Engro Corporation Annual Report 2010 - SEARCHABLE

enabling excellence.
Annual Report 2010

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Engro Corporation Limited & Engro Fertilizers Limited

head offices in Karachi (7th & 8th floor, Harbor Front)
have been certified as Green Offices by WWF Pakistan
engro corp
Every day, Engro enables its brand of excellence to come

alive through investments, innovation and inspiration.
a n d began production in 1 9 6 8 . At US $ 4 3 million with an annual
About Us production capacity of 173,000 tons, this w a s the single largest
foreign investment by a multinational corporation in Pakistan at t h e
Engro Corporation Limited is one of Pakistan's largest conglomerates
time. As the nation's first fertilizer brand, the company also pioneered
with the c o m p a n y ' s business portfolio spanning across sectors
the education of farmers in Pakistan, helping to modernize traditional
including chemical fertilizers, PVC resin, a bulk liquid chemical
farming practices to boost farm yields, directly impacting the quality
terminal, industrial automation, foods, power generation a n d
of life for farmers a n d t h e nation.
c o m m o d i t y trade. At Engro, our ambition is to b e c o m e the premier
Pakistani enterprise with a global reach.
In 1 9 7 8 , Esso w a s renamed Exxon globally, a n d the c o m p a n y
The management team at Engro is responsible for conceptualizing became Exxon Chemical Pakistan Limited. The business continued
and articulating goals that bring our people together in pursuit of to prosper as it relentlessly pursued productivity gains and strived
our objectives. It leads the company with a firm commitment to the to attain professional excellence.
values a n d spirit of Engro. In our journey to b e c o m e a profitable,

growth-oriented a n d sustainable company, our management In 1 9 9 1 , following a decision by Exxon to divest its fertilizer business
structure has evoived to create a more transparent and accessible on a global basis, the employees of Exxon Chemical Pakistan
organization. Limited d e c i d e d to buy o u t Exxon's share. This w a s , a n d perhaps

still is, the m o s t successful employee buy-out in the corporate
history of Pakistan. Renamed Engro Chemical Pakistan Limited,
Our growth is driven by our people. Our culture is dynamic and
the c o m p a n y continued to go from strength to strength, reflected
energetic, with emphasis on our core values a n d loyalty of our
in its consistent financial performance, g r o w t h a n d diversification.
employees. Our w o r k environment promotes leadership, integrity,
t e a m w o r k , diversity and excellence.
In 2 0 0 9 a decision w a s m a d e to d e m e r g e t h e fertilizer business
Our History into an independent operating c o m p a n y to ensure undivided focus

on the business's expansion a n d g r o w t h . In the best interests of
a multi category business, expansion strategy a n d g r o w t h vision,
Today, Engro is one of Pakistan's most progressive, growth oriented
the management decided that t h e various businesses w o u l d be
organizations, m a n a g e d under a holding structure that w o r k s
better served if the c o m p a n y w a s converted to a holding company;
towards better managing and oversight of subsidiaries and affiliates
Engro Corporation Limited.
that are part of Engro's capital investments in Pakistan.
The c o m p a n y is also defined by its history, which reflects a rich From its inception as Esso Pakistan Fertilizer C o m p a n y Limited in
legacy of innovation and growth. The seeds for the c o m p a n y were 1965 to Engro Corporation Limited in 2 0 1 0 , Engro has c o m e a
s o w n following the discovery of the Mari gas field by Esso / Mobil long way a n d will continue working towards its vision of b e c o m i n g
in 1957. Esso proposed the establishment of a urea plant, and the a premier Pakistani c o m p a n y with a global reach.
Esso Pakistan Fertilizer C o m p a n y Limited w a s established in 1965

Engro Fertilizers Limited Engro Foods Limited
Engro Fertilizers Limited is a premier fertilizer manufacturing a n d Engro Foods Limited used dairy as a stepping stone to enter into
marketing c o m p a n y with products that focus on balanced c r o p the food business. The business has established state-of-the-art
nutrition a n d increased yield. The fertilizers business is a dynamic dairy processing units in Sukkur and Sahiwal, along with an ice
c o m p a n y driven by a vision to improve productivity a n d lifestyle for cream production facility in Sahiwal.
t h o u s a n d s of farmers across Pakistan.
Top quality dairy brands like Olper's, Olwell, Tarang, Omore and
Having started with single product, Urea, the business today caters O w s u m have been successfully launched under the helm of the
to a variety of fertilizers for different farmers. Engro Zorawar is a business's dairy products. To support these brands and their higher
high Phosphate-content fertilizer having ideal pH characteristics for standards of quality, Engro Foods has invested heavily in milk
alkaline soils whereas Engro Zarkhez is a high-end fertilizer product processing and milk collection infrastructure. The business has also
that provides convenient a n d balanced nutrition for a w i d e variety m a d e steps out of the dairy sector with the launch of its brand of
of crops. For zinc deficiency Engro Zingro is an imported Zinc juices, Olfrute, a n d has completed construction of its rice processing
fertilizer w h i c h primarily targets deficiency prone c r o p s like rice, facility in Muridke.
potato, maize, sugarcane, wheat, c o t t o n , vegetables a n d fruits.
Engro Fertilizers has successfully developed a loyal customer base The business is n o w set to conquer the international markets
all across Pakistan, not only by providing farmers with quality through a global business unit, which is preparing to enter the halal
fertilizers, but also through extensive market development activities. meat market in America and Canada, following its acquisition of
'Al Safa Halal'.
W i t h the d e m a n d for Urea continuing to g r o w in Pakistan, Engro's
fertilizer manufacturing facility at Daharki underwent a major expansion
project, with the completion of the w o r l d ' s largest single-train
ammonia- urea plant in 2010. This takes the business's production
capacity to 2.3 million tons, a n d provides the potential for Pakistan
to end near-term imports of urea, with benefits to the agri economy
a n d the national exchequer.
Engro C o r p . I Annual Report 2 0 1 0

Engro Polymer & Chemicals Limited Engro Vopak Terminal Limited
Engro Polymer & Chemicals Limited is Pakistan's only manufacturer Engro V o p a k Terminal Limited is a joint venture with Royal Vopak
and marketer of PVC (polyvinyl chloride) resin, with an annual PVC of the Netherlands a n d has been providing world class services to
production of 150,000 tons. The business markets its products the growing chemical a n d petrochemical industry of Pakistan. The
under the brand name of SABZ. Following recent expansion, the business offers storage and handling solutions for liquid a n d gaseous
business n o w has an integrated facility with the capability to chemicals, oil p r o d u c t s , petrochemicals, bio-fuels, vegetable oils
manufacture EDC, V C M , Chlorine a n d Caustic soda. and Liquefied Natural Gas (LNG). The business reached a landmark
for the terminal industry of Pakistan with the successful
The business plays a pivotal role in ensuring the sustainability of commissioning of Pakistan's first cryogenic import facility for
the domestic PVC industry and provides support through the provision Ethylene.
of quality products and technical services. It also invests in developing

new products and markets. As a part of market development it is
looking to set up a complete business line for the construction
industry by promoting PVC based doors and windows.
03
Engro Powergen Limited Engro Eximp Private Limited
Engro Powergen Limited seeks to develop power projects in Pakistan Engro Eximp Private Limited trades in c o m m o d i t y fertilizers such
to help reduce the power shortage in the country a n d earn a as DAP, MAP, MOP and SOP, and micro-nutrients like Zinc Sulphate.
competitive return for shareholders. It supplies these fertilizers as raw materials to Engro Fertilizer's
Zarkhez plant for manufacturing blended c o m p o u n d fertilizers.
The business has set up its first venture into the power sector, with Engro Eximp has been the largest importer of phosphates a n d
a 2 2 0 MW power plant in Qadirpur. This is Engro's first Independent potash fertilizers in Pakistan over the last few years and has also
Power Project (IPP) a n d it utilizes permeate gas, t h u s reducing recently expanded into the regional trade of fertilizers.
c a r b o n emissions.
W i t h a vision to expand into n e w a n d profitable trading avenues,
The Sindh Engro Coal Mining C o m p a n y Limited is a joint venture Engro Eximp has established a fast growing basmati rice trading
b e t w e e n the Government of Sindh a n d Engro Powergen, to mine business. T h e business will procure high quality basmati paddy
coal from Thar Block II. The project has c o m p l e t e d its technical, from farmers and export finished basmati rice to B 2 B customers
e c o n o m i c a n d environmental feasibility assessment a n d aims to across the w o r l d . As part of this initiative, Engro has set up a large,
utilize the ample reserves of coal in the Thar Desert for power state-of-the-art rice processing mill in Muridke; the heart of the
generation. basmati growing area in Pakistan.
Engro Powergen also seeks to reduce Pakistan's power shortage

by exploring a n d implementing cleaner, efficient a n d e c o n o m i c
methods of power generation. Wind, hydro a n d solar power projects
are being actively assessed as alternative energy options for Pakistan.

Avanceon Limited
Avanceon Limited is a leading global automation business, providing
process a n d control solutions, with subsidiaries operating in UAE
and the United States. The business also offers power a n d energy
management integrated solutions, as well as high end software
that integrate production a n d business applications. Avanceon's
driving force is its vision to develop intellectual property to optimize
the energy footprint of the manufacturing industry.
05
engro at a glance
Investment
40 70
Total Investment to date in USD Millie
- 2,160 _
Total Employees
3,202
J Daharki j_] Karachi J Sukkur [J Qadirpur | J Muridke & Lahore J Sahiwal |_| Others

Our Employees and Investment across Pakistan
contents
01
C o m p a n y Introduction
Engro at a glance 06
Key Figures 10
C o m p a n y Information 12
Notice of Meeting 13
T h e Board of Directors 16
Directors' Profiles 18
Core Values 24
Corporate Governance 26
Board C o m m i t t e e s 28
Functional Committees 29
Directors' Report
30 Business Review
Health, Safety a n d Environment
33
37
Employee Relations a n d
Organizational Development 39
Social Investments 40
Corporate A w a r d s 42
Results for the year 43
Dividends 44
Value Addition 45
Key Shareholding a n d Shares Traded 60
Pattern of Holding of the Shares 52
Shareholder Information 56
Standalone A c c o u n t s
58 Statement of Compliance
Review Report on Statement of Compliance
59
61
Auditors' Report on Compliance
with Employee Share Option S c h e m e 62
Auditors' Report t o the M e m b e r s 63
Standalone Financials 64
Consolidated A c c o u n t s
112 Auditors' Report to the Members

Consolidated Financials
113
114
Financials at a glance
208 Proxy Form 209
© 2010, Engro Corp.
All Rights Reserved. No part of this publication may be reproduced

without the prior written permission of the publisher.
key figures
Weight Average number of

Sales Revenue Rs million ordinary shares (000's)
2009 2010 2009 2010
58,152
79,975 310,913
327,737
Earning per share Basic

Profit after Tax Rs Million & Diluted Rs
2009 2010 2009 2010
3807 1224
6,790 20.72
Dividend Rs/Share EBITDA Rs Million
2009 2010 2009 2010
6.00
6.00 9,018
15,362
Market Capitalization
Capital Expenditure Rs Million (Year End) Rs Million
2009 2010 2009 2010
53,894
21,153 54,604
63,519
Market Capitalization
Total Assets Rs Million (Year End) USD Million
2009 2010 2009 2010
132,105
164,778 649
742
Total Equity Rs Million Price to Earning Ratio

2009 2010 2009 2010
29,344
34,115 15
9
11
company information
JS Bank Limited
Board of Directors Bank Al-Habib Limited
Bank Al-Fa!ah Limited
Hussain D a w o o d , Chairman
Askari Bank Limited
A s a d Umar, President & Chief Executive
Citibank Limited
Asif Qadir
NIB Bank Limited
Arshad Nasar
Shahzada D a w o o d
Shabbir Hashmi
Isar A h m a d Auditors
Khalid Mansoor
Ruhail M o h a m m e d A.F. Ferguson & C o m p a n y
Chartered Accountants
Khalid Siraj Subhani
M u h a m m a d Aliuddin Ansari State Ufe Building No. 1 -C
I.I. Chundrigar Road
Abdul S a m a d D a w o o d
Karachi-74000, Pakistan
Saad Raja
Tel: +92(21) 3 2 4 2 6 6 8 2 - 6 / 3 2 4 2 6 7 1 1 - 5
Fax +92(21) 3 2 4 1 5 0 0 7 / 3 2 4 2 7 9 3 8
Company Secretary
Andalib Alavi Registered Office
7th & 8th Floors, The Harbor Front Building,
HC # 3, Marine Drive, Block 4, Clifton,
Bankers
Karachi-75600, Pakistan
Tel: +92(21) 3 5 2 9 7 5 0 1 - 3 5 2 9 7 5 1 0
Standard Chartered Bank Pakistan Limited
M C B Bank Limited Fax:+92(21) 3 5 8 1 0 6 6 9
Allied Bank Limited e-mail: [email protected]
United Bank Limited Website: w w w . e n g r o . c o m
Habib Bank Limited

notice of meeting
NOTICE IS HEREBY GIVEN that the Forty Fifth Annual General "5. The share capital of the C o m p a n y is Rs. 4,500,000,000
Meeting of Engro Corporation Limited will be held at Karachi Marriott (Rupees Four Billion Five Hundred Million) divided into
Hotel, Abdullah Haroon Road, Karachi on Thursday, March 3 1 , 4 5 0 , 0 0 0 , 0 0 0 Ordinary Shares of Rs. 1 0 / - (Rupees Ten)
2011 at 10,00 a.m. to transact the following business: each."
A. Ordinary Business (6) To consider, a n d if thought fit, to pass the following Resolution
as an Ordinary Resolution:
(1) To receive a n d consider the Audited A c c o u n t s for the year
ended December 31, 2 0 1 0 a n d the Directors' a n d Auditors' "RESOLVED that
Reports thereon.
(a) A s u m of Rs. 6 5 5 , 4 7 3 , 6 3 0 (Rupees Six Hundred Fifty Five
(2) To declare a final dividend at the rate of Rs. 2.00 per share for Million Four Hundred Seventy Three Thousand Six Hundred
the year ended December 31, 2 0 1 0 . and Thirty only) out of the free reserves of the C o m p a n y
be capitalised a n d applied towards the issue of 65,547,363
(3) To appoint Auditors a n d fix their remuneration. ordinary shares of Rs. 10/- each as bonus shares in the
ratio of 1:5 i.e. 2 0 % on ordinary shares held by the members
B. Special Business w h o s e names appear on the Members Register on March
1 7 , 2 0 1 1 . These bonus shares will rank pari passu in all
(4) To consider, a n d if thought fit, to pass the following resolution respects with the existing shares but shall not be eligible
as a Special Resolution: for the dividend declared for the year ended December 3 1 ,
2010.
"RESOLVED that the consent of the C o m p a n y in General

Meeting be a n d is hereby a c c o r d e d to invest upto Rs. 562 (b) M e m b e r s entitled to fractions of shares as a result of their
million by w a y of subscription to Rights Shares of a subsidiary holding either being less than 5 ordinary shares or in excess
company, Engro Polymer & Chemicals Ltd. (E.Polymer)." of an exact multiple of 5 ordinary shares shall be given the
sale proceeds of their fractional entitlements for which
(5) To consider, and if thought fit, to pass the following resolution purpose the fractions shall be consolidated into w h o l e
as a Special Resolution: shares a n d sold on the Karachi S t o c k Exchange.
"RESOLVED that the Authorized Capital of the C o m p a n y be (c) For the purpose of giving effect to the foregoing, the directors
increased from Rs. 3 , 5 0 0 , 0 0 0 , 0 0 0 to Rs. 4 , 5 0 0 , 0 0 0 , 0 0 0 be a n d are hereby authorised to give s u c h directions as
(Rupees Four Billion Five Hundred Million) a n d that: they d e e m fit to settle any question or any difficulties that
may arise in the distribution of the said bonus shares or in
(a) Cause 5 of the Memorandum of Association of the Company the payment of the sale proceeds of the fractions."
be and is hereby a m e n d e d to read as follows:
"5. The Share Capital of the Company is Rs. 4,500,000,000

(Rupees Four Billion Five Hundred Million) divided into By Order of the Board
4 5 0 , 0 0 0 , 0 0 0 Ordinary shares of Rs. 1 0 / - (Rupees Ten)
each."
Karachi, ANDALIB ALAVI
(b) Article 5 of the Articles of Association of the C o m p a n y be Dated: February 14, 2 0 1 1 . Vice President - Legal
and is hereby a m e n d e d to read as follows: & C o m p a n y Secretary
13
notice of
N.B.
(1) The Share Transfer Books of the C o m p a n y will be closed from Rights, a n d therefore it is thought prudent to obtain shareholder
Thursday, March 17, 2011 t o Thursday, March 3 1 , 2 0 1 1 (both approval for the s a m e at the A G M .
days inclusive). Transfers received in order at the office of our
Registrar, M/s. FAMCO Associates (Private) Limited, 1st Floor, S o m e of the Directors of Engro are interested in the business to
State Life Building No. 1-A, I.I. Chundrigar Road, Karachi-74000 the extent that they are also nominee Directors of E.Polymer a n d
by the close of business (5:00 p.m) on Wednesday, March 16, hold one share each as nominees of Engro, while Mr. Asif Qadir
2011 will be treated in t i m e for the purpose of payment of final holds (including 1 nominee share) 1,607,776 shares of E.Polymer.
dividend a n d issuance of bonus shares to the transferees, a n d
to attend the meeting. The information required under SRO 865(1 )/2000 for equity
investment is provided below:
(2) A m e m b e r entitled to attend a n d vote at this Meeting shall be
entitled to appoint another person, as his/her proxy to a t t e n d , (i) N a m e of investee C o m p a n y or a s s o c i a t e d u n d e r t a k i n g :
speak a n d vote instead of him/her, a n d a proxy so appointed Engro Polymer & Chemicals Limited
shall have such rights, as respects attending, speaking a n d
voting at the Meeting as are available to a member. Proxies, (ii) Nature, a m o u n t a n d e x t e n t of investment:
in order to be effective, must be received by the C o m p a n y not Acquisition of shares of E.Polymer for an amount of upto Rs.
less than 48 hours before the Meeting. A proxy need not be 562 million. The shares will be acquired directly from E.Polymer
a m e m b e r of the Company. through its Rights issue as further equity injection.
Statement under Section 160 of the Companies (iii) Average market price of the shares intended to be purchased
Ordinance, 1984 during preceeding 6 months:
Rs. 12.56
This Statement is annexed to the Notice of the Forty Fifth Annual
General Meeting of Engro Corporation Limited to be held on March
(iv) B r e a k - u p value of shares:
3 1 , 2011 at w h i c h certain Special Business is to be transacted.
Rs. 10.42 (as at e n d December, 2010)
The purpose of this Statement is to set forth the material facts
concerning such Special Business.
(v) Price at w h i c h shares will be p u r c h a s e d :
Rs. 10 per share. However, incase volatility in the stock market
Item (4) of the Agenda d o e s not m a k e it possible or practical to have a Rights issue
at par, offer by E.Polymer a n d subscription by Engro at lower
Engro Polymer & Chemicals Limited (E.Polymer) is a Subsidiary of
t h a n par may have to be considered.
Engro, with other large shareholders being the International Finance
Corporation (15%) a n d Mitsubishi Corporation (10.24%). E.Polymer
(vi) Earning / (Loss) per share of investee c o m p a n y in last 3 years:
has executed a major expansion a n d b a c k integration project by
Rs. 0.68, Rs. (0.35) a n d Rs. (1.22) in 2 0 0 8 , 2 0 0 9 a n d 2 0 1 0
expanding its PVC resin production capacity by 5 0 , 0 0 0 t o n s (to a
respectively.
total of 150,000 t o n s per annum) and b a c k integrating by setting
up an EDC / V C M plant with a capacity of 150,000 t o n s pa and
(vii) S o u r c e s of f u n d s f r o m w h e r e shares will be p u r c h a s e d :
a chlor-alkali unit to produce 106,000 t o n s pa of caustic soda and
Internal cash generation a n d possible further debt, ff required.
9 4 , 0 0 0 t o n s pa of chlorine, alongwith a 65 MW power plant and
allied equipment a n d facilities. The project is now complete and in
(viii)Period f o r w h i c h i n v e s t m e n t will b e m a d e :
production. However d u e delays in completion, E.Polymer h a d to
Long t e r m .
borrow an extra Rs. 9 5 0 million from banks. The terms of the loan
are that repayment is to be m a d e in one lump sum and the banks
(ix) P u r p o s e of i n v e s t m e n t :
can require E.Polymer to implement a Rights issue, incase a majority
To provide comfort to and to enable repayment of the loans of
of the banks feel that internal cash generation may not be sufficient
the lenders to E.Polymer a n d to provide further equity to
to repay the loans. As the C o m p a n y o w n s 5 6 % of the shares of
E.Polymer.
E.Polymer, it w o u l d be obliged to subscribe to its portion of the

(x) Benefits likely to accrue to the c o m p a n y a n d the shareholders
Item (5) of the Agenda
from the Proposed investment:
E.Polymer has expanded a n d b a c k integrated its business, In order to provide for increase in authorized capital for issuance
and Engro is confident of the long term success of this project. of bonus shares and further growth, the Board of Directors proposes
Consequently, the benefits to Engro and its shareholders will that the Authorized Capital be increased from Rs.3,500,000,000
c o m e from the profitability of E.Polymer, resulting in dividend t o Rs.4,500,000,000.
from E.Polymer and increasing value of the shares of E.Polymer,
which should result in increased profitability of Engro a n d
Item (6) of the Agenda
increase in value of the shares of Engro.
The Board of Directors r e c o m m e n d that taking into a c c o u n t the

(xi) Interest of directors a n d their relatives in the investee company: financial position of the Company the issued capital of the C o m p a n y
Except for Mr. Asif Qadir, the directors of Engro have no persona! be increased by capitalization of free reserves amounting to Rs.
interest in E.Polymer, except that s o m e Directors of Engro are 6 5 5 , 4 7 3 , 6 3 0 a n d the issue of bonus shares in the ratio of 1:5 i.e.
Directors of E.Polymer a n d hold one share each in E.Polymer, 2 0 % . The Directors of the C o m p a n y are interested in the business
as nominees of Engro. Mr. Asif Qadir holds 1,607,776 shares to the extent of their shareholding in the Company.
of E.Polymer.
By Order of the Board
Karachi, ANDALIB ALAVI

Dated: February 14, 2 0 1 1 . Vice President - Legal
& C o m p a n y Secretary
15
F l a p o p e n left s i d e
enabling growth,
Engro Foods Limited

T h e foods business, incorporated in 2 0 0 5 , began operations in Quality brands like Olper's, Olwell, Tarang, Omore, Olfrute a n d
2006. This is Engro's first venture into the FMCG sector. Using dairy O w s u m are s o m e of the company's leading brands over the last
as a stepping stone to enter into the food business, the c o m p a n y 5 years. Engro Foods' vision is "Elevating C o n s u m e r Delight
is n o w involved in the manufacture, processing and selling of dairy Worldwide" and in pursuit of this ambition, the c o m p a n y has also
products, ice cream a n d fruit juices. The business also operates ventured into a halal meat project to cater to the North American
a dairy farm, and has constructed a rice processing facility. In pursuit market.
of maintaining t h e highest standards of quality, Engro Foods has
invested heavily in milk processing and milk collection infrastructure.
Flap inside
enabling growth,
Launched 11 brands since inception.
Market leader in the tea creaming segment.
Pakistan's 1 st company to cross one billion

Tetra packs in one year.
The market leader in UHT.
Omore, Pakistan's No. 2 ice cream brand

in less than two years.
Voted 'Best Place to Work' for consecutive

years.
board of directors
From left to right

Seated Arshad Nasar A s a d Umar president & Chief Executive) Hussain D a w o o d (Chairman)
Standing S a a d Raja Abdul S a m a d D a w o o d Shabbir Hashmi

directors' profile
Hussain Dawood
Chairman
Hussain D a w o o d graduated with an M B A from the Kellogg School He also serves as a M e m b e r of t h e G o v e r n m e n t of Pakistan
of Management, Northwestern University, USA, a n d is a graduate Education Task Force, Director of t h e Pakistan Business Council,
in Metallurgy from Sheffield University, UK. He is Chairman of Engro Pakistan Centre for Philanthropy, Beaconhouse National University
Corporation Umited, D a w o o d Hercules Chemicals Umited, Pakistan and is a Global Charter M e m b e r of The Indus Entrepreneurs (TIE).
Poverty Alleviation Fund and T h e D a w o o d Foundation. His social He is the Honorary Consul of Italy in Lahore a n d w a s conferred the
responsibilities include Chairmanship of t h e International Advisory a w a r d "Ufficiale Ordine al Merito della Repubblica Italiana" by t h e
Council of t h e Cradle to Cradle Institute in San Francisco, Karachi Italian Government. He joined t h e board in 2 0 0 3 .
Education Initiative / Karachi School for Business & Leadership.

Asad Umar
President & Chief Executive
Asad Umar graduated with an M B A from the IBA, Karachi in 1984. a n d Punjab Skill Development Fund. He is a m e m b e r of the Board
He started his career with HSBC, Pakistan a n d in 1985 joined of Directors of Karachi Education Initiative, Pakistan Institute of
Exxon Chemical Pakistan IJmited, which is now Engro Corporation Corporate Governance, State Bank of Pakistan a n d Board of
IJmited. During his years with Engro, he has w o r k e d in all the major Trustees of Lahore University Management Sciences. He w a s
divisions of the business, a n d t o o k over as President & Chief a w a r d e d the Sitra-i-lmtiaz in 2 0 1 0 .
Executive in January 2 0 0 4 , Mr. Umar is the Chairman of all Engro
subsidiaries and affiliates, as well as the Pakistan Business Council,
Pakistan Chemical & Energy Sector Skill Development C o m p a n y
19
directors' profile
Asif Qadir Arshad Nasar Shahzada Dawood

Director Director
Director
Asif Qadir is a Chemical Engineer by Arshad Nasar has a Masters degree in Shahzada D a w o o d is an M.Sc in Global
qualification. He is a Senior Vice President of Economics as well as Political Science. He Textile Marketing from Philadelphia University,
Engro Corporation Limited and Chief Executive has w o r k e d as Chairman and Managing USA, a n d LLB from Buckingham University,
of Engro Polymer & Chemicals Ltd. He is Director of Caltex Oil Pakistan Limited, and UK. He is the Director of D a w o o d
Chairman of the Board for Inbox Business has undertaken several key assignments Lawrencepur Limited & D a w o o d Hercules
Technologies (Pvt) Ltd. a n d Unicoi Limited. both in-country and overseas. Mr. Nasar Chemicals Ltd. He is a member of the Board
He also serves on the Managing Committee w a s subsequently the Chairman a n d Chief of Governors of National Management
of the Overseas Investors Chamber of Executive of O G D C L a n d served as a Foundation (LUMS) and also a m e m b e r of
Commerce & Industry and is a Director of the Director on the Boards of Pakistan Refinery Board of Trustees of D a w o o d Foundation.
Karachi Stock Exchange. He has held key Umited, Pak Arab Pipeline Company Umited He joined the Board in 2 0 0 3 .
assignments with the Company and with and Mari Gas C o m p a n y Limited. He is also
Exxon Chemical Canada He joined the Board a former President of the American Business
in 1997. Council of Pakistan. Mr. Nasar is a Director
on the Boards of PIDC, Foundation for
Advancement of Sciences & Technology
(FAST), National University, Funds for
Inclusion of People with Disabilities (FIPD)
a n d Engro Fertilizers Limited. He joined the
Board in 2 0 0 2 .

Shabbir Hashmi Isar Ahmad Khalid Mansoor
Director
Director Director
Shabbir Hashmi is an Engineer from DCET, Isar A h m a d holds a Masters Degree in Khalid Mansoor holds a Degree in Chemical
Pakistan and holds an M B A from JF Economics a n d is a Chartered Accountant Engineering with distinction and honors. He
Kennedy University, USA. He has more than from the Institute of Chartered Accountants is a Senior Vice President of Engro
25 years of project finance a n d private equity of England & Wales. He is Chief Executive Corporation Limited a n d Chief Executive of
experience. Until recently he led the regional Officer of D a w o o d Hercules Chemicals Engro Powergen Qadirpur Limited, Engro
operations of Actis Capital (formerly CDC Limited. He is the Chairman of D a w o o d P o w e r g e n Umited a n d Sindh Engro Coal
Group Pic) for Pakistan a n d Bangladesh. Lawrencepur IJmited, Central Insurance Mining C o m p a n y a n d is also a Director of
Prior to joining Actis he w o r k e d for 8 years C o m p a n y Limited a n d Tenaga Generasi Engro Polymer & Chemicals IJmited. He
with the World Bank and US Aid specializing Limited. Mr. A h m a d has a diversified has held various key assignments at Engro
in the energy sector. A C D C nominee in experience of working in senior management and with Esso Chemical, Canada including
2 0 0 1 / 0 2 on the Engro Board, he has been positions in multinational and large Pakistani leading development a n d execution of
serving as an independent director on the Organizations, having served as Finance various major expansion projects. He joined
Board since 2 0 0 6 . Director, Supply Chain Director and Head the Board in 2 0 0 6 .
of Business Unit at Reckitt Benckiser

(previously Reckitt & Colman), Managing
Director, Haleeb Foods (previously C D L
Foods IJmited), as well as having been the
Financial Advisor at Indus Motor C o m p a n y
IJmited. He joined the Board in 2 0 0 6 .
21
directors' profile
Ruhail Mohammed Khalid S. Subhani Muhammad Aliuddin Ansari

Director Director
Director
Ruhail M o h a m m e d has an M B A in Finance. Khalid S. Subhani is a Graduate in Chemical M u h a m m a d Aliuddin Ansari is t h e CEO of
He is a Senior Vice President a n d Chief Engineering. He is the President & Chief Dewan Drilling, Pakistan's first independent
Financial Officer of Engro Corporation Executive Officer of Engro Fertilizers Limited Oil & Gas drilling company. Mr. Ansari started
Limited. He has served at various senior and Senior Vice President of Engro his career as an Investment Manager at
positions in Pakistan, UAE and Europe, a n d Corporation Limited. Mr. Subhani is a Director Worldinvest/Bank of America in L o n d o n ,
is on the Boards of Engro Foods Limited, on the Boards of Engro Corporation Limited, a n d has also served as the CEO of A K D
Engro Powergen Qadirpur Limited, Engro Fertilizers Limited, Engro Vopak Terminal Securities a n d C O O , Emerging Europe for
Avanceon Limited, Engro Powergen Limited, Limited, Engro Eximp (Pvt.) Limited and Engro Credit Lyonnais Securities. He is also on
Engro Fertilizers Limited, Engro Eximp (Pvt.) Polymer & Chemicals Limited. He has also the Board of National Clearing C o m p a n y of
Limited, a n d Sigma Leasing Corporation served as Chairman of the Board of Avanceon Pakistan & Al-Meezan Investment
Limited, as well as being Chief Executive in the past. He joined the Board in 2006. Management. He joined the Board in 2 0 0 9 .
of Engro M a n a g e m e n t Services (Pvt.)
Limited. He joined the Board in 2 0 0 6 .

