10 Years at a Glance

Ingredients Innovation

Quality Solutions Team Work Technology

m

er

c fa tis a

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2010

2009

2008

2007

2006

Cu st o
2005

2004

2003

2002*

2001

Net Sales
Rs. Million

13,913 11,428 10,747 10,615 3,298 24 1,838 582 924 1,000 8,993 2,435 21 1,297 848 831 900 8,006 2,741 26 1,492 606 924 1,000

7,578 5,480 2,098 28 1,089 114 831 900

6,127 4,556 1,571 26 809 122 647 700 87.62

5,194 3,997 1,198 23 615 302 323 350 66.57

4,534 3,259 1,275 28 670 448 286 310 72.51

4,031 3,001 1,030 26 521 415 259 280 56.43

4,390 3,329 1,061 24 527 239 259 280 57.06

3,126 2,345 781 25 347 121 134 145 37.62

Cost of Sales
Rs. Million

Gross Profit
Rs. Million

%age of Sales Profit After Tax

Rs. Million

Capital Expenditure
Rs. Million

Dividend Amount
Rs. Million

Dividend Percentage
Rupees

Earnings per Share 198.99 140.43 161.57 117.92

* Data for 15 months

Annual Report

for the year ended December 31, 2010

In the name of Allah The Most Merciful, The Compassionate

Contents
02 03 06 15 16 17 18 24 26 27 28 29 30 31 32 35 36 37 38 61 Company Information Notice of Meeting Chief Executives Review Major Events 2010 Horizontal Analysis - P&L and B / S Vertical Analysis - P&L and B / S Directors Report Forward Looking Statements Stakeholders Information Summary of Cash Flow Statements Statement of Value Added & its Distribution Review Report Statement of Compliance Auditors Report Balance Sheet Statement of Comprehensive Income Cash Flow Statement Statement of Changes in Equity Notes to the Financial Statements Pattern of Shareholding Proxy Form
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34 Profit and Loss Account

Company Information

Chairman John F. Saucier Vice Chairman Rashid Ali Non-Executive Non-Executive

Business Strategy and Planning Committee John F. Saucier Rashid Ali Ansar Yahya Anis A. Khan Shares Transfer Committee Rashid Ali Ansar Yahya Anis A. Khan Sh. Gulzar Hussain Bankers Citibank, N.A. Habib Bank Ltd. Meezan Bank Ltd. MCB Bank Ltd. National Bank of Pakistan Standard Chartered Bank (Pakistan) Ltd. Auditors KPMG Taseer Hadi & Co. Chartered Accountants Lahore Karachi

Shares Registrar FAMCO Associates (Pvt.) Ltd. 1st Floor, State Life Building 1-A, I.I. Chundrigar Road, Karachi-74000: Tel: (92-21) 32427012 - 32425467 Fax: (92-21) 32426752 - 32428310 Registered Office 1st Floor, Finlay House, I.I. Chundrigar Road, Karachi-74000, Pakistan Ph: (92-21) 32442516 32410848 Fax: (92-21) 32428651 Head Office & Shares Department Rakh Canal East Road, Faisalabad, Pakistan Ph: (92-41) 8540121-22-23 Fax: (92-41) 8711016 - 8502197 Website: www.rafhanmaize.com E-mail: corporate@rafhanmaize.com

Chief Executive & Managing Director Ansar Yahya Directors Cheryl K. Beebe Mary A. Hynes Zulfikar Mannoo Mian M. Adil Mannoo Wisal A. Mannoo Anis A. Khan Sh. Gulzar Hussain - Non-Executive Non-Executive Non-Executive Non-Executive Non-Executive Executive Non-Executive Executive

Chief Financial Officer Anis A. Khan Secretary M. Yasin Anwar Audit Committee Cheryl K. Beebe Rashid Ali Zulfikar Mannoo Sh. Gulzar Hussain
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Non-Executive Non-Executive Non-Executive Non-Executive

Legal Advisor M. Ali Seena C/o Surridge & Beecheno, Karachi

Annual Report

for the year ended December 31, 2010

Notice of Meeting

Notice is hereby given that the 118th General Meeting (Annual Ordinary) of the shareholders of Rafhan Maize Products Co. Ltd. will be held on Tuesday, March 29, 2011 at 10:00 a.m. at the Overseas Investors Chamber of Commerce and Industrys Hall, Talpur Road, Karachi to transact the following business: 1. To confirm minutes of the last General Meeting (Annual Ordinary) of the shareholders of the Company held on Monday, March 29, 2010 at Karachi. To receive, consider and adopt the Audited Accounts of the Company for the year ended December 31, 2010 together with the Directors and Auditors Reports thereon. To approve final cash dividend @550% for the year ended December 31, 2010 as recommended by the Board of Directors. To appoint auditors and fix their remuneration. The present auditors Messrs KPMG Taseer Hadi & Co., Chartered Accountants, retire and being eligible, offer themselves for re-appointment. The Board of Directors, on recommendations of the Audit Committee, has proposed appointment of Messrs KPMG Taseer Hadi & Co., Chartered Accountants for the year 2011. By order of the Board M. Yasin Anwar Company Secretary Karachi March 7, 2011

Notes: 1. The Share Transfer Book of the Company will remain closed from 21st to 29th March, 2011 (both days inclusive) and no transfer will be accepted for registration during this period. A member entitled to attend, speak and vote at the meeting shall be entitled to appoint another person as his/her proxy to attend, speak and vote instead of him/ her, and a proxy so appointed shall have such rights with respect to attending, speaking and voting at the meeting as are available to a member. Proxies in order to be effective must be received by the Company not less than 48 hours before the meeting. A proxy need not be a member of the Company. Form of proxy is attached. Shareholders are requested to notify change of address, if any, to Companys Shares Registrar immediately. CDC shareholders desiring to attend the meeting are requested to bring their original Computerized National Identity Cards, Account and Participants ID numbers, for identification purpose, and in case of proxy, to enclose an attested copy of his/her CNIC.

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Vision
To be the Premier Provider of Refined Agriculturally Based Products and Ingredients in the Region.

Mission Statement
To grow business consistently through positive relationship with customers to attain full customer satisfaction and to bring continual improvement by adopting only those business practices which add value to our customers, employees and shareholders.

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Annual Report

for the year ended December 31, 2010

Safety Quality Integrity

Respect

Excellence

Our Core Values

Safety:
Nothing is more important than safety. We have a simple goal: Zero accidents. We have developed a company-wide safety program that applies to all of our facilities around the world, and we monitor and measure our safety performance. We will create and maintain an environment where our people come to work every day trusting that they will be safe, and where our neighbors trust us to act as a responsible member of their communities.

Quality:
Our focus every day is on quality: Quality of the ingredients we make; of the services we provide; and of the relationships that we build. When we do things right, our customers and our colleagues have confidence in us, and that gives us the foundation on which we will continue to build our Company.

Integrity:
Honesty and trust are the foundations of our business. The people of Corn Products International will maintain the highest standards of business conduct, not only because it is expected of them, but because it is the right thing to do. Our customers, employees, shareholders, partners and neighbors can be confident that they are working with people who stand by their products, live up to their promises, keep their word, and do business in an honorable fashion.

Respect:
We operate in an environment of openness, teamwork, trust and mutual cooperation. The global nature of our business and the diversity of our employees are important factors behind our ongoing success. We will create and maintain a culture where our people listen to and learn from one another, and where we treat one another with the dignity that all people deserve.

Excellence:
We will relentlessly pursue excellence in all that we do, continuing to find new, innovative solutions for our customers. We will provide our employees with the tools, training and resources they need to excel.
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Chief Executives Review

It gives me great pleasure to present the Annual Report and review of the performance of your Company for the financial year ended Dec 31, 2010. By the grace of Almighty Allah, your Company has continued its journey on the road to excellence during the year 2010 although the countrys overall economic situation and business environment made business growth difficult.
OPERATING RESULTS ECONOMIC ENVIRONMENT The year 2010 proved to be very challenging for the economy of Pakistan. In the beginning of the year, the economy was on track and performed better than in the previous year. However, the worst flooding ever damaged about one fourth of the countrys agriculture heartland and destroyed over three million bales of cotton resulting in a cumulative loss of about 1.5% to GDP. The severe energy crisis continued to impact the manufacturing sector and overall business activities. Consequently, the countrys economy continued to remain under stress and according to the State Banks projections will miss three targets - GDP growth, fiscal deficit and inflation. Despite better performance of the services sector, GDP growth is expected between 2 to 3% against growth target of 4.5%. Higher cost of imports, energy, commodities products and rising demand significantly contributed to raise the inflation to 16%. The task of economic recovery is difficult but the government is making efforts to restore macroeconomic stability and the confidence of business. Net Sales Net Income after Tax Earnings per Share Rs. (Million) Rs. (Million) Rupees Year ended December 31 2010 2009 13,913 1,838 198.99 11,428 1,297 140.43

By the grace of Almighty Allah, your Company has made steady progress in its financial performance and managed to improve its net sales by 22% as compared to last year. The profit after tax improved to Rs.1,838 million against Rs.1,297 million of last year. Your Company retained its strong position as the supplier of choice by focusing on good management practices, commitment to quality and better marketing mix. BUSINESS REVIEW Your Company has been engaged in a long journey during the last several years to achieve excellence and consistent growth in its business. A major key to our success has been continuous development of innovative ingredients to meet our customers requirements while reducing their cost. Our product portfolio spans three major categories Industrial, Food and Animal Nutrition & Health Ingredients which are supplied to multiple industries.

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Annual Report

for the year ended December 31, 2010

Our brands are our customers preferred choices in the respective categories due to your Companys focus on the changing needs of our customers. We aim to be real business partners and solution providers to our customers through strong business relationships and our continued quest for innovative ways of doing business in order to expand into new markets and product applications. INDUSTRIAL BUSINESS The Company offers a diversified range of products to the Industrial sector. The growth in this sector is the result of sharpening our focus on customers needs, exploring growth opportunities and promoting timely delivery of our products across the country. Our diversified range of regular and modified starches under the brand names of Rafhan , Penetrose , Amisol , Tex-o-Film and Coratex are consumed in textile weaving and processing as most favored ingredients. The textile mills sector has shown recovery from the global demand recession due to progress in its export base. However, short availability of cotton coupled with a drastic increase in prices of cotton yarn, the liquidity crunch and frequent disruptions in electricity and gas supply affected the operation of downstream textile units. Paper and paperboard demand in Pakistan has grown in line with the overall improvement in educational and industrial consumption. Large investments are being made by manufacturers in this sector to enhance the domestic capacities of quality paper and paperboard to meet the growing demand, which in turn helped to generate demand

for your Companys Q-Tac starches. The corrugation and paper sack industries also operated at a normal pace to cover demand for packaging of industrial, electronics and food products; creating demand for the sale of Tex-o-Film and Coragum starches and Dextrins. We consider diversification of our product-line to be a major factor for growth and viability in the ever changing market scenario. Over the years, the Company has continued to focus on innovation in its product line for the industrial sector to fulfill the modern needs of our customers for new applications. FOOD BUSINESS Despite a challenging market situation, your Company was successful in growing the food ingredient business with proactive strategies, service excellence and efforts to expand our customer base. The Company successfully continued to deliver supplies of sweeteners to our customers despite logistical constraints, through our coordinated supply chain. The major part of demand came from the export-led sugar confectionery segment for liquid glucose. However, small and medium confectioners were impacted by growing inflationary pressure on input costs, a rise in utilities prices and frequent power breakdowns. Our food business is characterized by a diversified portfolio of customers. Our product-line covers a wide range of products including Globe and Snowflake starches,
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Chief Executives Review

Rafhan Liquid Glucose, Cerelose Dextrose Monohydrate, Rafhan Liquid Caramel and Golden Syrup. Despite adverse economic factors, demand from major food industries has shown marginal improvement. Your Company continued as a trusted supplier to the food segment. Innovative solutions provided to the food sector have opened the door for other opportunities. Your Company remains committed to further expanding its product-lines for different applications in food products. ANIMAL NUTRITION AND HEALTH BUSINESS The Animal Nutrition ingredients include Prairie Gold and Rafhan Maize Gluten Meals, Buffalo Maize Bran, Rafhan Maize Germ Cake, Enzose Hydrol and Rafhan Crude Corn Oil. This segment delivered good performance because of stable demand from poultry, livestock and aquaculture segments. The poultry business has shown strength despite high inflation. Similarly growth in fish farming and dairy cattle segments continued to drive demand.

During the past few years, the dairy sector has shown progress due to the governments incentives to promote dairy farming to meet a growing demand for milk and milkbased products. Consequently, the use of formula feed rations has shown an upward trend. EXPORTS Your Company continues to align its strategic plans to take advantage of emerging global trends and opportunities. In 2010, the Company has made continuous efforts to increase sales by enhancing its presence in the export markets. At the same time, we remained focused on fresh challenges and opportunities within and beyond the territorial limits of the country. We believe that your Company is well positioned to take advantage of its experience and diversified product-line to explore regional markets. At the same time, our people are constantly engaged in assessing customers needs and market dynamics in export markets to develop our core competencies. RAW MATERIAL - MAIZE For the past 57 years, your Company has won as one of the most recognized and respected name among agrobased industries in Pakistan. We were the first Company to conceptualize and execute the unique idea of spring maize (corn) cultivation. Throughout this long history, the story of success still continues. Your Company is committed to play a leading role in agricultural advancement in Pakistan by providing integrated solutions and agronomical assistance to the farming community to meet growing maize consumption demand in the country. We provide to the farmers expert advice free of cost through our agricultural experts who are based in the field. Our maize production and purchase teams proactively play an integral role by helping farmers to improve crop yield and productivity by sharing best practices. Through our agricultural efforts, we have strategically been able to increase the area under cultivation in addition to improving the crop yields.

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Annual Report

for the year ended December 31, 2010

In our quest for professional excellence, your Company is striving for continuous improvement in the procurement process to cope with the present challenging economic environment where strategic procurement is as important as strategic selling. With growing demand of maize from different sectors, the need for quality raw material and enhancement in yields has become all the more important for a stable supply chain. The year under review was not good for maize cultivation. The spring crop was impacted by unfavorable weather at the time of pollination, and less availability of water for irrigation due to power load-shedding. The winter crop was partly damaged in KP and southern Punjab due to floods. Lower than target production against strong demand from livestock and other sectors pushed the price of maize to all time high level during the year 2010. INVESTMENT Your Company has always followed its policy to invest into new technologies and product innovation which is the core strength of its business. We are well cognizant of market needs and changing business dynamics to continuously enhance our competencies to meet customers needs with higher product standards. Our goal is to provide customized solutions to our customers to support market growth. We are determined to optimize our manufacturing capabilities and to maintain Companys position as one of the leading ingredient suppliers. Over the years, the plant capacity has gradually been increased and your Company now operates from two locations with sufficient manufacturing capacity to meet market demand. Construction work on our third plant in the South region is in progress to meet the growing demand and potential growth in the Southern markets. Your Company has embarked upon an expansion program and spent an amount of Rs. 582 million during the year 2010.

