Price differential on imported purchases Price differential claimService cost receivable from related partiesService cost receivable from associate company - PAPCOAdvances to suppliersInland freight equalisation mechanismStaff retirement benefit schemesMark-up receivable on short-term depositsSales taxWorkers' profit participation fundOthers
Less: Provision for impairment
623 24,343 18,148 43,114
3,915
47,029
680 30,532 11,508 42,720
–
42,720
12. LOANS AND ADVANCES - Considered good
Loans due from - Directors - Executives - Employees
Advances to - Employees
13. TRADE DEPOSITS AND SHORT-TERM PREPAYMENTS
14.1 This represents amount receivable on account of price differential on imports and the ex-refinery price ondirect and retail sales during the period 1990-2002.
14.2 This represents claims for price differential receivable from the Government of Pakistan (GoP). From time to time the GoP agrees to subsidise the petroleum prices by restricting the increase in prices of various petroleum products in order to reduce the burden of rising oil prices on the end consumers. The balance as at June 30, 2008 represents the claim for the fortnight June 15, 2008 to June 30, 2008.
Note 2008
(Rupees `000)
2007
14.3 Provision for impairment
Balance at July 1Provision made during the year Amount reversed during the year
Balance at June 30
15 CASH AND BANK BALANCES
With banks on interest bearing current accountsCash in hand
3130
15.1 Current accounts with banks carry interest ranging from 0.7 % to 5.5 % (2007: 0.7 % to 5.5 %) per annum.
15.2 Included in cash and bank balances is an amount of Rs 35.065 million (2007: Rs 44.260 million) in respect of contributions received for Earthquake Relief Fund.
16. SHARE CAPITAL
Authorised capital
2008
(Number of shares)
2007
100,000,000 100,000,000
Issued, subscribed and paid-up capital
(Number of shares)
Issued forcash
Issued asbonus
Total Issued forcash
Issued asbonus
Total
2008 2007
Ordinary shares ofRs. 10 each 1,000,000
234,810
313,094547,904
–
547,904
1,000,000
234,810
203,513438,323
109,581
547,904
–
20,351,250
20,351,250
10,958,063
31,309,313
23,481,000
20,351,250
43,832,250
10,958,063
54,790,313
Note 2008
(Rupees `000)
2007
3130
517,173) 513,820)
(123,836)
907,157)
234,784 282,389
–
517,173
11.3 Provision for impairment
Balance at July 1Provision made during the year Amount reversed during the year
Balance at June 30
23,481,000
–
23,481,000
–
23,481,000
–
31,309,313
31,309,313
–
31,309,313
23,481,000
31,309,313
54,790,313
–
54,790,313
23,481,000
–
23,481,000
–
23,481,000
555
2008
(Rupees `000)
2007
Fully paid in cash
Issued as fully paid bonus shares
Issued during the year as fully paid bonus shares
Closing balance
7,802) 206,006)
(7,802)
206,006)
817,271) 55,143)
872,414)
13,196) –
(5,394)
7,802)
770,408) 44,122)
814,530)
Annual Report2OO8Shell Pakistan Limited58
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 59Annual Report2OO8
Notes to the Financial Statementsfor the year ended June 30, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
Note 2008
(Rupees `000)
2007
22.122.1
22.2
35.2.2
22.3
2008
(Rupees `000)
2007
16.1 The Shell Petroleum Company Limited, United Kingdom, a subsidiary of Royal Dutch Shell Plc., held 41,699,176 (2007: 41,699,176) ordinary shares of Rs 10 each at June 30, 2008.
17. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE
The Company has entered into lease agreements with various leasing companies for lease of motor vehiclesincluding transport vans. The liability under these agreements are payable by the year 2011 and is subjectto finance charge at rates ranging from 5.50% to 14.25% (2007: 5.50% to 15.03%) per annum. Anadditional charge of 20% is also leviable on overdue rentals.
The Company intends to exercise its options to purchase the leased assets for Rs1.86 million(2007: Rs1.01 million) upon completion of the lease period.
The amount of future payments for the finance lease and the period in which these payments will become due are as follows:
– 60,461)
553) 2,113)
63,127) (4,169)
58,958)
(56,742)
2,216)
33,593) 241) 593)–
34,427 (1,677)
32,750)
(32,203)
547)
Year
2007 – 20082008 – 20092009 – 20102010 – 2011
Less: Finance charge not due
Present value of minimum lease payments
Less: Current maturity shown under current liabilities
18. LONG-TERM LOAN - Secured
The above loan has been obtained from a commercial bank and bears mark-up at the rate of 3-month KarachiInterbank Offered Rate (KIBOR) + 0.17% (2007: Nil) per annum payable and revised quarterly. The loanamount is payable in one bullet payment on September 27, 2010. The arrangement is secured by hypothecationof the Company's stock-in-trade, trade debts and other receivables.
2,500,000) –
2008
(Rupees `000)
2007
19. ASSET RETIREMENT OBLIGATION
Balance as at July 1Liabilities incurredAccretion expense
Balance as at June 30
20. SHORT-TERM RUNNING FINANCES UTILISED UNDERMARK-UP ARRANGEMENTS – Secured
Short-term running finances utilised under mark-up arrangements
138,494 47,985 5,141
191,620
4,338,339
98,320 34,551
5,623
138,494
725,836
The facilities for short-term running finances available from various banks aggregate to Rs 15,150 million(2007: Rs 13,700 million). The rates of mark-up range from Re 0.2614 to Re 0.3784 per Rs 1,000 perday (2007: Re 0.2661 to Re 0.2986 per Rs 1,000 per day). The purchase prices are payable on variousdates by June 30, 2009. These arrangements are secured by hypothecation of the Company's stock-in-trade, trade debts and other receivables.
21. SHORT-TERM LOANS - Secured
The above loan has been obtained from a bank and carries mark-up at 12.16% (2007: 9.16% to 9.44%) per annum. The loan amount is repayable on July 14, 2008. The loan is secured by hypothecation of the Company's stock-in-trade, trade debts and other receivables.
Note
32
11,990,626 772,266 311,071
1,344,994 764,877 206,623 125,140 27,598
190,051 3,537
71,133 35,065
530,030 109,997
16,483,008
4,175,781 5,050,802
287,703 1,046,341
725,951 215,752
– 25,901 34,217 – 71,163 44,260
136,152 98,473
11,912,496
22. TRADE AND OTHER PAYABLES
CreditorsBills payableOil marketing companies Accrued liabilitiesExcise and customs duties and development surchargeDealers' and cartage contractors' security deposits Security deposits from customerProvision for post retirement medical benefitsWorkers' welfare fundWorkers' profit participation fundUnclaimed dividendsPayable to the Earthquake Relief FundAdvances received from customersOther liabilities
22.1 Amounts due to related parties at the year end aggregated to Rs 5,706.276 million (2007: Rs 7,048.931million). Particulars of the amounts due to related parties are as follows:
42,207 5,013,763
650,306
5,706,276
81,612 5,993,491
973,828
7,048,931
Associate company - PAPCOOther related partiesParent companies
2008
(Rupees `000)
2007
1,500,000 6,810,000
2008
(Rupees `000)
2007
Annual Report2OO8Shell Pakistan Limited60
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 61Annual Report2OO8
Notes to the Financial Statementsfor the year ended June 30, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
Note 2008
(Rupees `000)
2007
22.2 The security deposits are non-interest bearing and are refundable on termination of contracts.
22.3 Workers' profit participation fund
Balance at July 1Allocation for the year
Add: Amount receivedLess: Amount paid
Balance at June 30
23. MARK-UP ACCRUED
Mark-up accrued on:- short-term running finances utilised under mark-up arrangements- short-term loans- long-term loans
23.1 During the year, the Government of Pakistan (GoP), for the purposes of reimbursing the outstanding pricedifferential claims, arranged for the Company to obtain two term finance facilities amounting to Rs 6,000million and Rs 5,000 million from consortium of banks (the Syndicates). Accordingly, the Company enteredinto two term finance agreements (the Agreements) dated January 11, 2008 and May 14, 2008 in thisrespect. Under both agreements, the principal was due at the end of a three year term in one bullet repaymentwhere as mark-up was due semi-annually and quarterly respectively, revised quarterly and benchmarkedto 3-month Karachi Interbank Offered Rate (KIBOR).