Abdul Samad Dawood Saad Raja
Director Director
Abdul Samad D a w o o d is a graduate in Saad Raja is an engineer from UET, Lahore
Economics from University College London, and with an MBA from the London Business
UK and a Certified Director of Corporate School. Joined DFJ ePIant Ventures in 2002,
Governance from the Pakistan Institute of prior to which he had worked at senior
Corporate Governance. He is the Chief management levels in the international asset
Executive of Central Insurance C o m p a n y management & investments sector. His diverse
Limited a n d D a w o o d Corporation (Pvt.) experiences have included tenures with Diachi
Limited. He is the Director on the Board(s) Ufe Mizuho Asset Management and Industrial
of Dawood Hercules Chemicals Umited, Sui Bank of Japan - Asset Management
Northern Gas Pipeline IJmited, D a w o o d International. He joined the Board in
Lawrencepur Limited, Engro Fertilizers December 2009.
Limited, DH Fertilizers Limited, Tenaga
Generasi Limited, W W F Pakistan, Inbox
Business Technologies (Pvt.) Limited and
Pebbles (Pvt.) Limited. He is a m e m b e r of
Young President Organization, Pakistan
Chapter. He joined the Board in 2 0 0 9 .
core values
4
1
J
Safety, Health & Environment Ethics & Integrity
We will manage and utilize resources and operations in such a way We do care h o w results are achieved a n d will demonstrate honest
that the safety and health of our people, our neighbors, our customers and ethica! behavior in al! our activities. Choosing the course of
a n d our visitors is ensured. We believe our safety, health a n d highest integrity is our intent a n d we will establish and maintain the
environmental responsibilities extend beyond protection and highest professional a n d personal standards. A well-founded
enhancement of our o w n facilities, a n d we are c o n c e r n e d a b o u t reputation for scrupulous dealing is itself a priceless asset.
the distribution, use a n d after use disposal of our p r o d u c t s .

a n d decision making. Effective communication should also provide
Leadership the means for gaining understanding of the c o m p a n y ' s overall
We have leaders of high integrity, energy and enthusiasm w h o have objectives, its plans a n d the thinking behind t h e m .
the necessary managerial, professional a n d people skills to inspire

a group or an organization to set high goals and achieve t h e m Enjoyment & Fun
willingly. We believe that leadership skills need to be strengthened
at all levels within our organization a n d that managerial and We believe that excitement, satisfaction and recognition are essential
professional c o m p e t e n c e is a necessary foundation. elements of a healthy, creative and high-performing work environment.
Having fun in our w o r k should be a normal experience for everyone.
Quality & Continuous Improvement

Innovation
We believe that quality and a relentless c o m m i t m e n t to continuous
improvement are essential to our ongoing success. To this end, we Success requires us to continually strive to produce break through
define quality as understanding the customer's expectations, ideas that result in improved solutions a n d services to customers.
agreeing on performance and value, a n d providing p r o d u c t s a n d We encourage challenges to the status quo and seek organizational
services that meet expectations a hundred percent of the time. Our environments in which ideas are generated, nurtured and developed.
m o t t o is, 'Quality in all we d o ' .

Individual Growth & Development
Enthusiastic Pursuit of Profit
We strongly believe in the dignity a n d value of people. We must
consistently treat e a c h other with respect a n d strive to create an
Successfully discharging our responsibilities to our shareholders to
organizational environment in w h i c h individuals are encouraged
enhance the long-term profitability and growth of our c o m p a n y
a n d e m p o w e r e d t o contribute, g r o w a n d develop themselves a n d
provides the best basis for our career security and meaningful
help to develop each other.
personal growth. We can best accomplish this by consistently
meeting the expectations of our customers and providing them
with value. Teamwork & Partnership
External & Community Involvement We believe that high-performing teams containing appropriate
diversity c a n achieve w h a t individuals alone cannot. Consciously
using the diversity of style, a p p r o a c h a n d skills afforded by t e a m s
We believe that society must have industrial organizations that it
is a strength, which we must continue building into our organization.
can trust. Trust and confidence are earned by our performance, by
o p e n a n d direct communication, and by active involvement in the
communities where we live and c o n d u c t our business. Diversity & International Focus
Candid & Open Communications We value differences in gender, race, nationality, culture, personality
a n d style because diverse solutions, approaches a n d structures
We value communications that are courteous, candid and o p e n are more likely to meet the needs of c u s t o m e r s a n d achieve our
and that enable each of us to do our j o b s more effectively by business goals.
providing information that contributes to the quality of our judgment
25
corporate governance
Compliance Statement Risk Management Process

The Board of Directors has throughout the year 2 0 1 0 complied Management at all subsidiaries periodically reviews major financial
with the ' C o d e of Corporate Governance' as per t h e listing and operating risks faced by the business. There are plans to launch
requirements of the stock exchanges a n d the 'Corporate a n d an Enterprise-wide Risk Management (ERM) initiative during 2 0 1 1
Financial Reporting Framework' of the Securities & Exchange at Engro Corp a n d its subsidiaries.
Commission of Pakistan.

Internal Control Framework Audit:
Engro has an Internal Audit function. T h e Board Audit C o m m i t t e e
Responsibility: annually reviews the appropriateness of resources a n d authority of
The Board is ultimately responsible for Engro's system of internal this function. T h e Head of Internal Audit functionally reports to the
control and for reviewing its effectiveness. However, such a system Audit Committee. T h e Board Audit C o m m i t t e e approves the audit
is designed to manage rather than eliminate the risk of failure to program, based on an annual risk assessment of the operating
achieve business objectives, a n d can provide only reasonable a n d areas. The Internal Audit function carries out reviews on the financial,
not absolute assurance against material misstatement or loss. operational a n d compliance controls, a n d reports on findings to
the Board Audit Committee, Chief Executive and the divisional
The Board, whilst maintaining its overall responsibility for managing management.
risk within the Company, has delegated the detailed design a n d

operation of the system of internal controls to the Chief Executive. Directors
Framework: Since April 2 0 0 9 , the Board has comprised of five executives, four
The company maintains an established control framework comprising independent non-executive Directors a n d four non executive
clear structures, authority limits, and accountabilities, well understood Directors, w h o had the collective responsibility for ensuring that the
policies a n d procedures a n d budgeting for review processes. All affairs of Engro are managed competently a n d with integrity.
policies a n d control procedures are d o c u m e n t in manuals. The
Board establishes corporate strategy a n d the C o m p a n y ' s business A non-executive Director, Mr Hussain D a w o o d , chairs the Board
objectives. Divisional management integrates these objectives into a n d the Chief Executive Officer is Mr A s a d Umar. Biographical
divisional business strategies with supporting financial objectives. details of the Directors are given on pages 18 a n d 23.
Review: A Board of Directors' meeting calendar is issued annually that
The Board meets quarterly to consider Engro's financial performance, schedules the matters reserved for discussion a n d approval. T h e
financial and operating budgets a n d forecasts, business g r o w t h full Board met ten times including meetings for longer term planning,
and development plans, capital expenditure proposals a n d other giving consideration b o t h to the opportunities a n d risks of future
key performance indicators. strategy.
The Board Audit Committee receives reports on the system of All Board members are given appropriate documentation in advance
internal financial controls from the external and internal auditors of each Board meeting. This normally includes a detailed analysis
and reviews the process for monitoring the effectiveness of internal on businesses a n d full papers on matters where the Board will be
controls. required to m a k e a decision or give its approval.
There is a c o m p a n y w i d e policy governing appraisal and approval

of investment expenditure and asset disposals. Post completion
reviews are performed on all material investment expenditure.
27
board
committees
T h e Board has established three committees, which are chaired The Chief Financial Officer regularly attends the Board Audit
by independent non-executive directors. These committees are as Committee meetings by invitation to present the accounts. After
follows: each meeting, the Chairman of the Committee reports to the Board.
The C o m m i t t e e met 7 times during 2 0 1 0 .
Board Compensation Committee
Director's Names
T h e c o m m i t t e e meets at least o n c e every quarter to review a n d Shabbir Hashmi (Chairman)
r e c o m m e n d all elements of the C o m p e n s a t i o n , Organization a n d Isar A h m e d
Employee Development policies relating to the senior executives' Aliuddin Ansari
remuneration and to approve all matters related to the remuneration Abdul S a m a d D a w o o d
of executive directors a n d members of the management committee.
T h e Secretary of the C o m m i t t e e is Naveed A Hashmi, General
The President and Chief Financial Officer attend Board Compensation Manager Corporate Audit
Committee meetings by invitation. The committee met 3 times
during 2 0 1 0 . The Board Investment Committee
Director's Names The C o m m i t t e e assists the Board in reviewing the C o m p a n y ' s
Hussain D a w o o d (Chairman) investment transactions and performances, oversee the Company's
Shabbir Hashmi capital and financial resources a n d advise on future strategy. The
Arshad Nasar Committee meets on a need basis, but at least three times a year
Shahzada D a w o o d and reguiariy reports to the Board.
T h e Secretary of the C o m m i t t e e is Tahir J a w a i d , Vice President, Director's Names

HR a n d PA Shabbir Hashmi (Chairman)
Isar A h m e d
The Board Audit Committee Aliuddin Ansari
Abdul S a m a d D a w o o d
The committee assists the Board in fulfilling its oversight Saad Raja
responsibilities, primarily in reviewing and reporting financial a n d
non financial information to shareholders, systems of internal control The Secretary of the Committee is Hafsa Shamsie, Manager Rnance
and risk management and the audit process. It has the power to and A d m i n
call for information f r o m management a n d to consult directly with
the external auditors or their advisors as considered appropriate.

functional
committees
These committees act at the operational level in an advisory capacity
to the Chief Executive Officer, providing recommendations relating
Committee Members
to businesses and employee matters.
A s a d U m a r (Chairman)
Asif Q a d i r
E X C O M is headed by the President & CEO, and includes the
Khalid Siraj S u b h a n i
corporate functional heads of HR a n d Finance as well CEOs of all Bakhtiar W a i n
Engro Corp subsidiaries. T h e c o m m i t t e e meets to discuss Khalid M a n s o o r
performance appraisals and annual business plans, a n d w o r k s in Sarfaraz A. R e h m a n
an advisory capacity to the President. Shaikh Imran-ul-Haque
Ruhail M o h a m m e d
C O E D C o m m i t t e e is responsible for the review of Compensation, Tahir J a w a i d
Organization, Training and Development matters of all employees.
T h e Secretary of the EXCOM is Syed Ali Akbar, Vice President

G B U , Engro Foods Limited.
T h e Secretary of the COED is Shafaq Omar, Manager HR, Engro

Corporation Limited.
engro foundation
Engro F o u n d a t i o n serves as a single platform for c o m m u n i t y
engagement activities and social investments of Engro affiliates. By
pooling their financial and managerial resources under the Foundation,
Engro affiliates seek to create large scale social impact through
w h i c h people have a c c e s s to choices a n d opportunities for
development. Engro Foundation is governed by a Board of Trustees.
Board of Trustees
A s a d U m a r (Chairman)
Khalid M a n s o o r
Khalid Siraj S u b h a n i
Sarfaraz A R e h m a n
Tahir J a w a i d
The Secretary of the Board is Jiwan Das, Director, Engro Foundation.
29
enabling growth,
Engro Fertilizers Limited's

Urea Expansion Project
The latest expansion at Engro Fertilizers Limited's urea manufacturing self sufficient in urea, and the Pakistani fanner will reap the benefits
facility in Daharki w a s completed in December 2 0 1 0 . This is the of cheaper urea produced domestically. This expansion also provides
world's largest single train urea-ammonia plant in the w o r l d . W i t h Pakistan with the ability to reduce the import bill thereby saving on
a capacity of 1.3 million tons, this expansion takes Engro's total valuable foreign exchange as well as resulting in benefits for the
annual capacity to 2.3 million tons, a n d is the largest private sector farmer, consumer a n d the national economy.
industrial investment in Pakistan w o r t h USD 1.1 billion. With the
addition of this capacity, Engro has enabled Pakistan to b e c o m e
Flap inside
enabling growth,
enabling excellence
The largest single train ammonia - urea
plant in the world, setup with an investment
of USD 1.1 billion.
The new plant has the capacity to produce

1.3 million tons per year.
The most energy efficient plant with the

lowest gas consumption per ton of urea
in Pakistan, and 100% environmentally
compliant.
The project set a new national record of

completing 29.8 million safe man-hours.
Saves USD 500 million per annum of

foreign exchange.
directors' report
The Directors of Engro Corporation Limited are pleased to

submit the forty fifth annual report and the audited accounts
for the year ended December 3 1 , 2010.
Principal Activities Organizational Overview
Engro Corporation Limited is c o n c e r n e d with the oversight of 2 0 1 0 w a s a year of many achievements including the highest
subsidiaries and affiliates. Its current portfolio of capital investments ever profit of Rs. 6.8 billion in the history of Engro. In its first year
consists of businesses including chemical fertilizers, PVC resin, a of operations as Engro Corporation Umited, the company recorded
bulk liquid chemical terminal, industrial automation, f o o d s & a number of successes by its various subsidiaries and joint ventures,
commodities a n d power generation.

• The fertilizer business completed construction of the world's largest
single train state-of-the-art ammonia-urea plant, which takes the
company's capacity to 2.3 million tons.
• The foods business achieved overall profitability in 2010, reaching

the target earlier than planned, as well as beginning operations at
the rice processing plant in Muridke.
• The petrochemical business commenced production from the VCM

plant and began full operations from the integrated facility.
• The power generation business began commercial operations at

its Qadirpur energy plant, as well as completing the detailed feasibility
study confirming the technical, social and environmental viability for
the Thar Coal Project.
The priorities that drove our success in 2010 - HSE, people and operational performance - remain
the foundation of our agenda as we work to further enhance our competitive position in the
coming year.
Business Revenues (Rs million)
2 1 , 0 5 0
19,018
Consolidated Revenue (Rs million)
1,828
14,618
79,976
| Foods Polymers Powergen | Eximp | Avanceon | Fertilizers
'Excludes revenue from Vopak

engro corp holding structure
engro
engro foe engro eximp engro fertilizers engro powergen

100% 100% 100% 100% o
engro powergen
qadirpur limited
95%
ENGRO VOPAK TERMINAL LTD.
engro polymer & chemicals -AVANCEON
50% 56% 63%
Engro Corporation Limited is a holding company, created following the conversion of Engro Chemical Pakistan Limited
on January 1, 2010. Engro Corp provides the long term vision for the company as well as the guiding policies, and
oversees performance of the subsidiaries and affiliates.
business review
Fertilizers
The c o m p a n y ' s fertilizers business h a d been incorporated as a urea plant with a capacity of 1.3 million t o n s a n d is t h e largest
subsidiary of Exxon Chemicals Private Limited in 1964. Following private sector industrial investment of approximately US$ 1.1 billion.
a number of transitions over the last four decades, the c o m p a n y The a d d e d capacity will not only meet t h e country's urea needs
evolved into Engro Fertilizers Limited as of January 1, 2 0 1 0 after but also save foreign exchange of approximately U S $ 5 0 0 million
a demerger, and remains a fully o w n e d subsidiary of Engro at current pricing. The plant w a s unable to continue operating as
Corporation Limited. S N G P L c o m m e n c e d a 45-day gas outage on January 7, 2 0 1 1 , as

part of a gas load m a n a g e m e n t program. The c o m p a n y expects
to receive gas by the end of February, following w h i c h start-up
The fertilizer business is primarily engaged in the manufacturing,
activities can begin again at the plant. Commercial production is
marketing of urea and npk fertilizers. Engro Eximp imports, distributes
expected s o o n after the plant is stabilized.
a n d markets phosphate based fertilizers,
In 2 0 1 1 , t h e c o m p a n y faces the challenge of a continuing gas

Pakistan's urea industry declined by 5% in t h e past year to 6.2
millions in 2010 from 6.5 million tons in 2009, after facing the worst curtailment of the government, which has potentially serious impact
ever floods in the country's history. Pakistan's domestic urea on t h e agricultural e c o n o m y of Pakistan by increasing the cost of
production stood at 5.21 million tons in the past year, only marginally inputs to the farmers and costing the national economy by importing
higher as c o m p a r e d to 5.05 million t o n s in 2 0 0 9 . This w a s despite more expensive urea a n d providing subsidy for the same.
n e w capacity coming online, a n d w a s partially a result of continued

gas curtailment initiated by the government in the second quarter The phosphate fertilizer d e m a n d in Pakistan declined to 1.4 million
of 2 0 1 0 . During the year the c o m p a n y produced 972,000 t o n s of tons from 1.8 million tons in 2009 due to floods and high international
urea, which is 2% higher than the 952,000 t o n s produced in 2009. and domestic prices. The business sold 327,000 tons of phosphates
T h e gas curtailment impact w a s offset by a record production in in 2 0 1 0 , against 3 5 7 , 0 0 0 t o n s in 2 0 0 9 , achieving a market share
the first half, as well as no planned turnaround during the year. The of 2 3 % in 2 0 1 0 Vs 21 % in 2 0 0 9 . Despite lower sales, the g r o w t h
c o m p a n y sold 9 4 9 , 0 0 0 t o n s of urea, with 2 2 , 0 0 0 t o n s c o n s u m e d in market share w a s d u e to lower market d e m a n d .
in our Zarkhez operations. T h e c o m p a n y ' s full year share of 1 5 %

of the fertilizer market w a s the same as 2 0 0 9 . D e m a n d for potash remained healthy throughout 2 0 1 0 , as prices
remained significantly lower c o m p a r e d to 2 0 0 9 . Sales of the
c o m p a n y ' s Zarkhez brand of fertilizers increased by 9% to 6 0 , 0 0 0
The company's urea expansion project at Daharki, achieved a major
t o n s in 2 0 1 0 f r o m 5 5 , 0 0 0 t o n s in 2 0 0 9 . This increase w a s a direct
milestone in 2010, with the mechanical completion of the facility
result of g r o w t h in the potash industry spurred by a government
a n d start of trial urea production by December 29, 2 0 1 0 . It is
subsidy, as well as imports by other potash players.
currently the w o r l d ' s largest single train state-of-the-art a m m o n i a -
33
T h e NP industry declined by 1 7 % c o m p a r e d to 2 0 0 9 , In line with UHT category. In 2 0 1 0 , the company also entered the dairy powder
a decline in the phosphate market, a n d accordingly, E-NP sales business with the launch of Tarang P o w d e r which achieved a 4%
decreased to 35,000 tons in 2 0 1 0 from 45,000 tons during 2009, market share by the end of the year. Olpers grew by 9% to 137
although E-NP market share remained at around 1 0 % . The million liters.
c o m p a n y ' s Zarkhez plant p r o d u c e d a total of 100,000 t o n s of
blended fertilizers, which includes 6 3 , 0 0 0 t o n s of Zarkhez a n d The ice cream market g r e w by 2 0 % to 71 million liters f r o m 59
3 7 , 0 0 0 t o n s of E-NP, as c o m p a r e d to a total of 9 2 , 0 0 0 t o n s million liters in 2009. Industry volume growth was driven by increased
p r o d u c e d during 2 0 0 9 . competitive activities between Walls and Omore increasing consumer
awareness. In addition, heavy competition kept prices d o w n , making
Foods ice cream more affordable for the consumers. O m o r e volumes
increased by 1 0 0 % to 12.2 million liters in 2 0 1 0 from 6.1 million
Engro Foods IJmited is a wholly o w n e d subsidiary engaged in the liters in 2 0 0 9 , and Omore market share w a s estimated at 1 7 %
manufacture, processing a n d sales of dairy products, ice cream during 2010. However, the brand m a d e an operational loss due to
and fruit juices. In addition, the company also operates a dairy farm, continued investment in the Omore' brand.
a n d has constructed a rice processing facility, which is o w n e d by

Engro Food Supply Chain Limited, a n d is manufactured for Engro T h e c o m p a n y continued its efforts to b e c o m e a significant player
Eximp, w h i c h deals in the procurement a n d marketing of the rice in the flavored milk segment for children, with the launch of t w o
product to premium customers in Europe & Middle East. new flavors for O w s u m , expanding the brands portfolio to five
variants. In 2010, the company also entered the fruit based segment
In 2 0 1 0 the local processed milk market grew by 1 5 % to 794 million with the launch of Olfrute Juices a n d Nectars.
liters from 6 9 0 million liters in 2 0 0 9 . The c o m p a n y continued its
aggressive business strategy of growth and diversification into new T h e c o m p a n y ' s Nara Dairy Farm has c o m m e n c e d its s e c o n d
product ranges a n d achieved volume growth of 2 7 % during 2 0 1 0 lactation a n d is currently producing 2 1 , 5 0 0 litres per day, with a
increasing its volumes to 3 0 9 million liters f r o m 2 4 3 million total herd size of 2,591 animals of w h i c h 1,269 are milking. The
liters in 2 0 0 9 . The c o m p a n y achieved a market share of 3 9 % in farm has also successfully provided a d e m o effect to encourage
the processed milk segment. dairy farming in Pakistan, with a n u m b e r of new dairy farms in the
making across the country.
T h e processed milk market market g r o w t h is being driven by tea

creamers where Tarang maintained its leadership with segment In the rice trading business, Engro Eximp successfully built
share of 6 2 % . Tarang grew its volumes by 4 7 % to 169 million liters relationships with premium buyers in international markets, a n d
in 2 0 1 0 a n d w a s awarded the 'Brand Used M o s t Often' title in the exported 5,000 t o n s of rice during the year.

through its subsidiary a n d exported 9 , 0 0 0 tons of PVC during the
Petrochemicals last quarter.
Engro Polymer & Chemicals Limited is a 5 6 % o w n e d subsidiary

and is listed on all three stock exchanges of Pakistan. It is the only Caustic S o d a plant had c o m e into commercial operation in August
manufacturer of PVC in the country and also manufactures a n d 2 0 0 9 . During the year, 9 3 , 0 0 0 tons of Caustic soda w a s produced
markets caustic soda. The business p r o d u c e s all its energy f r o m as c o m p a r e d to 39,000 t o n s in 2009. Caustic soda sales remained
its c o m b i n e d cycle power plants and sells any surplus energy to strong during the year a n d c o m p a n y sold 8 0 , 0 0 0 t o n s as against
the Karachi Electric Supply C o m p a n y (KESC). 27,000 tons in 2009. The company also produced and sold 20,000
t o n s of Sodium Hypochlorite.
The c o m p a n y ' s V C M plant achieved start up by the first quarter of

2010. Operating capacity at the V C M plant w a s gradually enhanced Power Generation
throughout the year, a n d the plant achieved commercial operations
by September 2010. With the commercial production of the V C M Engro Qadirpur Powergen Limited, Engro's first initiative in the
power sector of Pakistan is a 9 5 % o w n e d subsidiary, 1 0 % directly
plant, the integrated facility b e c a m e fully operational.
a n d 8 5 % through its power holding company, Engro Powergen
Limited. IFC has the remaining 5% equity stake. During the first
During the year the c o m p a n y p r o d u c e d 114,000 tons of PVC as
nine m o n t h s of operations, the plant demonstrated an availability
c o m p a r e d to 116,000 tons in 2 0 0 9 . Production w a s lower t h a n
factor of 9 5 % , despite being its first year of operation. The plant
capacity d u e to limited availability of V C M and some operational
dispatched a total net power of 1,201 G W h to the national grid.
constraints. A total of 60,000 tons of V C M w a s produced during
T h e c o m p a n y received its true-up tariff in November 2 0 1 0 . To
the year out of which 28,000 tons w a s produced in the last quarter.
resolve an inconsistency in t h e true-up determination with the
Due to the delay in commissioning of the V C M plant, there w a s
original tariff determination, the c o m p a n y has filed a review petition
limited use of EDC produced for the manufacture V C M , and therefore
with NEPRA.
3 7 , 0 0 0 t o n s o f EDC w a s exported.
In 2 0 1 0 , the Sindh Engro Coal Mining C o m p a n y Limited (SECMC)

The company's PVC domestic sales volume declined to 9 7 , 0 0 0
completed the detailed feasibility study (DFS) as per the target
t o n s in 2 0 1 0 from 119,000 tons in 2 0 0 9 , due to limited availability
deadline, confirming the technical, social and environmental viability
of s t o c k w h i c h w a s mainly attributable to low production during
of t h e Thar Coal Mining Project. T h e e c o n o m i c viability of the
the first half of 2010. PVC d e m a n d slowed down during the second
project will be confirmed u p o n obtaining closure on infrastructure
half of the year due to reduced government spending and liquidity
development projects by Government of Sindh & Government of
crunch, a direct result of the floods. In order to counter relatively
Pakistan. S E C M C is a joint venture b e t w e e n Engro a n d the
lower domestic d e m a n d , the c o m p a n y initiated export of PVC
35
Government of Sindh for the development, construction a n d The c o m p a n y has received a s h o w cause notice from the
operation of an o p e n coal mine facility in Block 2 of the Thar Coal Competition Commission of Pakistan regarding the exclusivity
Field. clause in its Implementation Agreement (IA) with Port Qasim Authority.
T h e c o m p a n y believes the IA is valid in its totality a n d is defending
Chemical Storage and Terminal the matter before the Commission.
Engro Vopak Terminal Limited is a 5 0 : 5 0 joint venture with Royal Automation and Control
Vopak of the Netherlands, a n d is engaged in the handling and
storage of chemicals a n d LPG. The c o m p a n y completed 13 years Avanceon Limited is engaged in automation and control engineering
of safe operations without lost w o r k injury in November 2 0 1 0 . The services. The c o m p a n y has a wholly o w n e d subsidiary in Jebel Ali
terminal continues to maintain the highest levels of health, safety Free Zone, UAE, which in turn has a 7 0 % interest in its US subsidiary.
and quality standards, and w a s rated the highest amongst all Vopak The company continued its focus on health, safety a n d environment
terminals in Asia in a Terminal Health Assessment c o n d u c t e d in initiatives in 2 0 1 0 and achieved zero Lost Work Injury (LWI) during
2010. t h e year.
During the year, efforts continued to position for the LNG import Despite tough economic conditions, the c o m p a n y had an increase
terminal at Port Qasim, a n d the c o m p a n y has received a No in n e w business a n d revenues over the last year. However, this
Objection Certificate (NoC) f r o m the Port Qasim Authority for t h e revenue of Rs 5 5 6 million remained below breakeven point due to
project site at Khiprianwala to c o n d u c t a feasibility study. difficulties in its energy S B U .
The c o m p a n y ' s actual throughput for the year w a s 1,104 k t o n s Due to the lasting impact of the recession, customers remained
vs. 1,063 k t o n s in 2 0 0 9 , including LPG import of 31 k t o n s vs. cautious with their capital expenditures, with the c o m p a n y ' s U A E
40 k t o n s in 2 0 0 9 . Engro V o p a k also achieved a first in the history subsidiary facing a decline in order generation a n d sales, mainly
of LPG imports in the country by handling the largest ship (5,000 attributable to the macro-economic environment of the UAE.
tons) to d o c k in Pakistan. The increased annual throughput is mainly However, t h e c o m p a n y ' s US subsidiary demonstrated a robust
attributable to higher import of Phos Acid a n d the first full year of turn around, increasing its revenues a n d making a profit for 2 0 1 0 .
operation of the V C M plant at Engro Polymer & Chemicals Limited.

health, safety
and environment
The c o m p a n y is highly conscious of its HSE responsibility a n d t h o s e associated with our business processes. This involved
continued to w o r k relentlessly t o w a r d s increasing efficiencies a n d improving air a n d water quality, exploiting internal energy resources
reducing environmental impact of all of its industrial and office a n d helping to create n e w j o b s a n d avenues for environmentally-
locations during 2 0 1 0 . The c o m p a n y continued its endeavor to conscious g r o w t h .
align HSE management systems a n d processes to international
best practices including Occupational Safety and Health Every employee involved in plant operations at any of our manufacturing
Administration (OSHA) and Dupont Workplace Safety Standards. facilities is given an overview of the process and operating procedures,
All HSE systems and processes are regularly assessed and audited with an emphasis on specific HSE hazards, emergency operations
internally as well as by third parties. and safe w o r k practices. The Occupational Health program at Engro
includes aspects of industrial hygiene and occupational medicine.
The company is committed to reduce its carbon footprint a n d water All employees are also trained and kept up to date on technological
usage and as a result, a number of initiatives have been taken at changes a n d safety related aspects of their jobs. The company has
all stages of production a n d at all levels in the company. All of established environment management programs at its facilities to
Engro's facilities are NEQS compliant and follow the highest comply to environmental laws a n d regulations.
standards for ensuring health a n d safety of its employees and all
The following table highlights the results of a successful year of best practices at all Engro businesses:
Million M a n - h o u r s TRIR R e c o r d a b l e Injuries LWI'S