We are confident that continued investment in our people and technologies would enable us to achieve our strategic goals. We shall continue to pursue our expansion and diversification projects in an anticipation to meet the growing demand from local resources. OPERATIONS Our strategies have repeatedly proven effective at achieving sustained and quality output from our plants. This is a result of our commitment towards operational efficiency of manufacturing facilities. Our plants have shown a solid production performance over the years driven by continuous production enhancement, process optimization and efficiency improvements in all plants. We have equipped our plants with state-of-the-art facilities which combine competent people, technology and management system to achieve profitable growth in line with our growth strategy from year over year. Multiple steps were taken to recover production losses due to energy shortage in the country and several energy saving measures were taken to improve energy optimization. Processes were reengineered and employees trained for coordinated efforts and teamwork to enhance productivity. Extended electricity and gas load-shedding affected the overall productivity. Each rupee of the investment was spent in the right place. However, your Company maintained its momentum to produce according to market demand and customer needs which helped maintain market leadership. The management developed a system for close monitoring of critical and important operations and took timely versatile measures to reduce production losses and improve/maintain efficiency of machines. INTEGRATED QUALITY AND ENVIRONMENTAL MANAGEMENT SYSTEM Quality and Safety are key indicators in our core values and, therefore, are of high priority at all levels. Quality
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Chief Executives Review

management is an integral part of our business strategy. We have been able to consistently achieve the level of quality required to satisfy our customers and to pursue further improvements. Our quality policy reflects our commitment to quality. The satisfaction of our customers is the measure for the quality of our products and services. We recognize that our strength lies in the strength of our customers and are committed to provide them with best quality and service. Product quality is consistently maintained and monitored at every stage. All processes are consistently monitored, measured and evaluated to guarantee a consistent high level of performance. The Company has already implemented ISO certification at all departments and facilities. During this year, certification of QMS to its new version ISO-9001:2008 was achieved and also qualified for Surveillance Audits of EMS, OHSAS and Halal certification. Recertification was also achieved without any non conformity for OHSAS 18001. We endeavor to maintain this record in the future. The working on implementation of FSMS ISO-22000 has been completed and certification process is targeted to be completed by the end of the current year. Furthermore, in-house training session and seminars on GMP and HACCP implementation were held, a step forward to achieve ISO-22000:2005 Food Safety Management System certification. Besides, we qualified a number of customers audits from multinational pharmaceutical and food companies and obtained excellent ranking which clearly indicate Companys commitment to its quality management systems. PRODUCT DEVELOPMENT Innovation is a key to our success. We consider diversification of our product-line as a major factor to continue to compete effectively. There is a constant endeavor at all levels of the organization to enhance Companys performance by offering upgraded range of its products and services. Research and Development is an integral part of our operations designed to keep pace with the technological advancement and maintain the
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Companys competitiveness in the market. Our production facilities are supported by our research and development team to meet the particular requirements of our customers. Company R&D capability is one of the principal reasons for the Companys strong business relationship with our valued customers. We want our customers to get the best value of their money spent. Our R&D expertise allows us to actively engage in business development activities and makes us enable to identify and enhance the product portfolio to remain a supplier of choice for our customers. O C C U PAT I O N A L HEALTH & SAFETY Your Company continues to strive for excellence in Occupational Health and Safety. Safety is the most important and first core value of the Company. We are committed to provide clean, healthy and safe conditions to our employees, contractors, visitors and the community in which we operate. A safety culture is inculcated through employees participation in training sessions, inspections, audits, competitions, other activities in compliance with safety procedures and monthly meetings of Safety Committees. The landmarks achieved during the year 2010 are as under: The goal of zero loss time accident during 2010 was successfully achieved. Over 8.3 million exposure hours without a lost workday accident were achieved for Company employees and 6.8 million hours for contractors employees at Rakh Canal Plant. Over

Annual Report

for the year ended December 31, 2010

13.5 million exposure hours without a lost workday accident have been achieved at Cornwala Plant for Company and contractors employees. Safety and Environment Month was observed in October. Safety slogan for the year was Safety Your Lifes Value - Someone is waiting for You. Practical demonstrations and drills on fire fighting, rescue, firstaid and confined space entry were arranged by full participation of employees in coordination with the Civil Defence Department.

The following additional actions were taken in the area of CSR and Sustainability: The Company contributed Rs.1.9 million to the fund for rehabilitation of flood affected people. Contributed in the uplift of countrys economy by providing free agricultural advisory service to the farmers of various provinces. New plant is being set up in the South region for socio economic uplift of the area. Green belts of 49,182 and 32,400 square feet developed outside the plants were maintained for public use. 248 plants were planted in the green fields of neighboring farmers during 2010 making the total 1,098 plants. Public primary school and post office built on your Companys donated land are being maintained. 37 students of different professional institutions were provided internship training and trained professionally and ethically.

ENVIRONMENT STEWARDSHIP PROGRAM Environment Stewardship Program was continued during the year 2010. The management maintained its strong commitment for safe environment in its operations throughout the years. We continued to demonstrate our strong sense of responsibility to the society and environment. Environment slogan for the year was Many Species, One Planet, One Future. For the second time, the Company received the Environment Excellence Award from National Forum for Environment and Health (NFEH) on account of its excellent environmental initiatives and successful implementation of environmental management system. Environment stewardship program was extended to offices, plants and warehouses to improve overall the environment. CORPORATE SOCIAL RESPONSIBILITY (CSR) AND SUSTAINABILITY Your Company is fully conscious of its responsibility towards communities and sustainable environment. The most important part of this responsibility is training of employees on ethical practices, CSR and sustainability to make them good citizens, act as role model for others and ambassadors of good practices in the society.

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Chief Executives Review

HR MANAGEMENT AND EMPLOYEES RELATIONS Our people are our identity and most precious asset. Our employees team consists of a very dynamic and vibrant workforce with a positive attitude to face the emerging challenges. These people are highly professional, ethical and result oriented. We acknowledge that sustained growth and excellence depends on the recruitment, development and retention of competent human resources. Focusing on teamwork in all areas of our business is the key driving force in achieving high performance. Your Companys workforce works tirelessly to translate its strength into tangible results. The workforce is spread all across the country and playing concrete roles to achieve the Companys goals and targets. The ultimate objective is to have the right people in the right place, at the right time with the right pay, and make the Company an employer of choice. The Company has taken a number of measures to develop its employees to meet the challenges of todays competitive business world. We maintain a robust leadership strategy to identify and use a systematic approach by providing growth oriented and varied career opportunities to employees, thereby obtaining exceptional performance. We recognize that continuous improvement in management capability is a vital ingredient for growth. The Company rewarded its 152 employees for their long service ranging from 10-40 years. This year, a number of education scholarships were also given to deserving children of employees to recognize their efforts in achieving excellence in education. TRAINING & MANAGEMENT DEVELOPMENT Over the years, the Company has maintained a distinctive corporate culture driven and influenced by our dedicated and energetic workforce. All Company employees are given appropriate opportunities for self-development and career growth. We strongly believe that training and development is an investment rather than an expense. Formal assessments are carried out for training needs and the employees are exposed to various kinds of training, including, as appropriate, technical courses, management courses, workshops and seminars both at home and abroad. Extensive in-house training and development programs are one of the tools used for development of our winning team. A number of in-house courses and workshops were held including environment and safety. The training program of the Company is designed on annual basis focusing on the customer and business needs and
One day Seminar on GMP & HACCP conducted by Corporate Hygienist, Nestle Pakistan Ltd

SAP Go Live 5th July 2010

Your Company is recognized as the employer of equal opportunity in the area with fairly good compensation and benefits and working conditions. Employees participation in the community welfare activities is encouraged. Green Chemistry - introducing new environment friendly and bio degradable products for supply to customers as replacement of synthetic products. Awareness and participation of employees was enhanced by observing Earth Day, World Hepatitis Day and World Environment Day. A fully equipped dispensary is also maintained to face any emergency and general health care of employees and their dependants. Apprenticeship training is provided to school/college leaving students for 2 to 3 years - 13 apprentices are on roll for practical training.

INFORMATION TECHNOLOGY The Company recognizes information technology is an essential tool for future progress. Marked efforts have been made to introduce a streamlined and integrated IT infrastructure within the organization to support our growing business needs. We make full use of IT resources available. The production facilities and our offices in different locations are connected through dedicated communication channels. In line with our Companys vision and the long term strategy, your Company achieved another milestone by implementing the world renowned SAP/ERP System. The project was started in January 2010 and completed within the seven months planned time. The scope of the new SAP System covers majority of the business areas like Financial Accounting, Sales, General Purchase, Materials Management, Materials Requirement Planning, Production Planning, Quality Management and Plant Maintenance. The new system will provide support to the related business areas to manage and achieve Company goals in more effective way.
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Annual Report

for the year ended December 31, 2010

challenges. As the year 2010 was full of challenges due to escalating costs of energy, raw materials and spares, full emphasis was focused on the cost savings in designing our in-house training programs by including following topics: 1. 2. 3. 4. 5. 6. 7. 8. 9. Standard Operating Procedures Control of Critical Parameters Personal Hygiene at Plant Data Logging and Analysis Energy, Water Conservation and Waste Control Control of Manufacturing Supplies Material Consumptions Development of Spares and Enhancing their Working Life Re-engineering of Processes Root Cause Analysis to Improve Efficiency of Equipment

fast growing challenges. Our team members are aware of their corporate and social responsibilities to promote your Companys reputation as a model corporate citizen. VALUES AND BUSINESS CONDUCT POLICIES Your Companys Core Values and Business Conduct Policies are critical in establishing an ethical and honest culture. The training program titled PILLARS-VALUES AND BUSINESS CONDUCT WORKSHOP continued during the year and a number of sessions were held to promote the understanding of the Core Values and their compliance by employees. The training included all employees, at all levels of the Company. BUSINESS RISKS, CHALLENGES AND FUTURE PROSPECTS The economic outlook for 2011 remains problematic. Some of the major challenges are: low growth, high inflation, rising unemployment, continued fiscal indiscipline, surging food and energy prices, expensive credit to private sector and low foreign investment. Whereas a sustained flow of home remittances from overseas Pakistanis happens to be a consolation, food and oil imports are likely to put pressure on the balance of payments. The State Bank of Pakistan has already revised the inflation rate to 16% which would continue to impact the cost of production. However, the performance of the commodity producing sectors of the economy is expected to improve in the months ahead. Large scale manufacturing growth is expected to turn positive as strong agri-prices support demand and with the additional capacities coming on line in some major industries. As such the macroeconomic imbalances in the economy are still manageable provided immediate steps are taken to implement critical structural adjustments. Pakistans economy has always shown resilience during unfavorable business environments and we are hopeful that the initiatives being taken by the Government and the
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About 200 in-house training sessions were conducted for 2,144 operators/workers at Faisalabad and Cornwala Plants. The above mentioned training programs helped our employees to partially off-set the impact of escalating costs of inputs by cutting down the manufacturing and other costs. Training was provided to management and non-management employees on the following topics: 1. 2. 3. 4. 5. 6. 7. Management and Technical Skills Development HACCP and GMP Zero Defect Production Program Product Yield Control Food Product Safety Vibration Monitoring and Balancing of Rotary Equipment Electrical Safety and Arc Flash

Your Company is committed to providing its employees with opportunities for professional skills development and to enhance their personal capabilities to meet the

Chief Executives Review

political parties on the agenda for economic reforms would be helpful in reviving economic growth. In view of the prevalent market circumstances, the performance of consuming segments may remain depressed which may impact overall demand for our products especially from downstream consuming industries. Inflationary pressure on the cost of maize, utilities and other overhead will continue, however, it may be difficult to include the total impact of cost increases in the prices of our products. The management of your Company is fully aware of the challenges ahead and is taking measures to face those challenges by adopting market driven strategies, optimizing manufacturing capabilities, striving for continued differentiation of our products and services and continuing our operational excellence and prudent use of our resources. We are confident that our journey on the track of progress will continue and we will continue to create value for all our stakeholders. CORPORATE DISTINCTIONS Your Company continued to be recognized for high performance by receiving the Top 25 Companies of Pakistan Award from the Karachi Stock Exchange for the fourteenth year in a row. The same was the case with the Best Corporate Reports Award from the Institute of Chartered Accountants of Pakistan and Institute of Cost & Management Accountants of Pakistan, which your Company has received for the tenth consecutive year. The Special Merit Trophy Award from the Federation of Pakistan Chambers of Commerce & Industry for export of maize derived products was another landmark. In addition to the above, your Company also received the following awards and distinctions during the year: Corporate Social Responsibility National Excellence Award 2009. Annual Award on Best Practices in Occupational Health, Safety and Environment (OHSE) in a competition arranged by Employers Federation of Pakistan. 7th Environment Excellence Award 2010 in a competition arranged by National Forum for Environment and Health. 1st Global HR Recognition Award 2010 in a competition arranged by Global Media Links. We also received special Award for Best Employee Engagement Strategy. 5th Corporate Social Responsibility National Excellence Award 2010 in a competition arranged by Help International.

Corporate Excellence Award from The Management Association of Pakistan

ACKNOWLEDGEMENT We take this opportunity to thank our valued customers who have shown great confidence in our products and continue to provide sustained support in ensuring the progress of the Company. We also would like to take advantage of this opportunity to thank our business partners and those who continue to lead the Company forward with their support and conviction. We are grateful to the Board of Directors for their guidance, trust and support in steering the Company to grow. We also acknowledge the support and cooperation received from our esteemed suppliers, dealers, bankers and other stakeholders. We are also thankful for trust reposed by the shareholders on the management and the Board of Directors of the Company. Your Company is immensely proud of its employees, I would like to take this opportunity to extend my compliments and gratitude for the devoted and sincere efforts of employees of the Company at all levels. The Companys achievement and impressive results have not been possible without their contributions. Looking forward, the coming days would be more challenging. The uncompromising commitment of our dedicated employees and their efforts will continue, Insha Allah, to make your Company as one of the PREMIER PROVIDER OF REFINED AGRICULTURALLY BASED PRODUCTS AND INGREDIENTS IN THE REGION. Please join me in praying Almighty Allah to give us courage and wisdom to face those challenges and work with more zeal for the prosperity of the Company and to create value for its stakeholders. Ameen!