The GoP issued irrevocable and unconditional guarantees dated January 30, 2008 and May 21, 2008 infavour of the Syndicates stating that it was fully responsible and liable as a Principal Obligor to repay thefinance, mark-up and all the obligations arising under the Agreements.
On June 30, 2008, the GoP settled the outstanding principal under the Agreements amounting to Rs 11,000million consequent to which the Syndicate banks have released the aforementioned guarantees. However,as at this date, mark-up and other charges amounting to Rs 316.742 million are still payable to the banks.The management is of the view that based on the substance of the transaction, the aforementionedmark-up will be settled by the Company upon receipt of the amount from the GoP in accordance with letterof comfort issued by the GoP in favour of the Company. Accordingly, this has not been separately recognisedas a liability and the corresponding receivable from the GoP has also not been booked. In respect of theamount settled by the GoP to the banks amounting to Rs 11,000 million which was routed through theCompany, it effectively represents settlement of price differential balances by the GoP and has been reflectedas such in the cash flow statement. Contra inflows and outflow of this balance as financing activity in thecash flow statement have not been reflected.
24. CONTINGENCIES AND COMMITMENTS
24.1 Contingencies
24.1.1 Infrastructure fee
Through the Sindh Finance Act 1994, the Government of Sindh imposed a fee, for services rendered inrespect of development and maintenance of infrastructure, on goods entering or leaving the Province fromor for outside the Country through sea or air.
The Company (SPL) and several others challenged the levy of the said infrastructure fee in constitutionalpetitions before the High Court of Sindh. However, certain amendments were made to the impugnedlegislation on three occasions during the pendency of the petitions. In 2001 the said “fee” was changedto a “cess”. Consequently the petitions filed by SPL and others were dismissed by the High Court as havingbecome infractuous.
Subsequently, SPL and others filed civil suits in the High Court of Sindh challenging the amending Ordinance.These suits were dismissed by a single judge in October 2003. Being aggrieved, SPL and others filedintra-court appeals against the said judgement on, interalia, the ground that the import, export, customsduty and highways are exclusive Federal subjects and therefore levy of the infrastructure tax/fee/cessby the Government of Sindh is ultra vires the Constitution. These appeals are currently pending adjudication.
The accumulated levy up to June 30, 2008 comes to Rs 988.031 million (2007: Rs 699.836 million). Noprovision has been made in these financial statements against the levy as SPL management expects afavourable outcome.
24.1.2 PARCO pipeline fill
The Ministry of Petroleum and Natural Resources (MOPNR) has made a claim relating to the loan arrangedby the Government of Pakistan (GoP) to the Company to finance the initial fill of the Pak-Arab RefineryLimited (PARCO) Pipeline. MOPNR has calculated the Company's liability by applying the price prevailingon August 11, 2000 to the quantity of fuel supplied at the time of initial fill.
The Company maintains that its liability is limited only to the extent of Rs 78.164 million (2007: Rs 78.164million) which has been fully paid in March 2007.
The claim, if calculated on the August 11, 2000 price as indicated by MOPNR, would amount to Rs 294million. Based on legal advice obtained, the management is confident that its exposure in this respectamounted to Rs 78.164 million and consequently no provision has been made for the additional demandraised by MOPNR.
24.1.3 Others
The aggregate amount of other claims against the Company not acknowledged as debt as at June 30,2008 amounted to approximately Rs 848.115 million (2007: Rs 533.570 million). This includes claimsby refineries, amounting to Rs 355.613 million (2007: Rs Nil) in respect of delayed payment charges.
31 (4,963)
403,537) 398,574)
4,963) (400,000)
3,537)
92,737) 63,493) 1,038)
157,268)
(532) 15,569) 15,037)
– (20,000)
(4,963)
28,288) 103,292)
–
131,580)
Annual Report2OO8Shell Pakistan Limited62
Shell Pakistan Limited 12
Shell Pakistan Limited 63Annual Report2OO8
Notes to the Financial Statementsfor the year ended June 30, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
24.2 Commitments
a) Capital expenditure contracted for but not incurred as at June 30, 2008 amounted to approximately Rs 828.745million (2007: Rs 276.964 million).
b) Commitments for rentals of assets under operating lease agreements as at June 30, 2008 amountedto Rs 1,335.797 million (2007: Rs 1,150.256 million) payable as follows:
Note 2008
(Rupees `000)
2007
28.1
28 . DISTRIBUTION EXPENSES
Salaries, wages and benefitsStaff trainingStores and materialsFuel and powerRent, taxes and utilitiesLease rentals and chargesRepairs and maintenanceInsuranceTravellingAdvertising and publicityLegal and professional chargesCommunication and stationeryComputer expensesStorage and other chargesOthers
Less: Handling and storage charges recoveredSecondary transportation expenses
28.1 Salaries, wages and benefits include Rs 70.644 million (2007: Rs 73.665 million) in respect of staff retirementbenefits.
798,112)) 9,153))
32,094)) 57,677))
294,891)) 11))
226,166)) 52,904))
158,566)) 410,056))
4,450)) 18,145)) 5,765))
33,471)) 18,810)))
2,120,271)) (8,166))
838,317))
2,950,422)
782,511) 18,333) 30,335) 64,553)
332,112) 2,085)
235,346) 60,946)
159,413) 450,700)
3,517) 21,536) 11,659) 18,325) 21,888)
2,213,259) (28,197)
1,181,493)
3,366,555)
27.1 Duties and levies
Petroleum development levyCustoms and excise dutyInland freight equalisation marginAdditional petroleum development levyWharfage
6,035,675 5,284,344 3,401,640
–35,976
14,757,635
29.1
3737
3.23.2
29. ADMINISTRATIVE AND MARKETING EXPENSES
Salaries, wages and benefitsStaff trainingStores and materialsFuel and powerRent, taxes and utilitiesLease rentals and chargesRepairs and maintenanceInsuranceTravellingAdvertising and publicityTechnical service feeTrade marks and manifestations license feeLegal and professional chargesCommunication and stationeryComputer expensesDepreciation - tangible assetsAmortisation - intangible assetsOthers
Less: Costs recovered under Service Level Agreement from related parties
278,335)) 6,699))
274)) 19,539)) 23,140))
– 7,831)) 8,587))
37,456)) 20,837))
583,169)) 162,118)) 63,474)) 91,857))
145,593)) 655,401))
8,714)) 4,724))
2,117,748)
(8,459)
2,109,289)
221,027) 5,349)
307) 14,945)
9,111) 416)
13,494) 2,265)
34,542) 16,717)
539,682) 65,242) 40,365) 63,014)
122,376) 564,406) 10,378)
– 1,723,636)
(6,929)
1,716,707)
10
27.1 10
26. OTHER REVENUE
License/franchise fee charged to dealers
27. COST OF PRODUCTS SOLD
Opening stock of raw and packing materialsRaw and packing materials purchasedLess: Closing stock of raw and packing materials
Raw and packing materials consumedAdd: Manufacturing expenses
Cost of products manufacturedNon-fuel retail purchasesOpening stock of finished productsFinished products purchasedDuties and leviesLess: Closing stock of finished products
341,349)
581,580) 5,105,250)
(1,036,141)
4,650,689) 117,227)
4,767,916) 118,802)
7,662,474) 114,934,880) 14,269,781)
(17,059,382)
124,694,471)
447,517)
552,963) 3,840,029) (581,580)
3,811,412) 119,487)
3,930,899) 138,953)
9,426,923) 88,072,996) 14,757,635) (7,662,474)
108,664,932)
25. SALES
Gross salesLess: Trade discounts and rebates
158,585,360) 958,869)
157,626,491)
131,040,241) 910,397)
130,129,844)
2008
(Rupees `000)
2007Note
Not later than one yearLater than one year and not later than five yearsLater than five years
53,770222,447
1,059,580
1,335,797
41,669173,097935,490
1,150,256
c) Post-dated cheques have been deposited with the Collector of Customs Port Qasim and Karachi Port Trustin accordance with the Customs' Act 1969 as an indemnity to adequately discharge the liability for the dutiesand taxes leviable on imports, as required under the Finance Bill 2005. As at June 30, 2008 the value ofthese cheques amounts to Rs 5,339.763 million (2007: Rs 4,820.228 million). The maturity dates of thesecheques extend to November 30, 2008.