FERTILIZERS 25.7 0.3 39 0 1
POLYMER 3.7 0.109 2 0 0

POWERGEN 1.31 0 0 0 0
FOODS 16.32 0.38 31 1 10

VOPAK 0.37 0.53 1 0 0
AVANCEON 0.5 0 0 0 0
EXIMP 0.23 0 0 0 0
Total 48.1 0.3 73 1 11
37
Being a socially responsible company, Engro has a continuing focus The polymer business has a comprehensive Environmental
on environmental aspects of its operations a n d risk mitigation plans Management System (EMS), certified a n d regularly audited under
in place. Environmental awareness is deeply rooted in the company's ISO 14001:2004. The business has also established and maintained
values and w o r k culture, and Engro continues to invest in upgrading a procedure for including environmental management in consideration
systems a n d improving standards to international benchmarks. of planning, design, production, marketing and disposal stages
where appropriate a n d implementable.
The fertilizers business continued efforts to reduce its emissions

and its manufacturing facility in Daharki, Sindh has had a n u m b e r Engro Powergen Qadirpur Limited built its first facility, a power plant
of modifications over the years to increase energy efficiency and which produced energy using w a s t e gas that was being flared from
reduce carbon emissions. The business also recorded HSE success the Qadirpur gas fields. It is also in the final stages of acquiring
at its expansion project which has set a national record of completing carbon emissions reductions (CERs) a n d is working towards getting
29.8 million man hours without a Lost Work Injury (LWI) a n d a Total 3 0 0 0 - 4 0 0 0 carbon credits a year.
Recordable Incident Rate (TRIR) of 0.28.
The chemical terminal continued to maintain health, safety a n d
The foods business ensures that safety, health and a hygienic w o r k quality standards- per O H S A S 1 8 0 0 1 , ISO 9001 a n d 14001 a n d
environment are among the t o p priorities of the company's Vopak Standards. Terminal Health Assessment w a s c o n d u c t e d in
management. The c o m p a n y calculates the Total Recordable Injury 2 0 1 0 by a t e a m f r o m Vopak Asia a n d c o m p a n y achieved highest
Rate (TRIR) based on the total man hours and the total reported score of 9 5 % amongst all terminals of Vopak in Asia.
injuries a n d has achieved a year to date TRIR of 0.42.

employee relations and
organizational development
As a responsible employer, Engro respects its employees' rights In the last year, the c o m p a n y continued to invest in the professional
a n d endeavor to provide a safe a n d healthy workplace, fair policies development of its employees. Various in-house a n d outsourced
a n d procedures, freedom of opinion a n d expression a n d o p e n training courses, seminars a n d w o r k s h o p s in the areas of
dialogue with all employees. In 2 0 1 0 , the c o m p a n y continued to management, plant operation a n d maintenance, information
w o r k towards enhancing employee satisfaction, offering attractive technology, finance, etc. were arranged throughout the year.
and fair compensation and benefits, increasing gender diversity,
enabling personal and professional development a n d providing The c o m p a n y also continued its dedication towards creating a
opportunities for g r o w t h and to nurture future corporate leaders. rewarding life experience for employees through efforts during the
flood relief. The company initiated a special leave policy for employees
The c o m p a n y demonstrated engagement in diversity, proactive w h o sought to volunteer for flood relief w o r k , a n d the c o m p a n y ' s
inclusion and equal opportunity as an investment in our people and volunteer network, Envison, organized opportunities for Engro
our future g r o w t h . T h e c o m p a n y ' s c o m m i t m e n t to provide equal employees t o donate time, money a n d g o o d s .
opportunity to all employees a n d applicants for employment in
a c c o r d a n c e with its values a n d all applicable laws, directives a n d
regulations is constantly reaffirmed through its policies a n d best in-
class practices.
39
social investments
As part of the company's enduring commitment towards improving approximately Rs. 2 5 0 million from internal sources a n d external
the life of its stakeholders, a n d especially host communities, Engro partners and volunteers to support the residents of the hardest hit
contributed over Rs.136 million under its social investments areas. T h e c o m p a n y ' s efforts w e r e concentrated in district Ghotki
c o m m i t m e n t in 2 0 1 0 , as c o m p a r e d to Rs. 58 million in 2 0 0 9 . and Sukkur in Sindh and districts Muzaffargarh and Layyah in
Punjab.
After an evaluation of the social impact of Engro's efforts, t h e
c o m p a n y m a d e a decision to create the Engro Foundation, Education holds special significance for the company, and is a major
established with the m a n d a t e to enhance the c o m p a n y ' s key focus area, especially in the communities that host our manufacturing
corporate social responsibilities in its geogarphical s c o p e of facilities. Over the years, Engro has partnered with institutions like
operations. The Foundation serves as a single platform for community Sahara Welfare Trust a n d The Citizen's Foundation for the
engagement activities a n d social investments of Engro affiliates. By development of educational facilities in these areas. Engro has also
pooling their financial and managerial resources under the Foundation, established a Training a n d Resource Center fTARC) to provide a
Engro affiliates seek to create large scale social impact. dedicated resource for the training of teachers involved in these
Major investments include education, health, water and sanitation, schools. In addition, Engro is also supporting 11 schools in the
with the main focus of activities being the communities in the vicinity Katcha (riverine belt) area along the Indus. Engro has also initiated
of the c o m p a n y ' s manufacturing sites a n d supply chains. The a Government School A d o p t i o n program with the support of the
Foundation also has employee giving volunteering programs to provincial education department a n d local communities. At present,
support employees' efforts in their communities. Engro supports 13 schools a r o u n d Daharki a n d Qadirpur, with an
enrollment of 1,600 students. Till date, Engro's investments in
Engro was also heavily involved in the relief and rehabilitation efforts education have reached out to 3,309 students, in addition to funding
the employment of 55 teachers across 25 schools.
following the floods during the summer of 2 0 1 0 . Engro organized

Vocational training is also a significant area of Engro's investment, continued to invest in health facilities s u c h as subsidized clinics
to enhance employability of local youth. Towards this end, the a n d specialized treatment centers. These include the one of a kind
c o m p a n y is partnering to build a technical training center providing Snakebite Treatment Facility at the Engro Clinic in Daharki as well
a 3 year diploma with investment in excess of Rs 2 2 0 million in as clinics in partnership with Dar ul Shifa a n d Marie Stopes Society.
collaboration with PIDC, Mari Gas, Saipem and Descon. Engro has T h e c o m p a n y also continues to fund a n d maintain specialized
also established the Sahara Arts & Crafts Center in 2 0 0 3 to impart centers for treatments as wide ranging as thalassemia, kidney
vocational training to females to enhance income generation skills dialysis, malaria control, polio immunization a n d eye care. These
through their newly developed skills. initiatives have enabled Engro to t o u c h the lives of over 1 3 , 0 0 0
people over the years.
Engro has also played a pivotal role in the establishment of a world

class business school, named the 'Karachi School for Business Engro Foundation has also signed an M o U with the Pakistan Poverty
and Leadership', to produce future business leaders for the country. Alleviation Fund (PPAF) for the a m o u n t of Rs. 3 5 0 million to be
The first phase of the school's development w a s completed in invested in the areas of health, education and physical infrastructure.
2 0 1 0 , with the initiation of executive development programs. As
part of a leadership development curriculum, Engro is proactively Over the last year, the fertilizers business continued to w o r k with
developing executive leadership programs at the school. We are smallholder farmers to improve sustainable practices, a n d helped
partnering with the school's faculity in order to target specific t h e m boost local incomes a n d productMty. Training of farmers has
courses for different m a n a g e m e n t levels. resulted in improvements in yield a n d profitability. T h e polymer
business continued its efforts to address agricultural water scarcity
Health is an integral component of Engro's values, a n d the company issues through the active promotion of drip irrigation, which is used
strives to ensure a better quality of life for its employees, their to prevent w a s t a g e of water during the farming process.
families and its host communities. As part of this effort, Engro has
41
corporate awards
The company was ranked Pakistan's leading company for Corporate The polymer business w a s a w a r d e d a c o m m e n d a t i o n for
Social Responsibility (CSR), by the first Asian Sustainability c o m m i t m e n t to excellence in sustainability reporting by t h e Asian
Rating (ASR). Sustainability Rating.
The company received the A C C A - W W F 'Best Sustainability' Award The f o o d s business w o n the 'Best Place to W o r k ' for the s e c o n d
during the year. time from the P S H R M .
The c o m p a n y w a s honored with the Investor Relations A w a r d by The c o m p a n y w o n the seventh consecutive national forum of
the CFA Association of Pakistan for the year 2 0 1 0 . environment a n d health (NFEH) annual environment awards.
1
The fertilizers business received 'Brand of the Year awards for t w o W o n the 5th CSR National Excellence award from CSR Association
of its products. of Pakistan.
Awarded best performance in Hearth by CSR Association of Pakistan

Flap open right side
results for the year

Engro Corporation Limited delivered a net profit (attributable to Sales for the year a m o u n t e d to Rs 79.97 billion against Rs 5 8 . 1 5
the equity holders of the holding company) of Rs 6.8 billion in 2010 billion last year. This substantial increase w a s to c o m p e n s a t e for
v s . Rs 3.8 billion in 2 0 0 9 . The increase is primarily d u e to improved the impact of gas curtailment, improved dairy sales volumes and
Urea production, c o m m e n c e m e n t of Engro Powergen Qadirpur prices, power generation c o m i n g online, increased fertilizer prices
operations and rising c o m m o d i t y prices which favorably impacted a n d higher PVC prices as c o m p a r e d to 2 0 0 9 .
our trading business. Additionally, a onetime income of Rs 7 6 4
million, due to sale of land and a tax write back, w a s realized during Engro Corporation's profit after tax for the year, on standalone
the year. basis s t o o d at Rs. 1.68 billion
Revenue of Businesses
24,000 -r
21,000 - -
18,000
15,000--
12,000--
9,500--
6,000--
3,000--
Fertilizers Foods Polymer Powergen Eximp Vopak Avanceon
| 2010 2009
Flap inside
PAT of businesses
4000 T-
3500 --
3000 - -
2500--
2000 - -
i 1500--
CL
1000--
500 - -
-500 - -
-1000--
Fertilizers Foods Polymer Powergen Eximp Vopak Avanceon
| 2010 2009
performance
over the years
Rs Million
1990 2004 2006 2007 2009 2010
Revenues
1,277 13,068 20,240 34,121 58,152 79,976
PAT
134 1,719 2,107 2,834 3,807 6,790
Total A s s e t s £
6,724* 13,538 20,054 49,236 132,105 164,778
A s s e t s as of Dec 3 1 , 1 9 8 9
dividends
The Board is pleased to propose a final dividend of Rs. 2 per share. The total dividend attributable to the year is Rs. 6 per share versus
Rs. 6.00 per share paid last year.
The appropriations approved by the Board of Directors are as follows:
Million R u p e e s
Un-appropriated profit f r o m prior years 9,251
Rnal dividend for the year 2 0 0 9 on 2 9 7 , 9 4 2 , 5 6 3 shares of Rs. 10 e a c h at Rs. 2.00
per share declared on January 2 2 , 2 0 1 0 (596)
Bonus shares issued in ratio of 1 share for every 10 shares held (298)
Profit for the year after taxation 1,676
Disposable profit for appropriation 10,033
First interim dividend on 3 2 7 , 7 3 6 , 8 1 9 shares of Rs. 10 each at Rs. 2.00 per share declared
o n July 2 8 , 2 0 1 0 (655)
S e c o n d interim dividend on 3 2 7 , 7 3 6 , 8 1 9 shares of Rs. 10 each at Rs. 2.00 per share declared
o n October 2 8 , 2 0 1 0 (655)
Un-appropriated profit carried forward 8,723
S u b s e q u e n t Effect
Proposed final dividend on 3 2 7 , 7 3 6 , 8 1 9 shares of Rs. 10 each at Rs. 2 per share (655)
Total Dividend for t h e year Rs 6 per share 1,965
Key operating a n d financial d a t a for 10 years is summarized on page —
Earnings Per Share (EPS) / Dividends Per Share (DPS)

The C o m p a n y ' s post tax EPS registered constant increase over the last 5 years which demonstrates our business strength, leadership
position and successful diversification.
2006 2007 2008 2009 2010
EPS 8.99 10.98 14.67 12.24 20.72
DPS 9.00 7.00 6.00 6.00 6.00
Bonus 0 0 0 10% 20%

value addition
2010 2009
Rupees in Million % Rupees in Million %
Wealth Generated
Total revenue inclusive of sales-tax a n d other income 84,759 60,932
Bought-in-material and services (56,462) (42,188)
28,297 18,744
Wealth Distributed
To employees
Salaries, benefits a n d other costs 4,836 17.09% 3,134 16.72%
To Government
Taxes, duties a n d development surcharge 9,646 34.09% 7,790 41.56%
To Society
Donation towards education, health, environment a n d natural disaster 136 0.48% 0.31%
To Providers of Capital
- Dividend to Shareholders 2,203 7.78% 1,617 8.63%
- Mark-up / interest expense on borrowed money 4,201 14.85% 2,222 11.85%
Retained for reinvestment & future growth, depreciation, amortization
and retained profit 7,275 25.71' 3,923 20.93%
28,297 18,744
45
The product w a s successfully received by the investor market and
Cash Flow and Capital Investment managed to raise approximately Rs. 3.5 bn by the end of 2010,
a n d w a s fully subscribed to the worth of Rs 4 billion before its official
Lower Cash w a s generated from operations during the year (Rs
close in January 2 0 1 1 . In addition to raising funds for subsidiaries
5,876 million versus Rs 15,410 million in 2009) on account of higher
the TFCs will also help to develop the corporate debt market of
working capital of Rs 15,037 million as c o m p a r e d to last year. This
Pakistan where participation from retail investors has been almost
increase in working capital is attributed to higher stores a n d spares
negligible in the past. With individuals subscribing to almost 8 0 %
for the Urea Expansion project, higher procurement a n d inventories
of the Issue, Engro Rupiya Certificate has provided a successful
of rice a n d W A P D A receivables (2009:NIL). Taxes paid for the year
arternative for the company to raise funds from a previously untapped
a m o u n t e d to Rs 2,378 million v s . Rs 1,956 million last year based
investor base. Through partnerships with leading financial institutions,
on withholding tax deducted at import stage on purchased fertilizers
Engro has positioned the product as a convenient investment option
a n d on the regulations governing income tax.
with returns that are superior to Bank Deposits and National Saving
S c h e m e s . T h e instrument is secured on certain assets of t h e
Total long term investments of 2,409 million were m a d e during the
C o m p a n y a n d has been rated AA by PACRA.
year including investment of Rs 1,577 million in the Foods Business,
Rs 28 million in Power business and Rs 804 million in Petrochemical
Business. Pakistan's first ever OTC
Engro Fertilizers IJmited provided Pakistan with its first Over-the-
Additions to property, plant a n d equipment s t o o d at Rs 2 1 , 0 0 0
Counter (OTC) listing at the Karachi S t o c k Exchange on January
million representing expenditure towards construction of the Urea
1 7 , 2 0 1 1 . The c o m p a n y listed their private commercial paper worth
Fertilizer expansion project of Rs 1 5 , 0 0 0 million a n d additions of
Rs. 1 billion through the OTC market which makes it the first OTC
Rice plant a n d Foods expansion.
listing in the country as well as the first commercial paper to be
listed. The purpose of the OTC market is to provide investors with
Capital Investment, Capital Structure
an efficient a n d transparent source of investment, as well as
and Finance
encourage the corporate sector to fund their expansions and new
industries through this means in a cost effective manner.
During the year, the c o m p a n y issued 1 0 % bonus shares which
increased t h e paid-up capital of the c o m p a n y to Rs 3 , 2 7 7 million.
Shareholders' funds (excluding hedging reserves) at the year e n d Major Judgement Areas
totalled Rs 35,042 million. This increase is d u e to issuance of bonus
shares as well as retained profit. Main areas related to Group relief & Group tax, sales tax, special
excise duty, apportionment of gross profit etc. in the subsidiaries
are detailed in Notes to the A c c o u n t s (Note 38)
Net long t e r m borrowings at year e n d increased to Rs 104,695
million (2009: Rs 86,518 million) primarily for financing the company's
Urea Expansion Project for Rs 11,936 million and Foods expansion Management Information Systems
for Rs 2 , 3 0 0 million a n d Rs 3 , 3 8 4 million raised through Engro
Rupiya Certificate Issue. We continue to enhance efficiencies by increasing the S A P footprint
in the C o m p a n y from the existing implementation of financial,
accounting a n d h u m a n resource applications.
T h e balance sheet gearing (Company's long term d e b t to equity
ratio) for the year e n d e d 2 0 1 0 is 7 5 : 2 5 (2009 - 75:25). However
aforementioned ratio d o e s not factor in revaluation of base urea Accounting Standards
plant at Daharki, post revaluation Debt to Equity d r o p s to
68 : 3 2 . The liquidity position of the C o m p a n y remains robust with The accounting policies of the Company fully reflect the requirements
a year-end current ratio of 1.54 (2009 - 1 . 4 7 ) . of the Companies Ordinance 1984 and such approved International
A c c o u n t i n g Standards and International Financial Reporting
Standards as have been notified under this Ordinance as well as
Engro Rupiya Certificates (TFC)
through directives issued by the Securities a n d Exchange
Commission of Pakistan.
T h e C o m p a n y issued a fixed return Term Finance Certificate (TFC)
to target retail investors in the last quarter of 2 0 1 0 . Branded as the
Engro Rupiya Certificates, the T F C offered a return of 1 4 . 5 % per
annum, over a period of 3 years with semi-annual profit payments.

c o m p a n y to manage these risks has been curtailed by State Bank
Credit Rating of Pakistan's decision to disallow forward exchange contracts on
letters of credit. S o m e of the businesses have natural hedges for
Pakistan Credit Rating Agency in its annual review of the Company's
their foreign currency exposures - for e.g. the p o w e r business
credit worthiness has maintained Engro Corp's long term and short
foreign currency exposure is taken by W A P D A , polymer's has a
term ratings as "AA"(Double A) a n d "A1 +"(A One Plus) respectively.
natural hedge d u e to its p r o d u c t pricing being on imported parity
These ratings reflect the C o m p a n y ' s financial a n d management
basis while Engro Vopak has certain dollar denominated contracts,
strength and denote a low expectation of credit risk and the capacity
a n d for the fertilizers business we have hedged US$ 85 million out
for timely payment of financial c o m m i t m e n t .
of our total foreign currency borrowings of U S $ 2 8 5 million. We
continue to monitor foreign currency trends a n d take appropriate
Treasury Management actions w h e n required.
The treasury activities are controlled and carried out in accordance

with the policies approved by the Board. The purpose of the treasury Employee Share Option Scheme
policies is to ensure that adequate cost-effective funding is available
at all times and that exposure to financial risk is minimized. The T h e corporation a n d each of its subsidiaries have been granted
risks m a n a g e d by the Treasury function are liquidity risk, interest share options. The details of each s c h e m e is explained in n o t e 9
rate a n d currency risk. We use derivative financial instruments to of the accounts.
manage our exposure to foreign exchange rate, interest rate, and

the objective is to reduce volatility in cash flow a n d earnings. T h e Pension, Gratuity and Provident Fund
treasury function does not operate as a profit center.
The C o m p a n y maintains plans that provide post employment a n d
Interest Rate Management retirement benefits to its employees. These include a contributory
provident f u n d , a defined contributory (DC) pension plan, a non
contributory gratuity scheme for all employees a n d a defined benefit
At the end of 2 0 1 0 , Engro C o r p ' s consolidated borrowings were
(DB) pension scheme for the annuitants retired before July 1, 2 0 0 5
Rs. 104 billion. A significant portion of this amount is of foreign
(db pension for annuitants has m o v e d to efert).
currency, which is linked to LIBOR (note 22 of the accounts). Interest
rates on foreign currency borrowings are hedged through a fixed
interest rate swap for the entire tenor of the loans (note 10 of the The above mentioned plans are f u n d e d s c h e m e s recognized by
accounts). The local currency borrowings are all based on KIBOR the tax authorities. The latest actuarial valuation of m a n a g e m e n t
which is monitored regularly for adverse movements which may be pension a n d gratuity schemes w a s carried out at December 3 1 ,
mitigated by fixing the same. 2 0 1 0 a n d the financial statements of these have been audited up
to December 3 1 , 2009. The latest audited accounts for the provident
fund cover year ended June 3 0 , 2010. The C o m p a n y has fully paid
Liquidity Risk
all its obligations on all the above schemes.
In order to maintain adequate liquidity for its working capital

R u p e e s in Million
requirements, the Boards of each subsidiary have approved adequate
Provident Pension Gratuity
short termed funded facilities. Engro's policy is to ensure that
Fund Fund Fund
adequate short term funding and c o m m i t t e d bank facilities are
Audited upto June 3 0 December 31 December 31
available to meet the forecast peak borrowing requirements. We
2010 2009 2009
mitigate liquidity risk by careful monitoring of our cash flow needs,
regular communication with our credit providers, and careful selection Net Assets as per Ias1 863 748 355
of financially strong banks to participate in our operating lines. audited financial

statements
DSCs/PIBs/RICs 537 458 177
Foreign Currency Risk
Mutual Funds 0 12 1
TFCs 64 89 8
Where d e e m e d appropriate, we eliminate currency exposure on
Shares 143 90 128
purchases of goods and foreign currency loans through the use of
Bank Deposits/T-Bills 59 128 44
forward exchange contracts a n d options as permitted by the
Receivables 68 12 1
prevailing foreign currency regulations. However, the ability of the
Payables (8) (41) (4)
Total 863 748 355
47
5. The system of internal control is sound in design and has been
Auditors
effectively implemented a n d monitored.
Messrs AF Ferguson & Co. have been appointed as the statutory

auditors of the company. The Board Audit Committee and the Board 6. There are no significant d o u b t s u p o n the c o m p a n y ' s ability to
of Directors of the Company have endorsed the communication. continue as a going c o n c e r n .
Pattern of Shareholding 7. There is no material departure from the best practices of

corporate governance, as detailed in the listing regulations.
Major shareholders of Engro Corporation IJmited are The D a w o o d

Group including D a w o o d Hercules Chemicals IJmited (DH), Engro Board Meetings and Attendance
group c o m p a n y employees, annuitants and their relatives. Other
Shareholders are local a n d foreign institutions and the general In 2 0 1 0 , the Board of Directors held 10 meetings to cover its
public. complete cycle of activities. The attendance record of the Directors

is as follows:
A statement of the general pattern of shareholding along with

pattern of shareholding of certain classes of shareholders w h o s e Director's Name Meetings Attended
disclosure is required under the reporting framework a n d the Mr. Hussain D a w o o d 09/10
statement of purchase a n d sale of shares by Directors, C o m p a n y Mr. A s a d Umar 09/10
Secretary a n d their spouses including minor children during 2 0 1 0 Mr. Isar A h m a d 09/10
is s h o w n on page 45 of this report. Mr. M u h a m m a d Aliuddin Ansari 10/10
Mr. Abdul Samad D a w o o d 09/10
T h e c o m p a n y ' s stock is amongst the actively t r a d e d shares on all Mr. Shahzada D a w o o d 10/10
the S t o c k Exchanges of the country. Mr. Shabbir Hashmi 10/10

Mr. Khalid Mansoor 09/10
Board of Directors Mr. Ruhail M o h a m m e d 10/10

Mr. Arshad Nasar 09/10
Statement of Director Responsibilities Mr. Asif Qadir 10/10

Mr. S a a d Raja 07/10
The directors confirm compliance with Corporate a n d Financial
Mr. Khalid S. Subhani 09/10
Reporting Framework of the SECP C o d e of Governance for the
following:
1. The financial statements, prepared by the management of the

company, present fairly its state of affairs, the result of its
operations, cash flows a n d changes in equity.
2. Proper books of accounts of the company have been maintained.
3. Appropriate accounting policies have been consistently applied

in preparation of the financial statements except for changes
resulting on initial application of standards, a m e n d m e n t s or
interpretations to existing standards a n d reclassification of
capital spares. Accounting estimates are based on reasonable
prudent judgment.
4. International Accounting Standards, as applicable in Pakistan,

have been followed in preparation of t h e financial statements
a n d any departures there from have been adequately disclosed.

Outlook Challenges
Fertilizer The gas curtailment regime of the government has seriously impacted
With our new urea expansion coming online, installed urea production t h e agricultural e c o n o m y of Pakistan by: (a) increasing the cost of
capacity allows the country to become self-sufficient in urea, thereby inputs to the farmers(approximately Rs.20 billion /annum on domestic
saving significant foreign exchange for the exchequer. However the urea production) a n d (b) costing the national economy by importing
government has implemented a gas curtailment regime which has more expensive urea a n d providing subsidy for the s a m e
significantly reduced the production of all fertilizer plants, including (approximately Rs. 17 billion for 2011).
our new plant, which has an iron clad 20 year contract behind it.
To counteract this reduction in capacity the company has increased The f o o d business is expected to face challenges by the proposed
urea price by PKR190 per bag (23%). With the reduced supply value a d d e d tax expected in the 2H of 2 0 1 1 . The VAT/GST is likely
there is again a shortage of urea in the country a n d hence the to impact both volumes and margins in the processed milk segment
c o m p a n y does not foresee any issues with selling its entire of the business.
production.
The main challenge facing the polymer business will remain the
Foods smooth operation of the V C M plant thereby providing stable margins
The f o o d s business continues to increase its market share in the for the business.
processed milk a n d ice cream segments. The c o m p a n y further
intends to increase geographical reach for ice cream and strengthen The macro e c o n o m i c situation of the country a n d more specifically
its position in this segment. 2011 will also see the beginning of the fiscal deficit will remain a major challenge. Higher interest rates
sales from its o w n rice processing plant, as well as entering t h e a n d higher devaluation rates arising d u e to the fiscal situation will
halal food business in America a n d Canada through its planned directly affect t h e profitability of the company.
acquisition of 'Al Safa Halal' (subject to regulatory approvals). This
will be Engro f o o d s first international venture. The Board w o u l d like to take this opportunity to express its
appreciation for its dealers, customers, government, joint venture
Petrochemicals partners, d o n o r s , bankers, suppliers, employees a n d other
PVC domestic d e m a n d is expected to be stable to strong in 2011 stakeholders for their dedication, support and cooperation throughout
on account of reconstruction activities in flood affected areas, t h e year.
d e m a n d from agricultural sector a n d pipe exports to Afghanistan.
However Government spending in other areas is expected to remain
limited. Power load shedding and gas supply curtailment will continue
to adversely affect d e m a n d . Caustic S o d a d e m a n d is expected to
remain strong a n d the c o m p a n y is expected to sell capacity.
Powergen
Based on current d e m a n d supply situation the Qadirpur power
plant is expected to achieve very high dispatch rates. W o r k will
continue on the Thar Coal Mining and Power Project.
W i t h all its major expansion projects complete, Engro plans to list

s o m e of its subsidiaries in 2011 including Foods, Fertilizers &
Powergen Qadirpur Limited.
Hussain D a w o o d Asad Umar
Chairman President & C E O
49
key shareholding
and shares traded
Information of shareholding required under reporting framework is as follows:
1. Associated Companies, undertakings & related parties
D a w o o d Hercules Chemicals Ltd. 124,982,408

Central Insurance C o . L t d . 11,608,251
Patek (Pvt.) L t d . 21,676,081
2. NITandlCP
National Investment Trust 5,418,265

Investment Corporation of Pakistan 15,447
3. Directors, CEO & their spouses & minor children
Hussain D a w o o d 196,409
A s a d Umar 1,478,343
Isar A h m a d 8,108
M u h a m m a d Aliuddin Ansari 3,850
Abdul Samad Dawood 111,930
Shahzada D a w o o d 540,007
Shabbir Hashmi 27,913
Khalid Mansoor 367,240
Ruhail M o h a m m e d 6,375
Arshad Nasar 210
Asif Qadir 616,958
S a a d Raja 110
Khalid S. Subhani 454,945
Mrs. Kulsum D a w o o d (w/o. Mr. Hussain Dawood) 987,140
Mrs. Farrukh Sultan Qadir (w/o. Mr. Asif Qadir) 24,860
4. Executives 3,487,064
5. Public Sector Companies & Corporations 15,501,846
6. Banks, Development Financial 28,830,334

Institutions, Non-Banking Financial
Institutions, Insurance Companies,
Modarabas a n d Mutual Funds
7. Shareholder holding ten percent or more voting interest in the C o m p a n y

D a w o o d Hercules Chemicals Ltd. 124,982,408

8. Details of purchase/sale of shares by Directors/Company Secretary/Chief Financial Officer a n d their spouses/minor children during 2010
Name
Isar A h m a d March 0 2 , 2 0 1 0 737* - -