Faisalabad February 14, 2011

Ansar Yahya Chief Executive and Managing Director

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Annual Report

for the year ended December 31, 2010

Rafhan Calendar of Major Events - 2010

January 11 March 20 March 24 April 23 24 SAP Kick-off Meeting. In-house Seminar on Six Sigma for employees. Safety Training Program for employees and contractors at Cornwala Plant. In-house Training Program on Awareness, Implementation & Auditing of ISO 2000:2005 Food Safety Management System (FSMS) at Cornwala Plant. April 28 Best Practices in Occupational Safety, Health & Environment (OHSE) Award 2009 from the Employers Federation of Pakistan and International Labour Organization. May 27 29 June 14 June 30 July 05 July 08 IMS Audit by Moody International Certification for Rakh Canal and Cornwala Plants. Hajj balloting was held where 17 lucky winners amongst staff and workers were selected to perform Hajj. Safety & Environment Training Program for employees and contractors was held at Cornwala Plant. SAP Go-Live Day. Global HR Recognition Award 2010 by Global Media Links and Better Pakistan Forum and Special Award for Best Employee Engagement Strategy. July 27 August 02 September 08 October 05 Referendum for election of Collective Bargaining Agents (CBA). Environment Excellence Award - 2010 from the National Forum for Environment & Health (NFEH). Nomination for Top 25 Companies Award by the Karachi Stock Exchange (Guarantee) Ltd. Special Merit Export Trophy Award from the Federation of Pakistan Chambers of Commerce & Industry on export of Corn (Maize) derived products. October 13 One day seminar on GMP & HACCP Implementation Guidelines (ISO-22000 FSMS) was conducted at Cornwala Plant. October 22 Best Corporate Report Award 2009 and got Ist Position in Miscellaneous Sector from the Joint Committee of Institute of Chartered Accountants of Pakistan and Institute of Cost & Management Accountants of Pakistan. October October was observed as Safety Month at both plants. The safety slogan for the year was Safety, Your Lifes Value someone is waiting for You. July November November 17 Pillars - Values and Business Conduct Policies Workshops. The Board of Directors of CPI adopted a Resolution in favour of Rafhan Maize Products Co. Ltd., Faisalabad Plant for achieving the safety milestone of THREE YEARS without a Lost Workday accident. November 23 Corporate Excellence Award (Certificate of Excellence in Food Producers Sector) from The Management Association of Pakistan. December 05 December 15 Picnic Party of managers/officers and staff. Nominated for 5th Corporate Social Responsibility National Excellence Award 2010 by CSR Association of Pakistan.

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Horizontal Analysis of Profit and Loss Account

2010 Sales Cost of sales Gross profit Distribution cost Administrative expenses Operating profit Other operating income Finance cost Other operating expenses Profit before taxation Taxation Profit after taxation 122% 118% 135% 113% 113% 139% 105% 65% 138% 139% 135% 142% 2009 106% 112% 89% 73% 113% 88% 87% 135% 88% 88% 89% 87% 2008 142% 146% 131% 84% 108% 138% 145% 306% 137% 137% 136% 137% 2007 124% 120% 134% 179% 107% 133% 141% 58% 135% 134% 134% 135% 2006 118% 114% 131% 128% 105% 135% 95% 247% 145% 131% 131% 132% 2005 115% 123% 94% 142% 119% 89% 147% 162% 82% 91% 89% 92%

(Note: 2004 has been taken as base year and percentage variations have been worked out on year on year basis.)

Horizontal Analysis of Balance Sheet

2010 NON CURRENT ASSETS Property, plant and equipment Intangible assets Capital work-in-progress 123% 98% 114% 196% 103% 566% 112% 33% 113% 55% 91% 38% 2009 2008 2007 2006 2005

Employees retirement benefits Long term loans CURRENT ASSETS Stores and spares Stock in trade Trade debts Loans and advances Trade deposits and prepayments Other receivables Cash and bank balances TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Mark up accrued on short term running finances Short term running finances - secured (Refer note below) Provision for taxation NON CURRENT LIABILITIES Deferred taxation SHARE CAPITAL AND RESERVES Share capital Reserves TOTAL LIABILITIES

411% 82%

22% 451%

75% 54%

290% 58%

94% 103%

90%

112% 268% 120% 1055% 115% 191% 6% 138%

99% 48% 92% 48% 85% 102% 4905% 100%

128% 177% 105% 143% 123% 1609% 4% 134%

125% 117% 123% 197% 84% 104% 129% 112%

109% 84% 123% 152% 100% 48% 1631% 100%

114% 116% 130% 72% 75% 300% 44% 113%

151% 96% 86%

96% 101% 143%

130% 13970% 188%

107% 3% 143%

99% 61% 84%

113% 1245% 102% 201%

135%

111%

93%

133%

132%

94%

100% 124% 138%

100% 112% 100%

100% 119% 134%

100% 111% 112%

100% 107% 100%

100% 114% 113%

Note: 1. No percentage has been worked out where there were no figures in current or corresponding year.

2.
16 |

2004 has been taken as base year and percentage variations have been worked out on year on year basis.

Annual Report

for the year ended December 31, 2010

Vertical Analysis of Profit and Loss Account

2010 Sales Cost of sales Gross profit Distribution cost Administrative expenses Operating profit Other operating income Finance cost Other operating expenses Profit before taxation Taxation Profit after taxation 100.0% 76.3% 23.7% 0.9% 1.5% 21.2% 0.6% 0.2% 1.5% 20.1% 6.9% 13.2% 2009 100.0% 78.7% 21.3% 1.0% 1.6% 18.6% 0.7% 0.4% 1.3% 17.6% 6.3% 11.3% 2008 100.0% 74.5% 25.5% 1.5% 1.5% 22.5% 0.8% 0.3% 1.6% 21.4% 7.5% 13.9% 2007 100.0% 72.3% 27.7% 2.5% 2.0% 23.2% 0.8% 0.2% 1.6% 22.2% 7.8% 14.4% 2006 100.0% 74.4% 25.6% 1.7% 2.3% 21.6% 0.7% 0.3% 1.5% 20.4% 7.2% 13.2% 2005 100.0% 76.9% 23.1% 1.6% 2.6% 18.8% 0.9% 0.2% 1.2% 18.3% 6.5% 11.8%

Vertical Analysis of Balance Sheet

2010 NON CURRENT ASSETS Property, plant and equipment Intangible assets Capital work-in-progress 29.9% 0.4% 13.4% 33.3% 18.6% 29.4% 9.5% 38.1% 2.3% 38.2% 7.7% 33.6% 14.0% 2009 2008 2007 2006 2005

Employees retirement benefits Long term loans CURRENT ASSETS Stores and spares Stock in trade Trade debts Loans and advances Trade deposits and prepayments Other receivables Cash and bank balances TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Mark up accrued on short term running finances Short term running finances - secured Provision for taxation NON CURRENT LIABILITIES Deferred taxation SHARE CAPITAL AND RESERVES Share capital Reserves TOTAL LIABILITIES

0.9% 0.0%

0.3% 0.1%

1.4% 0.0%

2.4% 0.0%

0.9% 0.1%

1.0% 0.1%

4.3% 43.1% 5.2% 1.7% 0.4% 0.2% 0.5% 100.0%

5.2% 22.0% 5.9% 0.2% 0.4% 1.2% 12.7% 100.0%

5.3% 45.5% 6.5% 0.5% 0.5% 1.2% 0.3% 100.0%

5.5% 34.5% 8.3% 0.4% 0.5% 0.1% 7.7% 100.0%

5.0% 32.8% 7.6% 0.2% 0.7% 0.1% 6.7% 100.0%

4.6% 39.1% 6.1% 0.2% 0.7% 0.2% 0.4% 100.0%

15.3% 0.1% 8.7% 2.8%

14.0% 0.2% 0.0% 5.5%

14.6% 0.2% 9.3% 3.9%

14.8% 0.0% 0.0% 2.0%

15.7% 0.1% 0.0% 1.5%

15.8% 0.1% 5.4% 1.8%

4.8%

5.0%

4.5%

6.4%

5.4%

4.1%

1.3% 67.0% 100.0%

1.8% 74.6% 100.0%

1.8% 66.7% 100.0%

2.3% 74.4% 100.0%

2.6% 74.7% 100.0%

2.6% 70.1% 100.0%

| 17

Directors Report
The Directors of your Company feel pleasure in presenting the annual audited accounts along with auditors report thereon for the year ended December 31, 2010. Financial Results Profit and Appropriations
Year ended December 31 2010 2009 (Rupees in Thousands)

Profit after taxation Actuarial gains/(losses) of employees retirement benefits

1,837,937 31,861 5,747,070

1,297,080 (36,513) 4,708,550 369,457 230,911 230,910 831,278 3,877,272 140.43

Un-appropriated profit brought forward Appropriations Final Dividend 2009 @400% 1st Interim Dividend 2010 @350% (2008: @400%) (2009: @250%)

3,877,272 3,447,983

369,457 323,275 230,911 923,643

2nd Interim Dividend 2010 @250% (2009: @250%)

Un-appropriated Profit Earnings per Share (Rupees) Chief Executives Review

4,823,427 198.99

The Directors of the Company endorse the contents of the Chief Executives Review which cover your Companys business review, salient activities in different fields of operations, outlook and investment plans for strategic growth. Corporate Governance Your Company is committed to maintain high standards of good corporate governance without any exception. The Directors are pleased to state that your Company is compliant with the provisions of the Code of Corporate Governance as required by SECP and formed as part of stock exchanges listing regulations. The statement of compliance with Code of Corporate Governance is annexed. Disclosures under Code of Corporate Governance Corporate and Financial Reporting Framework (a) The financial statements prepared by the management of the Company, fairly present state of its affairs, the result of its operations, cash flow and changes in equity. (b) (c) Proper books of accounts of the Company have been maintained. Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment. International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements and any departure there from has been adequately disclosed. The system of internal control is sound in design and has been effectively implemented and monitored. There are no significant doubts upon the Companys ability to continue as a going concern. There has been no material departure from the best practices of corporate governance as detailed in the listing regulations.

Distribution of Sales
(Percentage) 8.40% 73.40%

(d)

13.21% 4.75%

0.01% 0.23%

(e) (f)

Material & Services Taxation Dividend & Retention

Employee Cost Finance Cost Society Welfare

(g)

18 |

Annual Report

for the year ended December 31, 2010

Key operating and financial data of last six years are as follows:
2010 Net Sales Cost of Sales Gross Profit %age of Sales Operating Profit %age of Sales Profit Before Tax Profit After Tax Earnings per Share Dividend Amount Dividend Percentage Capital Expenditure (RsMio) (RsMio) (RsMio) (RsMio) (RsMio) (RsMio) (RsMio) Rupees (RsMio) 13,913 10,615 3,298 24 2,955 21 2,800 1,838 198.99 924 1,000 582 2009 11,428 8,993 2,435 21 2,131 19 2,012 1,297 140.43 831 900 848 2008 10,747 8,006 2,741 26 2,415 22 2,299 1,492 161.57 924 1,000 606 2007 7,578 5,480 2,098 28 1,755 23 1,681 1,089 117.92 831 900 114 2006 6,127 4,556 1,571 26 1,321 22 1,252 809 87.62 647 700 122 2005 5,194 3,997 1,198 23 978 19 953 615 66.57 323 350 302

Ten Years Performance showing key indicators has been given on the inside cover sheet of this report.

Sales
2010 2009 2008 2007 2006 2005
0

(Rupees in Million) 13,913 11,428 10,747 7,578 6,127 5,194

3000 6000 9000 12000 15000

Profit after Tax

(Rupees in Million) 2010 2009 2008 2007 2006 2005
0 500

1.838 1,297 1,492 1,089 809 615

1000 1500 2000

| 19

Directors Report
Value of investments of employees retirement funds:
2010 2009

Rs. in million

Provident Fund Gratuity Fund Superannuation Fund Board of Directors

as at June 30 as at December 31 as at December 31

622.891 507.583 298.473

683.457 464.553 271.036

The Board of Directors comprises two executive and eight non-executive directors. The current members of the Board of Directors have been listed in the Company Information. During the year under review, no casual vacancy occurred on the Board. Attendance at Board Meetings During the year ended December 31, 2010, four meetings of Board of Directors were held and attended as follows:
Name of Director Name of Alternate Director No. of meetings attended

John F. Saucier Rashid Ali Ansar Yahya Cheryl K. Beebe Mary A. Hynes Zulfikar Mannoo Mian M. Adil Mannoo Wisal A. Mannoo Anis A. Khan Sh. Gulzar Hussain

M. Maqbool Ahmad

S. Yousuf Hashmi Abdul Khalil

4 3 4 3 4 4 2 3 4 3

Transactions in Companys Shares CEO, Directors, CFO, Company Secretary and their spouses and minor children have made no transactions in the Companys shares during the year except as stated below:
No. of Shares Purchased

Mr. Rashid Ali Mr. Zulfikar Mannoo Mian M. Adil Mannoo Mr. Wisal A. Mannoo Sh. Gulzar Hussain Parent Company

Vice Chairman Director Director Director Director

265 100 1,451 3,055 924

Corn Products International, Inc., USA is holding majority shares of the Company.

20 |

Annual Report

for the year ended December 31, 2010

Directors Report
Earnings Per Share
(Rupees) 2010 2009 2008 2007 2006 2005
0 50

198.99 140.43 161.57 117.92 87.62 66.57

100 150 200

Capital Expenditure
(Rupees in Million) 2010 2009 2008 2007 2006 2005
0 200

582 848 606 114 122 302

400 600 800 1000

Auditors The retiring auditors, Messrs KPMG Taseer Hadi & Co., Chartered Accountants, being eligible, offer themselves for re-appointment. The Board of Directors, on recommendations of Audit Committee, has proposed appointment of Messrs KPMG Taseer Hadi & Co., Chartered Accountants for the year 2011. Audit Committee The Board of Directors has established an Audit Committee in compliance with the Code of Corporate Governance with the following members Cheryl K. Beebe Rashid Ali Zulfikar Mannoo Sh. Gulzar Hussain Chairperson Member Member Member (Non Executive Director) (Non Executive Director) (Non Executive Director) (Non Executive Director)

to accounts and audit were discussed. The Audit Committee also reviewed internal audit findings and held separate meetings with internal and external auditors as required under the Code of Corporate Governance. The Audit Committee also discussed with the external auditors their letter to the management. Related Parties Transactions were also placed before the Audit Committee. The Audit Committee has fully adopted the terms of reference as specified in Code of Corporate Governance. Business Strategy & Planning Committee The Board of Directors has established Business Strategy & Planning Committee comprising of following Board members John F. Saucier Rashid Ali Ansar Yahya Anis A. Khan Chairman Vice Chairman Member Member

Four meetings of the Audit Committee were held during the year. The Audit Committee reviewed the quarterly, half yearly and annual financial statements before submission to the Board and their publication. CFO, Head of Internal Audit and a representative of external auditors attended all the meetings where issues relating

During the year, three meetings of the Committee were held. The Committee has to keep a vigilant eye on the Companys performance and work out strategy for enhancement of its business.
| 21

Directors Report
Shares Transfer Committee The Board of Directors has established Shares Transfer Committee comprising of following Board members Rashid Ali Ansar Yahya Anis A. Khan Sh. Gulzar Hussain Chairman Member Member Member M. Saleem Rana Director Operations, Safety & Environment M. A. Haq Siddiqui Senior Manager HR & Admin. Terms of Reference: The Company believes in happy and satisfied workforce. In order to ensure recruitment of dedicated and devoted employees and also retain existing ones, the responsibility of this committee is to formulate and implement packages for new employees, consider promotions of existing workforce through prescribed appraisal forms and review their remunerations. Crisis Management Committee: Ansar Yahya Anis A. Khan M. Saleem Rana Muhammad Sarwar Chief Executive & Managing Director Chief Financial Officer & Director Director Operations, Safety & Evironment Deputy Director Marketing & Business Development S. Raza Haider Plant Manager Iftikhar Anwer Khan P&A & Commercial ManagerSouth Region M. A. Haq Siddiqui Senior Manager HR & Admin. M. Yasin Anwar Company Secretary & Compliance Officer M. Farooq A. Mian Manager Warehouses & Stores Terms of Reference: To assure that Rafhan Maize can effectively manage any unexpected crisis. To prepare Company as thoroughly as possible in advance for any crisis; whether involving personnel, plant, product, natural disaster or any unexpected event of similar nature. Compliance of Crisis Management Procedures as per Companys Crisis Management Manual and Emergency Action Plans.