d) Letters of credit and bank guarantees outstanding as at June 30, 2008 amount to Rs 3,830 million (2007:Rs 3,635 million).
2008
(Rupees `000)
2007Note
2,106,094 7,138,542 4,811,180
165,41348,552
14,269,781
Annual Report2OO8Shell Pakistan Limited64
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 65Annual Report2OO8
Notes to the Financial Statementsfor the year ended June 30, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
30 . OTHER OPERATING INCOME
Income from financial assets / liabilitiesReversal of provision for impairment of trade debtsReversal of provision for impairment of other receivablesLiabilities no longer payable written backMark-up on short-term depositsMark-up on delayed payments
Income from non-financial assetsScrap salesProfit on disposal of property, plant and equipmentSundries
11.314.3
29.1 Salaries, wages and benefits include Rs 24.637 million (2007: Rs 18.961 million) in respect of staff retirementbenefits.
Note 2008
(Rupees `000)
2007
31 . OTHER OPERATING EXPENSES
Workers' profit participation fundWorkers' welfare fundExchange lossProvision for impairment of trade debtsProvision for impairment of other receivablesOther receivables written offFixed assets written offAuditors' remunerationLoss on disposal of property, plant and equipmentDonations
403,537156,115529,025513,820206,00622,22462,1413,535
–19,198
1,915,601
15,56910,72131,821
282,389 –
834 –
3,44815,50517,691
377,978
22.3
11.314.3
3.531.1
31.2
31.1 Auditors’ remuneration
Audit feeFee for substantiating inland freight equalisation marginAudit of Provident, Pension, Gratuity and Workers' Profit Participation FundsSpecial certifications, HSSE assurance audits and sundry advisory servicesOut of pocket expenses
33. TAXATION
Current - for the year - for prior periodsDeferred
2,053,705 200,000 332,541
2,586,246
31.2 Interest of the Directors or their spouses in the donations made during the year is as follow s:
Name of Donee and address
Shell LiveWIRE Trust(Shell House, 6, Ch.Khaliquzzaman Road, Karachi)
The Layton Rahmatulla Benevolent Trust(37-C, Phase II, Sunset LaneNo. 4, DHA, Karachi)
The Kidney Centre PostGraduate Training Institute(172/R, Rafiqui Shaheed Road,Karachi)
The Aga Khan University Hospital(Stadium Road, Karachi)
Lahore University ofManagement Sciences(DHA, Lahore Cantt.)
SOS Children's Villages of Pakistan(Ferozepur Road, Lahore)
Names of interested Directors and nature of interest
Mr. Zaiviji Ismail bin Abdullah -Chairman Board of Trustees
Mr. Yousuf Ali - TrusteeMr. Asif Sindhu - Trustee
(2007: Mr. Quentin D'Silva -Ex-Chairman Board of Trustees
Mr. Zaiviji Ismail bin Abdullah -Chairman Board of Trustees
Mr. Yousuf Ali - TrusteeMr. Asif Sindhu - Trustee)
Mr. Zaiviji Ismail bin Abdullah - TrusteeMr. Farrokh K. Captain - Trustee
(2007: Zaiviji Ismail bin Abdullah - TrusteeMr. Farrokh K. Captain - Trustee)
Mr. Zaiviji Ismail bin Abdullah - Member,Board of Governors
(2007: Mr. Quentin D'Silva - Ex-Member,Board of Governors
Mr. Zaiviji Ismail bin Abdullah - Member,Board of Governors)
(2007: Mr. Quentin D'Silva - Ex-Member,The Resource Development Committee
Mr. Zaiviji Ismail bin Abdullah - Member,The Resource Development Committee)
Mr. Zaiviji Ismail bin Abdullah - Member,Board of Governors
(2007: Mr. Manzoor H. Noon - Vice President)
2,000
3,000
2,000
–
1,150
–
2,000
4,500
4,200
100
–
500
32. FINANCE COST
Bank chargesAccretion expenseMark-up on short-term running finances and short-term loansFinance charge on liabilities against assets subject to finance lease
87,9705,141
873,7443,412
970,267
85,5295,623
783,611 3,335
878,098
89,779) (84,432)
(333,270)
(327,923)
123,836 7,802
14,52021,7657,345
14,432 70,230 46,523
306,453
– 5,394
168,186 5,7082,246
7,902 –
25,886
215,322
2,000 384
125
666 360
3,535
1,800 364
125
781 378
3,448
2008
(Rupees `000)
2007
2008
(Rupees `000)
2007Note
19
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Notes to the Financial Statementsfor the year ended June 30, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
35. EMPLOYEE BENEFITS
35.1 Pension & Gratuity
As mentioned in note 2.16, the Company operates funded gratuity and pension schemes for all itsemployees. Contributions are made to these schemes on the basis of actuarial recommendations. The latestactuarial valuation was carried out as at June 30, 2008.
The information provided in notes 35.1.1 to 35.1.11, 35.2 and 35.3 has been obtained from the actuarialvaluations carried out as at June 30, 2008.