Hussain D a w o o d March 0 2 , 2 0 1 0 17,855* - -
Shahzada D a w o o d March 2, 2 0 1 0 63553* -
September 14, 2 0 1 0 - 100,000** 174.72
September 15, 2 0 1 0 - 35,000** 176.58
December 6, 2 0 1 0 - 9,837*** 182.00
December 6, 2 0 1 0 - 14,252**** 182.00
Shabbir Hashmi March 2 , 2 0 1 0 2537* - -

Khalid Mansoor March 2, 2 0 1 0 35,203* - -
March 1 8 , 2 0 1 0 - 20,000** 184.88
Ruhail M o h a m m e d February 8, 2 0 1 0 - 50,000** 206.98
March 02, 2010 3761* - -

March 1 1 , 2010 - 35000** 184.48
Abdul S a m a d D a w o o d March 0 2 , 2 0 1 0 4819* - -

December 6, 2 0 1 0 14252™ - 182.00
December 6, 2 0 1 0 44669****** - 182.00
Arshad Nasar March 0 2 , 2 0 1 0 18* - -

M u h a m m a d Aliuddin Ansari March 0 2 , 2 0 1 0 350* - -
Asif Qadir March 0 2 , 2 0 1 0 56087* - -
Khalid S.Subhani March 0 2 , 2 0 1 0 41,358* - -
A s a d Umar March 0 2 , 2 0 1 0 134,394* - -
Saad Raja March 0 2 , 2 0 1 0 10* - -
Andalib Alavi February 1 7 , 2 0 1 0 - 180,000** 187.07
March 0 2 , 2 0 1 0 18,297* - -
M r s . Kulsum D a w o o d March 02, 2010 96,200* - -
(w/o. Mr. Hussain Dawood) December 6, 2 0 1 0 9837***** - 182.00
December 23,2010 - 80,899******* -

Mrs. Farrukh Sultan Qadir March 0 2 , 2 0 1 0 2260* - -
(w/o. Mr. Asif Qadir)
* 1 0 % Bonus shares
:
* Shares sold on Karachi S t o c k Exchange
* Shares sold to Ms.Kulsum D a w o o d
* Shares sold to Mr.Abdul S a m a d D a w o o d
* Shares purchased from Mr. Shahzada D a w o o d
* Shares purchased from Ms.Sabrina D a w o o d
'* Shares gifted to Mst. Azmeh D a w o o d (daughter)
51
pattern of holding of shares
Pattern of holding of the shares held by the shareholders as at December 31, 2010
Number of Shareholding Total S h a r e s H e l d Number of Sharer o l d i n g
Shareholders From To Shareholders From TO
2,501 1 100 105,364 7 100001 105000 713,343
3,256 101 500 879,560 12 105001 110000 1,292,844
1,903 501 1000 1,429,160 15 110001 115000 1,678,466
3,623 1001 5000 8,642,950 4 115001 120000 472,768
1,057 5001 10000 7,607,766 6 120001 125000 738,982
476 10001 15000 5,833,159 6 125001 130000 773,568
249 15001 20000 4,305,906 4 130001 135000 535,917
171 20001 25000 3,865,099 8 135001 140000 1,105,847
95 25001 30000 2,616,800 3 140001 145000 426,573
75 30001 35000 2,415,499 8 145001 150000 1,187,223
62 35001 40000 2,335,476 3 150001 155000 455,100
37 40001 45000 1,580,771 3 155001 160000 473,528
40 45001 50000 1,911,679 1 160001 165000 161,700
28 50001 55000 1,478,815 4 165001 170000 677,588
28 55001 60000 1,614,046 1 170001 175000 175,000
20 60001 65000 1,249,668 4 175001 180000 712,008
22 65001 70000 1,490,218 2 180001 185000 361,608
19 70001 75000 1,375,668 3 185001 190000 560,746
21 75001 80000 1,628,217 2 190001 195000 386,738
12 80001 85000 996,476 3 195001 200000 596,409
11 85001 90000 967,896 2 200001 205000 401,169
3 90001 95000 274,690 1 205001 210000 209,702
14 95001 100000 1,382,335 3 210001 215000 636,894

Number of Shareholding Total Shares Held Number of Shareholding Total Shares Held
Shareholders From To Shareholders From TO
1 215001 220000 215,600 1 400001 405000 400,428
7 220001 225000 1,555,473 2 405001 410000 813,628
1 225001 230000 225,440 1 410001 415000 412,053
2 230001 235000 466,598 1 450001 455000 454,945
2 235001 240000 475,020 455001 460000 1,370,053
2 240001 245000 484,031 1 460001 465000 462,620
2 245001 250000 494,686 1 465001 470000 465,193
3 250001 255000 759,475 1 495001 500000 496,618
1 255001 260000 258,421 1 510001 515000 510,280
3 265001 270000 801,725 540001 545000 1,084,674
3 270001 275000 822,732 1 545001 550000 545,227
2 280001 285000 569,718 1 570001 575000 572,701
1 285001 290000 285,109 1 585001 590000 588,851
3 295001 300000 899,213 1 605001 610000 607,779
1 305001 310000 308,000 1 615001 620000 616,958
3 310001 315000 940,699 1 620001 625000 620,300
2 315001 320000 637,746 1 660001 665000 664,277
2 320001 325000 645,300 1 680001 685000 684,921
3 335001 340000 1,012,779 1 720001 725000 723,422
1 340001 345000 344,410 1 775001 780000 776,100
1 355001 360000 357,807 1 805001 810000 808,000
2 365001 370000 733,432 1 815001 820000 818,328
2 395001 400000 796,050 1 830001 835000 830,247
53
N u m b e r of Shareholding mber of Shareholding Total Shares H e l d
Shareholders From To iholders From To
1 865001 860000 859,827 2075001 2080000 2,077,132
1 880001 885000 883,437 1 2715001 2720000 2,717,662
1 900001 905000 900,300 1 2880001 2885000 2,884,054
1 925001 930000 926,000 1 3545001 3550000 3,547,662
1 940001 945000 940,500 1 3590001 3595000 3,594,372
1 960001 965000 963,862 1 6810001 6815000 6,810,872
1 975001 980000 978,464 1 8690001 8695000 8,690,974
1 985001 990000 987,140 9325001 9330000 9,329,169
1 1035001 1040000 1,036,081 1 11605001 11610000 11,608,200
1 1045001 1050000 1,047,524 1 21675001 21680000 21,676,081
1 1170001 1175000 1,173,505 1 124980001 124985000 124,982,408
1 1235001 1240000 1,235,328
1 1270001 1275000 1,271,400 13,939 327,736,819
1 1290001 1295000 1,291,117
1 1355001 1360000 1,359,726
1 1375001 1380000 1,376,233
1 1475001 1480000 1,478,343
1 1660001 1665000 1,661,000
1 1685001 1690000 1,687,478
1 1800001 1805000 1,804,446
1 1820001 1825000 1,823,913
1940001 1945000 1,940,640
1 2050001 2055000 2,053,963

category of shareholding
as at december 31, 2010
S.No. Categories of Shareholders Number of shareholders Shares held Percentage
1 Individuals 13,467 77,433,363 23.63
2 Investment Companies 25 6,260,194 1.91
3 Insurance Companies 15 21,247,883 6.48
4 Joint S t o c k Companies 160 151,019,764 46.07
5 Financial Institutions 74 40,114,698 12.23
6 M o d a r a b a Companies 54 17,625,884 5.32
7 Cooperative Societies 1 30,243 0.09
8 Securities & Exchange Commission of Pakistan 1 1 -
9 Others 142 14,004,789 4.27
Total 13,939 327,736,819 100
On behalf of the Board of Directors

55
shareholder information
Annual General Meeting Ownership

The annual shareholders meeting will be held at 1 0 : 0 0 a.m. on O n December 3 1 , 2 0 1 0 there were 1 3 , 9 3 9 holders o n record o f the
Thursday, March 3 1 , 2 0 1 1 at Karachi Marriott Hotel, Abdullah Haroon C o m p a n y ' s ordinary shares.
R o a d , Karachi.
Dividend Payment
Shareholders a s o f M a r c h 1 7 , 2 0 1 1 are encouraged t o participate
and vote. The proposal of the board of directors for dividend payment,
and issue of bonus shares, will be considered at t h e annual general
A n y shareholder may appoint a proxy to vote on his or her behalf. meeting. Provided the proposal is approved, the dividend warrants
Proxies should be filed w i t h t h e c o m p a n y at least 48 hours before will be sent soon thereafter to persons listed in the register of
t h e meeting time. m e m b e r s on March 1 7 , 2 0 1 1 . Income Tax will be d e d u c t e d in
accordance with the current regulations. Shareholders w h o wish to
C D C Shareholders or their Proxies are requested to bring with t h e m have the dividends deposited directly in their bank accounts should
copies of their Computerized National Identity Card or passport contact our Registrar's, M/s. FAMCO Associates (Private) Ltd.
along w i t h t h e Participant's ID n u m b e r a n d their account n u m b e r

at the time of attending t h e Annual General Meeting in order to
facilitate their identification.
ECLVsKSE 100 (2010)

130 T
Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10

All annual/quarterly reports and presentations from quarterly briefings
Quarterly Results are regularly p o s t e d at the C o m p a n y ' s website: w w w . e n g r o . c o m
The c o m p a n y issues quarterly financial statements. The planned

dates for release of the quarterly results in 2011 are: The c o m p a n y reserves the right to change any of the above dates.
1 st q u a r t e r : April 28 Change of Address

2nd quarter: August 12
3 r d quarter: October 2 8 All registered shareholders should send information on changes of
address t o :
The c o m p a n y holds quarterly briefings with Security Analysts to

discuss the results and the business environment. These sessions M/s. FAMCO Associates (Private) Limited
are planned to be held on: 1 st Hoor, State Life Building N o . 1 -A

I.I. Chundrigar Road
1st quarter: May 2 Karachi-74000
2nd quarter: August 15

3rd quarter: October 31
Share Prices and Volumes (2010)
125 -
Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10
Engro Volume Traded ('000) Engro (Rs/share) KSE-100 Index
57
enabling growth,
Engro Excellence Awards

Engro C o r p hosted its first Engro Excellence A w a r d s in January Chairman of the jury, assisted by Dr. Iqbai Chowdhry, Dr. Nafis
2 0 1 1 . The Engro Excellence A w a r d s a i m at giving Pakistan a Sadik, Prof. Anita Ghulam Ali and Mr. Iftikhar Arif.
platform to present itself as a talented and knowledgeable nation
to the w o r l d . Winners were awarded on the basis of nominations from educated
civilians across Pakistan. The winners w e r e A b d u l Sattar Edhi for
The First Engro Excellence A w a r d s recognized contributions of Social & Humanitarian Services, Mushtaq Ahmed Yusufi for Literature
three w o r t h y recipients, from the fields of Social & Humanitarian a n d Dr. Atta ur Rehman for Physical & Applied Sciences. Each
Services, Literature a n d Physical & Applied Sciences. Nominees winner received PKR 5 million in recognition of their contributions
were selected by a jury of five of Pakistan's m o s t e s t e e m e d and towards their respective fields. The Engro Excellence A w a r d s
respected personalities, considered as symbols of excellence a n d will be an annual event, awarding a host of prestigious civilians
beacons of hope in their relevant fields. Dr. Ishrat Hussain w a s t h e across Pakistan.
Flap inside
enabling growth,
enabling excellence
V **
standalone accounts
• Statement of Compliance with the Code

of Corporate Governance
• Review Report to the Members on

Statement of Compliance with Best
Practices of Code of Corporate
Governance
• Auditors' Report to the

Members on Compliance with Employees
Share Option Scheme
• Auditors' Report to the Members
• Financial Statements
statement of compliance with the
code of corporate governance
This statement is being presented to c o m p l y with the C o d e of C o r p o r a t e G o v e r n a n c e contained in the listing regulations of Karachi,
Lahore and Islamabad Stock Exchanges for the purpose of establishing a framework of g o o d governance, whereby a listed c o m p a n y is
managed in compliance with the best practices of corporate governance.
The C o m p a n y has applied the principles contained in the C o d e in the following manner:
1 . T h e C o m p a n y encourages representation of independent non-executive directors a n d directors representing minority interests on

its Board of Directors. At present the Board includes four independent non-executive directors, four non-executive directors and of
the remaining five, w h o are all Executives of the Company, three have been appointed as chief executives of Engro subsidiaries and
do not therefore devote their full t i m e to the business of the Company. Due to the diversified nature of t h e shareholding structure of
the C o m p a n y there is no single majority shareholder as s u c h .
2. The directors have confirmed that none of t h e m is serving as a director in more than t e n listed companies, including this Company.
3. All t h e resident directors of the C o m p a n y are registered as taxpayers a n d none of t h e m has defaulted in payment of any loan to a
banking company, a DFI or an NBFI or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange.
4 . No casual vacancy o c c u r e d in the Board of Directors during the year
5 . A 'Statement of Ethics a n d Business Practices', has been circulated to all the directors a n d employees of t h e Company, which is in
the process of being signed.
6. The Board has developed a vision/mission statement, overall corporate strategy a n d significant policies of the Company. A complete
record of particulars of significant policies along w i t h the dates on w h i c h they w e r e a p p r o v e d or a m e n d e d has b e e n maintained.
7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination
of remuneration and terms a n d conditions of employment of t h e CEO a n d other executive directors, have been taken by the Board.
8. T h e meetings of the Board were presided over by the Chairman a n d the Board met at least once in every quarter. Written notices
of the Board meetings, along with the agenda, were circulated at least seven days before the meetings. The minutes of the meetings
were appropriately recorded and circulated.
9. The m e m b e r s of the Board are well aware of their duties a n d responsibilities as outlined by corporate laws a n d listing regulations.
10. T h e Board has a p p r o v e d appointment of CFO, C o m p a n y Secretary a n d H e a d of Internal Audit, including their remuneration a n d
terms and conditions of employment, as determined by the C E O .
11. T h e Directors' Report for this year has been prepared in compliance with the requirements of the C o d e a n d fully describes the salient
matters required to be disclosed.
12. The financial statements of the C o m p a n y were duly endorsed by CEO and CFO before approval of the Board.
13. The directors, CEO and executives do not hold any interest in the shares of the C o m p a n y 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. It comprises of 4 members all of w h o m are non-executive directors including the Chairman.
59
16. The meetings of the audit committee were held at least once every quarter prior to approval of interim a n d final results of the C o m p a n y
and as required by the Code. The terms of reference of the committee have been formed and advised to the committee for compliance.
17. The Board has set-up an effective internal audit function.
18. The statutory auditors of the C o m p a n y have confirmed that they have been given a satisfactory rating under the quality control review
programme of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of the firm, their spouses a n d minor
children do not hold shares of the C o m p a n y and that the firm and all its partners are in compliance with International Federation of
A c c o u n t a n t s (IFAC) g u i d e l i n e s o n c o d e o f e t h i c s a s a d o p t e d b y I n s t i t u t e o f C h a r t e r e d A c c o u n t a n t s o f P a k i s t a n .
19. The statutory auditors or the persons associated with t h e m have not been appointed to provide other services except in accordance
w i t h t h e listing r e g u l a t i o n s a n d t h e a u d i t o r s h a v e c o n f i r m e d t h a t t h e y h a v e o b s e r v e d IFAC g u i d e l i n e s i n t h i s r e g a r d .
2 0. The Related Party transactions have been placed before the Audit C o m m i t t e e a n d a p p r o v e d by the Board of Directors alongwith
pricing m e t h o d s for such transactions.
21. We confirm that all other material principles contained in the C o d e have been complied w i t h .

Karachi
Dated: February 14, 2011

review report to the members
on statement of compliance
with best practices of code of corporate governance
We have reviewed the Statement of C o m p l i a n c e with the best practices contained in the C o d e of Corporate Governance for t h e year
ended December 3 1 , 2 0 1 0 prepared by the Board of Directors of Engro Corporation Limited to comply with the Listing Regulations of
the Karachi, Lahore, and Islamabad Stock Exchanges where the C o m p a n y is listed.
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 C o m p a n y ' s compliance with the provisions of the C o d e of Corporate Governance a n d report if it does not. A review is limited primarily
t o inquiries o f the C o m p a n y p e r s o n n e l a n d review o f various d o c u m e n t s p r e p a r e d b y the C o m p a n y t o c o m p l y w i t h the C o d e .
As part of our audit of financial s t a t e m e n t s we are required to obtain an understanding of the a c c o u n t i n g a n d internal control systems
sufficient to plan the audit a n d develop an effective audit a p p r o a c h . We are not required to consider whether the Board's statement on
internal control covers all risks a n d controls, or to form an opinion on the effectiveness of s u c h controls, the C o m p a n y ' s corporate
governance procedures and risks.
Further, Listing Regulations of the Karachi, Lahore a n d Islamabad S t o c k Exchanges require the C o m p a n y to place before the Board of
Directors for their consideration a n d approval, related party transactions distinguishing between transactions carried out on terms equivalent
to those that prevail in arm's length transactions and transactions which are not executed at arm's length price, recording proper justification
for using such alternate pricing m e c h a n i s m . Further, all such transactions are also required to be separately placed before the audit
c o m m i t t e e . We are only required and have ensured compliance of requirement to the extent of approval of related party transactions by
the Board of Directors a n d placement of s u c h transactions before the audit c o m m i t t e e . We have not carried o u t any p r o c e d u r e s to
determine whether the related party transactions were undertaken at a r m ' s length price or not.
Based on our review, nothing has c o m e to our attention which causes us to believe that the Statement of Compliance does not appropriately
reflect the C o m p a n y ' s compliance, In ail material respects, with the best practices contained in the C o d e of Corporate Governance.
Karachi
Engagement Partner: I m t i a z A . H . Laliwala
61
auditors' report to the
members on compliance
with employees share option scheme
We have audited the Engro Corporation Limited's compliance as of December 3 1 , 2 0 1 0 with:
(i) the Employees Share Option Scheme (the Scheme) as approved by the shareholders of the Company; and
(ii) the Public Companies (Employees Stock Option Scheme) Rules, 2001 (the Rules) issued by the Securities a n d Exchange Commission
of Pakistan vide S R O 300(1) 2 0 0 1 dated May 1 1 , 2 0 0 1 .
The responsibility for implementation of the S c h e m e , as approved by the shareholders of the C o m p a n y a n d in accordance with the Rules,
i n c l u d i n g m a i n t e n a n c e o f p r o p e r b o o k s o f a c c o u n t s a n d r e c o r d s i n r e s p e c t t h e r e t o , i s that o f t h e C o m p a n y ' s m a n a g e m e n t .
Our responsibility is to provide an opinion based on our evidence gathering procedures in a c c o r d a n c e with International Standards on
Auditing applicable to compliance auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the C o m p a n y has complied with the S c h e m e and the Rules. An audit includes examining appropriate evidence on a test
basis. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the C o m p a n y w a s , in all material respects, in c o m p l i a n c e with the S c h e m e and the Rules as of D e c e m b e r 3 1 , 2 0 1 0 .
Karachi
Dated: February 14, 2 0 1 1 .
Engagement partner: Imtiaz A . H . Laliwala

auditors' report
to the members
We have audited the annexed balance sheet of Engro Corporation Limited as at December 3 1 , 2 0 1 0 and the related profit and loss account,
statement of comprehensive income, statement of c h a n g e s in equity a n d statement of c a s h flows together with the notes forming part
thereof, for the year then ended and we state that we have obtained all the information a n d explanations which, to the best of our knowledge
and belief, were necessary for the purposes of our audit.
It is the responsibility of the C o m p a n y ' s management to establish a n d maintain a system of internal control, a n d prepare a n d 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 c o n d u c t e d our audit in a c c o r d a n c e with the auditing standards as applicable in Pakistan. These standards require that we plan and
perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An
audit includes examining, on a test basis, evidence supporting the a m o u n t s a n d 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 a n d , after due verification, we report
that:
(a) as more fully explained in note 35 to the financial statements, due to a fire at the C o m p a n y ' s old premises on August 19, 2 0 0 7 certain
records, documents a n d b o o k s of account of the C o m p a n y relating to prior years were destroyed. Records in electronic form remained
intact and certain hard copy records relating to financial year 2005 and 2006 have not been recreated;
(b) in our opinion, except for the matter referred to in paragraph (a), proper b o o k s of account have been kept by the C o m p a n y as required
by the Companies Ordinance, 1984;
(c) in our opinion:

(i) the balance sheet and profit a n d loss account together with the notes thereon have been drawn up in conformity with the Companies
Ordinance, 1984, a n d are in agreement with the b o o k s of account a n d are further in accordance with accounting policies consistently
applied;
(ii) the expenditure incurred during the year w a s for t h e purpose of the C o m p a n y ' s business; a n d
(iii) the business c o n d u c t e d , investments m a d e a n d the expenditure incurred during the year w e r e in a c c o r d a n c e with the objects of
the C o m p a n y ;
(d) in our opinion a n d to the best of our information a n d a c c o r d i n g to the explanations given to us, the balance sheet, profit a n d loss
account, statement of comprehensive income, statement of changes in equity a n d statement of cash flows, together with the notes
forming part thereof c o n f o r m with approved accounting standards as applicable in Pakistan, a n d , give the information required by
the Companies Ordinance, 1984, in the manner so required a n d respectively give a true a n d fair view of the state of the C o m p a n y ' s
affairs as at D e c e m b e r 3 1 , 2 0 1 0 a n d of the profit, total comprehensive income, changes in equity a n d its cash flows for the year then
e n d e d ; and
(e) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980) w a s d e d u c t e d by the C o m p a n y
a n d deposited in the Central Zakat Fund established under Section 7 of that Ordinance.
Karachi
Engagement Partner: Imtiaz A. H. Laliwala
63
balance sheet
(Amounts in thousand)
Note 2010 2009

(notes 1.2 & 1.3)
(Rupees)
Assets
Non-current assets
Property, plant a n d equipment A 136,178 69,517,512
Intangible assets 1.3 - 122,704
Long t e r m investments 5 26,136,701 12,988,657
Deferred employee compensation expense 6 - 2,787
Long t e r m loans a n d advances 7 1,623,514 328,907
27,896,393 82,960,567
Current assets
Stores, spares a n d loose tools 1.3 - 961,117
Stock-in-trade 1.3 - 422,607
Trade debts 1.3 - 2,514,425
Loans, advances, deposits a n d prepayments 8 139,910 1,469,155
Other receivables 9 197,453 275,714
Derivative financial instruments 1.3 - 76,209
Taxes recoverable 1.3 - 536,167
Short term investments 10 1,970,603 450,857
Cash a n d bank balances 11 806,584 3,955,342
3,114,550 10,748,871
Total A s s e t s 31,010,943 93,709,438

Note 2010 2009

(notes 1.2 & 1.3)
(Rupees)
Equity & Liabilities

Equity
Share capital 12 3,277,369 2,979,426
Share premium 10,550,061 10,550,061
Employee share option compensation reserve 6 74,813 288,258
Hedging reserve 1.4 - (609,719)
Genera! reserve 4,429,240 4,429,240
Unappropriated profit 8,722,156 9,250,972
23,776,270 23,908,812
Total e q u i t y 27,053,639 26,888,238
Liabilities
Non-current liabilities
Borrowings 13 - 58,565,354
Deferred liabilities 14 1,297 988,169
Employee housing subsidy 1.3 - 211,785
Retirement and other service benefits obligations 15 1,550 47,581
2,847 60,425,731
Current liabilities
Trade a n d other payables 16 267,044 3,160,852
Accrued interest / mark-up / profit 17 65,000 1,366,022
Current portion of:
- borrowings 13 3,384,536 810,100
- other service benefits obligations 15 - 20,600
Short term borrowings 1.3 - 195,753
Taxation 57,247 -
Unclaimed dividends 180,630 102,099

3,954,457 6,395,469
Total liabilities 3,957,304 66,821,200
Contingencies and Commitments 18
Total Equity & Liabilities 31,010,943 93,709,438
The annexed notes from 1 to 38 form an integral part of these financial statements.
Hussain Dawood A s a d Umar

65
profit and loss account
for the year ended december 31, 2010
(Amounts in thousand except for earnings per share)
Note 2010 2009

(notes 1.2 & 1.3)
(Rupees)-
Net Sales 30,171,520

C o s t of sales (23,240,176)
G r o s s profit 6,931,344
Selling and distribution expenses (1,945,176)

4,986,168
Dividend income 19 1,640,000 1,885,000

Royalty i n c o m e 20 257,584
1,897,584 1,885,000
Administrative expenses 21 (388,652)

1,508,932 6,871,168
Other operating income 22 433,947 88,467

Other operating expenses 23 (38,773) (424,110)
1,904,106 6,535,525
Finance cost 24 (92,131) (1,320,579)

Profit before t a x a t i o n 1,811,975 5,214,946
Taxation 25 (136,016) (1,257,696)
Profit f o r t h e year 1,675,959 3,957,250
Restated
Earnings per share - basic a n d diluted 26 Rs. 5.11 Rs. 12.73


statement of
comprehensive income
Note 2010 2009

(notes 1.2 & 1.3)
(Rupees).
Other c o m p r e h e n s i v e i n c o m e
H e d g i n g reserve - c a s h f l o w h e d g e s
Losses arising during the year - (226,520)
Adjustment for amounts transferred to
initial carrying amount of hedged items (capital w o r k in progress) _ (907,366)
- (1,133,886)
Income tax (Deferred) relating to hedging reserve - 396,860
Other comprehensive income for the year, net of tax (737,026)
Total c o m p r e h e n s i v e i n c o m e for t h e year 1,675,959 3,220,224
Hussain D a w o o d A s a d Umar
67
statement of changes in equity
Share Share Employees Hedging General Unappropriated Total

capital premium shareoption reserve reserve profit
compensation
reserve
(Rupees)
Balance as at January 1, 2009 2,128,161 7,152,722 305,052 127,307 4,429,240 6,911,124 21,053,606
Total comprehensive income for the

year ended December 3 1 , 2009
Profit for the yea- 3,957,250 3,957,250

Other comprehensive income
cash flow hedges, net of tax (737,026) (737,026)
(737,026) 3,957,250 3,220,224
Transactions with owners
Final dividend for the year ended

December 3 1 , 2008 @ Rs. 2 per share (425,632) (425,632)
Interim dividends
- 1 s t ® Rs. 2 per share (595,885) (595,885)
- 2nd @ Rs. 2 per share (595,885) (595,885)
Shares issued during the year in the

ratio of 4 shares for every 10 shares held
@ Rs. 50 per share (including share
premium net of share issue cost) 851,265 3,397,339 4,248,604
Effect of changes in number

of share options (16,794) (16,794)
851,265 3,397,339 (16,794) (1,617,402) 2,614,408
Balance as at December 3 1 , 2009 2,979,426 10,550,061 288,258 (609,719) 4,429,240 9,250,972 26,888,238

year ended December 3 1 , 2010 1,675,959 1,675,959
Transfer of Fertilizer Undertaking
Transfer of hedging reserve to

Engro Fertilizers Limited (note 1.4) - - - 609,719 - - 609,719
Other transactions with owners

December 3 1 , 2009 @ Rs. 2 per share - - - - - (595,886) (595,886)
Interim dividends
- 1 s t ® Rs. 2 per share (655,473) (655,473)
- 2nd @ Rs. 2 per share - - - - - (655,473) (655,473)
Bonus shares issued during the year

in the ratio of 1 share for every
10 shares held 297,943 - - - - (297,943) -
Effect of changes in
number of share options (213,445) (213,445)
297,943 - (213,445) - - (2,204,775) (2,120,277)
297,943 - (213,445) 609,719 - (2,204,775) (1,510,558)
Balance as at December 3 1 , 2 0 1 0 3,277,369 10,550,061 74,813 - 4,429,240 8,722,156 27,053,639

statement of cash flows
Note 2010 2009

(notes 1.2 & 1.3)
(Rupees)
Cash Flows From Operating Activities

Cash generated from operations 29 24,128 8,775,252
Retirement a n d other service benefits paid (18,954) (140,636)
Financial charges - (758,947)
Taxes paid (78,371) (1,226,858)
Payment to Engro Foods Limited for acquisition of tax losses - (450,000)
Long term loans and advances - net (2,502) (110,087)
Net cash (utilized in) / generated from operating activities (75,699) 6,088,724
Cash Flows From Investing Activities

Purchases of property, plant and equipment (PPE) (104,063) (36,352,361)
Sale proceeds on disposal of PPE 4,477 58,366
Deferred income received - 96,305
Long term investments (2,408,900) (1,896,800)
Income on deposits / other financial assets including income
earned on subordinated loan to subsidiaries 168,551 14,370
Dividends received 1,662,500 1,862,500
Net cash utilized in investing activities (677,435) (36,217,620)
Cash Flows From Financing Activities

Loan to Engro Fertilizer Limited (1,500,000) -
Repayment of long term finances - (76,600)
Proceeds from issue of share capital (net) - 4,248,604
Proceeds from loan from subsidiary 300,000 -
Repayment of loan to subsidiary (300,000) -
Payment of financial charges (17,131) -
Proceeds from long term finances (net) 3,374,536 31,957,387
Dividends paid (1,828,300) (1,833,623)
Net cash (utilized in) / generated from financing activities 29,105 34,295,768
Net (decrease) / increase in cash a n d cash equivalents (724,029) 4,166,872
C a s h a n d cash equivalents at beginning of the year, net of

transfer amounting to Rs. 7 0 9 , 2 3 0 (2009: Nil) 3,501,216 43,574
Cash a n d cash equivalents at end of the year 30 2,777,187 4,210,446
k
Hussain D a w o o d A s a d Umar
69
notes to the financial statements
1. Legal Status and Operations