Ten meetings of the Shares Transfer Committee were held during the year. The Committee met from time to time to consider and approve valid transfers and transmissions of shares or any business related thereto. Corporate Executive Management Committees In order to strengthen team spirit and encourage participation in management decisions, following Corporate Executive Management Committees have been formed Executive Management Committee Ansar Yahya Anis A. Khan M. Saleem Rana Chief Executive & Managing Director Chief Financial Officer & Director Director Operations, Safety & Environment

All business decisions are finalized by this team. This committee collaborates to achieve and improve overall performance of the Company, develop and implement approved business plan objectives and strategies, identify potential problems, monitor investment projects, review expenditures, identify opportunities/ projects and implement good governance throughout Rafhan Maize. Business Strategy Committee Ansar Yahya Anis A. Khan M. Saleem Rana Abdul Khalil Muhammad Sarwar Terms of Reference: To consider all matters pertaining to Companys operations, day-to-day affairs requiring collective wisdom of the senior management. Preparation of annual business plan, budget, operational model and structure. Evaluate market, financial and operational risks, threats and opportunities and devise ways to mitigate the effects of risks on Companys performance efficiently and effectively. Monitor performance against achievement of goals. Provides inputs on new initiatives, products and projects. Chief Executive & Managing Director Chief Financial Officer & Director Director Operations, Safety & Environment Deputy Director Finance Deputy Director Marketing & Business Development

Systems & Information Technology Committee Ansar Yahya Anis A. Khan M. Saleem Rana M. Tayyab Raza Chief Executive & Managing Director Chief Financial Officer & Director Director Operations, Safety & Environment Chief Information Manager (IT)

Terms of Reference: Rapid changes and improvements are taking place in the IT world. The role of the committee is to adopt latest technologies and modern systems for overall improvement in the IT area. Policies on Business Conduct Compliance Committee: Ansar Yahya Anis A. Khan M. Saleem Rana Muhammad Sarwar Chief Executive & Managing Director Chief Financial Officer & Director Director Operations, Safety & Environment Deputy Director Marketing & Business Development M. A. Haq Siddiqui Senior Manager HR & Admin. M. Yasin Anwar Company Secretary & Complaince Officer Iftikhar Hussain Internal Auditor

Remuneration & Compensation Committee: Ansar Yahya Anis A. Khan Chief Executive & Managing Director Chief Financial Officer & Director

22 |

Annual Report

for the year ended December 31, 2010

Terms of Reference: Effective communication of Policies on Business Conduct and Core Values. Review of implementation and compliance of Company policies. Promote compliance and investigate violation of policies, if any. Recommend appropriate disciplinary actions for violation of policies, if any.

- - -

In addition to Corporate Executive Committees, Divisional Committees have also been formed which meet once in a month to review the performance of the respective divisions and find ways and means to further improve and achieve even better results. The Team Leaders are responsible to hold the meetings of the Committees. Divisional Committees include 1. 2. 3. 4. 5. 6. 7. Finance & IT Committee CAPEX & Projects Review Committee Human Resources Committee Manufacturing Optimization and Regulatory Affairs Committee Supply Chain Task Force Quality Excellence Committee Business Segmentation & New Ingredients Development Committee

Provided sites to a local bank, government primary school and a post office to facilitate service to the general public. Provides financial support to the government school. Fully equipped dispensaries at Rakh Canal Plant, Faisalabad and Cornwala Plant, Jaranwala are being maintained. Plantation drive at the plants and surrounding agri fields to protect the environment. Scholarships provided to various talented students to promote higher education. Promoting maize cultivation in Punjab, Sindh and KP to enhance agri-based contribution to national economy. Several cost and energy savings measures have been taken. Integrated Management System (IMS) has four international certifications which include QMS, EMA, OHSMS and HALAL 2009. Safety slogan for 2010 was Safety, Your Lifes Value. Safety month was observed during 2010. Rs.1.5 million donated to Chief Ministers Fund for Flood Relief and Rehabilitation. Internship provided to 37 students from professional institutions during 2010. Installation of water pumps alongside Rakh Canal for free supply of drinking water to the local community.

Dividend The Company has already paid two interim dividends of 350% and 250%. The Directors now propose a final dividend of 550% making the total 1150% for the year. On behalf of the Board

One sub-committee under Finance & IT and one under Manufacturing Optimization and Regulatory Affairs have been formed. Moreover, following three additional sub-committees have also been formed to include the bottom line management in decisions making 1. 2. 3. Logistics & Inventory Control Quality Products Development

Faisalabad February 14, 2011

Ansar Yahya Chief Executive and Managing Director

Pattern of Shareholding Pattern of Shareholding as on December 31, 2010 according to requirements of Code of Corporate Governance and a statement reflecting distribution of shareholding appears at the end of this report. Contribution to National Exchequer Your Company has contributed Rs.1,773 million (2009:Rs.1,299 million) during the year 2010 to the national exchequer on payments towards sales tax, income tax, import duties and statutory levies. An amount of Rs.129 million (2009: Rs.131million) was also paid as withholding income tax deducted by the Company from shareholders, employees, suppliers and contractors. Corporate Social Responsibility Your Company is fully aware of its responsibilities being a responsible corporate citizen. Detailed steps with figures have been mentioned in the Chief Executives Review. A few steps taken by the Company are being given below
| 23

24

Forward Looking Statements

This Annual Report contains or may contain forward looking statements. The Company intends these forward-looking statements to be covered by the safe harbor provisions for such statements. These statements include, among other things, any predictions regarding the Companys prospects or future financial condition, earnings, revenues, tax rates, capital expenditures, expenses or other financial items, any statements concerning the Companys prospects or future operations, including managements plans or strategies and objectives therefor and any assumptions, expectations or beliefs underlying the foregoing. These statements can sometimes be identified by the use of forward looking words such as may, will, should, anticipate, believe, plan, project, estimate, expect, intend, continue, pro forma, forecast or other similar expressions or the negative thereof. All statements other than statements of historical facts in this report or referred to in or incorporated by reference into this report are forward-looking statements. These statements are based on current expectations, but are subject to certain inherent risks and uncertainties, many of which are difficult to predict and are beyond our control. Although we believe our expectations reflected in these forward-looking statements are based on reasonable assumptions, stockholders are cautioned that no assurance can be given that our expectations will prove correct. Actual results and developments may differ materially from the expectations expressed in or implied by these statements, based on various factors, including the effects of global economic conditions and their impact on our sales volumes and pricing of our products, our ability to collect our receivables from customers and our ability to raise funds at reasonable rates; fluctuations in worldwide markets for corn and other commodities, and the associated risks of hedging against such fluctuations; fluctuations in the markets and prices for our co-products, particularly corn oil; fluctuations in aggregate industry supply and market demand; the behavior of financial markets, including foreign currency fluctuations and fluctuations in interest and exchange rates; continued volatility and turmoil in the capital markets; the commercial and consumer credit environment; general political, economic, business, market and weather conditions in the various geographic regions and countries in which we manufacture and/or sell our products; future financial performance of major industries which we serve, including, without limitation, the food and beverage, pharmaceuticals, paper, corrugated, textile and brewing industries; energy costs and availability, freight and shipping costs, and changes in regulatory controls regarding quotas, tariffs, duties, taxes and income tax rates; operating difficulties; boiler reliability; our ability to effectively integrate and operate acquired businesses, including National Starch; labor disputes; genetic and biotechnology issues; changing consumption preferences and trends; increased competitive and/or customer pressure in the corn-refining industry; and the outbreak or continuation of serious communicable disease or hostilities including acts of terrorism. Our forward-looking statements speak only as of the date on which they are made and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of the statement as a result of new information or future events or developments. If we do update or correct one or more of these statements, investors and others should not conclude that we will make additional updates or corrections.

24 |

| 25

Stakeholders Information
Six Years Summary

2010 Investors Information Gross profit ratio EBITDA margin to Sales Net profit to Sales Return on assets Return on equity Return on capital employed Weighted average cost of debt Inventory turnover ratio No. of days in inventory Debtors turnover ratio No. of days in receivables Creditors turnover ratio No. of days in payables Operating cycle Total assets turnover ratio Fixed assets turnover ratio Current ratio Quick/ Acid test ratio Price earning ratio Cash dividend per share Bonus shares issued Dividend yield ratio Dividend payout ratio Dividend cover ratio Debt : Equity ratio Interest cover Break-up value per share - Refer note below - Without surplus on revaluation of fixed assets Rupees - Including the effect of surplus on revaluation of fixed assets Market value per share Market value per share during the year (High) Market value per share during the year (Low) Earnings before interest, taxes, depreciation and amortization (EBITDA) Rs. Mio 2,989.07 Rupees Rupees Rupees Rupees 536.34 2,109.87 2,298.00 1,100.00 536.34 Times Percentage Percentage Percentage Percentage Percentage Percentage Percentage Times Days Times Days Times Days Days Times Times Times Times Times Rupees Percentage Percentage Percentage Times 23.70 21.48 13.21 25.32 41.02 34.64 13.35 3.09 118.12 36.91 9.89 9.58 38.10 61.31 1.92 6.40 2.05 0.30 10.60 100.00 5.00 50.25 1.99 89.75

2009

2008

2007

2006

2005

21.31 19.35 11.35 24.73 34.20 30.39 13.73 6.23 58.59 36.24 10.07 12.25 29.80 63.89 2.18 6.47 2.53 1.05 10.57 90.00 6.00 64.09 1.56 42.26 433.91 433.91 1,485.00 2,262.35 1,286.87 2,211.54

25.51 23.03 13.89 28.54 45.20 39.13 12.66 2.98 122.48 31.28 11.67 10.45 34.93 77.78 2.06 6.92 2.19 0.29 14.74 100.00 4.00 61.89 1.62 64.65 387.43 387.43 2,381.42 2,940.00 2,300.00 2,475.27

27.69 24.14 14.37 27.60 37.87 33.23 8.91 3.47 105.19 23.08 15.81 9.30 39.25 73.43 1.92 5.05 3.38 1.01 19.12 90.00 4.00 76.32 1.31 143.38 327.58 327.58 2,255.00 2,415.00 945.00 1,829.73

25.64 23.84 13.21 22.95 30.59 27.75 9.28 3.41 107.04 22.97 15.89 8.24 44.30 85.11 1.74 4.56 3.08 0.89 10.27 70.00 8.00 79.89 1.25 62.38 295.21 295.21 900.00 918.00 700.00 1,460.72

23.06 21.76 11.84 17.44 25.52 22.69 6.17 2.60 140.38 24.01 15.20 7.18 50.84 96.38 1.47 4.38 2.21 0.33 10.52 35.00 5.00 52.58 1.90 116.33 277.72 277.72 700.00 700.00 594.00 1,130.22

Note: The Company has not carried out any revaluation, hence there is no surplus on revaluation of fixed assets.

26 |

Annual Report

for the year ended December 31, 2010

Summary of Cash Flow Statement

2010 2009 2008 2007 2006 2005 (Rupees in Thousand) Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities 232,457 (577,499) (288,480) (633,522) Opening cash and cash equivalents Effect of exchange rate fluctuations Closing cash and cash equivalents 673,409 (146) 39,741 2,830,047 (846,392) (1,324,451) 659,204 13,730 475 673,409 741,549 (604,368) (429,291) (292,110) 305,420 420 13,730 1,011,781 (111,239) (831,423) 69,119 236,295 6 305,420 1,179,228 (119,926) (837,449) 221,853 14,484 (42) 236,295 599,956 (299,500) (318,987) (18,531) 33,062 (47) 14,484

| 27

Statement of Value Added and its Distribution

2010 (Rupees in thousand) VALUE ADDED Net sales Material and services Other income 13,912,769 (10,137,486) 83,104 3,858,387 11,428,104 (8,536,013) 79,259 2,971,350 2009

DISTRIBUTION

EMPLOYEES AS REMUNERATION Salaries, wages and amenities 661,374 17.1 608,737 20.5

FINANCIAL CHARGES TO PROVIDERS OF FINANCE Finance Cost 31,548 0.8 48,766 1.6

GOVERNMENT AS TAXES Tax Workers profit participation fund Workers welfare fund 962,052 150,198 56,245 1,168,495 SHAREHOLDERS AS DIVIDEND Cash dividend 923,643 23.9 831,278 28.0 24.9 3.9 1.5 30.3 714,784 108,072 47,500 864,356 24.0 3.6 1.4 29.0

SOCIETY WELFARE Donation to flood / earthquake victims RETAINED WITHIN THE BUSINESS Depreciation / amortization Retained profit 157,533 914,294 1,071,827 3,858,387 4.1 23.7 27.8 100 150,911 465,802 616,713 2,971,350 5.1 15.7 20.8 100 1,500 0.1 1,500 0.1

28 |

Annual Report

for the year ended December 31, 2010

Review Report to the Members

on Statement of Compliance with Best Practices of Code of Corporate Governance

We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate Governance prepared by the Board of Directors of Rafhan Maize Products Company Limited (the Company) to comply with the Listing Regulations of Karachi and Lahore Stock Exchanges. The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Companys compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the Company personnel and review of various documents prepared by the Company to comply with the Code. As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We have not carried out any special review of the internal control system to enable us to express an opinion as to whether the Boards statement on internal control covers all controls and the effectiveness of such internal controls. Further, Sub-Regulation (xiii a) of Listing Regulation No.35 (previously Regulation No.37) notified by The Karachi Stock Exchange (Guarantee) Limited vide circular KSE/N-269 dated 19 January 2009 requires the Company to place before the Board of Director for their consideration and approval of related party transactions distinguishing between transactions carried out on

terms equivalent to those that prevail in arms length transactions and transactions which are not executed at arms length price recording proper justification for using such alternate pricing mechanism. Further, all such transactions are also required to be separately placed before the audit committee. We are only required and have ensured compliance of requirement to the extent of approval of related party transactions by the Board of Directors and placement of such transactions before the audit committee. We have not carried out any procedures to determine whether the related party transactions were under taken at arms length price. Based on our review nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the Companys compliance, in all material respects, with the best practices contained in the Code of Corporate Governance as applicable to the Company for the year ended 31 December 2010.

Lahore February 14, 2011

KPMG Taseer Hadi & Co. Chartered Accountants (Bilal Ali)

| 29

Statement of Compliance

with the Code of Corporate Governance -Year ended December 31, 2010

This statement is being presented to comply with the Code of Corporate Governance contained in Listing Regulation No.35 of Karachi Stock Exchange (Guarantee) Limited and Chapter XI of Lahore Stock Exchange (Guarantee) Limited for the purpose of establishing a framework of good governance, whereby the company is managed in compliance with the best practices of corporate governance. The Company has applied the principles contained in the Code in the following manner: 1. The Company encourages representation of independent non-executive directors and the Board has 8 independent non-executive directors including 3 directors representing minority shareholders. The directors of the Company have confirmed that none of them is serving as a director in more than ten listed companies, including this Company. All the resident directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company. None of our directors is a member of Stock Exchange. No casual vacancy occurred in the Board during the year under review. The Company has prepared a Statement of Ethics and Business Practices, which has been signed by all the directors and employees of the Company. 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 they were approved or amended has been maintained. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO and other executive directors, have been taken by the Board. The meetings of the Board were presided over by the Chairman, and in his absence, by the Vice Chairman, and in their absence by a director elected by the Board for this purpose and the Board met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated within stipulated time. The Directors of the Board were apprised of their duties and responsibilities from time to time during Board meetings.