34. EARNINGS PER SHARE
34.1 Profit after taxation
Average number of ordinary shares in issue during the year
Earnings per share
5,137,094
54,790,313
93.76
No. of Shares
Rupees
33.1 Relationship betw een tex t expense and accounting profit
Accounting profit before taxation (excluding share of associate)
Tax rate
Tax on accounting profitTax effect of lower tax on certain income of the CompanyTax charge / (reversal) in respect of prior yearsTax impact on account of lower tax rate on share of profit of associateOthers
Tax expense for the current year
7,723,340
35%
2,703,169) (303,702) 200,000) (53,062) 39,841)
2,586,246)
2008
(Rupees `000)
2007
378,736)
35%
132,558(340,706) (84,432)(30,563) (4,780)
(327,923)
706,659
54,790,313
12.90
% per annum
11.09 13.25 13.25
35.1.1 Actuarial assumptions
The following significant assumptions were used in the valuation of these schemes:
- Expected long-term rate of increase in salary level- Discount rate- Expected long-term rate of return on assets
2008 2007
8.90 11.00 11.00
35.1.2 Net asset arising
Fair value of plan assets
Less: Present value ofdefined benefit obligation
Surplus / (deficit)
Unrecognised past service cost
Actuarial (gains) / losses to berecognised in future periods inaccordance with the Company'saccounting policy
Asset in respect of staff retirementbenefit schemes
2008
Management Non-Management Total
Pension Gratuity Pension Gratuity
(Rupees ‘000)
1,345,689)
(1,248,072)
97,617)
–
1,644)
99,261)
82,780)
(158,971)
(76,191)
–
85,694)
9,503)
64,759)
(35,941)
28,818)
–
(7,976)
20,842)
7,287
–
7,287
–
–
7,287
1,500,515)
(1,442,984)
57,531)
–
79,362)
136,893)
35.1.3 Movement in the fair value of plan assets
2008
Management Non-Management Total
Pension Gratuity Pension Gratuity
2007
Management Non-Management Total
Pension Gratuity Pension Gratuity
Total plan assets as at July 1
Expected return on plan assets
Contribution by the Company
Contribution by the employees
Benefits paid
Inter fund transfer
Actuarial (losses) / gains on plan assets
Total plan assets as at June 30
(Rupees ‘000) (Rupees ‘000)
1,215,336)
134,060)
63,241)
9,209)
(65,490)
–
(10,667)
1,345,689)
6,844)
753)
–
–
–
–
(310)
7,287)
65,398)
7,224)
568)
–
–
–
(8,431)
64,759)
1,371,199)
150,955)
83,141)
9,209)
(90,063)
–
(23,926)
1,500,515)
Note
35.1.3
35.1.4
89,789)
8,871)
17,323)
–
(32,712)
–
350)
83,621)
1,089,853)
117,130)
61,937)
8,726)
(77,442)
–
15,132)
1,215,336)
6,520)
703)
–
–
–
(230)
(149)
6,844)
59,173)
6,381)
540)
–
(502)
230)
(424)
65,398)
1,245,335)
133,085)
79,800)
8,726)
(110,656)
–
14,909)
1,371,199)
83,621)
8,918)
19,332)
–
(24,573)
–
(4,518)
82,780)
34.2 There were no convertible potential ordinary shares in issue as at June 30, 2008 and June 30, 2007.
2007
Management Non-Management Total
Pension Gratuity Pension Gratuity
(Rupees ‘000)
1,215,336)
(1,110,297)
105,039)
–
(24,623)
80,416)
83,621)
(145,145)
(61,524)
–
76,542)
15,018)
65,398)
(31,781)
33,617)
1,096)
(17,098)
17,615)
6,844
–
6,844
–
–
6,844
1,371,199)
(1,287,223)
83,976)
1,096)
34,821)
119,893)
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Notes to the Financial Statementsfor the year ended June 30, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
35.1.4 Movement in the present value of defined benefit obligation
Present value of obligation as at July 1
Current service cost
Interest cost
Benefits paid
Past service cost
Actuarial losses / (gains) on obligation
Present value of obligation as at June 30
2008
Management Non-Management Total
Pension Gratuity Pension Gratuity
2007
Management Non-Management Total
Pension Gratuity Pension Gratuity
(Rupees ‘000) (Rupees ‘000)
1,110,297)
70,378)
118,625)
(65,490)
–
14,262)
1,248,072)
145,145)
14,955)
14,650)
(24,573)
–
8,794)
158,971)
–
–
–
–
–
–
–
31,781)
1,447)
3,496)
–
–
(783)
35,941)
1,287,223)
86,780)
136,771)
(90,063)
–
22,273)
1,442,984)
35.1.5 Amount recognised in the profit and loss account
2008
Management Non-Management Total
Pension Gratuity Pension Gratuity
2007
Management Non-Management Total
Pension Gratuity Pension Gratuity
Current service cost
Interest cost
Expected return on plan assets
Past service cost
Actuarial (gain) / loss recognised during the year
Employee contributions
Expense / (reversal) for the year
Actual return on plan assets
(Rupees ‘000) (Rupees ‘000)
70,378)
118,625)
(134,060)
–
(1,338)
(9,209)
44,396)
123,393)
14,955)
14,650)
(8,918)
–
4,160)
–
24,847)
4,400)
–
–
(753)
–
310)
–
(443)
(1,207)
1,447)
3,496)
(7,224)
1,096)
(1,474)
–
(2,659)
443)
86,780)
136,771)
(150,955)
1,096)
1,658)
(9,209)
66,141)
127,029)
1,030,062)
65,859)
106,973)
(77,442)
–
(15,155)
1,110,297)
139,141)
14,188)
13,281)
(32,712)
–
11,247)
145,145)
4
–
–
–
–
(4)
–
27,971)
1,315)
2,989)
(502)
1,096)
(1,088)
31,781)
1,197,178)
81,362)
123,243)
(110,656)
1,096)
(5,000)
1,287,223)
65,859)
106,973)
(117,130)
322)
(8,726)
47,298)
132,262)
14,188)
13,281)
(8,871)
3,730)
–
22,328)
9,221)
–
–
(703)
145)
–
(558)
554)
1,315)
2,989)
(6,381)
(1,454)
–
(3,531)
5,957)
81,362)
123,243)
(133,085)
2,743)
(8,726)
65,537)
147,994)
35.1.6 Movement in the asset / (liability) recognised in the balance sheet
2008
Management Non-Management Total
Pension Gratuity Pension Gratuity
2007
Management Non-Management Total
Pension Gratuity Pension Gratuity
Balance at July 1
Net (charge) / reversal for the year
Contributions by the Company
Transfers between funds
Asset in respect of staff retirement benefit schemes
Current account balance with funds
Balance in respect of secondedstaff
(Rupees ‘000) (Rupees ‘000)
80,416)
(44,396)
63,241)
–
99,261)
2,649)
(15,475)
86,435)
15,018)
(24,847)
19,332)
–
9,503)
12,200)
(5,413)
16,290)
17,615)
2,659)
568)
–
20,842)
477)
–
21,319)
6,844)
443)
–
–
7,287)
–
(442)
6,845)
119,893)
(66,141)
83,141)
–
136,893)
15,326)
(21,330)
130,889)
2008
Management Non-Management Total
Pension Gratuity Pension Gratuity
2007
Management Non-Management Total
Pension Gratuity Pension Gratuity
Defence Saving Certificates (DSC's)
Others (PIB's,TFC's etc)
Mutual Fund Units
Cash
Receivable and (payable) balances
35.1.7 Plan assets comprised of the follow ing
2008
Management Non-Management Total
Pension Gratuity Pension Gratuity
2007
Management Non-Management Total
Pension Gratuity Pension Gratuity
Defence Saving Certificates (DSC's)
Others (PIB's,TFC's etc)
Mutual Fund Units
Cash
Receivable and (payable) balances
(Rupees ‘000) (Rupees ‘000)
(Percentage Composition) (Percentage Composition)
–
52,496)
40,388)
7,107)
(17,211)
82,780)
153,804)
1,084,048)
102,962)
28,054)
(23,179)
1,345,689)
2,745)
2,316)
2,232)
2)
(8)
7,287)
–
27,111)
10,463)
29,350)
(2,165)
64,759)
156,549)
1,165,971)
156,045)
64,513
(42,563)
1,500,515)
11%
81%
8%
2%
(2% )
100%
0%
63%
49%
9%
(21% )
100%
38%
32%
30%
0%
0%
100%
0%
42%
16%
45%
(3% )
100%
10%
78%
11%
4%
(3% )
100%
65,777)
(47,298)
61,937)
–
80,416)
37,835)
(17,322)
100,929)
20,023)
(22,328)
17,323)
–
15,018)
17,274)
(4,260)
28,032)
13,314)
3,531)
540)
230)
17,615)
(7,061)
–
10,554)
6,516)
558)
–
(230)
6,844)
(12,060)
–
(5,216)
105,630)
(65,537))
79,800)
–
119,893)
35,988)
(21,582)
134,299)
13,135)
24,816)
26,443)
37,134)
(17,907)
83,621)
647,104)
129,086)
63,300)
409,578)
(33,732)
1,215,336)
2,473)
2,248)
1,999)
281)
(157)
6,844)
38,922)
–
–
29,749)
(3,273)
65,398)
701,634)
156,150)
91,742)
476,742)
(55,069)
1,371,199)
53%
11%
5%
34%
(3%)
100%
16%
30%
32%
44%
(22%)
100%
36%
33%
29%
4%
(2%)
100%
60%
0%
0%
45%
(5%)
100%
51%
11%
7%
35%
(4%)
100%
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Notes to the Financial Statementsfor the year ended June 30, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
35.1.8 The expected return on plan assets was taken as 13.25%, which is representative of yields on long-termGovernment bonds and term deposits with banks. Due to the increased volatility in the equity prices inrecent months, there is no clear indication of return on equity. It is therefore assumed that the yield onequity matches that on debt.