1.1 Engro Corporation Limited - the C o m p a n y (formerly, Engro Chemical Pakistan Limited), is a public listed c o m p a n y incorporated in
Pakistan under the Companies Ordinance, 1984 a n d its shares are q u o t e d on Karachi, Lahore a n d Islamabad stock exchanges of
Pakistan. The principal activity of the Company, consequent to demerger (note 1.2), is to manage investments in subsidiary companies
a n d joint venture, engaged in fertilizers, PVC resin manufacturing a n d marketing, control a n d automation, f o o d , energy, exploration
a n d chemical terminal a n d storage businesses. The C o m p a n y ' s registered office is situated at 7th & 8th Floors, The Harbour Front
Building, HC # 3, Block 4, Marine Drive, Clifton, Karachi.
1.2 The Board of Directors in their meeting on April 2 8 , 2 0 0 9 d e c i d e d to divide the C o m p a n y into t w o c o m p a n i e s by separating its
fertilizer undertaking from the rest of the undertaking that w a s to be retained in the C o m p a n y (Retained Undertaking). In this regard,
a wholly o w n e d subsidiary namely Engro Fertilizers Limited was incorporated on June 2 9 , 2 0 0 9 . The division w a s effected on January
1, 2 0 1 0 (the Effective Date) through a S c h e m e of Arrangement (the Scheme) whereby:
a) the Fertilizer Undertaking has been transferred and v e s t e d in Engro Fertilizers Limited against the issuance of ordinary shares
of Engro Fertilizers Limited to the Company, as summarized in note 1.4; a n d
b) the retention of the Retained Undertaking in the C o m p a n y along with the change of name of the C o m p a n y to Engro Corporation
Limited. Engro Corporation Limited henceforth will function as a Holding C o m p a n y to oversee the business of the new fertilizer
subsidiary as well as business of its other existing subsidiaries/associates.
1.3 Bifurcated Balance Sheet as at January 1, 2010

In order to determine the net assets of the Retained Undertaking a n d the Fertilizer Undertaking for the aforementioned transfer /
demerger of the Company, the assets a n d liabilities of the C o m p a n y as at January 1, 2 0 1 0 were bifurcated, as per the S c h e m e ,
b e t w e e n the Fertilizer Undertaking a n d Retained Undertaking. T h e bifurcated balance sheet as at January 1, 2 0 1 0 , duly audited
by the external auditors, is summarised below:

Note Retained Fertilizer Total

Undertaking Undertaking
- (Rupees)-
Assets
Property, plant and equipment
- Operating assets, at net b o o k value 4.1 6,102,330 6,156,969
- Capital work-in-progress 4.4 63,233,217 63,233,217
- Capital spares 4 127,326 127,326
69,462,873 69,517,512
Intangible assets 2.3 122,704 122,704
Long term investments 5 12,988,657
Deferred employee compensation expense
including current portion: 6.1 90,065
Loans, advances, deposits a n d prepayments
including current portion:
- Long term loans and advances
- Executives 7.1 280,408 282,246
- Other employees 7 218,439 218,439
- Subordinated loans to:
- A v a n c e o n Limited 241,318
- Engro Eximp (Private) Limited 770,000 770,000
- Advances a n d deposits 176,437 178,157
- Prepayments 113,000 113,718
Less: Provision for impairment (5,816) (5,816)
245,594 1,552,468 1,798,062
Stores, spares a n d loose tools 2.11 961,117 961,117

Stock-in-trade 2.12 422,607 422,607
Trade debts 2.13 2,514,425 2,514,425
Other receivables: 9
- Receivable from Government of Pakistan 76,412
- A c c r u e d i n c o m e on deposits / investments 5,300
- Receivable from pension fund 31,887
- Due from subsidiary companies a n d joint venture 134,103
- Claims on foreign suppliers, net 18,533
- Others, net 9,479
134,103 141,611 275,714
Derivative financial instruments 76,209 76,209

Taxes recoverable 536,167 536,167
Short term investments 10.2 450,857 450,857
Cash and bank balances 11.2 3,501,216 454,126 3,955,342
Total A s s e t s 17,014,274 76,695,164 93,709,438
71
Note Retained Fertilizer Total

Undertaking Undertaking
(Rupees)-
Equity
Share capital 12 2,979,426 2,979,426
Share premium 10,550,061 10,550,061
Employees' share option compensation reserve 6.2 288,258 288,258
Hedging reserve 1.4 (609,719) (609,719)
General reserve 4,429,240 4,429,240
24,518,531 (609,719) 23,908,812

Total Equity 27,497,957 (609,719) 26,888,238
Liabilities
Borrowings including current portion 13 59,375,454 59,375,454
Derivative financial instruments including
current portion of Rs, 7 4 0 , 0 4 3 1,352,885 1,352,885
Deferred liabilities:
- Deferred taxation 890,965 I 891,864
- Deferred income 96,305 96,305
987,270 988,169
Employee housing subsidy 2.20 211,785 211,785
Retirement a n d other service benefits
obligations including current portion 15 67,245 68,181
Trade a n d other payables 16.2 3,009,325 3,160,852
A c c r u e d interest / mark-up 17 1,366,022 1,366,022
Short t e r m borrowings 195,753 195,753
Unclaimed dividends 102,099
255,461 66,565,739 66,821,200
A d j u s t m e n t pertaining t o transfer o f
Fertilizer U n d e r t a k i n g (note 1.4) (10,739,144) 10,739,144
Total Equity a n d Liabilities 17,014,274 76,695,164 93,709,438

1.4 Net assets of the Fertilizer Undertaking transferred to Engro Fertilizers Limited
The net assets of the Fertilizer Undertaking transferred to Engro Fertilizers Umited as at January 1 , 2 0 1 0 amounted to Rs. 10,739,144,
as summarized below:
(Rupees)
Total assets (note 1.3) 76,695,164
Less: Total liabilities (note 1.3) 66,565,739
Net assets transferred to Engro Fertilizers Limited 10,129,425
A d d : Hedging reserve (negative) - refer note below 609,719
Adjustment pertaining to transfer of Fertilizer Undertaking 10,739,144
Engro Fertilizers IJmited in return issued 9 , 9 9 9 , 9 9 3 , in addition to existing 7, fully paid ordinary shares of Rs. 10 e a c h plus share
premium to the C o m p a n y against the above net adjustment as follows:
(Rupees)
Share's par value 100,000
Share premium 10,639,144
10,739,144
H e d g i n g Reserve
As per the Scheme of Arrangement, the hedging reserve a n d revaluation surplus/reserves as at January 1, 2010 is to be transferred
to Engro Fertilizers Limited, whereas only the revaluation surplus/reserves (hedging reserve omitted) is to be d e d u c t e d by Engro
Fertilizers Limited from the net assets so transferred to determine the share premium amount over and above the Rs. 100,000 share
capital. Such omission of hedging reserve created a difference of an equivalent a m o u n t in the balance sheet. Therefore, this being
an inadvertent omission in the S c h e m e of Arrangement, the management has also included the hedging reserve (negative) in the
determination of share premium to eliminate the aforementioned difference. Further, in the opinion of the Company's management,
s u p p o r t e d by t h e legal advisor, the n e e d for a m e n d m e n t to the S c h e m e of Arrangement in respect of s u c h inclusion of h e d g i n g
reserve d o e s not arise as it d o e s not in any w a y adversely affect the interest of t h e shareholders or creditors.
2. Summary of Significant Accounting Policies

The significant accounting policies applied in the preparation of these financial statements are set out below. These policies have
been consistently applied to all years presented, unless otherwise s t a t e d . Further, certain policies m a y not be applicable to the
current year financial statements consequent to demerger of the Fertilizer Undertaking (note 1.2) but have been presented for the
purposes of comparative information.
2.1 Basis of preparation

2.1.1 These financial statements have been prepared under the historical cost convention, e x c e p t for remeasurement of certain financial
assets a n d financial liabilities at fair value.
2.1.2 T h e s e financial s t a t e m e n t s have been prepared in a c c o r d a n c e with t h e requirements of the C o m p a n i e s Ordinance, 1 9 8 4 (the
Ordinance), directives issued by the Securities a n d Exchange C o m m i s s i o n of Pakistan (SECP) a n d a p p r o v e d financial reporting
standards as applicable in Pakistan. A p p r o v e d financial reporting standards c o m p r i s e of such International Financial Reporting
Standards (IFRS) issued by the International A c c o u n t i n g Standards Board as are notified under the provisions of the Ordinance.
Wherever, the requirements of the Ordinance or directives issued by the S E C P differ with the requirements of these standards, the
requirements of the Ordinance a n d of the said directives have been followed.
73
2.1.3 The preparation of financial statements in conformity with the above requirements requires the use of certain critical a c c o u n t i n g
estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting policies. T h e
areas involving a higher degree of judgment or complexity, or areas where assumptions a n d estimates are significant to the financial
statements are disclosed in note 3.
2.1.4 Initial a p p l i c a t i o n of s t a n d a r d s , a m e n d m e n t s or an interpretation to existing s t a n d a r d s

a) Standards, a m e n d m e n t s to published standards a n d interpretation that are effective in 2010 a n d are relevant to t h e C o m p a n y
The following a m e n d m e n t s to published standards are mandatory for the financial year beginning January 1, 2 0 1 0 .
• IFRS 5 (amendment), 'Non-current assets held for sale a n d discontinued operations'. T h e a m e n d m e n t clarifies that IFRS 5
specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued
operations. It also clarifies that the general requirement of IAS 1 still apply, in particular paragraph 15 (to achieve a fair presentation)
a n d paragraph 125 (sources of estimation uncertainty) of IAS 1. Currently, as C o m p a n y d o e s not have any non-current asset
(or disposal group) classified as held for sale or d i s c o n t i n u e d operations, therefore this a m e n d m e n t has no i m p a c t on t h e
Company's financial statements.
• IAS 1 (amendment), 'Presentation of financial statements'. T h e a m e n d m e n t is part of t h e lASB's annual improvements project
published in April 2 0 0 9 . The a m e n d m e n t provides clarification that the potential settlement of a liability by the issue of equity is
not relevant to its classification as current or non current. By amending the definition of current liability, the a m e n d m e n t permits
a liability to be classified as non-current (provided that the entity has an unconditional right to defer settlement by transfer of
cash or other assets for at least 12 months after the accounting period) notwithstanding the fact that the entity could be required
by the counterparty to settle in shares at any time. Such amendment has no effect on the C o m p a n y ' s financial statements as
there is no s u c h liability on C o m p a n y ' s balance sheet, w h i c h requires settlement by issue of its o w n equity.
b) S t a n d a r d s , a m e n d m e n t s t o p u b l i s h e d s t a n d a r d s a n d interpretations effective i n 2 0 1 0 b u t n o t relevant
T h e other n e w standards, a m e n d m e n t s a n d interpretations that are mandatory for accounting periods beginning on or after
January 1, 2 0 1 0 , are considered not to be relevant or to have any significant effect on the C o m p a n y ' s financial reporting a n d
operations.
c) S t a n d a r d s , a m e n d m e n t s t o p u b l i s h e d s t a n d a r d s a n d i n t e r p r e t a t i o n s t h a t are n o t y e t e f f e c t i v e a n d h a v e n o t b e e n early
adopted by the Company
The following new standards, amendments to published standards and interpretations are not mandatory for accounting periods
beginning on or after January 1 , 2 0 1 0 a n d have not been early a d o p t e d by the Company.
• IFRS 9 'Financial instruments' (effective for periods beginning on or after January 1, 2013). This standard is the first step in the
process to replace IAS 3 9 , 'Financial instruments: recognition a n d measurement'. IFRS 9 introduces new requirements for
classifying a n d measuring financial assets and is likely to affect the Company's accounting for its financial assets. The C o m p a n y
is yet to assess t h e full impact of IFRS 9, however, initial indications are that it may not affect the Company's financial assets
significantly, as currently the C o m p a n y d o e s not have any assets classified as 'available for sale'.

{Amounts in thousand)
• IAS 24 (revised), 'Related party disclosures'. IAS 24 (revised) is mandatory for periods beginning on or after January 1, 2 0 1 1 .
Earlier application, in whole or in part, is permitted. The revised standard clarifies and simplifies the definition of a related party
and removes the requirement for government-related entities to disclose details of all transactions with the government a n d
other government-related entities.
• IFRIC 14 (Amendment) 'Prepayments of a minimum funding requirement' (effective for periods beginning on or after January
1, 2011), The a m e n d m e n t s correct an unintended c o n s e q u e n c e of IFRIC 14, 'IAS 19 - The limit on a defined benefit asset,
m i n i m u m funding requirements and their interaction'. Without the a m e n d m e n t s , entities are not permitted to recognize as an
asset s o m e voluntary prepayments for minimum funding contributions. This was not intended w h e n IFRIC 14 was issued, and
the a m e n d m e n t corrects this. The Company's retirement benefit f u n d s are not subject to any m i n i m u m funding requirement,
hence, these a m e n d m e n t s will have no impact on the Company's financial statements.
• IFRIC 19 'Extinguishing financial liabilities with equity instruments' (effective for periods beginning on or after January 1, 2011).
The interpretation clarifies the accounting by an entity w h e n the terms of a financial liability are renegotiated and result in the
entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap).
It requires a gain or loss to be recognized in profit or loss, w h i c h is measured as the difference between the carrying amount
of the financial liability and the fair value of the equity instruments issued. If the fair value of the equity instruments issued cannot
be reliably measured, the equity instruments should be measured to reflect the fair value of the financial liability extinguished.
The C o m p a n y has not renegotiated the terms of a financial liability and offered any of its shares to its creditors, therefore, this
interpretation is not expected to have any material impact on the Company's financial statements.
A m e n d m e n t s to following standards as a result of improvements to International Financial Reporting Standards 2010, issued by
IASB in May 2010:
• IFRS 7 (Amendment), 'Financial instruments: Disclosures' (effective for periods beginning on or after January 1, 2011). The
a m e n d m e n t emphasizes the interaction between quantitative and qualitative disclosures a b o u t the nature and extent of risks
associated with financial instrument. The a m e n d m e n t will only affect t h e disclosures in the Company's financial statements.
• IAS 1 (Amendment) 'Presentation of financial statements' (effective for periods beginning on or after January 1, 2011). The
amendment clarifies that an entity will present an analysis of other comprehensive income for each c o m p o n e n t of equity, either
in the statement of changes in equity or in the notes to the financial statements. The amendment will only affect the disclosures
in the Company's financial statements.
• IAS 34 (Amendment) 'Interim financial reporting' (effective for periods beginning on or after January 1, 2011). This amendment
provides g u i d a n c e to illustrate h o w to apply disclosure principles in IAS 34 and a d d disclosure requirements a r o u n d the
circumstances likely to affect fair values of financial instruments and their classification, transfers of financial instruments between
different levels of the fair value hierarchy, changes in classification of financial assets, changes in contingent liabilities and assets.
There are a number of other minor amendments and interpretations to other published standards that are not yet effective, and
are also not relevant to the C o m p a n y and therefore have not been presented here.
75
2.2 Property, plant and equipment
2.2.1 O w n e d assets
These are stated at historical cost less accumulated depreciation and impairment losses, if any, except free-hold land a n d capital
w o r k in progress w h i c h are stated at c o s t . Historical cost includes expenditure that is directly attributable to the acquisition of the
items including borrowing c o s t s (note 2.25). The cost of self constructed assets includes the cost of materials a n d direct labor, any
other costs directly attributable to bringing the asset to a working condition for its intended use, a n d the costs of dismantling a n d
removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the
related equipment is capitalised as part of that equipment.
Where major c o m p o n e n t s of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items of property, plant a n d equipment.
S u b s e q u e n t c o s t s are included in the asset's carrying a m o u n t or recognised as a separate asset, as appropriate, only w h e n it is
probable that future economic benefits associated with the item will flow to the C o m p a n y a n d the cost of the item c a n be measured
reliably. The carrying a m o u n t of the replaced part is derecognised. All other repairs a n d maintenance are charged to the profit a n d
loss a c c o u n t during the financial period in which they are incurred.
Disposal of asset is recognised w h e n significant risk a n d rewards incidental to ownership have been transferred to buyers. Gains
a n d losses on disposals are determined by comparing the proceeds with the carrying a m o u n t a n d are recognised within 'Other
operating expenses/ income' in the profit and loss account.
Depreciation is c h a r g e d to the profit a n d loss account using the straight line m e t h o d whereby t h e cost of an operating asset less
its estimated residual value is written off over its estimated useful life at rates given in note 4 . 1 . Depreciation on addition is charged
from the m o n t h following the month in which the asset is available for use a n d on disposals upto the preceding m o n t h of disposal.
Depreciation m e t h o d , useful lives and residual values are reviewed annually.
2.2.2 Leased assets

Leases in terms of which the C o m p a n y assumes substantially all the risks and rewards of ownership, are classified as finance lease.
Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and present value of minimum
lease payments. Subsequent to initial recognition, the asset is a c c o u n t e d for in a c c o r d a n c e with the accounting policy applicable
to that asset. Outstanding obligations under the lease less finance cost allocated to future periods are s h o w n as a liability.
Finance c o s t under lease agreements are allocated to the periods during the lease t e r m so as to produce a constant periodic rate
of finance cost on the remaining balance of principal liability for each period.
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the C o m p a n y
will obtain ownership by the end of the lease t e r m .

2.3 Intangible assets

a) Computer Software and Licenses
Costs associated with maintaining computer software programmes are recognised as an expense w h e n incurred. However, costs
that are directly attributable to identifiable software a n d have probable e c o n o m i c benefits exceeding the cost beyond o n e year,
are recognised as an intangible asset. Direct costs include the purchase cost of software (license fee) and related overhead cost.
Expenditure which enhances or extends the performance of c o m p u t e r software beyond its original specification a n d useful life
is recognised as a capital improvement a n d a d d e d to the original cost of the software.
C o m p u t e r software a n d license cost treated as intangible assets are amortised from the date the software is put to use on a
straight-line basis over a period of 3 to 5 years.
b) Rights for future g a s utilization

Rights for future g a s utilization represents premium paid to the G o v e r n m e n t of Pakistan for allocation of 100 M M C F D natural
gas for a period of 20 years f r o m Qadirpur gas field at a predetermined price for a period of t e n years c o m m e n c i n g f r o m the
d a t e of commercial production. T h e rights will be amortised from the d a t e of commercial production on a straight-line basis
over the remaining allocation period.
The aforementioned intangible assets have been transferred to the Fertilizer Undertaking, as referred to in note 1.3.
2.4 Impairment of non-financial assets

A s s e t s that are subject to depreciation/amortisation are reviewed at each balance sheet d a t e to identify circumstances indicating
occurrence of impairment loss or reversal of previous impairment losses. An impairment loss is recognised for the a m o u n t by which
the asset's carrying a m o u n t exceeds its recoverable amount. T h e recoverable amount is the higher of an asset's fair value less cost
to sale a n d value in use. Reversal of impairment loss is restricted to t h e original cost of the asset.
2.5 Non current assets (or disposal groups) held-for-sale

Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally
through a sale transaction rather than continuing use and a sale is considered highly probable. They are stated at the lower of carrying
amount and fair value less costs to sell. Impairment losses on initial classification as held for sale a n d subsequent gains or losses
on remeasurement are recognised in profit and loss account.
2.6 Investments
Investment in subsidiary and joint venture companies are initially recognised at cost. At subsequent reporting dates, the recoverable
a m o u n t s are estimated to determine the extent of impairment losses, if any, a n d carrying a m o u n t s of investments are adjusted
accordingly, Impairment losses are recognised as an expense. Where impairment losses subsequently reverse, the carrying amounts
of the investments are increased to the revised recoverable amounts but limited to the extent of initial cost of investments. A reversal
of impairment loss is recognised in the profit a n d loss account.
2.7 Financial assets
2.7.1 Classification
The C o m p a n y classifies its financial assets in the following categories: at fair value through profit or loss, held to maturity, loans and
receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management
determines the classification of its financial assets at initial recognition.
77
a) Financial assets at fair value t h r o u g h profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category
if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading unless they
are designated as hedges. Assets in this category are classified as current assets.
b) L o a n s a n d receivables
Loans a n d receivables are non-derivative financial assets with fixed or determinable payments that are not q u o t e d in an active
market. They are included in current assets, except for maturities greater than 12 m o n t h s after the e n d of the reporting period.
These are classified as non-current assets.
c) H e l d to m a t u r i t y financial assets
Held to maturity financial assets are non derivative financial assets with fixed or determinable payments a n d fixed maturity with
a positive intention a n d ability to hold to maturity.
d) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the
other categories. They are included in non-current assets unless the investment matures or m a n a g e m e n t intends to dispose
off it within 12 m o n t h s of the e n d of the reporting date.
2.7.2 Recognition a n d m e a s u r e m e n t
Regular purchases a n d sales of financial assets are recognised on the trade date - the d a t e on which the C o m p a n y c o m m i t s to
purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried
at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, a n d
transaction c o s t s are e x p e n s e d in the profit a n d loss a c c o u n t . Financial assets are derecognised w h e n the rights to receive c a s h
flows f r o m the investments have expired or have been transferred a n d the C o m p a n y has transferred substantially all risks a n d
rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently
carried at fair value. Loans a n d receivables are s u b s e q u e n t l y carried at a m o r t i s e d c o s t using t h e effective interest m e t h o d .
Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented
in the profit a n d loss a c c o u n t within 'other operating income/expenses' in the period in w h i c h they arise. Dividend i n c o m e from
financial assets at fair value through profit or loss is recognised in the profit a n d loss a c c o u n t as part of other i n c o m e w h e n the
C o m p a n y ' s right to receive payments is established.
Changes in fair value of monetary and non-monetary securities classified as available-for-sale are recognised in other comprehensive
income. W h e n securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in
equity are included in the profit a n d loss account as 'gains a n d losses from investment securities'.
Interest on available-for-sale securities calculated using the effective interest m e t h o d is recognised in t h e profit a n d loss account
as part of other income. Dividends on available for sale equity instruments are recognised in the profit a n d loss account as part of
other income w h e n the Company's right to receive payments is established.

The C o m p a n y assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of
financial assets is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss is removed from
equity and recognised in the profit and loss account. Impairment losses recognised in the profit a n d loss account on equity instruments
are not reversed through t h e profit a n d loss account. Impairment testing of trade d e b t s a n d other receivables is described in note
2.13.
2 . 8 Financial liabilities
Financial liabilities are recognized at the time when the C o m p a n y b e c o m e s a party to the contractual provisions of the instrument.
All financial liabilities are recognised initially at fair value less directly attributable transactions costs, if any, a n d subsequently measured
at amortised cost using effective interest rate m e t h o d .
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expired. Where an existing
financial liability is replaced by another from the s a m e lender on substantially different terms, or the t e r m s of an existing liability are
substantially modified, such an exchange or modification is treated as a derecognition of the original liability a n d the recognition of
a new liability, and the difference in respective carrying amounts is recognized in the profit a n d loss a c c o u n t .
2 . 9 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right
to offset the recognised a m o u n t s and there is an intention to settle either on a net basis, or realise the asset a n d settle the liability
simultaneously.
2.10 Derivative financial instruments and hedging activities

Derivatives are recognised initially at fair value; attributable transaction cost are recognised in profit a n d loss account w h e n incurred.
Subsequent to initial recognition, derivatives are measured at fair values, a n d changes therein are accounted for as described below:
a) Cash flow hedges

Changes in fair value of derivative hedging instruments designated as a c a s h flow hedge are recognised directly in equity to
the extent that the hedge is effective. To the extent the hedge is ineffective, changes in fair value are recognised in profit a n d
loss account.
If the hedging instrument no longer meets the criteria for hedge a c c o u n t i n g , expires or is sold, terminated or exercised, the
hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in equity remains there until
the forecast transaction o c c u r s . W h e n the h e d g e d item is a non-financial asset, the amount recognised in equity is transferred
to carrying a m o u n t of the asset w h e n it is recognised. In other cases t h e a m o u n t recognised in equity is transferred to profit
a n d loss a c c o u n t in the same period that the hedge item affects profit a n d loss account.
b) O t h e r n o n - t r a d i n g derivatives
When a derivative financial instrument is not held for trading, and is not designated in a qualifying hedge relationship, aii changes
in its fair value are recognised immediately in profit or loss.
Effective January 1, 2 0 1 0 , derivative financial instruments balance has been transferred to the Fertilizer Undertaking in accordance
w i t h the s c h e m e of arrangement (notes 1.3 & 1.4).
79
2.11 Stores, spares and loose tools

These are valued at w e i g h t e d average cost except for items in transit which are stated at invoice value plus other charges paid
thereon till the balance sheet date. For items which are slow moving a n d / or identified as surplus to the C o m p a n y ' s requirements,
adequate provision is m a d e for any excess b o o k value over estimated realizable value. The C o m p a n y reviews the carrying a m o u n t
of stores a n d spares on a regular basis a n d provision is made for obsolescence.
Effective January 1, 2 0 1 0 , stores a n d spares balance has been transferred to the Fertilizer Undertaking in a c c o r d a n c e with the
s c h e m e of arrangement (notes 1.3 & 1.4).
2.12 Stock-in-trade
These are valued at the lower of cost and net realizable value. Cost is determined using weighted average m e t h o d except for raw
material in transit w h i c h are stated at cost (invoice value) plus other charges incurred thereon till the balance sheet date. Cost in
relation to finished g o o d s includes applicable purchase cost a n d manufacturing expenses. T h e c o s t of w o r k in process includes
material a n d proportionate conversion c o s t s .
Net realisable value signifies the estimated selling price in the ordinary course of business less all estimated c o s t s of completion
a n d costs necessarily to be incurred in order to m a k e the sales.
Effective January 1, 2 0 1 0 , stock-in-trade balance has been transferred to the Fertilizer Undertaking in accordance with the s c heme
of arrangement (notes 1.3 & 1.4).
2.13 Trade debts and other receivables

These are recognised initially at fair value plus directly attributable transaction costs, if any a n d subsequently measured at amortised
cost using effective interest rate method less provision for impairment, if any. A provision for impairment is established if there is objective
evidence that the C o m p a n y will not be able to collect all a m o u n t s due according to the original terms of receivables. The amount of
provision is c h a r g e d to profit a n d loss a c c o u n t . Trade d e b t s a n d o t h e r receivables c o n s i d e r e d irrecoverable are written-off.
2.14 Cash and cash equivalents

C a s h and cash equivalents in the statement of cash flows includes cash in hand, balance with banks, other short-term highly liquid
investments with original maturities of three months or less, and bank overdrafts / short term borrowings. Bank overdrafts are s h o w n
within borrowings in current liabilities on t h e balance sheet.
2.15 Share capital

Ordinary shares are classified as equity a n d recognised at their face value. Incremental c o s t s directly attributable to the issue of
new shares or options are s h o w n in equity as a deduction, net of tax, from the proceeds.
2.16 Employees' share option scheme

The grant d a t e fair value of equity settled share based payments to employees is initially recognised in the balance sheet as deferred
employee compensation expense with a consequent credit to equity as employee share option compensation reserve.
The fair value determined at the grant date of the equity setlled share based payments is recognised as an employee compensation
expense on a stright line basis over t h e vesting period.
W h e n an unvested option lapses by virtue of an employee not conforming to the vesting conditions after recognition of an employee
c o m p e n s a t i o n expense in profit or loss, employee compensation expense in profit or loss will be reversed equal to the amortised
portion with a corresponding effect to employee share option compensation reserve in the balance sheet.
Engro C o r p . I Annual Report 2010

W h e n a vested option lapses on expiry of the exercise period, employee c o m p e n s a t i o n expense already recognised in the profit
or loss is reversed with a corresponding reduction to employee share option compensation reserve in the balance sheet.
When the options are exercised, employee share option compensation reserve relating to these options is transferred to share capital
and share premium account. An amount equivalent to the face value of related shares is transferred to share capital. Any amount
over and a b o v e the share capital is transferred to share premium account.
2.17 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised
cost; any difference b e t w e e n the p r o c e e d s (net of transaction costs) and t h e redemption value is recognised in the profit a n d loss
a c c o u n t over the period of the borrowings using the effective interest m e t h o d .
Borrowings are classified as current liabilities unless the C o m p a n y has an unconditional right to defer settlement of the liability for
at least 12 months after the balance sheet date.
2.18 Trade and other payables

Trade a n d other payables are recognised initially at fair value a n d subsequently m e a s u r e d at amortised c o s t using the effective
interest m e t h o d .
These are classified as current libilites if payment is d u e with in o n e year or less (or in the normal operating cycle of the business if
longer). If not, thay are presented as non-current libiiites.
2.19 Current and deferred income tax

T h e tax expense f o r t h e period c o m p r i s e s current a n d deferred tax. Tax is recognised in the profit a n d loss account, e x c e p t to the
extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised
in other comprehensive income or directly in equity, respectively.
2.19.1 Current
T h e current i n c o m e tax c h a r g e is based on the taxable i n c o m e for the year calculated on t h e basis of the t a x laws enacted or
s u b s t a n t i v e l y e n a c t e d a t t h e b a l a n c e s h e e t d a t e , a n d any a d j u s t m e n t t o t a x p a y a b l e i n r e s p e c t o f p r e v i o u s y e a r s .
2.19.2 Deferred
Deferred tax is recognised using the balance sheet m e t h o d , providing for all temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes a n d the a m o u n t s u s e d for taxation purposes. Deferred tax is measured at
the t a x rates that are e x p e c t e d to be applied to the t e m p o r a r y differences w h e n they reverse, b a s e d on t h e laws that have been
enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised to the extent that is probable that future taxable profits will be available against which temporary
difference c a n be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
220 Employees' housing subsidy scheme

Employee c o m p e n s a t i o n expense under Housing Subsidy S c h e m e is recognised as an expense on a straight line basis over the
vesting period with a corresponding credit to employee housing subsidy s h o w n as long term liability in the balance sheet.
W h e n an employee leaves the c o m p a n y before the vesting period a n d after recognition of an employee compensation expense in
profit or loss, employee compensation expense in profit or loss will be reversed equal to the amortised portion with a corresponding
effect to employee housing subsidy in the balance sheet.
81
On expiry of the vesting period, amounts disbursed under the s c h e m e will be set-off against the employee housing subsidy.
Effective January 1, 2 0 1 0 , e m p l o y e e s ' housing subsidy s c h e m e balance has been transferred to the Fertilizer Undertaking in
a c c o r d a n c e with the scheme of arrangement (notes 1.3 & 1.4).
221 Employee benefits

221.1 Defined c o n t r i b u t i o n plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contribution into a separate entity
a n d will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans
are recognised as an employee benefit expense in profit or loss when they are due. Prepaid contributions are recognised as an asset
to t h e extent that a cash refund or a reduction in future payments is available.
The C o m p a n y operates:
- defined contribution provident fund for its permanent employees. Monthly contributions are m a d e b o t h by the C o m p a n y a n d
employees to the fund at the rate of 1 0 % of basic salary.
- defined contribution pension fund for the benefit of management employees. Monthly contributions are m a d e by the C o m p a n y
to the fund at rates ranging from 1 2 . 5 % to 1 3 . 7 5 % of basic salary.
2212 Defined benefit plans

A defined benefit plan is a p o s t - e m p l o y m e n t benefit plan other than the defined contribution plan. T h e C o m p a n y ' s net obligation
in respect of defined benefit plans is calculated by estimating the amount of future benefit that e m p l o y e e s have earned in return
for their service in current a n d prior periods; that benefit is discounted to determine its present value. T h e calculation is performed
annually by a qualified actuary using the projected unit credit m e t h o d , related details of which are given in note 28 to the financial
statements. Actuarial gains/losses in excess of corridor limit (10% of the higher of fair value of assets and present value of obligation)
are recognised over t h e average remaining service life of the employees.
Contributions require assumptions to be m a d e of future outcomes which mainly includes increase in remuneration, expected long-
t e r m return on plan assets and the discount rate used to convert future cash flows to current values. Calculations are sensitive to
c h a n g e s in the underlying assumptions.
The C o m p a n y operates defined benefit f u n d e d gratuity scheme for its management employees.
The C o m p a n y also o p e r a t e d defined benefit f u n d e d gratuity s c h e m e f o r n o n - m a n a g e m e n t e m p l o y e e s , u n f u n d e d s c h e m e f o r

resignation gratuity of certain management employees and defined benefit funded pension schemes for its management employees.
Provision is m a d e annually to cover the liability under the s c h e m e s . The pension s c h e m e provides life t i m e pension to retired
employees or to their spouses. Contributions are m a d e annually to these funds on the basis of actuarial r e c o m m e n d a t i o n s . T h e
pension s c h e m e has been curtailed a n d effective from July 1, 2 0 0 5 , no new m e m b e r s are inducted in this s c h e m e . Actuarial gains
on curtailment of defined benefit pension scheme (curtailed) is recognised immediately once the certainty of recovery is established.
Effective January 1, 2 0 1 0 , the C o m p a n y has only retained defined benefit funded gratuity schemes for its management employees,
in accordance with the s c h e m e of arrangement, as referred to in note 1.2.
Annual provision is also m a d e under a service incentive plan f o r certain category of experienced e m p l o y e e s to continue in t h e
C o m p a n y ' s employment.