12. The financial statements of the Company were duly endorsed by CEO and CFO before approval of the Board. 13. The CEO, directors, and executives do not hold any interest in the shares of the Company other than that disclosed 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 comprising of four non-executive directors as members 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 and final results of the Company and as required by the Code. The terms of reference of the committee have been formed and advised to the committee for compliance. The related party transactions were placed before the audit committee and approved by the board of directors. All transactions were made at arms length basis under Comparable Uncontrolled Price Method. 17. The related party transactions have been placed before the audit committee and approved by the board of directors to comply with the requirements of Listing Regulations of Karachi and Lahore Stock Exchanges. 18. The Board has set-up an effective internal audit function. The Internal Auditor is suitably qualified and experienced for the purpose and is conversant with the policies and procedures of the Company. The Internal Auditor is involved in internal audit function on a full time basis. 19. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the Quality Control Review program of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by Institute of Chartered Accountants of Pakistan. 20. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard. 21. We confirm that all other material principles contained in the Code have been complied with. On behalf of the Board

2.

3.

4.

5.

6.

7.

8.

9.

10. The Board approves appointment of CFO, Company Secretary and Head of Internal Audit, including their remuneration and terms and conditions of employment, as determined by the CEO. However, there was no new appointment against these posts during the year. 11. The directors report for the year has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed.
30 |

Ansar Yahya Chief Executive and Managing Director Faisalabad February 14, 2011

Annual Report

for the year ended December 31, 2010

Auditors Report to the Members

We have audited the annexed balance sheet of Rafhan Maize Products Co. Ltd. (the company) as at 31 December 2010 and the related profit and loss account, cash flow statement, statement of comprehensive income and statement of changes in equity, together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the Companys management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: a) in our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance, 1984; b) in our opinion: i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies consistently applied; ii) the expenditure incurred during the year was for the purpose of the Companys business; and iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Company; c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, Lahore February 14, 2011 KPMG Taseer Hadi & Co. Chartered Accountants (Bilal Ali) d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980(XVIII of 1980), was deducted by the Company and deposited in the Central Zakat Fund established under section 7 of that Ordinance. profit and loss account, cash flow statement, statement of comprehensive income and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the Companys affairs as at 31 December 2010 and of the profit, its comprehensive income, its cash flows and changes in equity for the year then ended; and

| 31

Balance Sheet
As at 31 December 2010
Note 2010 2009

( Rupees in thousands)

NON CURRENT ASSETS Property, plant and equipment Intangible assets Capital work in progress Employees retirement benefits Long term loans secured Current assets Stores and spares Stock in trade Trade debts Loans and advances Trade deposits and short term prepayments Other receivables Cash and bank balances Current liabilities Trade and other payables Mark up accrued on short term running finances Short term running finances secured Provision for taxation Working capital Total capital employed NON CURRENT LIABILITIES Deferred taxation NET CAPITAL EMPLOYED The annexed notes 1 to 39 form an integral part of these financial statements. 19 351,754 4,953,885 260,321 4,007,730 17 18 1,108,503 8,298 634,460 203,047 1,954,308 2,061,365 5,305,639 734,202 8,601 235,057 977,860 1,495,487 4,268,051 10 11 12 13 14 15 16 310,521 3,125,746 376,923 124,966 25,522 12,254 39,741 4,015,673 277,972 1,166,118 315,365 11,840 22,227 6,416 673,409 2,473,347 5 6 7 8 9 2,174,145 29,392 973,017 3,176,554 64,800 2,920 1,765,365 987,851 2,753,216 15,784 3,564

Anis Ahmad Khan Director

Ansar Yahya Chief Executive & Managing Director

Zulfikar Mannoo Director

32 |

Annual Report

for the year ended December 31, 2010

Note

2010

2009

( Rupees in thousands)

Represented by: Share capital and reserves Share capital Reserves Contingencies and commitments 20 21 22 92,364 4,861,521 92,364 3,915,366

4,953,885

4,007,730

Anis Ahmad Khan Director

Ansar Yahya Chief Executive & Managing Director

Zulfikar Mannoo Director

| 33

Profit and Loss Account

for the year ended 31 December 2010
Note 2010 2009

( Rupees in thousands)

Sales - Net Cost of sales Gross profit Distribution cost Administrative expenses Operating profit Other operating income

23 24

13,912,769 (10,615,033) 3,297,736

11,428,104 (8,992,742) 2,435,362 (116,884) (187,535) (304,419) 2,130,943 79,259 2,210,202 (48,766) (149,572) (198,338) 2,011,864 (714,784) 1,297,080

25 26

(131,768) (211,092) (342,860) 2,954,876

27

83,104 3,037,980

Finance cost Other operating expenses Profit before taxation Taxation Profit after taxation

28 29

(31,548) (206,443) (237,991) 2,799,989

30

(962,052) 1,837,937

Earnings per share - Basic and diluted (Rupees)

31

198.99

140.43

The annexed notes 1 to 39 form an integral part of these financial statements.

Anis Ahmad Khan Director

Ansar Yahya Chief Executive & Managing Director

Zulfikar Mannoo Director

34 |

Annual Report

for the year ended December 31, 2010

Statement of Comprehensive Income

for the year ended 31 December 2010
Note 2010 2009

( Rupees in thousands)

Profit for the year Other comprehensive Income: Acturial gain / (loss) of retirement benefits recognized directly in equity Deferred tax on acturial gain / (loss) recognized directly in equity

1,837,937

1,297,080

49,016 (17,155)

(56,173) 19,660

Total comprehensive income for the year

1,869,798

1,260,567

The annexed notes 1 to 39 form an integral part of these financial statements.

Anis Ahmad Khan Director

Ansar Yahya Chief Executive & Managing Director

Zulfikar Mannoo Director

| 35

Cash Flow Statement

for the year ended 31 December 2010
Note 2010 2009

( Rupees in thousands)

Cash flows from operating activities Profit before tax Adjustment for non-cash charges and other items: Depreciation Amortisation of intangible asset Provision for employees retirement benefits Provision for doubtful debts Provision for obsolete inventory Profit on sale of property, plant and equipment Interest income Finance cost Gain on foreign exchange transactions Markup capitalized Operating profit before working capital changes (Increase) / decrease in current assets: Stores and spares Stock in trade Trade debts Loans and advances Trade deposits and short term prepayments Other receivables Increase / (decrease) in current liabilities: Trade and other payables Net (increase) / decrease in working capital Cash generated from operations Taxes paid Employees retirement benefits paid Interest received Finance cost paid Net cash generated from operating activities Cash flows from investing activities Capital expenditure incurred Sale proceeds from sale of property, plant and equipment Long term loans disbursed Repayment from long term loans Net cash used in investing activities Cash flows from financing activities Dividend paid Short term running finances secured Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Effect of exchange rate fluctuations on cash and cash equivalents Cash and cash equivalents at the end of the year The annexed notes 1 to 39 form an integral part of these financial statements.

2,799,989 157,026 507 23,438 2,471 8,210 (2,561) (6,685) 31,548 146 20,751 3,034,840 (40,759) (1,959,628) (64,029) (113,293) (3,295) (5,838) (2,186,842) 373,598 (1,813,244) 1,221,596 (919,784) (23,438) 6,685 (52,602) (989,139) 232,457 (581,897) 3,587 (1,500) 2,311 (577,499)

2,011,864 150,911 18,089 780 3,579 (4,727) (4,303) 48,766 (475) 35,458 2,259,942 (1,783) 1,239,944 27,459 13,587 4,029 (1,034) 1,282,202 (32,258) 1,249,944 3,509,886 (581,908) (18,089) 4,303 (84,145) (679,839) 2,830,047 (847,507) 4,822 (4,826) 1,119 (846,392)

16

(922,940) 634,460 (288,480) (633,522) 673,409 (146) 39,741

(830,742) (493,709) (1,324,451) 659,204 13,730 475 673,409

Anis Ahmad Khan Director 36 |

Ansar Yahya Chief Executive & Managing Director

Zulfikar Mannoo Director

Annual Report

for the year ended December 31, 2010

Statement of Changes in Equity

for the year ended 31 December 2010
Capital Reserves Share capital Share premium Other General Revenue Reserves Unappropriated profit Total

( Rupees in thousands)

Balance as at 31 December 2008 Total comprehensive income for the year Transactions with owners of the Company, recognised directly in equity Final dividend 2008 @ Rs. 40 per share Ist interim dividend @ Rs. 25 per share 2nd interim dividend @ Rs. 25 per share Balance as at 31 December 2009 Total comprehensive income for the year Transactions with owners of the Company, recognised directly in equity Final dividend 2009 @ Rs. 40 per share Ist interim dividend @ Rs. 35 per share 2nd interim dividend @ Rs. 25 per share Balance as at 31 December 2010

92,364 92,364

36,946 36,946

941 941

207 207

3,447,983 1,260,567 4,708,550

3,578,441 1,260,567 4,839,008

92,364 92,364 ` 92,364

36,946 36,946

941 941

207 207

(369,457) (230,911) (230,910) (831,278) 3,877,272 1,869,798 5,747,070

(369,457) (230,911) (230,910) (831,278) 4,007,730 1,869,798 5,877,728

36,946

941

207

(369,457) (323,275) (230,911) (923,643) 4,823,427

(369,457) (323,275) (230,911) (923,643) 4,953,885

The annexed notes 1 to 39 form an integral part of these financial statements.

Anis Ahmad Khan Director

Ansar Yahya Chief Executive & Managing Director

Zulfikar Mannoo Director

| 37

Notes to the Financial Statements

for the year ended 31 December 2010
1 The Company and its operations Rafhan Maize Products Company Limited (the Company) is incorporated in Pakistan and is listed on the Karachi and Lahore Stock Exchanges. Corn Products International Inc. Chicago, U.S.A, holds majority shares of the Company. The registered office of the Company is located at Finlay House, I.I. Chundrigar Road, Karachi. The Company uses maize as the basic raw material to manufacture and sell a number of industrial products, principal ones being industrial starches, liquid glucose, dextrose, dextrin and gluten meals. 2 Basis of preparation 2.1 Statement of compliance These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan and the requirements of Companies Ordinance, 1984. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standard Board and Islamic Financial Reporting Standards (IFAs) issued by the Institute of Chartered Accountants of Pakistan as are notified under the provisions of the Companies Ordinance, 1984. Wherever, the requirements of the Companies Ordinance, 1984 or directives issued by the Securities and Exchange Commission of Pakistan differ with the requirements of these standards, the requirements of Companies Ordinance, 1984 or the requirements of the said directives shall prevail. 2.2 Standards and amendments to published approved International Financial Reporting Standards not yet effective The following standards, amendments and interpretations of approved accounting standards will be effective for accounting periods beginning on or after January 01, 2011. These standards are either not relevant to the Companys operations or are not expected to have a significant impact on the Companys financial statements other then increase in disclosures in certain cases: Amendment to IAS 32 - Financial Instruments: Presentation Classification of Rights Issues (effective for annual periods beginning on or after February 01, 2010). The IASB amended IAS 32 to allow rights, options or warrants to acquire a fixed number of the entitys own equity instruments for a fixed amount of any currency to be classified as equity instruments provided the entity offers the rights, options or warrants pro rata to all of its existing owners of the same class of its own non-derivative equity instruments. This interpretation has no impact on the Companys financial statements. IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments (effective for annual periods beginning on or after July 01, 2010). This interpretation provides guidance on the accounting for debt for equity swaps. This interpretation has no impact on Companys financial statements. IAS 24 - Related Party Disclosures (revised 2009) effective for annual periods beginning on or after January 01, 2011. The revision amends the definition of a related party and modifies certain related party disclosure requirements for governmentrelated entities. The amendment would result in certain changes in disclosures. Amendments to IFRIC 14 IAS 19 - The Limit on a Defined Benefit Assets, Minimum Funding Requirements and their Interaction (effective for annual periods beginning on or after January 01, 2011). These amendments remove unintended consequences arising from the treatment of prepayments where there is a minimum funding requirement. These amendments result in prepayments of contributions in certain circumstances being recognised as an asset rather than an expense. This amendment is not likely to have any impact on Companys financial statements. Improvements to IFRSs 2010 In May 2010, the IASB issued improvements to IFRSs 2010, which comprise of 11 amendments to 7 standards. Effective dates, early application and transitional requirements are addressed on a standard by standard basis. The majority of amendments are effective for annual periods beginning on or after January 1, 2011. The amendments include list of events or transactions that require disclosure in the interim financial statements and fair value of award credits under the customer loyalty programmes to take into account the amount of discounts or incentives that otherwise would be offered to customers that have not earned the award credits. Certain of these amendments will result in increased disclosures in the financial statements. Amendments to IFRS 7 - Disclosures Transfers of Financial Assets (effective for annual periods beginning on or after July 1, 2011). The amendments introduce new disclosure requirements about transfers of financial assets including disclosures for financial assets that are not derecognised in their entirety; and financial assets that are derecognised in their entirety but
38 |

Annual Report

for the year ended December 31, 2010

Notes to the Financial Statements

for the year ended 31 December 2010
for which the entity retains continuing involvement. This amendment is not likely to have any impact on Companys financial statements. 3 Basis of measurement These financial statements have been prepared under the historical cost convention, except for recognition of certain employees retirement benefits at present value. Summary of significant accounting policies 4.1 Trade debts Trade debts are carried at original invoice amount less an estimate made for doubtful debts based on a review of all outstanding amounts at the year end. Bad debts are written off when identified. 4.2 Revenue recognition Sale of goods Revenue represents the fair value of the consideration received or receivable for goods sold, net of discounts and sales tax. Revenue is recognized when it is probable that the economic benefits associated with the transaction will flow to the Company and the amount of revenue, and the associated cost incurred, or to be incurred, can be measured reliably. Revenue from sales is recognized upon transfer of significant risks and rewards of ownership of the goods to buyers i.e. dispatch of goods to customers. Interest Income from bank deposits and loans is recognized on accrual basis. 4.3 Taxation Income tax expense comprises current and deferred tax. Income tax is recognized in profit and loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current Provision of current tax is based on the taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to the profit for the year if enacted after taking into account tax credits, rebates and exemptions, if any. The charge for current tax also includes adjustments, where considered necessary, to provision for tax made in previous years arising from assessments framed during the year for such years. Deferred Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of the taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilised. Deferred tax assets and liabilities are calculated at the rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the income statement, except in the case of items credited or charged to equity in which case it is included in equity. 4.4 Earning per share The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
| 39

Notes to the Financial Statements

for the year ended 31 December 2010
4.5 Operating segments The financial statements have been prepared on the basis of a single reportable segment. 96.46% (2009: 97.46%) out of total sales of the Company relates to customers in Pakistan. All non current assets of the Company as at 31 December 2010 are located in Pakistan. Property, plant and equipment Property, plant and equipment except freehold land are stated at cost less accumulated depreciation and any identified impairment loss. Freehold land is stated at cost less any identified impairment loss. Cost in relation to certain property, plant and equipment signifies historical cost and borrowing costs as referred to in note 4.16. Depreciation on property, plant and equipment is provided on a straight-line-basis. Rates of depreciation, which are disclosed in note 5, are designed to write off the cost over the estimated useful lives of the assets. Depreciation methods, residual values and useful lives of the assets are reviewed at least at each financial year end and adjusted if impact on depreciation is significant. Depreciation on additions to property, plant and equipment is charged from the month in which the asset is acquired or capitalised, while no depreciation is charged for the month in which the asset is disposed off. The Company assesses at each balance sheet date whether there is any indication that property, plant and equipment may be impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amount. Where carrying values exceed the respective recoverable amount, assets are written down to their recoverable amounts and the resulting impairment loss is recognised in income currently. The recoverable amount is the higher of an assets fair value less costs to sell and value in use. Where an impairment loss is recognised, the depreciation charge is adjusted in the future periods to allocate the assets revised carrying amount over its estimated useful life. Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to income during the period in which they are incurred. The gain or loss on disposal or retirement of an asset represented by the difference between the sale proceeds and the carrying amount of the asset is recognised as an income or expense. 4.7 Intangible assets The Company reviews the rate of amortization and value of intangible assets for possible impairment on an annual basis. Any change in the estimates in future years might affect the carrying amounts of intangible assets with a corresponding affect on the amortization charge and impairment. 4.8 Capital work-in-progress Capital work in progress and stores held for capital expenditure are stated at cost less any identified impairment loss and represents expenditure incurred on property, plant and equipment during the construction and installation. Cost also includes applicable borrowing costs. Transfers are made to relevant property, plant and equipment category as and when assets are available for use. Retirement and termination benefits Defined contributions scheme The Company operates a defined contribution approved provident fund for all its eligible employees, in which the Company and the employees make equal monthly contributions at the rate of 14% of basic salary including dearness allowance of employees. Defined benefits schemes The Company also maintains an approved gratuity fund for all its employees and an approved pension fund for officers and above-grade employees, having a service period of minimum 10 years.