35.1.9 Expected contributions to the above schemes for the year ending June 30, 2008 is Rs 134 million.
35.1.10 The balances due from / payable to the funds are interest free and repayable on demand.
35.1.11 The break-up of balance receivable from staff retirement benefit schemes is:
Total balance receivable in respect of defined benefit schemesTotal balance receivable in respect of defined contribution schemes
35.2 Post retirement medical benefits
The Company also provides post retirement medical benefits to its management staff. Actuarial valuationof the scheme is carried out annually. The amount recognised in the balance sheet is based on a valuationcarried out as at the balance sheet date and is as follows:
2008
(Rupees `000)
2007
130,88912,440
143,329
134,29962,875
197,174
2008 2007
- Discount rate- Expected long-term rate of increase in medical cost
13.3%7.9%
11.0%5.7%
35.2.1 Actuarial assumptions
2008
(Rupees `000)
2007
Present value of defined benefit obligationLess: Fair value of plan assets
Actuarial losses to be recognised in future periods in accordance with the Company's accounting policy
Liability recognised at June 30
38,503 –
38,503
10,905
27,598
38,304 –
38,304
12,403
25,901
The following significant assumptions were used in the valuation of this scheme:
35.2.2 Amount recognised in the balance sheet
2008
(Rupees `000)
2007
Balance at July 1Add: Charge for the yearLess: Payments during the year
Balance at June 30
Current service costInterest costActuarial loss recognised during the year
25,901) 5,622)
(3,925)
27,598)
983) 4,003)
636)
5,622)
24,025) 5,255)
(3,379)
25,901)
907) 3,726)
622)
5,255)
35.2.3 Movement in the liability recognised in the balance sheet
35.2.4 Amount recognised in the profit and loss account
35.2.5 The effect of a 1% movement in the assumed medical cost trend rate is as follow s:
Increaseof 1%
Decreaseof 1%
7924,462
(629) (3,696)
Additional expense / (income)- Effect on the aggregate of the current service cost and interest cost for the year- Effect on the defined benefit obligation as at June 30, 2008
35.3 Five year data on surplus / deficit of the plans and experience adjustments
The Company amortises gains and losses over the expected remaining service of current plan members.The following table shows the total pension, gratuity and post retirement medical benefit obligation at theend of each year and the proportion thereof resulting from experience loss during the year, Similarly, itshows the total pension and gratuity plan assets at the end of each year and the proportion thereofresulting from experience gain during the year.
2008 2007 2006 2005 2004 ----------------------------- (Rupees '000) -------------------------------
Present value of defined benefit obligation 1,481,487 1,325,527 1,233,387 1,076,567 956,352Fair value of plan assets 1,500,515 1,371,199 1,245,335 1,099,066 1,111,049
Surplus 19,028 45,672 11,948 22,499 154,697
Experience adjustments:Loss on obligation 1 - 2 7 2(Loss) / gain on plan assets (2) 1 1 (7) 3
----------------------------------- (Percentage) -------------------------------
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Notes to the Financial Statementsfor the year ended June 30, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
35.4 The value of investments made by the staff retirement funds operated by the Company as per their lastaudited financial statements are as follows:
Shell Pakistan Management Staff Provident FundShell Pakistan Staff Provident FundShell Pakistan Labour Provident FundShell Pakistan Management Staff Gratuity FundShell Pakistan Labour and Clerical Staff Gratuity FundShell Pakistan Management Staff Pension FundShell Pakistan Staff Pension Fund
394,17116,53183,02654,87455,795
1,235,1967,170
2007
(Rupees `000)
2006
December 31
35.5 Aggregate amount charged in these financial statements in respect of the staff retirement benefit schemesare as follows:
2008
(Rupees `000)
2007
- in respect of pension and gratuity schemes- in respect of provident funds- in respect of post retirement medical benefit schemes
66,14123,5185,622
95,281
65,537 21,834
5,255
92,626
391,791 14,005 73,418 85,098 62,409
1,099,001 6,470
35.6 Share based payment
The Shell Group had a Performance Share Plan (PSP) which was launched in 2005. Under the PSP a conditionalnumber of Royal Dutch Shell Plc. (RDS) shares were awarded to some of the Company's employees. Underthis scheme if certain Performance Conditions of Shell Group are met, a number of shares may be awardedto the participants at the end of the three year performance period. These shares vested with employees in thecurrent year and the benefit provided is recharged by RDS to Shell Pakistan Limited. The cost of this benefithas been disclosed in note 36.
In the current year, effective January 1, 2008, the Shell Group has launched another PSP for three years withsimilar conditions under which shares may be awarded at the completion of performance period. No amounthas been accrued in the financial statements in respect of this plan as it is presently not determinable.
36. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES
2008
ChiefExecutive
Directors Executives
2007
ChiefExecutive
Directors Executives
36.1 Aggregate amount charged in the financial statements for the year for fee to 5 Non-Executive Directorswas Rs 250,000 (2007: 5 Non-Executive Directors Rs 175,000). In addition, an amount of Rs 3,848 millionwas charged in these financial statements in respect of share based compensation to the former ChiefExecutive of the Company.
36.2 In addition, the Chief Executive, Directors and some of the Executives were also provided with free use ofCompany maintained cars and the Chief Executive was also provided with Company provided furnishedaccommodation.
(Rupees ‘000)
Short-term employee benefitsManagerial remuneration (including bonus)Housing: - Rent - Utilities - Other items
Medical expensesShares based payment
Post-employment benefitsCompany's contribution to pension,gratuity and provident fund
Number of persons at year end
14,287
3,136 1,461 3,421
1061,835
24,246
–
24,246
1
20,548
– 1,040
458
234 2,884
25,164
2,993
28,157
3
660,201
– 34,730
5,048
7,922 10,923
718,824
90,500
809,324
443
11,451
1,912 916
2,569
509 –
17,357
210
17,567
1
476,024
– 26,601
4,821
11,021 –
518,467
64,307
582,774
271
22,032
– 753 228
237 –
23,250
2,279
25,529
4
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Notes to the Financial Statementsfor the year ended June 30, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
37. RELATED PARTY TRANSACTIONS
(i) Purchases
(ii) Sales
(iii)Other items
- Technical service fee charged
- Trade marks and manifestations license fee charged
- Computer expenses charged (Global Infrastructure Desktop charges)
- Expenses recovered from related parties
- Other expenses charged by related parties
- Legal charges
80,999,199
3,091,364
–
162,118
80,821
82,806
111,088
395
49,986,635
6,792,163
–
65,242
87,869
53,021
90,164
2,369
37.1 In addition to this, the Company also paid pipeline transportation expenses amounting to Rs 969.860million (2007: Rs. 1,012.743 million) to PAPCO which is an associate of the company.