2 2 1 3 Employees' compensated absences

The Company accounts for compensated absences on the basis of unavailed leave balance of each employee at the end of the year.
2.22 Provisions
Provisions are recognised w h e n the C o m p a n y has a legal or constructive obligation as a result of past events a n d it is probable
that an o u t f l o w of resources will be required to settle t h e obligation a n d a reliable estimate c a n be m a d e of t h e a m o u n t of the
obligation. Provisions are reviewed at each balance sheet date a n d adjusted to reflect current best estimate.
2.23 Foreign currency transactions and translation

These financial statements are presented in Pakistan Rupees, w h i c h is C o m p a n y ' s functional a n d presentation currency. Foreign
currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains a n d losses resulting from the settlement of such transactions a n d from the translation at year-end exchange
rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account, except where
such gains a n d losses are directly attributable to the acquisition, construction or production of a qualifying asset, in w h i c h c a s e ,
such gains and losses are capitalised as part of the cost of that asset.
2.24 Revenue recognition

Revenue is recognised to the extent that it is probable that the e c o n o m i c benefits will flow to the C o m p a n y and the a m o u n t of
revenue can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable a n d is reduced
for marketing allowances. Revenue is recognised on the following basis:
- Sales revenue is recognised when product is dispatched to customers.
- Income on deposits a n d other financial assets is recognised on accrual basis.
- Royalty income from associated/group companies is recognized on an accrual basis in accordance w i t h the agreement entered
therewith.
- Dividend income from investments is recognised w h e n the Company's right to receive payment has been established.
2.25 Borrowing costs

B o r r o w i n g c o s t s are recognised as an e x p e n s e in t h e p e r i o d in w h i c h t h e y are incurred e x c e p t w h e r e s u c h c o s t s are directly
attributable to the acquisition, construction or production of a qualifying asset in which case such costs are capitalised as part of
the cost of that asset. Borrowing costs includes exchange differences arising on foreign currency borrowings to the extent these
are regarded as an adjustment to borrowing costs.
2.26 Research and development costs

Research and development costs are charged to income as and w h e n incurred.
2.27 Government grant

Government grant that compensates the C o m p a n y for expenses incurred is recognised in the profit and loss account on a systematic
basis in the s a m e period in w h i c h the e x p e n s e s are r e c o g n i s e d . G o v e r n m e n t grants are d e d u c t e d f r o m related e x p e n s e .
2.28 Earnings per share

The c o m p a n y presents basic a n d 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 t h e period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary share holders a n d the weighted
average n u m b e r of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
83
2.29 Transactions with related parties

Sales, purchases a n d other transactions with related parties are carried out on commercial terms a n d conditions.
2.30 Dividend and appropriation to reserves

Dividend a n d appropriation to reserves are recognised in the financial statements in the period in w h i c h these are approved.
3 Critical Accounting Estimates and Judgements

Estimates a n d j u d g m e n t s are continually evaluated and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances. The C o m p a n y makes estimates a n d a s s u m p t i o n s
concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. T h e estimates
and assumptions that have a significant risk of causing a material adjustment to the carrying a m o u n t s of assets a n d liabilities within
the next financial year are as follows:

The C o m p a n y reviews appropriateness of the rate of depreciation, useful life and residual value used in the calculation of depreciation.
Further, where applicable, an estimate of recoverable amount of assets is m a d e for possible impairment on an annual basis.
3.2 Impairment of investments in subsidiaries, associates and joint venture

In making an estimate of future cash flows from the Company's financial assets including investment in subsidiaries, joint ventures
a n d associates, the m a n a g e m e n t considers future dividend stream a n d an estimate of the terminal value of these investments.
3.3 Investments stated at fair value through profit and loss

Management has determined fair value of certain investments by using quotations from active market and conditions a n d information
about the financial instruments. These estimates are subjective in nature a n d involve s o m e uncertainties a n d matters of j u d g e m e n t .
3.4 Income Taxes

In making the estimates for income taxes payable by the Company, the management looks at the applicable law and the decisions
of appellate authorities on certain issues in t h e past.
3.5 Fair value of employee share options

The management has determined the fair value of options issued under the Employee Share Option S c h e m e at the grant date using
Black Scholes pricing model. The fair value of these options a n d the underlying assumptions are disclosed in note 6.
3.6 Provision for retirement and other service benefits obligations

The present value of these obligations d e p e n d on a number of factors that are determined on actuarial basis using a n u m b e r of
assumptions. A n y changes in these assumptions will impact the carrying amount of these obligations. T h e present values of these
obligations a n d t h e underlying assumptions are disclosed in notes 28.2.3 a n d 28.2.6 respectively.
4 Property, Plant and Equipment

2010 2009
(Rupees)
Operating assets (note 4.1) 117,083 6,156,969

Capital w o r k in progress (note 4.4) 19,095 63,233,217
Capital spares (note 1.3) - 127,326
19,095 63,360,543
136,178 69,517,512

4.1 Operating assets

Land Building Plant and Catalyst Furniture Vehicles Total
Freehold Leasehold Freehold Leasehold machinery fixture and
equipments
(Rupees)
As at January 1 , 2 0 0 9
Cost 82,149 152,280 603,475 333,002 10,043,804 326,408 471,604 418,579 12,431,301
Accumulated depreciation - (42,403) (289,523) (56,873) (5,581,445) (265,429) (321,531) (184,821) (6,742,025)
Net book value 82,149 109,877 313,952 276,129 4,462,359 60,979 150,073 233,758 5,689,276
Year ended December 3 1 , 2 0 0 9

Opening net book value 82,149 109,877 313,952 276,129 4,462,359 60,979 150,073 233,758 5,689,276
Additions including
48,519 443,891 388,437
transfers (note 4.4) - 5,218 103,307 81,422 118,117 1,188,911
Disposals / transfers
Cost - - (32) (2,121) (54,042) - (77,403) (86,606) (220,204)
(5,405) 3,348 (986) 3,371 (328) -
Accumulated depreciation - - 32 2,121 44,516 - 76,341 62,432 185,442
3,982 (2,818) 39 240 (1,443) -
- - (1,423) 530 (10,473) - 2,549 (25,945) (34,762)
Depreciation charge (note 4.2) - (3,080) (39,619) (8,426) (476,333) (36,632) (56,285) (66,081) (686,456)
Net book value 130,668 106,797 716,801 273,451 4,363,990 127,654 177,759 259,849 6,156,969
As at December 3 1 , 2 0 0 9
Cost 130,668 152,280 1,041,929 339,447 10,377,213 429,715 478,994 449,762 13,400,008
Accumulated depreciation - (45,483) (325,128) (65,996) (6,013,223) (302,061) (301,235) (189,913) (7,243,039)
Net book value 130,668 106,797 716,801 273,451 4,363,990 127,654 177,759 259,849 6,156,969
As at January 1,2010
Retained Undertaking after
transfer (note 1.3)
Cost 2,120 75,705 77,825
Accumulated depreciation (792) (22,394) (23,186)
Net book value 1,328 53,311 54,639
Year ended December 3 1 , 2 0 1 0

Opening net book value 1,328 53,311 54,639
Aaditions including transfers
(note 4.4) 57,888 27,080 84,968
Disposals
Cost - (11,437) (11,437)
Accumulated depreciation - 7,246 7,246
- (4,191) (4,191)
Depreciation charge (note 4.2) (2,427) (15,906) (18,333)

Net book value 56,789 60,294 117,083
As at December 3 1 , 2010
Cost 60,008 91,348 151,356
Accumulated depreciation (3,219) (31,054) (34,273)
Net book value 56,789 60,294 117,083
Annual rate of depreciation (%) - 2 to 5 2.5 to 10 2.5 5to10 20 to 33.33 10 to 45 12 to 25
85
4 . 2 Depreciation charge for the year has been allocated as follows:

2010 2009
(Rupees)
C o s t of sales 620,792
Selling a n d distribution expenses 38,383
Administrative expenses (note 21) 18,333
Capital w o r k in progress (note 4.4) 27,281
18,333 686,456
4 . 3 The details of operating assets disposed off during the year are as follows:
Description a n d m e t h o d o f d i s p o s a l S o l d to Cost Accumulated Net b o o k Sale

depreciation value Proceeds
(Rupees)
Vehicles
By C o m p a n y policy to Inamullah Naveed Khan 1,328 994 334 332

existing / separating Shamsuddin Sheikh 2,750 1,848 902 875
executives Naveed A. Hashmi 1,859 407 1,452 1,520
Khalid Mansoor 2,750 1,977 773 875
Asif Qadir 2,750 2,020 730 875
11,437 7,246 4,191 4,477
4.4 Capital work-in-progress

Plant a n d Building & Other Furniture, Advances to Total
machinery civil w o r k s ancilliary fixture suppliers
costs and equipment
(Rupees)
Year e n d e d D e c e m b e r 3 1 , 2 0 0 9
Balance as at January 1, 2 0 0 9 21,199,705 3,390,474 2,359,191 113,677 643,439 27,706,486
Additions during the year 26,552,353 4,545,384 5,616,498 89,841 (225,606) 36,578,470
Transferred to:
- operating assets (note 4.1) (388,437) (449,109) (81,422) (118,117) (1,037,085)
- intangible assets (14,654) - (14,654)
Balance a s a t December 3 1 , 2 0 0 9 47,363,621 7,486,749 7,975,689 107,442 299,716 63,233,217
Balance as at January 1, 2 0 1 0
Retained Undertaking after
transfer (note 4.4.1)
Expenditures incurred during the year 67,631 36,432 104,063
Transferred to operating assets (note 4.1) (57,888) (27,080) (84,968)
Balance a s a t December 3 1 , 2 0 1 0 9,743 9,352 19,095
4.4.1 All of capital work-in-progress as at December 3 1 , 2 0 0 9 related to the Fertilizer Undertaking and as such has been transferred (note
1.3), which substantially pertains to Urea expansion project.

5 Long Term Investments

2010 2009
(Rupees)
Subsidiary companies - at cost (note 5.1) 25,681,701 12,533,657

Joint venture c o m p a n y - at cost
Engro Vopak Terminal Limited
4 5 , 0 0 0 , 0 0 0 Ordinary shares of
Rs. 1 0 e a c h , equity held 5 0 % (2009: 50%) 450,000 450,000
Others - at cost
Arabian Sea Country Club Limited
500,000 Ordinary shares of Rs. 10 each 5,000 5,000
Agrimali (Private) Limited (Note 5.2) -_
26,136,701 12,988,657
87
5.1 Subsidiary companies

2010 2009
Equity Investment Equity Investment
% held at c o s t % held at c o s t
(Rupees) (Rupees)
Quoted
Engro Polymer & Chemicals Limited
3 7 2 , 8 1 0 , 0 0 0 (2009: 292,400,000)
Ordinary shares of Rs. 10 e a c h (note 5.1.1) 56.19 3,651,300 56.19 2,847,200
Unquoted
Engro Fertilizers Limited
1,072,800,000(2009:7)
Ordinary shares of Rs. 10 each (note 5.1.2) 100 10,739,144 100
Engro Eximp (Private) Limited

4 8 , 0 1 0 , 0 0 0 ( 2 0 0 9 : 10,000)
Ordinary shares of Rs. 10 e a c h 100 480,100 100 100
A d v a n c e against issue of share capital 480,000
480,100 480,100
Engro PowerGen Limited

3 6 , 4 7 6 , 0 0 0 (2009: 6,010,000)
Ordinary shares of Rs. 10 e a c h (note 5.1.1) 100 3,106,700 100 60,100
A d v a n c e against issue of share capital 298,800
3,106,700 358,900
Engro Foods Limited

7 0 0 , 0 0 0 , 0 0 0 (2009: 542,300,000)
Ordinary shares of Rs. 10 each (note 5.1.1) 100 7,000,000 100 5,423,000
Engro Management Services (Private) Limited

2 5 0 , 0 0 0 (2009: 250,000)
Ordinary share of Rs. 10 each 100 2,500 100 2,500
Avanceon Limited
2 5 , 0 6 6 , 6 6 7 (2009: 25,066,667)
Ordinary shares of Rs. 10 e a c h 62.67 381,957 62.67 381,957
Engro Powergen Qadirpur Limited

(formerly, Engro Energy Limited)
3 2 , 0 0 0 , 0 0 0 (2009: 304,000,000)
Ordinary shares of Rs. 10 e a c h (note 5.1.3) 10 320,000 95 3,040,000
25,681,701 12,533,657

5.1.1 During the year, the Company has subscribed to:

- 8 0 , 4 1 0 , 0 0 0 right shares of Rs. 10 each at par, issued by Engro Polymer a n d Chemicals Limited;
- 3 0 , 4 6 6 , 0 0 0 right shares of Rs. 10 each at a premium of Rs. 90 per share, issued by Engro PowerGen IJmited; a n d
- 157,700,000 right shares of Rs. 10 each at par, issued by Engro Foods Limited.
5.1.2 Engro Fertilizers Limited, in addition to issuance of shares on transfer of Fertilizer Undertaking, as referred to in note 1.4, has issued
bonus shares to the C o m p a n y (i) in the ratio of 2,880 shares for even/ 100 shares held and (ii) in the ratio of 260 shares for even/
100 shares held in t h e s e c o n d a n d fourth quarter respectively.
513 T h e C o m p a n y transferred 2 7 2 , 0 0 0 , 0 0 0 ordinary shares of Rs. 10 each ( 8 5 % holding of share capital) in Engro Powergen Qadirpur
Limited (formerly, Engro Energy Limited) to Engro PowerGen Limited a wholly o w n e d subsidiary of t h e C o m p a n y , against c a s h
consideration, on account of the Company's overall restructuring of its business to enable all direct subsidiaries to operate as holding
companies for their respective lines of business. With regard to the remaining 1 0 % holding, the C o m p a n y may divest it but no firm
decision has been taken as at December 3 1 , 2 0 1 0 .
5.2 This represents the C o m p a n y ' s share in the paid-up share capital of the investee transfered free of cost to the C o m p a n y under a
joint venture agrement.
5.3 Value of the above investments, based on the net assets of the investee companies as at December 31 w a s as follows:
2010 2009
(Rupees)
Engro Polymer & Chemicals Limited 3,925,355 3,593,712
Engro Fertilizers IJmited 13,639,592
Engro Eximp (Private) Limited [including advance

against issue of share capital amounting to Nil (2009: Rs. 480,000) 1,131,703 499,386
Engro Management Services (Private) Limited 2,639 2,663
Engro Foods Limited [including advance against issue of

share capital amounting to Nil (2009: Rs. 50,000)] 5,124,360 3,370,148
Engro Powergen Qadirpur Limited

(formerly, Engro Energy Limited) 419,309 2,928,318
Engro Vopak Terminal Limited 526,902 512,178
Engro PowerGen (Private) Limited - [including advance against

issue of share capital Nil (2009: Rs. 298,800)] 3,866,018 290,857
Avanceon Umited 28,520 58,392
Arabian Sea Country Club Limited (June 3 0 , 2 0 1 0 ) 5,569 3,197
Agrimall (Private) Limited (June 3 0 , 2 0 0 8 ) (4,096) (4,096)
89
6 Employee Share Option Scheme

Under the Employee Share Option S c h e m e (the Scheme), senior employees w h o are critical to the business operations are granted
options to purchase 5 million newly issued ordinary shares at an exercise price of Rs. 277 per ordinary share. As per the S c h e m e ,
the entitlements a n d exercise price are subject to adjustments because of issue of right shares a n d bonus shares. The n u m b e r of
options granted to an employee is calculated in a c c o r d a n c e with the criticality of employee to the business a n d their ability a n d is
subject to approval by the C o m p e n s a t i o n C o m m i t t e e . No a m o u n t s are paid or payable by t h e recipient on receipt of the o p t i o n .
The options carry neither right to dividends nor voting rights, vesting period has started f r o m the date of grant, for employees w h o
were granted shares o n o r before June 3 0 , 2 0 0 8 a n d e n d e d o n D e c e m b e r 3 1 , 2 0 1 0 , where after these options c a n b e exercised
within a period of t w o years ending December 3 1 , 2 0 1 2 .
For options granted after June 3 0 , 2 0 0 8 , the vesting period will end such number of days after December 3 1 , 2 0 1 0 as is equal to
the n u m b e r of days between the date the initial option letters were issued and the date of grant of the later options. However, the
latter options c a n also only be exercised upto December 3 1 , 2 0 1 2 .
In 2 0 0 8 , the grant date w a s c h a n g e d to A u g u s t 2 3 , 2 0 0 7 , from the date approved in the original s c h e m e . Further, consequent to
the issue of right shares in 2 0 0 8 a n d in the current year, the entitlements were increased to 5,500,000 shares a n d 7,700,000 shares
respectively a n d the exercise price w a s adjusted to Rs. 2 6 7 . 7 3 per share a n d Rs. 2 0 5 . 5 2 per share respectively. These c h a n g e s
have been duly approved by the Securities and Exchange Commission of Pakistan (SECP). The aforementioned reduction in exercise
price has no effect on the fair value of share options recognized in the financial statements.
C o n s e q u e n t to the demerger, as referred to in note 1.2, the employees transferred to Engro Fertilizers Limited have surrendered
their existing share options against which new share options have been granted under a n e w scheme of Engro Fertilizers Limited.
6.1 Deferred employee compensation expense

2010 2009
(Rupees)
Balance at January 1 90,065 189,291

Options lapsed d u e to employee resignation - (16,794)
Options surrendered by employees transferred to
Engro Fertilizers Limited (67,811)
Amortisation for the year (22,254) (82,432)
Balance at December 31 - 90,065
Current portion s h o w n under current assets - (87,278)
L o n g t e r m portion of deferred employee compensation expense - 2,787
6 . 2 Employee share option compensation reserve
Balance at January 1 288,258 305,052

Options lapsed d u e to employee resignation - (16,794)
Engro Fertilizers Limited (213,445)
Balance at December 31 74,813 288,258

6.3 Movement in share options outstanding at end of the year is as follows:

2010 2009
(Rupees)-
Balance at January 1 4,376,818 4,631,818

Options lapsed due to employee resignation (255,000)
Engro Fertilizers Limited (3,240,909)
Balance at December 31 (note 6.3.1) 1,135,909 4,376,818
6.3.1 T h e above mentioned share options do not include the effect of bonus a n d right shares w h i c h m a k e the total n u m b e r of share
options outstanding at e n d of the year to 1,924,230.
6.4 Further, consequent to the b o n u s issue in the current year, the entitlements w e r e increased to 1,924,230 shares f r o m 1,749,300
shares (adjusted with the effect of forfeiture) respectively and the exercise price w a s adjusted to Rs. 186.84 from Rs. 2 0 5 . 5 2
respectively. These changes have been duly approved by the SECP. The aforementioned reduction in exercise price has no effect
on the fair value of share options recognized in the financial statements.
6.5 T h e C o m p a n y used Black Scholes pricing model to calculate the fair value of share options at the grant date. T h e fair value of the
share options as per the model and underiying assumptions are as follows:
Fair value of the share options at grant date Rs. 6 5 . 8 6

Share price at grant date Rs. 2 2 0
Exercise price Rs. 2 7 7
Annual volatility 34.54%
Risk free rate used 10.77%
6.6 Employee-wise detail of options granted to senior management personnel/other personnel upto or in excess of five percent of total
options granted is as follows:
Name of employee No. of share options

A s a d Umar 770,000
Ruhail M u h a m m e d 462,000
Andalib Alavi 308,000
Tahir Jawaid 308,000
6.6.1 A b o v e mentioned shares include the impact of bonus a n d right shares.
91
7 Long Term Loans and Advances - Considered good

2010 2009
(Rupees)
Long t e r m loans a n d advances t o :

- Excecutives (note 7.1) 4,340 282,246
- Other employees (note 1.3) - 218,439
4,340 500,685
Less: Current portion s h o w n under current assets (note 8) 1,485 413,096
2,855 87,589
Sub-ordinated loan to subsidiaries - unsecured:
- Engro Fertilizers Limited (note 7.2) 1,500,000 -
- Avanceon Limited (note 7.3) 241,318 241,318
- Current portion s h o w n under current assets (note 8) (120,659) -
120,659 241,318
1,623,514 328,907
Reconciliation of the carrying amount

of loans a n d advances to executive
Balance as at January 1 282,246 137,836
Transferred to the Fertilizer Undertaking (note 1.3) (280,408) -
1,838 137,836
Disbursements 4,728 206,282
Repayments/amortization (2,226) (61,872)
Balance as at December 31 4,340 282,246
T h e loan carries m a r k - u p b a s e d on a margin of 1 % over a n d above m a r k - u p payable by the C o m p a n y for rupee finances of like
maturities, s u c h mark-up being payable on a semi-annual basis. The loan is subordinated to the facilities provided to the subsidiary
by its banking creditors a n d is repayable in one lump s u m payment d u e on September 15, 2 0 1 5 .
7.3 The loan carries mark-up at the rate of six months KIBOR plus a margin of 4% payable on a quarterly basis. The loan is sub-ordinated
to the facilities provided to the subsidiary by its banking creditors a n d is repayable in t w o installments d u e on O c t o b e r 2 3 , 2011
a n d April 2 3 , 2 0 1 2 respectively.

8 Loans, Advances, Deposits and Prepayments

2010 2009
(Rupees)
Current portion of long term loans a n d advances to

executives a n d other employees - considered g o o d (note 7) 1,485 413,096
Current portion of sub-ordinated loan to
A v a n c e o n Limited, a subsidiary c o m p a n y (note 7) 120,659 -
Sub-ordinated loan to Engro Eximp (Private) Limited,
a wholly o w n e d subsidiary (note 1.3) - 770,000
Advances a n d deposits (note 1.3) - 178,157
Prepayments (note 1.3) 17,766 113,718
139,910 1,474,971
Less: Provision for impairment - (5,816)
139,910 1,469,155
Other Receivables
2010 2009
Receivable from Government of Pakistan

against sales tax a n d others (note 1.3) 76,412
A c c r u e d income on deposits / investments 4,555 5,300
Receivable from pension fund (note 1.3) 31,887
Due from:
Subsidiary c o m p a n i e s
- Engro Eximp (Private) Limited 86 4,466
- Engro Foods Limited 1,390 1,062
- Engro Polymer & Chemicals Limited 902 3,220
- Engro Powergen Qadirpur Limited 485 270
- Avanceon Limited 44,615 10,392
- Engro Fertilizers Limited 54,062 519
- Engro PowerGen Limited 196 2,072
- Engro Foods Supply Chain Limited 227 -
Joint Venture
- Engro Vopak Terminal Limited, net (note 9.1 J 90,185 112,102
192,148 134,103
Claims on foreign suppliers, net of provision
for impairment of Rs. 295 (note 1.3) 18,533
Others, net of provision for impairment of
Rs. 144 (note 1.3) 750 9,479
197,453 275,714
93
9.1 This mainly includes dividend receivable amounting Rs. 9 0 , 0 0 0 (2009: Rs. 112,102).
9.2 The maximum amount due from joint venture/subsidiary companies at the end of any month during the year aggregated to as follows:
2010 2009
(Rupees)
- Engro Eximp (Private) Limited 3,268 66,012
- Engro Foods Limited 18,950 22,045
- Engro Powergen Qadirpur Limited 4,034 6,809
- Engro Polymer & Chemicals Limited 13,183 11,621
- Avanceon IJmited 44,615 13,899
- Engro PowerGen Limited 1,432 2,073
- Engro Management Services (Private) Limited 2,138 3
- Engro Fertilizers Limited 64,863 519
Joint venture
- Engro Vopak Terminal Limited 180,551 135,509
As at December 3 1 , 2 0 1 0 , receivables aggregating to Rs. 3 1 , 4 1 5 (2009: Rs. 59,061) were past d u e but not impaired. The ageing
/sis of these receivables is as follows:
2010 2009
(Rupees)-
Upto 3 m o n t h s 9,974 9,953

3 to 6 m o n t h s 9,915 -
More than 6 m o n t h s 11,526 49,108
31,415 59,061
Short Term Investments

2010 2009
(Rupees)-
Financial assets at fair value through profit or loss:
- Fixed income placements - 75,795
- Mutual fund securities (note 10.1) 1,970,603 375,062
1,970,603 450,857
10.1 These represents investments in various money market funds which are valued at their respective net assets value at balance sheet date.
10.2 The corresponding amount of short term investments aggregating to Rs. 450,857 were transferred to the Fertilizer Undertaking (note 1.3)

11 Cash and Bank Balances

2010 2009
(Rupees)
Cash at banks on:
deposit a c c o u n t s (note 11.1) 739,982 3,491,666
current a c c o u n t s 66,552 458,826
806,534 3,950,492
Cash in hand 50 4,850
806,584 3,955,342
11.1 These carry return ranging from 1 0 % to 1 2 . 5 % (2009: 10% to 11 % ) .
11.2 T h e corresponding a m o u n t of cash a n d bank balances include Rs. 4 5 4 , 1 2 6 transferred to the Fertilizer Undertaking (note 1.3).
12 Share Capital
12.1 Authorised Capital
2010 2009 2010 2009

(No. of Shares) (Rupees)
350,000,000 350,000,000 Ordinary Shares of Rs. 10 each 3,500,000 3,500,000
Issued, s u b s c r i b e d a n d p a i d - u p capital
2010 2009 2010 2009

( N o . of Shares) (Rupees)
185,354,484 185,354,484 Ordinary shares of Rs. 10 each fully paid in cash 1,853,545 1,853,545
Ordinary shares of Rs. 10 each issued as
142,382,335 112,588,079 fully paid b o n u s shares 1,423,824 1,125,881
327,736,819 297,942,563 3,277,369 2,979,426
12.2 Movement in issued, subscribed and paid-up capital during the year
2010 2009 2010 2009

297,942,563 212,816,117 As at January 1 2,979,426 2,128,161
Ordinary shares of Rs. 10 each
issued during the year as
85,126,446 fully paid right shares 851,265
issued during the period as
fully paid b o n u s shares
29,794,256 -_ (note 12.3) 297,943
327,736,819 297,942,563 3,277,369 2,979,426
12.3 During the year, the C o m p a n y issued b o n u s shares in the ratio of 1 share for every 10 shares held.
12.4 Associated companies held 158,516,740 (2009: 144,390,600) ordinary shares in the C o m p a n y at year end.
95
13. Borrowings
2010 2009
(Rupees)
Long t e r m finance utilised under mark-up arrangements 44,504,057