4.6

4.9

40 |

Annual Report

for the year ended December 31, 2010

Notes to the Financial Statements

for the year ended 31 December 2010
The contributions are made to pension and gratuity funds in accordance with the actuarys recommendations based on the actuarial valuation of these funds as at 31 December 2010. The future contribution rates of these funds include allowances for deficit and surplus. Projected unit credit method is used for valuation of these funds based on the following significant assumptions:

Gratuity Fund 2010 2009 Discount rate Expected return on plan assets Contribution rates (% of basic salaries) Annual increase in pension rate Expected rate of growth per annum in future salaries 14.50% 13.50% 6% 14.50% 12.75% 13% 6% 12.75%

Pension Fund 2010 2009 14.50% 13.50% 16% 5% 14.50% 12.75% 13% 11% 5% 12.75%

The actuarial gains and losses are recognized in the period in which they occur directly in shareholders equity and presented in the statement of comprehensive income. 4.10 Compensated absences The Company accounts for compensated absences on the basis of unavailed earned leave balance of each employee at the end of the year.

4.11

Stores and spares These are valued at lower of cost, which is calculated according to moving average method, and net realizable value. Stores in transit are valued at invoice value including other charges, if any, incurred thereon.

4.12

Stocks in trade Stocks in trade have been valued at the lower of cost and net realizable value. Net realizable value signifies the estimated selling price in the ordinary course of the business less estimated costs to complete and to make the sale. Cost has been determined as follows: Raw materials Moving average cost Work in process Moving average cost Finished goods Moving average cost

4.13

The variance between standard and actual cost on work in process and finished goods is charged to cost of sales. Research and development cost Research and development costs are charged to profit and loss account in the year in which these are incurred.

4.14

Foreign currencies All monetary assets and liabilities in foreign currencies are translated into rupees at exchange rates prevailing at the balance sheet date. Transactions in foreign currencies are translated into rupees at exchange rates prevailing at the date of transaction. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated into rupees at exchange rates prevailing at the date of transaction. Non-monetary assets and liabilities denominated in foreign currency that are stated at fair value are translated into rupees at exchange rates prevailing at the date when fair values are determined. Exchange gains and losses are included in the income currently.

4.15

Cash and cash equivalents For the purpose of cash flow statement, cash and cash equivalents comprise of cheques in hand, cash and bank balances.

| 41

Notes to the Financial Statements

for the year ended 31 December 2010
4.16 Borrowing costs Borrowing costs incurred on related property, plant and equipment are capitalized till the date of commissioning. All other borrowing costs are included in the profit and loss of the period on an accrual basis. 4.17 Provisions Provisions are recognized when the Company has a legal or constructive obligation as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. However, provisions are reviewed at each balance sheet date and adjusted to reflect current best estimate. 4.18 Financial assets and liabilities Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are initially measured at cost, which is the fair value of the consideration given and received respectively. These financial assets and liabilities are subsequently measured at fair value, amortised cost or cost, as the case may be. The particular measurement methods adopted are disclosed in the individual policy statements associated with each item. 4.19 Off-setting of financial assets and financial liabilities A financial asset and a financial liability is offset and the net amount is reported in the balance sheet if the Company has a legally enforceable right to set-off the recognized amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. Trade and other payables Financial liabilities are initially recognized at fair value plus directly attributable cost, if any, and subsequently at amortized cost using effective interest rate method. Other amounts payable are carried at cost which is the fair value of the consideration to be paid in future for goods and services. 4.21 Impairment losses Financial assets A financial asset is considered to be impaired if objective evidence indicate that one or more events had a negative effect on the estimated future cash flow of that asset. An impairment loss in respect of a financial asset measured at amortized cost is calculated as a difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its current fair value. Individually significant financial assets are tested for impairment on a individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. Non financial assets The carrying amounts of the Companys non-financial assets, other than biological assets, investment property, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the assets recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, recoverable amount is estimated at each reporting date. An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups.

4.20

42 |

Annual Report

for the year ended December 31, 2010

Notes to the Financial Statements

for the year ended 31 December 2010
Impairment losses are recognized in profit and loss. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets of the unit on a pro-rata basis. Derivative financial instruments These are initially recorded at fair value on the date a derivative contract is entered into and are re-measured to fair value at subsequent reporting dates. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Company designates certain derivatives as cash flow hedges. The Company documents at the inception of the transaction the relationship between the hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flow of hedged items. Derivatives are carried as assets when fair value is positive and liabilities when the fair value is negative. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized in equity. The gain or loss relating to the ineffective portion is recognized immediately in the profit and loss account. Amounts accumulated in equity are recognized in profit and loss account in the periods when the hedging items will effect profit or loss. However, when the forecast hedged transaction results in the recognition of a non-financial asset or a liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. Any gain or loss from change in fair value of derivatives that do not qualify for hedge accounting are taken directly to profit and loss account. 4.23 Related party transactions Transactions with related parties are priced at comparable uncontrolled market price except for the assets sold to employees under the employees car scheme as approved by the board of directors. Parties are said to be related if they are able to influence the operating and financial decisions of the Company and vice versa. Dividends Dividend distribution to the shareholders is recognized as a liability in the period in which it is approved by the shareholders.

4.22

4.24

| 43

Notes to the Financial Statements

for the year ended 31 December 2010
5 Property, plant and equipment
Reconciliation of net carrying value Particulars Net book value as at 1 January 2010 Additions Disposals (at NBV) Depreciation charge Net book value as at 31 December 2010 Reconciliation of gross carrying value Cost as at 31 December 2010 Accumulated depreciation as at 31 December 2010 Rupees in thousands Net book value Depreciation as at 31 rate (% per December 2010 annum)

Rupees in thousands

Freehold land Factory building on freehold land Plant, machinery and equipment Other machinery and equipment Furniture, fixture and office equipment Automobiles 2010

265,322 317,652 1,105,812 26,530 14,307 35,742 1,765,365

86,865 35,737 424,690 1,202 9,519 8,819 566,832

(1,026) (1,026)

(55,435) (83,172) (1,220) (4,921) (12,278) (157,026)

352,187 297,954 1,447,330 26,512 18,905 31,257 2,174,145

352,187 747,294 2,729,757 53,079 59,459 85,564 4,027,340

(449,340) (1,282,427) (26,567) (40,554) (54,307) (1,853,195)

352,187 297,954 1,447,330 26,512 18,905 31,257 2,174,145 10 5 5 20 20

Reconciliation of net carrying value Particulars Net book value as at 1 January 2009 Additions Disposals (at NBV) Depreciation charge Net book value as at 31 December 2009

Reconciliation of gross carrying value Cost as at 31 December 2009 Accumulated depreciation as at 31 December 2009 Rupees in thousands Net book value Depreciation as at 31 rate (% per December 2009 annum)

Rupees in thousands

Freehold land Factory building on freehold land Plant, machinery and equipment Other machinery and equipment Furniture, fixture and office equipment Automobiles 2009

265,322 260,595 960,842 23,599 10,170 32,628 1,553,156

108,218 227,585 4,643 8,099 14,670 363,215

(1) (3) (91) (95)

(51,161) (82,615) (1,711) (3,959) (11,465) (150,911)

265,322 317,652 1,105,812 26,530 14,307 35,742 1,765,365

265,322 711,557 2,313,782 51,877 49,941 82,973 3,475,452

(393,905) (1,207,970) (25,347) (35,634) (47,231) (1,710,087)

265,322 317,652 1,105,812 26,530 14,307 35,742 1,765,365 10 5 5 20 20

5.1

The cost of fully depreciated assets which are still in use is Rs. (thousands) 689,858 (2009: Rs. (thousands) 701,077). Note 2010 2009

( Rupees in thousands)

5.2

Depreciation charge for the year has been allocated as follows: Cost of sales Distribution cost Administrative expenses 24 25 26 145,768 4,859 6,399 157,026 140,628 4,503 5,780 150,911

5.3

Disposal of property, plant and equipment

Description Sold to Cost Book value Sale Proceeds Profit Mode of disposal

( Rupees in thousands)

Automobile

New Jubilee Insurance Company 3rd Floor, Jubilee Insurance House I.I. Chundrigar Road, Karachi. 1,239 1,002 1,239 237 1,239 1,002 1,239 237 Claim

Above represents sale of assets with book value of more than Rs. (thousand) 50. Note

2010

2009

( Rupees in thousands)

Intagible assets SAP computer software and implementation

Gross carrying value basis Cost Amortisation Rate of amortisation

6.1

6.1

29,899 (507) 29,392 20%

The software represents financial accounting software which has been acquired during the current year. The amortisation of the software represents the total amortisation charged during the current year which is equal to accumulated amortisation.

44 |

Annual Report

for the year ended December 31, 2010

Notes to the Financial Statements

for the year ended 31 December 2010
7. Capital work in progress Cornwala/ Mehran projects Plant expansion projects

Others

2010

2009

( Rupees in thousands)

Civil works and buildings Plant and machinery Project stores Advance for land - note 7.2 2010 2009 7.1

306,015 653,375 959,390 978,769

327 6,486 6,813 2,268

6,814 6,814 6,814

306,342 659,861 6,814 973,017

235,702 472,929 272,406 6,814 987,851

Cornwala/Mehran projects include markup amounting to Rs. (thousands) 20,751 (2009: Rs. (thousands) 35,458) capitalized during the year at the rate ranging from 12.63% to 14.84% per annum (2009: 11.64% to 16.75%).

7.2

This represents full payment of Rs. (thousands) 1,814 (2009: Rs. (thousands) 1,814) and legal cost incurred Rs. (thousands) 5,000 (2009: Rs. (thousands) 5,000) for the Companys factory land in Faisalabad which was acquired from the government in 1953 but registration of title is still pending in the name of Company. 2010
Note

2009

( Rupees in thousands)

8.

Employees retirement benefits Gratuity Pension 8.1 8.1 92,030 (27,230) 64,800 8.1 Movements in the net assets/(liabilities) recognized in the balance sheet are as follows: Gratuity 2010 2009 2010
( Rupees in thousands)

83,988 (68,204) 15,784

Pension 2009

Net assets/(liabilities) at the beginning of the year Expenses recognized Contribution paid Actuarial loss recognized Net assets/(liabilities) at the end of the year 8.2 The amounts recognized in the profit and loss account are as follows: Current service cost Interest cost Expected return on plan assets 19,185 48,341 (59,483) 8,043 20,613 60,633 (73,156) 8,090 7,852 42,482 (34,939) 15,395 7,517 38,679 (36,197) 9,999 92,030 83,988 (27,230) (68,204) 83,988 (8,043) 8,043 8,042 89,746 (8,090) 8,090 (5,758) (68,204) (15,395) 15,395 40,974 (17,789) (9,999) 9,999 (50,415)

| 45

Notes to the Financial Statements

for the year ended 31 December 2010
Gratuity 2010 2009 2010 ( Rupees in thousands) 8.3 The amounts recognized in the balance sheet are as follows: Present value of the obligation Fair value of plan assets Net asset/(liability) 8.4 Movement in present value of defined benefit obligation Present value of defined benefit obligation as at the beginning of the year Current service cost Interest cost Actual benefits paid during the period Actuarial (gain)/loss on obligation. Present value of defined benefit obligation as at the end of the year Movement in fair value of plan assets Fair value of plan asset as at the beginning of the year Expected return on assets Actual contribution by the employer Actual paid during the year Actuarial gain on plan asset Fair value of plan asset as at the end of the year 8.6 Actual return on plan assets Expected return on plan assets Actuarial loss on plan assets 59,483 (1,239) 58,244 73,156 (3,269) 69,887 34,939 (2,911) 32,028 36,197 (6,536) 29,661 464,553 59,483 8,043 (23,257) (1,239) 507,583 582,149 73,156 8,090 (195,573) (3,269) 464,553 271,036 34,939 15,395 (19,986) (2,911) 298,473 242,847 36,197 9,999 (11,471) (6,536) 271,036 380,565 19,185 48,341 (23,257) (9,281) 415,553 492,403 20,613 60,633 (195,573) 2,489 380,565 339,240 7,852 42,482 (19,986) (43,885) 325,703 260,636 7,517 38,679 (11,471) 43,879 339,240 (415,553) 507,583 92,030 (380,565) 464,553 83,988 (325,703) 298,473 (27,230) (339,240) 271,036 (68,204) Pension 2009

8.5

(Percentage) 2010 2009 8.7 Plan assets consist of the following Debt instruments Cash and other deposits 2010 8.8 Historical information-gratuity Present value of defined benefit obligation Fair value of plan assets Surplus in the plan Experience adjustment arising on plan liabilities Experience adjustment arising on plan assets
46 |

(Percentage) 2010 2009 77% 23% 84% 16% 2006

79% 21%

86% 14%

2009 2008 2007 (Rupees in thousands)

(415,553) 507,583 92,030

(380,565) 464,553 83,988

(492,403) 582,149 89,746

(416,871) 507,134 90,263

(393,382) 445,285 51,903

(9,281)

2,489

37,155

(408)

60,504

(1,239)

(3,269)