37.2 Purchases from / sales to related parties are made on commercially agreed terms negotiated by the Company.The related outstanding balances have been disclosed in relevant notes to these financial statements.
37.3 Technical services include advice and assistance on the implementation of strategies and in the Company'soperations. The costs for these services and the fees have been determined on the basis of agreementsbetween the Company and related Shell Group companies based on an agreed methodology.
37.4 Trade marks and manifestations license fee and Global Infrastructure Desktop charges are based on theagreements entered into by the Company.
37.5 Transactions and balances with staff retirement benefit schemes are disclosed in note 35 to these financialstatements.
37.6 Transactions and outstanding balance in respect of the Workers' Profit Participation Fund are disclosed in note 22.3 to these financial statements.
37.7 Expenses recovered from / charged by related parties are based on actuals. The related outstanding balanceshave been disclosed in notes 14 and 22.1 to these financial statements.
37.8 Key management personnel are those persons having authority and responsibility for planning, directingand controlling the activities of the company directly or indirectly. The Company considers its Chief Executiveand Executive Directors to be key management personnel.
Particulars of transactions entered with key management personnel are as per the terms of their employmentand are disclosed in note 3.4, 5 and 36 to these financial statements.
Other related parties
2008 2007
(Rupees ‘000)
–
–
583,169
–
132,599
–
–
–
–
539,682
–
–
150,798
–
–
Parent company
2008 2007
Note
29
29
Note 2008
(Rupees `000)
2007
15
2021
3.23231143130
14.330 & 31
4.13032
38.1
38. CASH GENERATED FROM OPERATIONS
Profit before taxation
Adjustment for non-cash charges and other items:
Depreciation / amortisation expense charged to the profit and loss accountAccretion expense in respect of asset retirement obligationProvision for impairment of trade debtsProvision for impairment of other receivablesFixed assets written offReversal of provision for impairment of trade debtsReversal of provision for impairment of other receivables(Profit) / loss on disposal of property, plant and equipmentShare of profit of associateMark-up on short-term depositsMark-up on short-term running finances and loansWorking capital changes
38.1 Work ing capital changes
Decrease / (increase) in current assetsStores and sparesStock-in-trade (net)Trade debtsLoans and advances (net)Trade deposits and short-term prepayments (net)Other receivables (net)
Increase / (decrease) in current liabilities Trade and other payables
(excluding unclaimed dividends)
39. CASH AND CASH EQUIVALENTS
Cash and bank balancesShort-term running finances utilised under mark-up arrangementsShort-term loans
7,723,340)
679,632) 5,141)
513,820)206,006)62,141)
(123,836)(7,802)
(70,230)(212,248)(21,765)873,744)
(6,594,929)
3,033,014)
16,958)(9,851,469)
(953,077)(4,309)
(67,625)(305,949)
(11,165,471)
4,570,542)
(6,594,929)
872,414)
(4,338,339)(1,500,000)
(4,965,925)
378,736)
588,674)5,623)
282,389)7,802)–––
15,505)(122,250)
(5,708)784,321)324,616)
2,259,708)
(1,421)1,735,832)
698,013)(899)
27,078)(2,017,123)
441,480)
(116,864)
324,616)
814,530)
(725,836)(6,810,000)
(6,721,306)
Annual Report2OO8Shell Pakistan Limited76
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 77Annual Report2OO8
Notes to the Financial Statementsfor the year ended June 30, 2008
Notes to the Financial Statementsfor the year ended June 30, 2008
40. FINANCIAL ASSETS AND LIABILITIES
40.1 The Company's exposure to interest rate risk on its financial assets and liabilities at the balance sheet dateare summarised as follows:
Financial assets
InvestmentsLoans and advancesDepositsTrade debtsOther receivablesCash and bank balances
Financial liabilities
Liabilities against assets subject to finance leaseRunning finance utilised under mark-up arrangementsLoansTrade and other payablesMark-up accrued
On balance sheet gap (a)
2008
(Rupees ‘000)
Non Interest / Mark-up bearing
Maturity
upto one
year
Maturity
after one
year
Subtotal Total
Interest / Mark-up bearing
Maturity
upto one
year
Maturity
after one
year
Subtotal
a) The on balance sheet gap represents the net amounts of on-balance sheet items.
Financial assets
InvestmentsLoans and advancesDepositsTrade debtsOther receivablesCash and bank balances
Financial liabilities
Liabilities against assets subject to finance leaseRunning finance utilised under mark-up arrangementsLoansTrade and other payablesMark-up accrued
On balance sheet gap (a)
– 41,883)
–328,227
– 770,408)
812,291)
32,203)
725,836) 6,810,000)
– –
7,568,039)
(6,755,748)
– 61,580
– – – –
61,580
547
– – – –
547
61,033
– 103,463)
– – –
770,408)
873,871)
32,750)
725,836) 6,810,000)
– –
7,568,586)
(6,694,715)
– 837)
–)4,251,325)
4,165,412) 44,122)
8,789,923)
–
– –
11,126,427) 131,580)
11,258,007)
(2,468,084)
5,000 120,999 29,390
– – –
155,389
–
– – – –
–
155,389
5,000) 121,836) 29,390)
4,579,552) 4,165,412)
44,122)
8,945,312)
–
– –
11,126,427) 131,580)
11,258,007)
(2,312,695)
5,000) 225,299)
29,390) 4,579,552) 4,165,412)
814,530)
9,819,183)
32,750)
725,836) 6,810,000)
11,126,427) 131,580)
18,826,593)
(9,007,410)
2007
(Rupees ‘000)
Non Interest / Mark-up bearing
Maturityupto one
year
Maturityafter one
yearSubtotal Total
Interest / Mark-up bearing
Maturityupto one
year
Maturityafter one
yearSubtotal
–
42,259)
–
291,541)
–
817,271)
1,151,071)
56,742)
4,338,339)
1,500,000)
–
–
5,895,081)
(4,744,010)
–
102,924)
–
426,461)
–
817,271)
1,346,656)
58,958)
4,338,339)
4,000,000)
–
–
8,397,297)
(7,050,641)
–
60,665)
–
134,920)
–
–
195,585)
2,216)
–
2,500,000)
–
–
2,502,216)
(2,306,631)
–
4,770)
–
4,613,399)
4,205,504)
55,143)
8,878,816)
–
–
–
17,026,699)
157,268)
17,183,967)
(8,305,151)
5,000
85,716
59,009
–
–
–
149,725
–
–
–
–
–
–
149,725
5,000)
90,486)
59,009)
4,613,399)
4,205,504)
55,143)
9,028,541)
–
–
–
17,026,699)
157,268)
17,183,967)
(8,155,426)
5,000)
193,410)
59,009)
5,039,860)
4,205,504)
872,414)
10,375,197)
58,958)
4,338,339)
4,000,000)
17,026,699)
157,268)
25,581,264)
(15,206,067)
The effective interest / mark-up rates for the monetary financial assets and liabilities are mentioned in therespective notes to the financial statements.