Term Finance Certificates - 14,871,397
Transferred to t h e Fertilizer Undertaking (note 1.3) - 59,375,454
Term Finance Certificates (note 13.1) 3,384,536

Less: Current portion s h o w n under current liabilities 3,384,536 810,100
- 58,565,354
13.1 Represents subscription money received (net of transaction c o s t of Rs. 178,319) from the general public against t h e issuance of
Engro Rupiya Certificates (the Certificates). T h e Certificates are available by January 1 4 , 2 0 1 1 on first c o m e first serve basis or earlier
if the issue a m o u n t of Rs. 4 , 0 0 0 , 0 0 0 is reached. The profit is payable semi-annually at the fixed rate of 1 4 . 5 % f r o m the date of
investment by the Certificate holders. The Certificates are structured to redeem 0.1 % of principal in five equal semi-annual installments
in the first thirty m o n t h s and the remaining 9 9 . 9 % principal in thirty sixth month from the date of issue. The Certificate holder, however,
may ask the C o m p a n y for early redemption at any time from the date of investment subject to service charge of 2% of the outstanding
issue price.
These Certificate are secured by way of first ranking floating charge over all the present and future movable properties of the Company
except for present a n d future trade mark, copy rights and certain investment in subsidiary companies.
IGI Investment Bank Limited has been appointed as trustees in respect of these certificates.
14. Deferred Liabilities

2010 2009
(Rupees)
Deferred taxation (note 1.3 & 14.1) 1,297 891,864

Deferred i n c o m e (note 1.3) 96,305
1,297 988,169
14.1 Deferred taxation

Credit / (debit) balances arising on a c c o u n t of:
- accelerated depreciation allowance 1,822 1,257,152
- fair values of hedging instruments (328,310)
- provision for:
- retirement benefits (525) (23,863)
- inventories, s l o w moving stores a n d spares and doubtful receivables (20,526)
- others 7,411
1,297 891,864

15 Retirement and Other Service Benefits Obligations

2010 2009
(Rupees)
Defined benefits gratuity plan (note 15.1) 1,550 68,181

Less: Current portion s h o w n under current liabilities - (20,600)
1,550 47,581
The corresponding amount include Rs. 6 7 , 2 4 5 , transferred to the Fertilizer Undertaking (note 1.3).
Trade and Other Payables

Creditors 5,678 593,372
A c c r u e d liabilities (note 16.1) 205,306 1,116,378
Advances from customers - 1,099,390
Advances from subsidiary c o m p a n i e s 12,892 -
Deposits f r o m dealers refundable on
termination of dealership - 11,073
Contractors' deposits a n d retentions 3,574 60,022
Workers' profits participation fund - 2,386
Workers' welfare fund (note 23) 36,979 106,428
Sales tax payable - 2,135
Others 2,615 169,668
267,044 3,160,852
Accrued liabilities
Salaries, w a g e s a n d other employee benefits 77,411 262,276
Vacation accruals 8,366 93,427
Freight accruals - 54,302
Advertisement 45,996 -
Commission 50,000 -
Consultancy services 2,228 -
Others 21,305 706,373
205,306 1,116,378
The corresponding amount of trade a n d other payables include Rs. 3,009,325 transferred to the Fertilizer Undertaking (note 1.3).
Accrued Interest/Mark-Up / Profit

A c c r u e d interest/mark-up o n :
- long term borrowings
- 1,355,503
- short t e r m borrowings - 10,519
Transferred to the Fertilizer Undertaking (note 1.3) - 1,366,022
A c c r u e d profit (note 17.1) 65,000 -
65,000 1,366,022
17.1 Represents profit accrued in respect of subscription money received against Engro Rupiya Certificate (note 13.1)
97
is. Contingencies and Commitments

2010 2009
(Rupees)-
18.1 Corporate Guarantees issued in favour of Subsidiary C o m p a n i e s :
- Engro Fertilizers IJmited (note 18.2) 65,642,000
- Engro Powergen Qadirpur IJmited (note 18.3) 857,000
- Engro PowerGen Limited 53,000
"B2 The C o m p a n y in addition to above has also issued a Corporate Guarantee to International Finance Corporation (IFC) for U S D 8 0 , 0 0 0
under the A m e n d e d Agreement entered into by the Subsidiary C o m p a n y with IFC. As at December 3 1 , 2010, U S D 50,000 has been
availed while U S D 3 0 , 0 0 0 is still undisbursed. Further, IFC has an option to convert a tranche of the disbursed loan amounting to
U S D 15,000, into ordinary shares of the C o m p a n y at Rs. 2 0 5 per ordinary share (Rs. 186.84 as at D e c e m b e r 3 1 , 2010) calculated
at the dollar rupee exchange rate prevailing on the business day prior to the date of notices issued by IFC to exercise the conversion
option. Such option is to be exercised within a period of no more than five years from the date of disbursement of loan (i.e. December
2 8 , 2009).
The C o m p a n y has entered during the year into an agreement with the Subsidiary C o m p a n y that in the event IFC exercises the
aforementioned conversion o p t i o n , the IFC loan a m o u n t then outstanding against the Subsidiary C o m p a n y w o u l d stand reduced
by the conversion option a m o u n t and the Subsidiary C o m p a n y w o u l d pay the rupee equivalent of the corresponding conversion
a m o u n t to the C o m p a n y w h i c h w o u l d simultaneously be given to the Subsidiary C o m p a n y as a subordinated loan, carrying mark-
up payable by the C o m p a n y for rupee finances of like maturities plus a margin of 1 %. The effect of IFC conversion in substance
w o u l d result in a loan from the C o m p a n y having the same repayment terms / dates as that of the extinguished loan of IFC i.e. three
half yearly installments c o m m e n c i n g from September 15, 2 0 1 5 .
18.3 Represents Corporate Guarantee amounting to USD 10,000 issued to Allied Bank Limited to open DSRA letter of credit in favour
of the Subsidiary C o m p a n y ' s senior long t e r m lenders.
18.4 The C o m p a n y has extended project completion support to the lenders of the Engro P o w e r g e n Qadirpur Limited for U S D 1 5 , 4 0 0
(2009: USD 15,400) and a further support to the lenders of Engro Polymer a n d Chemicals Umited for Nil (2009: USD 12,200). These
project supports are contingent u p o n occurrence or non-occurrence of specified future events.
19. Dividend Income

Subsidiary C o m p a n y
- Engro Eximp (Private) Umited 1,100,000 1,435,000
Joint Venture
- Engro Vopak Terminal Limited 540,000 450,000
1,640,000 1,885,000

20 Royalty Income
The C o m p a n y has granted Engro Fertilizers Limited, a Subsidiary C o m p a n y (note 1.2), the right to use trade marks and c o p y rights
for marketing of fertilizer products under a licensing agreement effective January 1, 2010.
21 Administration Expenses
2010
(Rupees)
Salaries, wages a n d staff welfare (note 21.1) 167,934

Staff recruitment, training, safety a n d other expenses 8,092
Repairs and maintenance 7,836
Advertising, sales promotion a n d corporate branding 70,405
Rent, rates and taxes 19,149
Communication, stationery a n d other office expenses 8,496
Travel 13,954
Depreciation (note 4.2) 18,333
Legal a n d professional charges 3,495
Donations 39,175
Other expenses (note 21.2) 31,783
388,652
21.1 Salaries, wages a n d staff welfare includes Rs. 19,213 in respect of staff retirement benefits.
21.2 Includes Rs.14,450 in respect of directors' fees.
22 Other Operating Income

2010 2009
(Rupees)
Financial a s s e t s :
Income on deposits/other financial assets (note 22.1) 308,612 19,670
N o n financial a s s e t s :
Service charges 6,397 25,255
Employees share option compensation
expense written b a c k 101,224
Gain on disposal of property, plant and equipment 286 5,700
Defined benefit pension plan expense written back - 23,604
Others 17,428 14,238
433,947 88,467
22.1 Include Rs. 94,612 in respect of profit earned on subordinated loan to subsidiary companies.
99
23. Other Operating Expenses

2010 2009
(Rupees)
Workers' profits participation fund - 280,072

Workers' welfare fund (note 16) 36,979 106,428
Research a n d development (including salaries a n d wages) - 16,081
Net foreign exchange loss on b a n k a c c o u n t s - 13,282
A u d i t o r s ' r e m u n e r a t i o n (note 23.1) 1,587 7,545
Professional tax 207 213
Others -_ 489
38,773 424,110
23.1 Auditors' remuneration

Fee for the
- audit of annual financial statements 150 1,350
- review of half yearly financial statements 75 300
Certifications, audit of retirement funds a n d
other advisory services 1,279 4,435
Tax services - 1,200
Reimbursement of expenses 83 260
1.587 7,545
24 Finance Cost
Interest/mark-up on
- long t e r m borrowings 75,000 870,103
- short t e r m borrowings 7,118 450,476
Other financial charges 10,013 -_
92,131 1,320,579
25 Taxation
Current
- for the year 135,618 1,135,050
- for prior years - 170,242
135,618 1,305,292
Deferred
- for the year 398 132,187
- for prior years - (179,783)
398 (47,596)
136,016 1,257,696

25.1 Relationship between tax expense and accounting profit

The tax on the C o m p a n y ' s profit before tax differs from the theoretical a m o u n t that w o u l d arise using t h e C o m p a n y ' s applicable
tax rate as follows;
2010 2009
(Rupees)
Profit before tax 1,811,975 5,214,946
Tax calculated at the rate of 3 5 % 634,191 1,825,231

Depreciation on exempt assets not deductible
for tax purposes 34,495
Effect of exemption from tax on certain income (320,527) (509,135)

Effect of applicability of lower tax rate a n d other tax credits / debits (177,648) (92,895)
Tax charge for t h e year 136,016 1,257,696
26 Earnings Per Share

There is no dilutive effect on the basic earnings per share of the Company, after taking into the effect of options granted on Company's
shares to (i) employees under the Employee Share O p t i o n S c h e m e (based on average annual market share price of 2010) a n d (ii)
IFC referred to in note 18.2.
(Rupees)
Profit after taxation 1,675,959 3,957,250
-(Numbers)-
Weighted average number of (Restated)
ordinary shares (in thousand) 327,737 309,231
27 Remuneration of Chief Executive, Directors and Executives

The aggregate amounts charged in these financial statements for remuneration, including all benefits, to chief executive, directors
and executives of the C o m p a n y are given below:
2010 2009
Directors Executives Directors Executives
Chief Others Chief Others
Executive Executive
-(Rupees)-
Managerial remuneration 42,194 18,615 83,306 39,640 37,066 847,737

Retirement benefits funds 4,788 2,236 11,596 3,929 4,154 116,932
Other benefits 11,630 6,764 13,276 10,147 15,413 182,314
Fees - 14,450 - - 7,708 -
Total 58,612 42,065 108,178 53,716 64,341 1,146,983
N u m b e r of persons
including those w h o
w o r k e d part of the year 1 12 44 1 13 415
101
27.1 The C o m p a n y also makes contributions based on actuarial calculations to pension and gratuity funds and provides certain household
items for use of s o m e employees a n d directors. Cars are also provided for use of s o m e employees a n d directors.
27.2 Premium charged in the financial statements in respect of directors indemnity insurance policy, purchased by the C o m p a n y during
the year, a m o u n t e d to R s . 7 9 1 .
28 Retirement Benefits
28.1 As per the S c h e m e a n d u p o n transfer of Fertilizer Undertaking, as referred to in note 1.3, except for M P T Employees Gratuity Fund,
all other f u n d s (the f u n d s maintained under defined benefit pension plan and defined benefit gratuity plan) have been transferred
to the Fertilizer Undertaking. Accordingly, the balances receivable f r o m / p a y a b l e to the aforementioned f u n d s , to the extent of
employees of the Fertilizer Undertaking, have also been transferred.
28.2 Defined benefit plans

The latest actuarial valuation of the defined benefit plans w a s carried out as at December 3 1 , 2 0 1 0 , using the Projected Unit Credit
M e t h o d . Details of the defined benefit plans are as follows:
28.2.1 Balance s h e e t reconciliation

Defined Benefit Defined Benefit
Gratuity Plans Pension Plan
Funded Funded (Curtailed)
2010 2009 2010 2009
(Rupees)
Present value of f u n d e d obligation 115,956 310,479 28,703
Fair value of plan assets (125,199) (346,583) (62,645)
Surplus (9,243) (36,104) (33,942)
Unrecognised actuarial gain 15,986 28,873 2,055
Payable to assosciated c o m p a n i e s (8.421) - -
Unrecognised past service cost 1,678 7,231 -
Net (assetVliability at end of t h e year - - (31,887)
M o v e m e n t in n e t (assetVliability r e c o g n i s e d
Net (assetVliability at beginning of the year - - (31,187)

(Reversal/expense recognised 1,762 11,334 (5,700)
A m o u n t s received from/(paid to) the Fund (1.762) (11,334) 5,000
Net (assetVliability at end of t h e year - - (31,887)
M o v e m e n t in d e f i n e d benefit o b l i g a t i o n
As at beginning of the year 68,020 267,158 29,311

Current service cost 3,449 17,345 -
Interest cost 8,309 39,540 4,172
Benefits paid during the year - (4,755) (2,501)
Actuarial (gainVloss on obligation 27,757 540 (2,279)
Unrecognised past service cost - (10,198) -
• a b i l i t y transferred in respect of inter-company transfer 8,421 849 -
As at e n d of the year 115,956 310,479 28,703

282.4 M o v e m e n t in fair v a l u e of p l a n a s s e t s
2010 2009 2010 2009
-(Rupees)-
As at beginning of the year 81,520 291,946 67,276

Expected return on plan assets 9,579 41,882 9,866
(Repayment to) / Contribution by the C o m p a n y 1,762 11,334 (5,000)
Benefits paid during the year (4,755) (2,501)
Actuarial gain/ (loss) on plan assets 32,338 5,327 (6,996)
Liability transferred in respect of inter-company transfer 849
As at e n d of the year 125,199 346,583 62,645
2 8 . 2 5 C h a r g e f o r t h e year
Current service cost 3,449 17,345

Interest cost 8,309 39,540 4,172
Expected return on plan assets (9,579) (41,882) (9,866)
Recognition of curtailment gain
Amortisation of unrecognized past service cost (129) (64)
Amortisation of transitional obligation (439)
Recognition of past service cost (2,464)
Net actuarial (gain)/loss recognised during the year (288) (702)
1,762 11,334 (5,700)
28.2.6 Principal actuarial a s s u m p t i o n s u s e d in t h e actuarial valuation
2010 2009 2010 2009
Discount rate 14.5 12 12

Expected per annum rate of return on plan assets 14.5 12 12
Expected per annum rate of increase in pension 4.5
Expected per a n n u m rate of increase in future salaries 14.5 12
(Rupees).
28.2.7Actual return o n plan assets

41,917 47,209 2,870
103
2010 2009
Rupees % Rupees
282.8 Plan assets c o m p r i s e of t h e f o l l o w i n g
Fixed income instruments 98,462 79% 269,802 66%

Cash 5,890 5% 23,493
Others 20,847 17% 115,933 28%
125,199 409,228
28.2.9 The e x p e c t e d return on plan assets w a s determined by considering the expected returns available on the assets underlying t h e
current investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the balance
sheet date.
28210 C o m p a r i s o n of five y e a r s
2010 2009 2008 2007 2006
-(Rupees)---
Present value of defined benefit obligation (115,956) (339,182) (296,469) (587,655) (536,209)
Fair value of plan assets 125,199 409,228 359,222 683,808 722,867
Surplus / (Deficit) 9,243 70,046 62,753 96,153 186,658
28.211 Expected future cost for the year ending December 3 1 , 2011 in respect of the retained MPT Gratuity fund on demerger amounts
t o Rs.6,000.
28.3 Defined contribution plans

An a m o u n t of Rs. 7,956 (2009: Rs. 121,044) has been charged during the year in respect of defined contribution plans maintained
by the Company.
29 Cash Generated From Operations

2010 2009
(Rupees)
Profit before taxation 1,811,975 5,214,946

Adjustment for non-cash charges a n d other items:
Depreciation / amortization 18,333 672,522
Gain on disposal of property, plant a n d equipment (286) (23,604)
Provision for retirement a n d other service benefits 20,455 146,218
Income on deposits / other financial assets (308,612) (19,670)
Dividend income (1,640,000) (1,885,000)
Financial charges 92,131 1,320,579
Employee share compensation expense - net (78,970) 65,174
Employee housing subsidy expense - 106,985
Provision for surplus a n d slow moving stores a n d spares - 14,605
Provision for doubtful trades - 814
Provision for other receivables - (1.374)
Provision for loans, advances, a n d prepayments - 1,295
Working capital changes (note 29.1) 109,102 3,161,762
24,128 8,775,252

2010 2009
(Rupees)
29.1 Working capital changes
(Increase) / decrease in current assets
- Stores, spares a n d loose tools (175,631)
- Stock-in-trade - 4,258,289
- Trade debts - (2,253,731)
- Loans, advances, deposits a n d prepayments (15,563) 428,674
- Other receivables (net) 8,435 208,583
(7,128) 2,466,184
Increase / (decrease) in current liabilities
- Trade and other payables including other service benefits (net) 116,230 695,578
109,102 3,161,762
30 Cash and Cash Equivalents

Cash and bank balances 806,584 3,955,342
Short term investments 1,970,603 450,857
Short term borrowings - (195,753)
2,777,187 4,210,446
31 Financial Instruments by Category

Financial assets as per b a l a n c e sheet
- L o a n s a n d receivables
Long t e r m loans 1,620,659 305,139
Trade d e b t s - 2,514,425
Loans and deposits 120,659 1,339,035
Other receivables 197,453 167,415
Cash a n d bank balances 806,584 3,955,342
2,745,355 8,281,356
- Fair value t h r o u g h profit a n d loss
Short t e r m investments 1,970,603 450,857
- Derivatives u s e d for h e d g i n g
Derivatives 76,209
Financial liabilities as per balance sheet
- Financial liabilities m e a s u r e d at a m o r t i s e d c o s t
Borrowings 59,571,207
Trade a n d other payable 217,173 1,680,932
A c c r u e d interest / mark-up 65,000 1,366,022
462,803 62,720,260
- Fair value t h r o u g h profit a n d loss
Conversion option on IFC loan 338,647
- Derivatives u s e d f o r h e d g i n g
Derivatives 1,014,238
105
32 Financial Risk Management

32.1 Financial risk factors
The C o m p a n y ' s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk a n d other price
risk), credit risk a n d liquidity risk. The C o m p a n y ' s overall risk management p r o g r a m m e focuses on having cost efficient funding as
well as to manage financial risk to minimize earnings volatility and provide m a x i m u m return to shareholders.
Risk management is carried out by t h e C o m p a n y ' s Finance a n d Planning department under policies approved by the Management
Committee.
a) M a r k e t risk
i) C u r r e n c y risk
Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign
exchange rates.
The C o m p a n y has given guarantees in favour of its subsidiary c o m p a n i e s amounting to U S D 105,400 (2009: USD 27,600). The
devaluation/revaluation of currency will only impact contingent liabilities a n d the impact on post tax profit for the year is negligible.
ii) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. The C o m p a n y is exposed to cash flow interest rate risk on its subordinated loan to Avanceon Limited (the
loan). At D e c e m b e r 3 1 , 2 0 1 0 , if interest rate had been 1 % higher / lower with all other variable held constant post tax profit for
the year w o u l d have been higher / lower by Rs. 1,448 (2009: Rs. 1,033) mainly as a result of higher / lower interest exposure
on the loan.
iii) O t h e r p r i c e risk
Other price risk is the risk that t h e fair value or future c a s h flows of a financial instrument will fluctuate because of changes in
market prices (other t h a n t h o s e arising f r o m currency risk or interest rate risk), whether t h o s e c h a n g e s are caused by factors
specific to the individual financial instrument or its issuer, or factors effecting all similar financial instruments traded in the market.
The C o m p a n y is not exposed to equity securities price risk as all of its investments are in subsidiary companies which are stated
at c o s t . Further, the C o m p a n y ' s investments in money market mutual funds are e x p o s e d to price risk d u e to changes in NAV
of mutual funds.
As D e c e m b e r 3 1 , 2 0 1 0 , if fair value (NAV) had been 1 % higher/lower with all other variables held constant post tax profit for
the year w o u l d have been higher / lower by Rs. 17,735 (2009: Rs.3,376).
b) Credit risk
Credit risk represents the risk of financial loss being caused if counter party fails to discharge an obligation.
Credit risk arises from deposits with banks and financial institutions, loans a n d advances, deposits, bank guarantees a n d other
receivables. The credit risk on liquid funds a n d mutual fund securities is limited because counter parties are financial institutions
with a reasonably high credit rating. The C o m p a n y maintains an internal policy to place f u n d s with commercial banks/mutual
funds having a minimum short t e r m credit rating of A 1 / A M 3 .

The C o m p a n y monitors the credit quality of its financial assets with reference to historical performance of s u c h assets a n d
available external credit ratings. T h e carrying values of financial assets w h i c h are neither past due nor impaired are as under:
2010 2009
(Rupees)-
Long term loans 1,620,659 305,139

Trade debts 2,381,684
Loans a n d deposits 120,659 1,339,035
Bank balances 806,534 3,950,492
4,715,908 8,535,561
The credit quality of receivables can be assessed with reference to their historical performance with no or negligible defaults in
recent history, however, no losses incurred. The credit quality of C o m p a n y ' s liquidity can be assessed with reference to external
credit ratings as follows:
Bank Rating a g e n c y Rating

Short t e r m Long term
Askari Bank Limited PACRA A1 + AA

Allied Bank Limited PACRA A1 + AA
Bank Alhabib Limited PACRA A1 + AA+
Bank Alfalah Limited PACRA A1 + AA
Citibank N.A. S&P A1 A+
Habib Bank Limited JCR-VIS A1 + AA+
JS Bank Limited PACRA A1 A
MOB Bank Limited PACRA A1 + AA+
NIB Bank Limited PACRA A1 + AA-
Standard Chartered Bank (Pakistan) Limited JCR-VIS A1 + AA+
United Bank Limited JCR-VIS A1 + AA+
c) Liquidity risk
Liquidity risk represents the risk that the C o m p a n y will encounter difficulties in meeting obligations associated with financial liabilities.
The C o m p a n y ' s liquidity management involves projecting cash flows and considering the level of liquid assets necessary to meet
these, monitoring balance sheet liquidity ratios against internal a n d external regulatory requirements a n d maintaining debt
financing plans.
These objectives are achieved by maintaining sufficient cash and marketable securities.
The table below analyses the C o m p a n y ' s financial liabilities into relevant maturity groupings based on the remaining period at
the balance sheet date to contractual maturity dates. The amounts disclosed in the table are the contractual undiscounted cash
flows.
107
2010 2009
Maturity Maturity Maturity Maturity
upto after Total upto after Total
o n e year one year one year one year
-(Rupees)-
Financial liabilities
Derivatives 740,043 612,842 1,352,885
Trade and other payables 217,173 217,173 1,680,932 1,680,932
A c c r u e d interest / m a r k - u p 65,000 65,000 1,366,022 1,366,022

3,384,536 3,384,536 1,005,853 58,565,354 59,571,207
Borrowings
180,630 180,630 102,099 102,099
Unclaimed d M d e n d s
3,847,339 3,847,339 4,894,949 59,178,196 64,073,145
32.2 Capital risk management

The C o m p a n y ' s objectives w h e n managing capital are to safeguard the C o m p a n y ' s ability to continue as a going concern in order
to provide returns for share holders a n d benefit for other stake holders a n d to maintain an optimal capital structure to reduce the
c o s t of capital.
The C o m p a n y manages its capital structure and makes adjustments to it in the light of changes in economic conditions. To maintain
o r a d j u s t t h e c a p i t a l s t r u c t u r e , t h e C o m p a n y m a y a d j u s t t h e d i v i d e n d p a y m e n t t o s h a r e h o l d e r s o r issue n e w s h a r e s .
The management seeks to maintain a balance between higher returns that might be possible with higher levels of borrowings a n d
the advantages a n d security afforded by a s o u n d capital position.
The proportion of borrowings to equity at the year e n d w a s :

2010 2009
(Rupees)
Total Borrowings 3,384,536 59,375,454

Total Equity 27,053.639 26,888,238
30.438.175 86.263.692
Total borrowings to equity ratio JLL%
The C o m p a n y finances its operations through equity, borrowings and m a n a g e m e n t of working capital with a view to maintaining
an appropriate mix between various sources of finance to minimise risk.
32.3 Fair value of financial assets and liabilities

The carrying value of all financial assets a n d liabilities reflected in the financial statements approximate their fair values.

33 Transactions With Related Parties

Related parties comprise subsidiaries, joint venture companies, other c o m p a n i e s with c o m m o n directors, retirement benefit funds,
directors and key management personnel. Details of transactions with related parties during the year, other than those which have
been disclosed elsewhere in these financial statements, are as follows:
2010 2009
(Rupees)-
Purchases and services 10,614,781
Sales 734
Services rendered 149,053 186,267
Mark up from subsidiaries 94,612
Disbursement of loan 1,500,000
Mark up paid to subsidiaries 7,116
Rent 17,646
Repayment of loan 300,000
Royalty Income 257,584
Associated companies
Purchases a n d services 4,271 1,236,921
Dividend paid 574,111 751,280
Payment of interest on TFCs a n d repayment of principal amount 7,051
Right shares issued (including share premium) 1,777,152
Donations 38,750
Investment in Mutual Funds 1,332,000 699,250
Redemption of investment in Mutual Funds 945,490 611,025
Joint ventures
Others
Dividend paid 19,446 50,195
Remuneration of key management personnel 102,726 153,441
Right shares issued (including share premium) 314,732
109
34 Donations
Donations include the following in w h i c h a director or his spouse is interested:
Interest Name and address 2010 2009
in Donee of Donee
(Rupees)-
Mr. A s a d Umar, Chairman Engro Foundation

Mr. Khalid Mansoor a n d Trustees
Mr. Khalid S. Subhani 38,600
Mr. Hussain D a w o o d Director Pakistan Centre for Philanthropy 850
Mr. Hussain D a w o o d Chairman Karachi Education Initiative 150 13,000

a n d Mr. A s a d Umar Director
Mr. A s a d Umar a n d Members Lahore University of Management

Mr. Shahzada D a w o o d Sciences, Lahore 300
38,750 14,150
35 Loss of Certain Accounting Records

During 2 0 0 7 , a fire broke out at PNSC Building, Karachi where the C o m p a n y ' s registered office w a s located. Immediately following
this event t h e C o m p a n y launched its Disaster Recovery Plan due to which operational disruption and financial impact resulting from
this incident remained minimal.
The fire destroyed a substantial portion of its hard c o p y records, related to the financial years 2 0 0 5 , 2 0 0 6 a n d the period January
1, 2 0 0 7 to A u g u s t 19, 2 0 0 7 although, electronic d a t a remained intact d u e to the aforementioned Disaster Recovery Plan. The
C o m p a n y launched an initiative to recreate significant lost records a n d w a s successful in gathering t h e s a m e in respect of the
financial year 2 0 0 7 . Hard c o p y records related to the already reported financial years 2 0 0 5 a n d 2 0 0 6 have not been recreated.
36 Non-adjusting Event After Balance Sheet Date

The Board of Directors in its meeting held on February 14, 2 0 1 1 has p r o p o s e d the following for approval of the m e m b e r s at the
Annual General Meeting t o b e held o n March 3 1 , 2 0 1 1 :
- an increase the authorised share capital of the c o m p a n y from Rs. 3,500,000 to Rs. 4 , 5 0 0 , 0 0 0 :
- a final c a s h dividend of Rs. 2.00 per share (2009: Rs. 2.00 per share final cash dividend)
- a bonus issue in the ratio of 1 share for every 5 shares held i.e. 2 0 % bonus ( 2 0 0 9 : 1 share for every 10 shares held i.e. 1 0 % bonus):
and
- an investment for Rs. 5 6 2 , 0 0 0 in Engro Polymer & Chemicals IJmited by w a y of subscription of right shares.
The financial statements do not include the effect in respect of the above, which will be a c c o u n t e d for in the finanical statements
for the year ending December 3 1 , 2 0 1 1 .
37 Date of Authorisation for Issue

These financial statements w e r e authorised for issue on February 14, 2 0 1 1 by the Board of Directors of the Company.
38 Corresponding Figures
Corresponding figures have been rearranged a n d reclassified for better presentation, wherever considered necessary, the effect of
w h i c h is not material.