36,638

37,952

41,150

Annual Report

for the year ended December 31, 2010

Notes to the Financial Statements

for the year ended 31 December 2010
2010 8.9 Historical informationpension Present value of defined benefit obligation (325,703) Fair value of plan assets 298,473 Surplus/(deficit) in the plan (27,230) Experience adjustment arising on plan liabilities Experience adjustment arising on plan assets (2,911) (6,536) Note 9,010 2010 11,759 11,183 2009 (339,240) 271,036 (68,204) (260,636) 242,847 (17,789) (205,827) 212,101 6,274 (201,449) 182,781 (18,668) 2009 2008 2007 (Rupees in thousands) 2006

(43,885)

43,879

33,073

(13,183)

(5,572)

( Rupees in thousands)

Long term loans - secured considered good Staff loans outstanding for periods less than three years to: Executives Other employees Less: Current maturity 13 9.4 3,000 1,470 4,470 1,550 2,920 9.1 3,073 2,208 5,281 1,717 3,564

Loans to other employees represent house building loans provided to employees in accordance with Companys policy and are repayable over a period of five years. These loans are secured against the employees provident fund. Loans to employees carry interest at the rate of approximately 8% per annum (2009: 8 % per annum). Maximum aggregate balance during the year, at the end of any month, of loans to executives was Rs. (thousands) 3,682 (2009: Rs. (thousands) 3,073). No loans were granted to the directors and chief executive of the Company.
Note 2010 2009

9.2 9.3

( Rupees in thousands)

9.4

Loans to executives Opening balance Disbursement during the year Recoveries during the year Closing balance

3,073 1,500 (1,573) 3,000

885 2,830 (642) 3,073

10

Stores and spares Stores Spares Less: Provision for slow moving and obsolete items Stores in transit 10.1

223,568 116,765 340,333 (42,808) 297,525 12,996 310,521

186,744 109,406 296,150 (34,598) 261,552 16,420 277,972

10.1

Provision for slow moving and obsolete items Opening balance Provision for the year Closing balance

34,598 8,210 42,808

31,019 3,579 34,598

| 47

Notes to the Financial Statements

for the year ended 31 December 2010
Note 2010 2009

( Rupees in thousands)

11

Stock in trade Raw materials - corn & cobs Work in process Finished goods 2,333,955 51,816 739,975 3,125,746 656,527 34,715 474,876 1,166,118

12

Trade debts Secured - against security deposits and bank guarantees Unsecured - considered good Related parties Others Considered doubtful Less: Provision for doubtful balances 12.1 19,926 76,583 96,509 13,899 110,408 (13,899) 96,509 376,923 12.1 Provision for doubtful balances Opening balance Provision for the year Bad debts written off Closing balance 11,428 2,471 13,899 10,651 780 (3) 11,428 34,874 64,110 98,984 11,428 110,412 (11,428) 98,984 315,365 280,414 216,381

13

Loans and advances Loans and advances - considered good Suppliers of goods and services Employees Current maturity of long term loans 13.1 9 118,585 4,831 1,550 124,966 13.1 No advances were given to executives, directors and chief executive of the Company during the year. Note 2010 2009 6,477 3,646 1,717 11,840

( Rupees in thousands)

14

Trade deposits and short term prepayments Security Deposits L/C margin Prepayments 12,727 1,001 11,794 25,522 8,870 546 12,811 22,227

48 |

Annual Report

for the year ended December 31, 2010

Notes to the Financial Statements

for the year ended 31 December 2010
Note 2010 2009

( Rupees in thousands)

15

Other receivables Other receivables - Farmers balances Considered good Considered doubtful Less: Provision for doubtful balances Due from related parties Workers profit participation fund Others 15.1 9,485 1,675 11,160 (1,675) 9,485 1,574 1,195 12,254 1,566 1,675 3,241 (1,675) 1,566 1,119 428 3,303 6,416

15.2

15.1

Provision for doubtful balances Opening balance Provision for the year Closing balance Workers profit participation fund Opening balance Provision for the year Payment to the fund Closing balance

1,675 1,675

1,675 1,675

15.2

28

428 (150,198) 149,572 (198)

1,177 (108,072) 107,323 428

16

Cash and bank balances Cash at banks on current accounts on PLS accounts 1,516 17,134 18,650 1,134 19,957 21,091 39,741 16.1 These carry profit at rates ranging from 5% to 11.5% per annum (2009: 5% to 12% per annum). Note 2010 2009 45,547 606,870 652,417 2,358 18,634 20,992 673,409

16.1

Cash in hand Cheques in hand

( Rupees in thousands)

17

Trade and other payables Creditors Advances from customers Security deposits from dealers and contractors Other deposits Accrued liabilities Workers welfare fund Workers profit participation fund Employees provident fund Sales tax payable Special excise duty payable Unclaimed dividend 328,796 140,386 299,713 855 244,536 57,075 198 6,588 22,441 3,554 4,361 1,108,503 138,187 78,320 174,219 857 277,131 41,067 1,071 16,777 2,915 3,658 734,202
| 49

17.1 17.2 28 15.2

Notes to the Financial Statements

for the year ended 31 December 2010

17.1 17.2 18

As per the terms of agreement between dealers and contractors, the Company can utilize these deposits in the normal course of business. These represent deposits held against tenders for the sale of scrap.

Short term running finance - secured 18.1 18.2 The aggregate financing facility available from commercial banks is Rs. (thousands) 3,000,000 (2009: Rs. (thousands) 3,000,000). The rate of markup ranges from 12.63% to 14.84% per annum (2009: 11.64% to 16.75% per annum). These facilities are secured by joint pari passu hypothecation charge on current assets of the Company and are subject to repricing on monthly/quarterly basis. The unutilized facility for letters of credit as on 31 December 2010 amounts to Rs. (thousands) 648,622 (2009: Rs. (thousands) 592,901). Note 2010 2009
( Rupees in thousands)

18.3

19

Deferred taxation The details of the tax effect of taxable and deductible temporary differences are as follows: Taxable temporary difference on: Accelerated tax depreciation 350,795 22,680 373,475 Deductible temporary difference on: Others (21,721) 351,754 (17,163) 260,321 271,959 5,525 277,484

Employees retirement benefits

2010
Opening Charged to Prifit and loss Charged to Other comprehensive income Closing

(Rupees in thousand)
19.1 Taxable temporary difference Accelerated tax depreciation Employees retirement benefits Deductible temporary difference Others (17,163) 260,321 (4,558) 74,278 17,155 (21,721) 351,754 271,959 5,525 78,836 17,155 350,795 22,680

2009
Opening Charged to Prifit and loss Charged to Other comprehensive income Closing

(Rupees in thousand)
Taxable temporary difference Accelerated tax depreciation Employees retirement benefits Deductible temporary difference Others (15,883) 235,273
50 |

225,971 25,185

45,988 (1,280) 44,708

(19,660) (19,660)

271,959 5,525 (17,163) 260,321

Annual Report

for the year ended December 31, 2010

Notes to the Financial Statements

for the year ended 31 December 2010
2010 2009 (Number of shares) 20 Authorized, issued, subscribed and paid up capital Authorized share capital Ordinary shares of Rs.10 each 20.1 Issued, subscribed and paid up capital Ordinary shares of Rs. 10 each fully paid up for cash Issued other than cash - plant and machinery Issued as fully paid bonus shares 36,294 7,341,143 9,236,428 20.2 36,294 7,341,143 9,236,428 363 73,411 92,364 363 73,411 92,364 1,858,991 1,858,991 18,590 18,590 2010 2009 (Rupees in thousands)

20,000,000

20,000,000

200,000

200,000

Corn Products International Inc., USA holds 6,494,243 (2009: 6,494,243) ordinary shares of Rs. 10 each as at 31 December 2010. Note 2010 2009
( Rupees in thousands)

21

Reserves Capital Share premium Other Revenue General reserve 207 4,823,427 4,823,634 4,861,521 21.1 21.2 207 3,877,272 3,877,479 3,915,366 21.1 21.2 36,946 941 37,887 36,946 941 37,887

Unappropriated Profit

This reserve can be utilized in accordance with the provision of section 83(2) of the Companies Ordinance, 1984. This reserve was created under section 15BB of the Income Tax Act, 1922 to avail the tax exemption in prior years.

22

Contingencies and commitments a) Certain labour cases are pending before the labour courts and their financial effect cannot be reasonably determined due to their nature and uncertainty surrounding them. The possibility of any outflow for settlement of these claims is considered remote. Land registration fee as per Note 7.2. Commitments in respect of capital expenditure contracted but not provided amounts to Rs. (thousands) 476,247 (2009: Rs. (thousands) 474,254). Commitments in respect of purchase of corn amounts to Rs. (thousands) 3,488,519 (2009: Rs. (thousands) 4,028,200). Commitments in respect of counter guarantees given to banks in consideration of their guarantees in the normal course of business amount to Rs. (thousands) 120,370 (2009: Rs. (thousands) 105,972).
| 51

b) c)

d)

e)

Notes to the Financial Statements

for the year ended 31 December 2010
2010
Note

2009

( Rupees in thousands)

23

Sales - net Domestic Export 14,120,519 518,656 14,639,175 Less: Sales tax Special excise duty Trade discount and commission 674,803 42,022 9,581 726,406 13,912,769 11,684,655 304,567 11,989,222 516,762 33,182 11,174 561,118 11,428,104

24

Cost of sales Raw material consumed: Corn Stores Packing material Factory expenses: Salaries, wages and amenities Spares consumed Fuel and power Rent, rates and taxes Repairs and maintenance Depreciation Insurance Factory general expenses 5.2 24.1 469,325 118,629 1,667,190 3,819 9,527 145,768 10,942 193,998 2,619,198 10,897,233 Add: Less: Opening work in process stock Closing work in process stock Opening finished goods stock Closing finished goods stock 34,715 10,931,948 (51,816) 10,880,132 474,876 11,355,008 (739,975) 10,615,033 24.1 Cost of production 420,824 102,523 1,163,108 25,525 13,519 140,628 10,231 142,116 2,018,474 8,988,484 28,785 9,017,269 (34,715) 8,982,554 485,064 9,467,618 (474,876) 8,992,742 7,744,004 263,587 270,444 8,278,035 6,490,974 254,649 224,387 6,970,010

Add: Less:

Salaries, wages and amenities include Rs. (thousands) 11,355 (2009: Rs. (thousands) 8,248) in respect of contribution to pension and gratuity fund and Rs. (thousands) 11,660 (2009: Rs. (thousands) 10,264) in respect of contributions to provident fund.

52 |

Annual Report

for the year ended December 31, 2010

Notes to the Financial Statements

for the year ended 31 December 2010
Note 2010 2009

( Rupees in thousands)

25

Distribution cost

Salaries and amenities Traveling and automobile expenses Freight and distribution Insurance Rent, rates and taxes Repair and maintenance Electricity charges Printing and stationery Telephone and postage Advertising and sales promotion Depreciation Market research and development Provision for doubtful debts Miscellaneous expenses

25.1

44,803 6,950 66,019 1,991 1,113 438 113 379 1,713 332

47,306 8,559 48,044 2,485 1,007 345 93 486 1,475 625 4,503 58 780 1,118 116,884

5.2 12.1

4,859 46 2,471 541 131,768

25.1

Salaries and amenities include Rs. (thousands) 2,780 (2009: Rs. (thousands) 2,380) in respect of contribution to pension and gratuity fund and Rs. (thousands) 1,951 (2009: Rs. (thousands) 1,951) in respect of contributions to provident fund. Note 2010 2009

( Rupees in thousands)

26

Administrative expenses

Salaries and amenities Traveling and automobile expenses Insurance Rent, rates and taxes IT, networking and data communication Repair and maintenance Electricity charges Printing and stationery Telephone and postage Legal and professional charges Depreciation Amortisation on intangible assets Auditors remuneration Miscellaneous expenses Donation and charity

26.1

5.2 6.1 26.2 26.3

147,246 11,460 811 1,421 22,186 1,061 1,975 1,595 3,439 7,397 6,399 507 1,874 2,221 1,500 211,092

140,608 10,852 881 1,361 8,378 2,140 1,489 936 3,132 5,524 5,780 1,704 3,250 1,500 187,535

26.1

Salaries and amenities include Rs. (thousands) 9,303 (2009: Rs. (thousands) 7,461) in respect of contribution to pension and gratuity fund and Rs. (thousands) 5,891 (2009: Rs. (thousands) 6,637) in respect of contributions to provident fund.

| 53

Notes to the Financial Statements

for the year ended 31 December 2010
2010 2009

( Rupees in thousands)

26.2

Auditors remuneration Statutory audit fee Review of half yearly accounts Services in connection with review and reporting of accounts to CPI Inc. Audit of gratuity and pension funds 690 84 30 90 1,874 635 84 85 1,704 730 250 670 230

Miscellaneous certification Out of pocket expenses reimbursed

26.3

This represents donation to Government for rehabilitation of flood victims and none of the Directors has any interest in the donee. Note 2010
( Rupees in thousands)

2009

27

Other operating income Mark up on staff loans and profit on bank deposits Profit on sale of scrap Profit on sale of property, plant and equipment Profit on sale of pesticides and seeds Commission received Foreign exchange (loss) / gain Miscellaneous income 6,685 56,647 2,561 7,127 1,108 (146) 9,122 83,104 4,303 54,835 4,727 2,992 1,210 1,200 9,992 79,259

28

Finance cost Mark up on short term running finances Bank charges and commission 24,166 7,382 31,548 42,401 6,365 48,766 108,072 41,500 149,572

29

Other operating expenses Workers profit participation fund Workers welfare fund 15.2 150,198 56,245 206,443

30

Taxation Current Deferred 887,774 74,278 962,052 30.1 670,076 44,708 714,784

The Income Tax Department has charged tax of Rs. (thousands) 81,078 for the assessment year 2001-2002 (financial year ended 30 September 2000) under section 12(9A) of the Income Tax Ordinance, 1979 (Repealed) on the allegation that the dividend distribution by the Company was less than 40% of its after tax profits. Against this levy, the Company filed an appeal with the Commissioner of Income Tax (Appeals), which was rejected. The Company preferred an appeal with the Income Tax Appellate Tribunal (ITAT) against the order of CIT (Appeals). The ITAT vide order dated 21 April 2006 decided the case in favour of the Company and confirmed that levy of tax under section 12(9A) was against the provisions of the law and directed the assessing officer for decision in accordance with the provisions of amended clause 59 of Part IV, Second Schedule to the repealed Income Tax Ordinance, 1979. The Income Tax Department has moved to Lahore High Court on 17 October 2006, against the orders of ITAT. The case has not been fixed for hearing so far. No provision has been made in these financial statements as according to the management of the Company, it is probable that this case will be decided in favour of the Company. The legal advisors of the Company have concurred with the managements view.