40.2 Financial risk management objectives and policies
The Company finances its operations through equity, borrowings and management of working capitalwith a view to maintaining an appropriate mix between various sources of finance to minimise risk.Taken as a whole, the Company's risk arising from financial instruments is limited as there is no significantexposure to price and cash flow risk in respect of such instruments.
40.2.1 Credit risk
Credit risk represents the accounting loss that would be recognised at the reporting date if counter partiesfailed completely to perform as contracted.
The Company’s credit risk is primarily attributable to its receivables. Out of the financial assets aggregatingRs 10,375.197 million (2007: Rs 9,819.183 million) the financial assets subject to credit risk amountto Rs 10,320.054 million (2007: Rs 9,775.061 million). The Company manages credit risk of receivablesthrough the monitoring of credit exposures, limiting transactions with customers and continuing assessmentof the credit worthiness of customers. Credit risk for balances at bank is limited by dealing with variousbanks with reasonably high credit rating.
Significant receivable balances relate to the balances due from the Government of Pakistan (includingits related agencies) and balances due from related parties. The Company believes that it is not exposedto any specific credit risk in respect of these balances.
40.2.2 Currency risk
Foreign currency risk arises mainly where payables exist due to imports of goods and transactions withforeign related parties as well as trade receivables from foreign related parties. The Company obtainsforward exchange cover, where necessary and permissible, to hedge foreign currency exposure.
40.2.3 Liquidity risk
Liquidity risk is the risk that an enterprise will encounter difficulties in raising funds to meet commitmentsassociated with financial instruments.
Through its treasury function, the Company continually monitors its liquidity position and ensuresavailability of funds by maintaining flexibility in funding by keeping committed credit lines available.
During the course of the year, the Company faced unprecedented liquidity issues on account of delayin settlement of Price Differential Claims (PDC) recoverable from Government of Pakistan (GoP), wherebythe Company had to enhance its borrowing limits with Commercial banks. The Company has vigorouslyengaged with the concerned stakeholders at various forums for the early recovery and settlement ofthese receivables. As at June 30, 2008 the GoP has settled all outstanding claims of PDC upto June 15,2008.
40.2.4 Interest rate risk
Interest risk arises from possibility that changes in interest rate will affect the value of financial instruments.The company is not materially exposed to interest rate changes.
Annual Report2OO8Shell Pakistan Limited78
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 79Annual Report2OO8
40.3 Capital Risk Management
The Company's prime objective when managing capital is to safeguard its ability to continue as a goingconcern in order to provide adequate returns for shareholders and benefits for other stakeholders and tomaintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paidto shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Company monitors capital on the basis of the gearing ratio. Thisratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cashand bank balances. Total capital is calculated as equity as shown in the balance sheet plus net debt.
Total BorrowingsLess: Cash and bank balances
Net DebtTotal Equity
Total Capital
Gearing Ratio
40.4 Financial risk management objectives and policies
The Company finances its operations through equity, borrowings and management of working capital witha view to maintaining an appropriate mix between various sources of finance to minimise risk. Taken asa whole, the Company's risk arising from financial instruments is limited as there is no significant exposureto price and cash flow risk in respect of such instruments.
40.5 Fair value of financial instruments
The carrying value of financial instruments reflected in the financial statements approximate their fair values.
41. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements in conformity with approved accounting standards requires the useof certain critical accounting estimates. It also requires management to exercise its judgement in the processof applying the Company's accounting policies. Estimates and judgements are continually evaluated andare based on historical experience, including expectations of future events that are believed to be reasonableunder the circumstances. The areas where various assumptions and estimates are significant to the Company'sfinancial statements or where judgement was exercised in application of accounting policies are as follows:
i) Provision for impairment of trade debts and other receivables (note 11 and note 14);ii) Asset retirement obligations (note 19);iii) Taxation (note 33); andiv) Accounting for staff retirement benefit schemes (note 35).
(Rupees ‘000)
2008 2007
Notes to the Financial Statementsfor the year ended June 30, 2008
42. CORRESPONDING FIGURES
For better presentation the following significant reclassifications in the corresponding figures have been made:
Description
Long-term debtors
Workers’ profit participation fund
Workers’ welfare fund
Exchange loss
Provision for impairment oftrade debts
Other receivables written off
Auditors’ remuneration
Loss on disposal of property,plant and equipment
Donations
43. DIVIDENDS
Subsequent to the year end, the Board of Directors of the Company in their meeting held on August 11,2008 have proposed a final cash dividend for the year ended June 30, 2008 of Rs 40.00 per share(400%). This is in addition to the interim cash dividend of Rs 10.00 per share resulting in a total cashdividend for the year of Rs 50.00 per share (2007: Rs 16.00 per share) amounting to Rs 2,739.516million (2007: Rs 876.645 million). The Directors have also recommended a stock dividend through theissue of bonus shares in the proportion of 1 share for every 4 shares held (25%). The bonus shares, soissued shall not be eligible for the final cash dividend declared for the year ended June 30 2008. Theapproval of the members for the final cash dividend and proposed bonus issue will be obtained in theAnnual General Meeting to be held on September 25, 2008.
44. GENERAL
Figures have been rounded off to the nearest thousand.
45. DATE OF AUTHORISATION
These financial statements were authorised for issue on August 11, 2008 by the Board of Directors ofthe Company.
Head of account of thefinancial statements for theyear ended June 30, 2007
Trade debts (note 11)
Profit and loss account
Profit and loss account
Finance cost (note 32)
Administrative and marketingexpenses (note 29)
Administrative and marketingexpenses (note 29)
Administrative and marketingexpenses (note 29)
Administrative and marketingexpenses (note 29)
Administrative and marketingexpenses (note 29)
Head of account of thefinancial statements for theyear ended June 30, 2008
Long-term debtors (note 7)
Other operating expenses (note 31)
Other operating expenses (note 31)
Other operating expenses (note 31)
Other operating expenses (note 31)
Other operating expenses (note 31)
Other operating expenses (note 31)
Other operating expenses (note 31)
Other operating expenses (note 31)
(Rupees ‘000)
328,227
15,569
10,721
31,821
282,389
834
3,448
15,505
17,691
Notes to the Financial Statementsfor the year ended June 30, 2008
8,397,297)
(872,414)
7,524,883)
13,611,638)
21,136,521)
35.6%
7,568,586)(814,530)
6,754,056)9,460,771)
16,214,827)
41.7%
Zaiviji Ismail bin AbdullahChairman & Chief Executive
Farrokh K. CaptainDirector
Annual Report2OO8Shell Pakistan Limited80
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 81Annual Report2OO8
Attendance at Board Meetingsfor the year ended June 30, 2008
Pattern of Shareholdingfor the year ended June 30, 2008
Number ofShares Held
8,016,484881,793
2,446,496551,71465,382
944,16441,699,176
142,14542,959
54,790,313
* This category represents the foreign shareholding of The Shell Petroleum Company Ltd., London.
** This category represents shareholders of Bangladesh, whose dividend is paid to the Administrator,Abandoned Properties Organisation, Government of Pakistan.