54 |

Annual Report

for the year ended December 31, 2010

Notes to the Financial Statements

for the year ended 31 December 2010
2010 % 30.2 Numerical reconciliation between average effective tax rate and applicable tax rate: Applicable tax rate Tax effect of inadmissible expenses Tax effect of admissible expenses Effect of presumptive tax regime and others Average effective tax rate (tax expense divided by profit before tax) 34.36 2010 31 Earnings per share - basic and diluted 31.1 Earning per share - Basic Profit attributable to ordinary shareholders Weighted average number of ordinary shares Earnings per share - basic 31.2 Earning per share - Diluted There is no dilution effect on basic earnings per share as the Company has no such commitments. 32 Financial instruments The Companys financial liabilities mainly comprise trade and other payables and short term running finances. The main purpose of financial liabilities is to raise finance for the Companys financial assets which comprise long term loan, trade debts, Loans and advances, trade deposits and short term prepayments, other receivables and Cash and bank balances. The company has exposure to the following risks from its use of financial instruments: Credit risk Liquidity risk Market risk The Board of Directors has overall responsibility for the establishment and oversight of Companys risk management framework. The Board is also responsible for developing and monitoring the Companys risk management policies. 32.1 Credit risk Credit risk represents the accounting loss that would be recognised at the reporting date if counter parties fail completely to perform as contracted and arise principally from long term loans, trade debts, loans and advances, trade deposits and short term prepayment and other receivables and cash and bank balances. Out of the total financial assets of Rs. 462,740 thousand (2009: Rs. 1,085,249 thousand) financial assets which are subject to credit risk amount to Rs. 442,783 thousand (2009: Rs. 1,011,175 thousand). To manage exposure to credit risk in respect of trade receivables, management performs credit reviews taking into account the customers financial position, past experience and other factors. Where considered necessary, advance payments are obtained from certain parties. Sales made to major customers are secured through security deposits, bank guarantees and letters of credit. To manage exposure to credit risk, the company applies credit limits to its customer and obtains advances from certain customers. All investing transactions are settled / paid for upon delivery. The Companys policy is to enter into financial instrument contract by following internal guidelines such as approving counterparties and approving credits. Concentration of credit risk arises when a number of counter parties are engaged in similar business activities or have similar economic features that would cause their abilities to meet contractual obligation to be similarly effected by the changes in economic, political or other conditions. The Company believes that it is not exposed to major concentration of credit risk. The carrying amount of financial assets represents the maximum credit exposure before any credit enhancements. The maximum exposure to credit risk at the reporting date is:
| 55

2009 %

35.00 0.54 (0.14) (1.04)

35.00 0.32 (0.33) 0.54 35.53 2009

(Rupees in thousands) (Numbers) (Rupees)

1,837,937 9,236,428 198.99

1,297,080 9,236,428 140.43

Notes to the Financial Statements

for the year ended 31 December 2010
2010 2009

( Rupees in thousands)

Long term loans Trade debts Loans and advances Trade deposits and short term prepayments Other receivables Cash and bank balances

4,470 376,923 4,831 24,521 12,254 19,784 442,783

5,281 315,365 3,646 9,416 6,416 671,051 1,011,175 221,662 789,513 1,011,175

Secured Unsecured

284,884 157,899 442,783

The company has placed its funds with banks which are rated Al+ by PACRA/JCR VIS The maximum exposure to credit risk for trade debts as at 31 December 2010 by geographic regions was: Domestic Foreign The aging of trade receivables at the reporting date is: Past due 0 - 30 days Past due 31 - 60 days Past due 61 - 90 days Past due 366 & above 385,478 2,411 255 2,678 390,822 The aging of impairment loss against trade receivable: Past due 0 - 30 days Past due 31 - 60 days Past due 61 - 90 days Past due 366 & above 8,555 2,411 255 2,678 13,899 The movement in provision for impairment of receivables is as follows: Opening balance Provision for the year Bad debts written off Closing balance 32.2 Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Companys approach to managing liquidity is to ensure as far as possible to always have sufficient liquidity to meet its liabilities when due. The Company is not materially exposed to liquidity risk as substantially all obligations / commitments of the Company are short term in nature and are restricted to the extent of available liquidity. In addition, the Company has obtained overdraft facilities from various commercial banks to meet any deficit, if required to meet the short term liquidity commitments. 11,428 2,471 13,899 10,651 780 (3) 11,428 3,935 5,214 1,383 896 11,428 319,300 5,214 1,383 896 326,793 380,134 10,688 390,822 287,809 38,984 326,793

56 |

Annual Report

for the year ended December 31, 2010

Notes to the Financial Statements

for the year ended 31 December 2010
The table below summarizes the maturity profile of the Companys financial liabilities as at reporting date: 31 December 2010
Carrying amount Contractual cash flows Less than 12 month More than

1 year

( Rupees in thousands)

Financial Liabilities Trade and other payables Mark up accrued on short term running finances Short term running finances secured 968,117 8,298 634,460 1,610,875 968,117 9,377 634,460 1,611,954 968,117 9,377 634,460 1,611,954

31 December 2009
Carrying amount Contractual cash flows Less than 12 month More than

1 year

( Rupees in thousands)

Financial Liabilities Trade and other payables Mark up accrued on short term running finances Short term running finances secured 655,882 8,601 664,483 32.3 Market risk Market risk is the risk that changes in market price, such as foreign exchange rates, interest rates and equity prices will effect the Companys income or the value of its holdings of financial instruments. 32.3.1 Currency risk The Company is exposed to currency risk on import of project related and stores and spares items and export of goods mainly denominated in US dollars and on foreign currency bank accounts. The Companys exposure to foreign currency risk for S Dollars are as follows: U USD 2010 Foreign debtors Foreign currency bank accounts Gross financial assets exposure Trade and other payables Net exposure The following significant exchange rates have been applied: 2010 2009 2010 2009 Average rate for the year Reporting date rate 124,795 100 124,895 (3,508) 121,387 USD 2009 462,520 100 462,620 (228,226) 234,394 655,882 9,891 665,773 655,882 9,891 665,773

USD to PKR

85.78

81.66

85.64

84.25

| 57

Notes to the Financial Statements

for the year ended 31 December 2010
Sensitivity analysis: At reporting date, if the PKR had strengthened by 10% against the foreign currencies with all other variables held constant, before tax profit for the year would have been lower by the amount shown below, mainly as a result of net foreign exchange gain on translation of foreign debtors, foreign currency bank account and trade and other payables. 2010 Effect on profit and loss US Dollar 1,040 1,040 1,975 1,975 2009
( Rupees in thousands)

The weakening of the PKR against foreign currencies would have had an equal but opposite impact on the post tax loss. The sensitivity analysis prepared is not necessarily indicative of the effects on profit for the year and assets / liabilities of the Company. 32.3.2 Interest rate risk At the reporting date the interest rate profile of the Companys significant interest bearing financial instruments was as follows:
2010 2009 2010 2009

Effective rate (in Percentage)

Carrying amount (Rupees in thousands)

Financial Assets Fixed rate instruments: Long term loans Variable rate instruments: Cash and bank balances - saving Financial liabilities Variable rate instruments: Short term borrowings 12.63 to 14.84 11.64 to 16.75 634.460 5 to 11.5 5 to 12 17,134 606,870 8 8 4,470 5,281

Fair value sensitivity analysis for fixed rate instruments

The Company does not account for any fixed rate financial assets and liabilities at fair value through profit and loss. Therefore a change in interest rates at the reporting date would not affect profit and loss account.

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the reporting date would have decreased / (increased) pofit for the year by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2009. Profit and loss 100 bps Increase Decrease (Rupees in thousand) As at 31 December 2010 As at 31 December 2009 242 424 (242) (424)

The sensitivity analysis prepared is not necessarily indicative of the effects on profit for the year and assets / liabilities of the Company. 32.3.3 Other price risk Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk). The company is not exposed to any price risk as there are no financial instruments at the reporting date that are sensitive to price fluctuations. Fair value of financial instruments The carrying values of the financial assets and financial liabilities approximate their fair values. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arms length transaction.

32.3.4

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Annual Report

for the year ended December 31, 2010

Notes to the Financial Statements

for the year ended 31 December 2010
32.3.5 Capital risk management The Boards policy is to maintain an efficient capital base so as to maintain investor, creditor and market confidence and to sustain the future development of its business. The Board of Directors monitors the return on capital employed, which the Company defines as operating income divided by capital employed. The Board of Directors also monitors the level of dividends to ordinary shareholders. The Companys objectives when managing capital are: (i) (ii) to safeguard the entitys ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and to provide an adequate return to shareholders. The Company manages the capital structure in the context of economic conditions and risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may, for example, adjust the amount of dividends paid to shareholders and issue new shares. For working capital requirement and capital expenditure, the Company primarily relies substantially on short term borrowings. 33 Remuneration of Chief Executive, paid Directors and Executives
Chief Executive & MD 2010 2009 2010 Directors 2009 (Rupees in thousands) Executives 2010 2009

Managerial remuneration Rent, bonus and other allowances Retirement benefits Club subscription Leave encashment Number

8,005 2,950 10,955 1,805 27 1,128 13,915 1

15,729 13,300 29,029 2,625 85 10,294 42,033 2

3,872 4,466 8,338 873 26 903 10,140 1

6,408 9,300 15,708 587 27 804 17,126 2

37,319 49,053 86,372 8,413 40 5,252 100,077 43

32,026 39,701 71,727 5,345 36 5,197 82,305 37

Meeting fees aggregating to Rs. (thousands) 9 (2009: Rs (thousands) 3) were paid to 4 (2009: 4) non-executive directors for attending board meetings. In addition Chief Executive & Managing Director, full time working director and some executives are also provided with Company maintained car. 34 Transactions with related parties and associates The realted parties comprise parent company, related group companies, local associated company, directors of the company, key management personnel and staff retirement funds. Details of transactions with related parties, other than those disclosed else where in these financial statements are as follows:
2010 Name of parties Nature of relationship Nature and description of related party transaction Total value of transaction Closing balance Total value of Closing transaction balance (Rupees in thousands) 2009

(Rupees in thousands)

Unilever Pakistan Food Limited Corn Products International Corn Products Kenya Ltd. Corn Products Malaysia

Associate Holding company Associate Associate Other related parties

Sales Services rendered Services received Export sales Export sales Contribution to funds

798,858 12,528 97,334 42,940

15,455 4,471

703,067 242,222 63 32,850 7,504 36,940 1,455 18,758 3,478 14,713

Employees benefits

The transactions were carried out at an arms length basis, in accordance with the accounting policy as stated in Note 4.23. No buying and selling commission has been paid to any associated undertaking.

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Notes to the Financial Statements

for the year ended 31 December 2010
2010
( Metric Tons)

2009

35

Plant capacity and production Average grind capacity per day Grind capacity for 350 working days Actual days worked Actual grind 1,408 492,683 303 425,528 1,303 456,050 309 399,723

The reduction in grind days/ grind was attributable to lower sales demand and acute energy crisis in the country. 36 Dividends The Board of Directors have proposed a final dividend for the year ended 31 December 2010 of Rs. 55 per share, amounting to Rs. (thousands) 508,004 at their meeting held on 14 February 2011, for approval of the members at the Annual General Meeting to be held on 29 March 2011 (2009: Rs. 40 per share amounting to Rs. (thousands) 369,457). 37 38 Date of authorization of issue These financial statements were authorized for issue on 14 February, 2011 by the Board of Directors of the Company. Use of estimates and judgments The preparation of financial statements in conformity with approved accounting standards requires management to make judgments, estimates and assumptions that effect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions and judgments are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making the judgment about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognized in the period in which the estimate is revised if the revision effects only that period, or in the period of revision and future periods if revision affects both current and future periods. The areas where various assumptions and estimates are significant to Companys financial statements or where judgments were exercised in application of accounting policies are as follows: - - 39 Taxation- (note 4.3 & 30) Useful life of depreciable assets- (note 4.6 & 5) Employees retirement benefits- (note 4.9 & 8) Provision and contingencies- (note 4.17 & 22)

General - - Figures in these financial statements have been rounded off to the nearest thousands of rupees. Comparative figures have been reclassified and re arranged where necessary in order to facilitate comparison.

Anis Ahmad Khan Director 60 |

Ansar Yahya Chief Executive & Managing Director

Zulfikar Mannoo Director

Annual Report

for the year ended December 31, 2010

Pattern of Shareholding
As at 31 December 2010

Number of Shareholders 715 152 47 48 2 1 1 1 2 2 1 3 1 1 2 2 1 2 1 1 1 1 988 1 101 501 1001 5001 15001 25001 40001 50001 55001 60001 65001 85001 100001 110001 140001 150001 165001 200001 235001 300001 6490001 Shareholding 100 500 1000 5000 10000 20000 30000 45000 55000 60000 65000 70000 90000 105000 115000 145000 155000 170000 205000 240000 305000 6495000

Total Shares Held 37,054 36,027 36,159 116,823 15,995 20,000 28,827 43,140 108,217 114,050 63,822 200,262 89,989 100,131 226,265 283,066 152,139 332,964 200,085 236,578 300,595 6,494,240 9,236,428

Sr. No. 1 2 3 4 5 6 7 8

Categories of Shareholders Individuals Investment Companies Insurance Companies Joint Stock Companies Modaraba Companies Foreign Investors Mutual Fund Others Total:

Number of Shareholders 955 1 3 10 2 5 6 6 988

Shares Held 2,532,945 60 113,322 1,603 3,378 6,494,288 88,451 2,381 9,236,428 Percentage 27.42 0.00 1.23 0.02 0.04 70.31 0.96 0.02 100.00

The above two statements include 341 shareholders holding 391,816 shares through Central Depository Company of Pakistan Limited.

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Pattern of Shareholding

As at 31 December 2010 as per format perscribed in Code of Corporate Governance

No. of Shares Associated Companies, undertakings and related parties Corn Products International Inc. NIT ICP Directors Mr. John F. Saucier Mr. Rashid Ali Ms. Cheryl K. Bebee Ms. Mary A. Hynes Mr. Zulfikar Mannoo Mian M. Adil Mannoo Mr. Wisal A. Mannoo Mr. Anis Ahmad Khan Sh. Gulzar Hussain Directors Spouses CEO Mr. Ansar Yahya Executives Public sector companies and corporations Banks, DFIs, Non-Banking FI, Insurance, Modaraba, Mutual Fund 82 1,712 0 204,601 Mrs. Sarwat Zulfikar W/o Mr. Zulfikar Mannoo 9,370 1 865 1 1 238,263 155,911 177,198 1,264 5,574 - Sponsor and Related Party 6,494,240 0 60

Shareholders holding ten percent or more voting interest Corn Products International Inc. 6,494,240

62 |

Annual Report

for the year ended December 31, 2010

Proxy Form

118th General Meeting (Annual Ordinary)

The Company Secretary, Rafhan Maize Products Co. Ltd., Rakh Canal East Road, P. O. Box 62, Faisalabad.

I / We of being shareholder(s) of Rafhan Maize Products Company Limited hereby appoint of or failing him as my / our proxy to vote for me / us and on my / our behalf at the 118th General Meeting (Annual Ordinary) of the Company to be held at Karachi on Tuesday, March 29, 2011 at 10:00 a.m. and / or at any adjournment thereof.

Dated this

day of

2011.

(Signature of Proxy)

Affix Revenue Stamp of Rs. 5/-

Witness Place No. of Shares held

Signature of Shareholder Folio No. / CDC No.

Notes: a) This Form of Proxy, duly completed and signed across a revenue stamp, must be deposited at the Companys Registered Office not less than 48 hours before the time of holding the meeting. A proxy need not be a member of the Company.

b)

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AFFIX CORRECT POSTAGE

The Company Secretary,

Rafhan Maize Products Co. Ltd;

Rakh Canal East Road, P. O. Box 62, Faisalabad.