Shareholding
67,886573,920580,079
1,811,848942,568498,877235,752355,743268,774161,57036,675
129,80195,363
105,022170,717186,20065,001
145,500175,73796,718
100,212215,600129,687135,400284,520173,000178,202220,000232,137249,312262,776274,885375,740413,725548,375812,968
1,780,84741,699,17654,790,313
Total Numberof Shares Held
100500
1,0005,000
10,00015,00020,00025,00030,00035,00040,00045,00050,00055,00060,00065,00070,00075,00090,000
100,000105,000110,000130,000140,000145,000175,000180,000220,000235,000250,000265,000275,000380,000415,000550,000815,000
1,785,00041,700,000
To
1101501
1,0015,001
10,00115,00120,00125,00130,00135,00140,00145,00150,00155,00160,00165,00170,00185,00195,001
100,001105,001125,001135,001140,001170,001175,001215,001230,001245,001260,001270,001375,001410,001545,001810,001
1,780,00141,695,001
From
1,6092,000
79483813641131610
51322331221121121111111111111
5,502
Number ofShareholders
––––––––––––––––––––––––––––––––––––
Percentage %
14.631.614.461.010.121.72
76.110.260.08
100.00
5,389219
6048119
5,502
ShareholdersCategory
IndividualsInvestment CompaniesInsurance CompaniesJoint Stock CompaniesModaraba CompaniesFinancial InstitutionsAssociated Companies*Abandoned Properties**Others
Number ofShareholders
Mr. Zaiviji Ismail bin Abdullah 6 6
Mr. Yousuf Ali 6 6
Mr. Akber Aziz 6 6
Mr. Saw Choo-Boon 6 2
Mr. Farrokh K. Captain 6 5
Mr. Hussain Dawood 4 1
Mr. Ijaz A. Khan 6 5
Mr. M. Azam Khan 6 6
Mr. Leon Menezes 6 6
Mr. Manzoor H. Noon 6 3
Mr. Asif Sindhu 6 6
Mr. Fatehali W. Vellani 2 2
*held during the period concerned Director was on the Board.
Total No.of Board Meetings*
No. of BoardMeetings AttendedName of Directors
Annual Report2OO7Shell Pakistan Limited82
Pattern of Shareholdingfor the year ended June 30, 2008
Additional Information
Shareholders’ Category
Associated companiesThe Shell Petroleum Company Limited, London
NIT and ICPNational Investment TrustNational Bank of Pakistan Trustee DepartmentInvestment Corporation of Pakistan
DirectorsMr. Farrokh K. CaptainMr. Imran R. IbrahimMr. Zaffar A. KhanMr. Badaruddin F. VellaniMs. Shahnaz Wazir Ali
Chief Executive Officer
Directors’ / CEO’s spousesMs. Samina
w/o. Mr. Imran R. Ibrahim
Executives
Public sector companies and corporations
Banks, Development Finance Institutions, Non-bank ing FinanceInstitutions, Insurance Companies,Modarabas and Mutual Funds
Shareholders holding 10% or more voting interestThe Shell Petroleum Company Limited, London
1
–1–
11111
–
1
7
3
39
1
Numberof Shares Held
Number ofShareholders
41,699,176
–1,835
–
375,853781
3,125100
5
–
1,085,030
3,121
2,507,424
1,830,411
41,699,176
as of December 31, 2007
Shell Pakistan Limited
Accounts of Subsidiary Companies
Annual Report2OO8Shell Pakistan Limited84
Shell Pakistan Limited 12Annual Report2OO7Shell Pakistan Limited 85Annual Report2OO8
Shell Pakistan Provident Trust (Pvt.) Ltd.
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet of Shell Pak istan Provident Trust (Private) Limited as at December 31, 2007 togetherwith the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanationswhich, 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 statement in conformity with the approved accounting standards and the requirements of the Companies Ordinance,1984. Our responsibility is to express an opinion on the statement based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we planand perform the audit to obtain reasonable assurance about whether the above said statement is free of any material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statement. An auditalso includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overallpresentation of the above said statement. We believe that our audit provides a reasonable basis for our opinion and, after dueverification, 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 together with the notes thereon has been drawn up in conformity with the Companies Ordinance, 1984, andis in agreement with the books of account;
ii) no business was conducted, expenditure incurred or investments made during the year;
c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet together withthe notes thereon conforms with approved accounting standards as applicable in Pakistan, and, gives the information required bythe Companies Ordinance, 1984, in the manner so required and gives a true and fair view of the state of the company's affairsas at December 31, 2007; and
d) in our opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980).
A.F.Ferguson & Co.Chartered AccountantsKarachi: August 20, 2008
AUTHORISED CAPITAL10 ordinary shares of Rs 100 each
ISSUED, SUBSCRIBED AND PAID-UP CAPITAL2 ordinary shares of Rs 100 each fully paid in cash
ASSETSCash in hand
Balance Sheet as at December 31, 2007
Note 1: The Board of Directors of the company has decided to liquidate the company and the process of liquidation has commenced.
Note 2: As there were no transactions during the year, no profit and loss account has been prepared.
1,000
200
200
1,000
200
200
2007(Rupees)
2006(Rupees)
Zaiviji Ismail bin AbdullahChairman & Chief Executive
Leon MenezesDirector
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet of Shell Pak istan Pensions Trust (Private) Limited as at December 31, 2007 togetherwith the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanationswhich, 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 statement in conformity with the approved accounting standards and the requirements of the Companies Ordinance,1984. Our responsibility is to express an opinion on the statement based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we planand perform the audit to obtain reasonable assurance about whether the above said statement is free of any material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statement. An auditalso includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overallpresentation of the above said statement. We believe that our audit provides a reasonable basis for our opinion and, after dueverification, 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 together with the notes thereon has been drawn up in conformity with the Companies Ordinance, 1984, andis in agreement with the books of account;
ii) no business was conducted, expenditure incurred or investments made during the year;
c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet together withthe notes thereon conforms with approved accounting standards as applicable in Pakistan, and, gives the information required bythe Companies Ordinance, 1984, in the manner so required and gives a true and fair view of the state of the Company's affairsas at December 31, 2007; and
d) in our opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980).
A.F.Ferguson & Co.Chartered AccountantsKarachi: August 20, 2008
AUTHORISED CAPITAL10 ordinary shares of Rs 100 each
ISSUED, SUBSCRIBED AND PAID-UP CAPITAL2 ordinary shares of Rs 100 each fully paid in cash
ASSETSCash in hand
Balance Sheet as at December 31, 2007
Note 1: The Board of Directors of the company has decided to liquidate the company and the process ofliquidation has commenced.
Note 2: As there were no transactions during the year, no profit and loss account has been prepared.
1,000
200
200
1,000
200
200
2007(Rupees)
2006(Rupees)
Zaiviji Ismail bin AbdullahChairman & Chief Executive
Leon MenezesDirector
Shell Pakistan Pensions Trust (Pvt.) Ltd.
Form of ProxyThe SecretaryShell Pak istan LimitedShell House6, Ch. Khaliquzzaman RoadP.O. Box No. 3901Karachi – 75530
I/We
of in the district of
being a member of Shell Pakistan Limited and holder of
Ordinary Shares as per Share Register Folio(No. of Shares)
No. and/or CDC Participant I. D. No.
and Sub Account No. hereby appoint
of in the district of
or failing him of
as my/our proxy to vote for me/us and on my/our behalf at the Thirty-Ninth Annual General Meeting of the Company
to be held on September 25, 2008 at 10 a.m. and at any adjournment thereof.
Signed this day of 2008.
WITNESSES:
1. Signature
Name
Address
NIC or
Passport No.
2. Signature
Name
Address
NIC or
Passport No.
Note:
1. A member entitled to be present and vote at the Meeting may appoint a proxy to attend. A proxy is entitled tospeak, vote, demand or join in demanding a poll. A proxy need not be a member of the Company.
2. Proxies in order to be effective must be received at the Registered Office of the Company not less than 48 hoursbefore the Meeting.
3. CDC Shareholders and their Prox ies must each attach an attested photocopy of their National Identity Cardor Passport with this proxy form.
Signature
(Signature should agree with the specimen
signature registered with the Company)