Flap open left side
enabling growth,
Engro Flood Relief & Rehab Efforts

Following the floods of 2 0 1 0 , Engro a n d its team of volunteers shoulder of comfort through an army of volunteers galvanized by
w o r k e d round the clock to support displaced residents of the our employees. Engro also provided s u p p o r t to the district
hardest hit areas, providing rations, shelter a n d medical aid. Over administration of Ghotki to coordinate relief efforts. These efforts
the course of the flood relief effort, Engro distributed over 2.5 million also included partnering with UNICEF to help nutrition centres at
meals, 4 1 8 , 5 5 6 liters of milk, 16,300 liters of water, as well as the Civil Hospitals in Thatta a n d Dadu.
providing medical treatment to nearly 5,000 people a n d over
100,000 animals. O n c e the flood waters subsided, Engro embarked on a rehabilitation
drive for the revival of lives and livelihoods, by rebuilding communities
This in addition to providing other necessities such as hand p u m p s , through a model village program, a n d simultaneously rehabilitating
hygiene kits, shelter tents a n d latrines, as well as the essential the local e c o n o m y by providing medical a n d nutritional care for
livestock.
Flap inside
enabling growth,
Engro relief efforts
Meals Livestock Healthcare
2,547,361 101,847
Liquid Milk (Litres Equivalent) Hand Pumps & Community Latrines
448,556 100
Patients Treated Shelter Tent
4,829 3,850
Water (Litres) Fodder Support
16,300 10,000
Hygiene Kits
3,600
Engro rehab efforts
Khushaal Livestock Program
FMD Vaccination Oat Seed and Fertilizer
9,1 33 (households) 2,500 (households)
FMD Vaccination Mineral Mixture packages
52,1 71 (animals) 4,084 (households)
consolidated accounts
• Auditors' Report to the Members
Financial Statements
auditors' report
to the members
We have audited the annexed consolidated financial statements comprising consolidated balance sheet of Engro Corporation Limited
(formerly, Engro Chemicals Pakistan Limited, the Holding Company) a n d its subsidiary c o m p a n i e s (the Group) as at December 3 1 , 2 0 1 0
and the related consolidated profit a n d loss account, consolidated statement of comprehensive income, consolidated statement of changes
in equity a n d consolidated statement of cash flows, together with notes forming part thereof, for the year then e n d e d . We have also
expressed separate opinion on the financial statements of the Holding C o m p a n y a n d its subsidiary companies e x c e p t for Avanceon FZE
(UAE), A v a n c e o n LP (USA) a n d Engro Innovative Inc (USA), subsidiary c o m p a n i e s of A v a n c e o n Limited, w e r e audited by other firms of
auditors w h o s e reports have been furnished to us and our opinion, in so far as it relates to the a m o u n t s included for s u c h c o m p a n i e s , is
based solely on the reports of s u c h auditors. These financial statements are responsibility of Holding C o m p a n y ' s m a n a g e m e n t . Our
responsibility is to express an opinion on these financial statements based on our audit.
Our audit w a s c o n d u c t e d in accordance with the International Standards on Auditing a n d accordingly s u c h test of accounting records
and such other auditing procedures as we considered necessary in the circumstances.
In our opinion the consolidated financial statements present fairly the financial position of Engro Corporation Limited (formerly, Engro
Chemicals Pakistan Limited, the Holding Company) a n d its subsidiary c o m p a n i e s as at D e c e m b e r 3 1 , 2 0 1 0 a n d the results of their
operations, changes in equity a n d cash flows for the year then e n d e d .
Without qualifying our opinion we draw attention to note 50 to the consolidated financial statements and more fully explained therein, due
to a fire at the Holding Company's old premises on August 1 9 , 2 0 0 7 , certain records, d o c u m e n t s a n d b o o k s of a c c o u n t of t h e Holding
C o m p a n y relating to years ended December 3 1 , 2007, 2 0 0 6 a n d 2 0 0 5 were destroyed. To date, the Holding C o m p a n y has been able
to reconstruct b o o k s of account pertaining to the year ended December 3 1 , 2 0 0 7 .
Karachi
Date: February 14, 2011
Engagement Partner: ImtiazA. H. Laliwala
113
consolidated balance sheet
Note 2010 2009

(Rupees)
Assets
Non-current assets
Property, plant a n d equipment 4 128,712,148 110,487,943
Exploration a n d evaluation expenditure 5 356,286 15,767
Biological assets 6 428,293 438,873
Intangible assets 7 877,323 585,358
Long t e r m investments 8 514,505 499,780
Long term loans a n d advances 11 193,458 150,960
131,082,013 112,181,650
Current assets
Stores, spares and loose tools 12 4,910,941 1,451,532
Stock-in-trade 13 8,843,677 3,819,971
Trade d e b t s 14 5,131,408 3,536,533
Deferred employee compensation expense 9 4,829 97,492
Derivative financial instruments 10 3,148 76,209
Loans, advances, deposits a n d prepayments 15 2,474,076 1,372,425
Other receivables 16 1,287,827 1,136,265
Taxes recoverable 2,494,314 1,040,636
Short term investments 17 4,426,188 512,255
Cash a n d bank balances 18 4,120,031 6,880,408
33,696,439 19,923,726
Total A s s e t s 164,778,452 132,105,376

Note 2010 2009

(Rupees)
Equity & Liabiiities

Equity
Share Capital 19 3,277,369 2,979,426
Share premium 10,550,061 10,550,061

Employee share option compensation reserve 9 162,455 318,242
Hedging Reserve 20 (927,438) (617,000)
Revaluation reserve on business combination 104,698 114,900
Maintenance reserve 21 197,577 -
Exchange revaluation reserve 28,883 (43,185)
General reserves 4,429,240 4,429,240
27,321,622 23,139,778
30,598,991 26,119,204
N o n C o n t r o l l i n g Interest 3,516,024 3,225,191

Total Equity 34,115,015 29,344,395
Liabilities
Non-current liabilities
Borrowings 22 89,151,849 84,142,153
Derivative financial instruments 10 805,154 632,777
Obligations under finance lease 23 18,998 20,587
Deferred taxation 24 2,471,226 1,687,298
Employee housing subsidy 25 347,886 211,785
Deferred liabilities 26 117,279 96,163
92,912,392 86,790,763
Current liabilities
Trade a n d other payables 27 12,614,214 9,608,000
A c c r u e d interest / mark-up 28 2,619,453 1,800,428
Current portion of:
- borrowings 22 15,543,787 2,375,675
- obligations under finance lease 23 13,310 18,246
- deferred liabilities 26 23,047 22,961
Short term borrowings 29 5,715,775 1,302,766
Derivative financial instruments 10 1,040,829 740,043
37,751,045 15,970,218
Total Liabilities 130,663,437 102,760,981
Contingencies a n d C o m m i t m e n t s 30
Total Equity & Liabilities 164,778,452 132,105,376
The annexed notes from 1 to 54 form an integral part of these consolidated financial statements.

115
consolidated
profit and loss account
(Amounts in thousand except for earnings per share)
Note 2010 2009

(Rupees)
Net sales 31 79,975,765 58,152,368

C o s t of sales 32 (59,702,130) (44,658,196)
G r o s s Profit 20,273,635 13,494,172
Selling a n d distribution expenses 33 (8,289,680) (6,215,316)

11,983,955 7,278,856
Other operating income 34 897,321 390,157
Other operating expenses 35 (957,982) (843,561)

Finance cost 36 (4,200,886) (2,221,739)
(5,158,868) (3,065,300)
Share of income from joint venture 37 554,725 458,570

Profit before t a x a t i o n 8,277,133 5,062,283
Taxation 38 (1,836,131) (1,343,481)

Profit attributable t o :
- Owners of the Holding C o m p a n y 6,790,049 3,806,918
- Non Controlling Interest (349,047) (88,116)
6,441,002 3,718,802
Restated
Earnings p e r share - basic a n d diluted 39 20.72 12.24
The annexed notes from 1 to 54 form an integral part of these consolidated financial statements


consolidated statement of
comprehensive income
Note 2010 2009

(Rupees) --
Other comprehensive income
H e d g i n g reserve - c a s h f l o w h e d g e s 20
(1,828,460) (226,998)
Losses arising during the year
Less:
65,267 22,557
- Reclassification adjustments for losses/ (gains) included in profit and loss
- Adjustments for amounts transferred to initial carrying 1,245,762 (889,226)
a m o u n t of hedged items (capital w o r k in progress) (517,431) (1,093,667)
Revaluation reserve o n b u s i n e s s c o m b i n a t i o n (21,974) (21,974)
E x c h a n g e differences o n translation o f f o r e i g n o p e r a t i o n s 114,996 (18,595)

(424,409) (1,134,236)
I n c o m e t a x relating t o :
Hedging reserve - cash flow hedges 181,100 382,783
Revaluation reserve on business combination 7,691 7,691
188,791 390,474
Other comprehensive income for the year, net of tax (235,618) (743,762)
Total c o m p r e h e n s i v e i n c o m e f o r t h e year 6,205,384 2,975,040
Total comprehensive income attributable to:
- Owners of the Holding C o m p a n y 6,541,477 3,062,726

- Non Controlling Interest (336,093) (87,686)
6,205,384 2,975,040
The annexed notes from 1 to 54 f o r m an integral part of these consolidated financial statements.

117
statement of changes in equity
Attributable to owners of the Holding Company-
Share Snare Employee Hedging Revaluation Maintenance Exchange General Unappro- Sub Non controlling Total
premium share option reserve reserve on reserve revaluation reserve priated total Interest
compensation business reserve Profit
reserve combination
(Rupees)
Balance as at 1 January, 20X39 2,128,161 7,152,722 327,020 105,337 125,102 (31,532) 4,429240 6,198,004 20,434,054 3,113,677 23,547,731

year ended December 31,2009
Profit for ttw year 3,806,918 3,806,918 (88,116) 3,718,802
3 income 1722,337) (10,202) (11,653) (744,192) 430 '743,762.!
(722,337) (10,202) (11,653) 3,806,918 3,062,726 (87,686) 2,975,040
Shares issued during the period in the ratio of 4
for every 10 shares @ Rs.50 per share
(including share premium net of
share issue cost) 851,266 3,397,339 4,248,604 4,248,604
Effect of changes in number of share options
issued (8,778! (8,778) (8,778)
December 31,2008 9 Rs. 2.00 per share (425,632) (425,632) (425,632)
Advance against issue of shares of Sindh Engro
Coal Mining Company Limited, subsidiary of
Engro PowerGen Limited 199.20O 199,200
Interim dividend:
- 1st @Rs. 2.00 per share (595,885) (595,885) (595,885)
-2nd@Rs. 2.00 per share (595,885) (595,885) (595,885)
85135 3,397,339 (8,778) 1,617,402) 2,622,424 199,200 2,821,624
Balance as at December 31,2009 2,979,426 10,550,061 318,242 (617,000) 114,900 (43,185) 4,429^40 8,387,520 26,119,204 3,225,191 29,344,3
year ended December 31,2010
Profit for the year 6,790,049 6,790,049 (349,047) 6,441,002
Other comprehensive income (310,438) 72,068 (248,572) 12,954 (235,618)
(310,438) (10,202) 72,068 6,790,049 6,541,477 (336,093) 6,205,384
Bonus shares issued during the year in the 297,943 (297,943)
rate of 1 for every 10 shares
Issue of shares by Engro Polymer and
Chemicals Limited 626,926 626,926
Maintenance reserve created by
Engro Powergen Qadirpur Limited, a subsidiary
of Engro PowerGen Limited
(formerly Engro Energy Limited) 197,577 (197,577)
vested options lapsed dunng the year
Effect of changes in number of share options
issued (154,858) (154,858) (154,&58i
Rnal dividend for the year ended December 31,
2009 @Rs. 2.00 per share
Interim dividend
- 1st @Rs. 2.00 per share (655,473) (655,473) (655,473)
- 2nd @Rs. 2.00 per share (655,473) (655,473) (655,473)
297,943 (155,787) 197,577 - (2,401,423) (2,061,69C) 626,926 (1,434,764)
Balance as at December 31, 2010 3,277,369 10,550,061 162,455 (927,438) 104,698 197,577 21 ,883 4,429240 12,776,146 30,598,99 3,516,024 34,115,015
he annexed notes 'rem 1 to 54 form an ntsgral car! of these consolidated financial statements.
It

cash flows
( A m o u n t s in thousand)
Note 2010 2009

(Rupees)
Cash flows from operating activities

Cash generated from operations 42 5,875,276 15,410,170
Retirement and other service benefits paid (215,227) (183,579)
Financial charges paid (3,381,861) (1,650,200)
Taxes paid (2,378,136) (1,955,654)
Long term loans and advances - net (42,498) 186,438
Net cash (used in) / generated from operating activities (142,446) 11,807,175
Cash flows from investing activities

Exploration a n d evaluation expenditure incurred (339,268) (15,768)
Purchases of property, plant & equipment a n d biological assets (20,813,639) (53,877,767)
Sale p r o c e e d s on disposal of property, plant & equipmentand biological assets 476,825 100,952
Income on deposits / other financial assets 372,526 128,459
Dividends received 562,500 427,500
Net cash used in investing activities (19,741,056) (53,236,624)
Cash flows from financing activities

Proceeds from issue of shares (net) - 4,248,604
Proceeds from borrowings 19,830,786 46,061,410
Repayments of borrowings (1,998,834) (265,674)
Obligations under finance lease - net (6,525) (10,590)

Retention money against project payments - (553,445)
Advance against issue of shares - Non Controlling Interest 199.200
Proceeds from issuance of shares by subsidiary c o m p a n y 626,926 -
Dividends paid (1,828,304) (1,833,623)

16,624,049 47,845,882
Net cash generated from financing activities
(3,259,453) 6,416,433
Net increase/ (decrease) in cash a n d cash equivalents
6,089,897 (326,536)
Cash a n d cash equivalents at beginning of the year
43 2,830,444 6,089,897
Cash and cash equivalents at end of the year
The annexed notes from 1 to 54 f o r m an integral part of these consolidated financial statements.
k
119
notes to the consolidated
financial statements
1. Legal Status and Operations

Engro Corporation Limited - the Holding Company (formerly, Engro Chemical Pakistan IJmited), is a public listed company incorporated
in Pakistan under the Companies Ordinance, 1984 and its shares are q u o t e d on Karachi, Lahore a n d Islamabad stock exchanges
of Pakistan. The principal activity of the Holding Company, consequent to demerger (note 1.1), is to manage investments in subsidiary
c o m p a n i e s a n d joint venture, engaged in fertilizers, PVC resin manufacturing a n d marketing, control a n d automation, f o o d , energy,
exploration and chemical terminal and storage businesses. The Holding C o m p a n y ' s registered office is situated at 7th & 8th Floors,
The Harbour Front Building, HC # 3, Block 4, Marine Drive, Clifton, Karachi.
1.1 The Board of Directors in their meeting on April 2 8 , 2009 decided to divide the Holding C o m p a n y into t w o companies by separating
its Fertilizer Undertaking f r o m the rest of the undertaking that w a s to be retained in the Holding C o m p a n y (Retained Undertaking).
In this regard, a wholly o w n e d subsidiary namely Engro Fertilizers Limited w a s incorporated on June 2 9 , 2 0 0 9 . T h e division w a s
effected on January 1, 2 0 1 0 (the Effective Date) through a S c h e m e of Arrangement (the Scheme) whereby:
a) t h e Fertilizer Undertaking has been transferred a n d vested in Engro Fertilizers Limited against the issuance of ordinary shares
of Engro Fertilizers Limited to the Holding C o m p a n y ; a n d
b) the retention of the Retained Undertaking in the Holding C o m p a n y along with the c h a n g e of the name of the Holding C o m p a n y
to Engro Corporation Limited. Engro Corporation Limited henceforth will function as a Holding C o m p a n y to oversee the business
of the n e w fertilizer subsidiary as well as business of its other existing subsidiaries/associates.
1.2 The "Group" consists of:
H o l d i n g C o m p a n y - Engro Corporation IJmited (formerly, Engro Chemical Pakistan Limited)
Subsidiary c o m p a n i e s , companies in which the Holding C o m p a n y o w n s over 5 0 % of voting rights, or companies directly controlled
by the Holding C o m p a n y :
%age of direct holding

2010 2009
- Engro Fertilizers Limited 100 100
- Engro Foods IJmited 100 100
- Engro Eximp (Private) Limited 100 100
- Engro Management Services (Private) Limited 100 100
- Engro PowerGen IJmited 100 100
- Avanceon Umited 62.67 62.67
- Engro Polymer a n d Chemicals IJmited 56.19 56.19
%age of direct holding

2010 2009
J o i n t Venture C o m p a n y :
- Engro Vopak Terminal IJmited 50 50
Associated Company:
- Agrimall (Private) Limited
- Arabian Sea Country Club Limited

1.3 Subsidiary companies

Engro Fertlizers L i m i t e d
Engro Fertilizers Limited, a wholly o w n e d subsidiary of the Holding Company, is a public unlisted c o m p a n y incorporated on June
2 9 , 2 0 0 9 i n Pakistan u n d e r t h e C o m p a n i e s O r d i n a n c e , 1 9 8 4 , for t h e p u r p o s e s o f transfer a n d vesting o f fertilizer b u s i n e s s
(manufacturing, purchasing and marketing of fertilizers), consequent to demerger, as referred to note 1 . 1 . Term Finance Certificates
issued are however listed at the Karachi S t o c k Exchange.
Engro Fertilzers Limted has been involved in the construction a n d setup of the Urea expansion project (Enven Plant) adjacent to
existing Dharki Plant. The capacity of Enven Plant will be 1.3 million t o n s of Urea per a n n u m , but could not continue for a reasonable
period, as required for commissioning of commercial production, d u e to curtailment of gas by Sui Northern Gas Pipeline Limited
(SNGPL) for forty five days from January 7, 2 0 1 1 . The production is n o w e x p e c t e d to c o m m e n c e by end of Febuary 2011 a n d
commercial production will be declared o n c e fully tested.
Engro F o o d s L i m i t e d
Engro Foods Limited, a wholly o w n e d subsidiary of the Holding C o m p a n y w a s incorporated in Pakistan on April 2 6 , 2 0 0 5 , under
the Companies Ordinance, 1984, as a private limited c o m p a n y and w a s converted to an unlisted public limited c o m p a n y effective
from April 2 7 , 2 0 0 6 . The principal activity of Engro Foods Limited is to manufacture, process a n d sell dairy, Ice c r e a m a n d other
f o o d products. Engro Foods Limited also o w n s and operates a dairy farm. During the year, Engro Foods Limited has c o m m e n c e d
commercial production of juices, hence further widening the portfolio of its products.
Further, Engro Foods Supply Chain (Private) Limited, a 7 0 % o w n e d subsidiary of Engro Foods Limited, w a s incorporated in Pakistan
on November 3, 2009, under the Companies Ordinance, 1984. The principal activity of this sub-subsidiary is to produce, manufacture
and trade all kinds of raw, processed and prepared food products including agriculture, dairy and farming products. A rice processing
plant in district Sheikhupura is currently under construction. During the year, the drying unit of the plant w a s c o m m i s s i o n e d a n d
commercial production c o m m e n c e d from November 7, 2 0 1 0 whereas the milling unit is expected to be commissioned in the first
half o f 2 0 1 1 .
Engro E x i m p (Private) Limited

Engro Eximp (Private) Limited, a wholly o w n e d subsidiary of the Holding Company, is a private limited company, and w a s incorporated
in Pakistan on January 16, 2003 under the Companies Ordinance 1984. Engro Eximp (Private) Limited is principally engaged in the
following trading businesses:
a) Fertilizer Trading: Engro Eximp (Private) Limited imports a n d sells different types of fertilizers a n d other related p r o d u c t s a n d
are being sold to the dealers through Engro Fertilizers Umited which has been appointed as a selling agent under an Agreement
effective January 1, 2010.
b) Rice Trading: Engro Eximp (Private) Limited is also engaged in rice business whereby bulk quantities of unprocessed rice and
p a d d y are p r o c u r e d from local suppliers, p r o c e s s e d a n d p a c k e d for selling locally as well as for e x p o r t to foreign b u y e r s .
Processing of rice is being o u t s o u r c e d .
Engro Eximp (Private) Limited also o w n s 3 0 % ordinary shares of Engro Foods Supply Chain (Private) Limited.
Engro M a n a g e m e n t Services (Private) L i m i t e d

Engro M a n a g e m e n t Services (Private) Limited, a wholly o w n e d subsidiary of the Holding C o m p a n y w a s incorporated in Pakistan
on January 2 3 , 2 0 0 3 under the Companies Ordinance 1 9 8 4 . Engro M a n a g e m e n t Services (Private) Limited h a d been registered
as a modaraba management c o m p a n y but subsequently w a s deregistered on account of not launching the modaraba. At present,
other viable business activities are being considered / evaluated. There are no assets and liabilities which require material adjustments.
121
Avanceon Limited
Avanceon Limited is a 6 2 . 6 7 % o w n e d subsidiary of the Holding Company. It w a s incorporated in Pakistan on March 2 6 , 2 0 0 3 as

a private limited c o m p a n y which w a s c h a n g e d to public c o m p a n y on March 3 1 , 2 0 0 8 under the Companies Ordinance, 1984. T h e
principal activity of A v a n c e o n Limited is to trade in p r o d u c t s of automation a n d control equipments a n d provide related technical
services. Avanceon Limited consists of following subsidiaries:
% age of holding of
Avanceon Limited
- Avanceon Free Z o n e Establishment, UAE; 100%
- Engro Innovative Inc., USA; 100%
- Innovative Automation (Private) Umited; 100%
- Avanceon LP, USA; a n d 70%
- Avanceon GP LLC, USA. 70%
• A v a n c e o n Free Z o n e Establishment, UAE is a Free Z o n e Establishment with limited liability f o r m e d under the laws of Jebel AH
Free Zone Authority, U.A.E a n d w a s registered on February 2 8 , 2 0 0 4 . The principal activity of the establishment is to trade in
p r o d u c t s of automation a n d control equipment and provide related technical support.
• Engro Innovative Inc., USA a wholly o w n e d subsidiary of Avanceon Free Zone Establishment w a s incorporated in the State of
Pennsylvania on October 2 5 , 2 0 0 6 , as a Corporation Service C o m p a n y under the provisions of Business Corporation L a w of
1 9 8 8 . Its principal activity is to explore investment opportunities in automation industry in USA a n d provide related technical
support f r o m its holding companies.
• Innovative Automation (Pvt.) Limited w a s incorporated in Pakistan as a private c o m p a n y limited by shares under the Companies
Ordinance, 1984 on December 0 4 , 2 0 0 8 . It is a wholly o w n e d subsidiary of Avanceon Limited.
• Avanceon LP, USA (formerly Advanced Automation LP - ALP) a 7 0 % o w n e d subsidiary of Engro Innovative Inc., is a Pennsylvania
Limited Partnership. The Partnership provides innovative technology solutions to clients in various industries. The Partnership
designs, d e v e l o p s , implements and provides s u p p o r t of a u t o m a t e d manufacturing p r o c e s s for their c u s t o m e r s .
• Avanceon GP LLC, a 7 0 % o w n e d subsidiary of Engro Innovative Inc., is a Pennsylvania IJmited Liability Corporation, w h i c h is
a general partner with 0.01 % general partner interest in Avanceon LP.
Engro P o l y m e r a n d C h e m i c a l s Limited
Engro Prolymer a n d Chemicals Limited as a 5 6 . 1 9 % o w n e d subsidiary of t h e Holding Company. Engro Polymer a n d Chemicals
IJmited, incorporated in Pakistan in 1997 under the Companies Ordinance, 1984, is listed on Karachi, Lahore a n d Islamabad Stock
Exchanges. T h e principal activity of Engro Polymer a n d Chemicals Limited is to manufacture, market a n d sell Poly Vinyl Chloride
(PVC), PVC c o m p o u n d s caustic s o d a a n d other related chemicals. It is also engaged is supply of surplus power generated from
its p o w e r plant to Engro Fertilizers IJmited (NPK Plant) and Karachi Electricity C o m p a n y Umited.
In 2 0 0 6 , Engro Polymer a n d Chemicals Limited c o m m e n c e d w o r k on its expansion a n d b a c k w a r d integration project comprising

of setting up of a new PVC plant, Ethylene Di Chloride (EDC), Chlor-alkali, Vinyl Chloride M o n o m e r (VCM) a n d Power plants (the
Project). Commercial operation of the PVC, EDC, chlor-alkali and Power Plant (Gas Turbines) c o m m e n c e d in 2 0 0 9 whereas the V C M
Plant declared c o m m e r c i a l operations during t h e year o n S e p t e m b e r 3 0 , 2 0 1 0 , u p o n w h i c h t h e integrated c h e m i c a l c o m p l e x
stands c o m p l e t e d .

Engro P o w e r G e n Limited
Engro PowerGen Limited is a wholly o w n e d subsidiary incorporated as a private limited c o m p a n y in Pakistan on May 3 1 , 2 0 0 8
under the Companies Ordinance, 1984, a n d w a s converted to an unlisted public c o m p a n y effective August 1 1 , 2009. It is established
with the primary objective to analyse potential opportunities in the Power Sector and undertake Independent Power Projects (IPPs)
based on feasibilities of new ventures. Following are the subsidiaries of Engro PowerGen Limited.
% age of holding of
Engro Powergen Qadirpur Limited 85%
(formerly Engro Energy Limited)
Sindh Engro Coal Mining C o m p a n y Limited 60%
• Engro P o w e r g e n Qadirpur Limited is an unlisted public c o m p a n y i n c o r p o r a t e d in Pakistan on February 2 8 , 2 0 0 6 u n d e r

t h e C o m p a n i e s Ordinance, 1 9 8 4 w i t h t h e primary objective t o u n d e r t a k e t h e business o f p o w e r generation, distribution,
transmission a n d sale. Effective N o v e m b e r 2 , 2 0 1 0 , the n a m e has b e e n c h a n g e d t o 'Engro P o w e r g e n Qadirpur L i m i t e d '
from Engro Energy Limited.
The Holding Company, had last year initiated the process of transferring its entire (95%) holding of 3 0 4 million shares of Rs. 10
each in Engro Powergen Qadirpur Limited (formerly Engro Energy Limited) to the Engro PowerGen Limited. Such transfer being
on a c c o u n t of Holding C o m p a n y ' s overall restructuring of its business to enable all direct subsidiaries to o p e r a t e as holding
companies of their respective lines of business. However, after approval from the shareholders for transferring a lower number,
the Holding C o m p a n y has transferred during the year 272 million shares ( 8 5 % of share capital) in Engro Powergen Qadirpur
Limited to Engro PowerGen Limited at par value of Rs. 10 each against cash consideration, while retaining 1 0 % holding. By
virtue of such transfer, Engro Powergen Qadirpur Limited has n o w b e c o m e a subsidiary of Engro PowerGen Limited. However,
the ultimate holding of the Holding C o m p a n y remains at 9 5 % .
During the year, Engro Powergen Qadirpur Limited completed construction a n d testing of its 2 1 7 . 3 MW c o m b i n e d cycle power
plant and has c o m m e n c e d commercial operations on March 2 7 , 2 0 1 0 . The electricity generated is transmitted to the National
Transmission a n d Despatch C o m p a n y (NTDC) under the Power Purchase Agreement (PPA) dated October 26, 2 0 0 7 , valid for
a period of 25 years.
• Sindh Engro Coal Mining C o m p a n y Limited is a public unlisted company, incorporated in Pakistan on October 15, 2 0 0 9 under
the Companies Ordinance, 1984. ft has been formed under a Joint Venture Agreement (JVA), dated September 8, 2 0 0 9 , between
the Government of Sindh, Coal a n d Energy Development Department (GoS), the Engro PowerGen Limited a n d the Holding
!
Company. The aforementioned JVA is consequent to the selection of the Engro PowerGen Limited as GoS s joint venture partner,
through an International Competitive Bidding process, for the development, construction and operation of an o p e n cast mine
facility in Block II of Thar Coal Field, Sindh, with an annual mining capacity of 6.5 million tons of coal which will be subsequently
increased to 22 million t o n s in later years of mining. In this regard, as per JVA, the Sindh Engro Coal Mining C o m p a n y Limited
initiated a Detailed Feasibility Study (DFS) in November 2 0 0 9 by a t e a m of International Consultants a n d local experts to confirm
the technical, environmental, social and e c o n o m i c viability of the Project.
During the year, Sindh Coal Authority, Coal and Energy Development Department, Government of Sindh (GoS/SCA), allocated
an area of 7 9 . 6 s q . km in Thar Coal Field, District Thar, pursuant to M e m o r a n d u m of Understanding (MoU), d a t e d March 3 1 ,
2010, signed between the Sindh Engro Coal Mining C o m p a n y Limited a n d GoS/SCA, to carry out a feasibility study. As agreed
in the M o U , G o S / S C A requested the Director General Mines a n d Mineral Development Department, G o v e r n m e n t of Sindh to
issue an exploration license for the aforementioned area to the Sindh Engro Coal Mining C o m p a n y U m i t e d , which w a s granted
on August 8, 2 0 1 0 . Further on successful completion of technical feasibility Sindh Engro Coal Mining C o m p a n y Limited, as
directed by G o S vide its letter d a t e d N o v e m b e r 12, 2 0 1 0 , has applied to Director General Mines a n d Minerals Development
Department on November 3 0 , 2 0 1 0 for t h e mining lease for a period of 30 years, extendable to mine's life. However, efforts
are being m a d e for closure on timely availability of all the required infrastructure a n d tariff to c o n f i r m e c o n o m i c viability
of the Project.
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Further, the Project's approval, through Sindh Engro Coal Mining C o m p a n y Limited, is linked to a n d dependent on the feasibility
of mine mouth power plant (approximately 600-1200 MW) to be o w n e d and constructed by Engro PowerGen IJmited. A separate
feasibility in this regard shall be c o n d u c t e d by Engro PowerGen Limited.
• Engro PowerGen Limited has been granted a Letter of Intent (LOI) on October 12, 2 0 1 0 by the Alternate Energy Development
Board (AEDB) for establishing an approximately 50 MW Wind Power Generation Project in Gharo W i n d Corridor. Under the LOI,
feasibility study including other various mildstone to be completed / achieved within a period of eighteen m o n t h s thereof.
1.4 Joint Venture Company

Engro V o p a k Terminal Limited
Engro V o p a k Terminal Limited, a 5 0 % share joint venture of Engro Corporation Limited is an unlisted public limited c o m p a n y
incorporated in Pakistan under the C o m p a n i e s Ordinance, 1984. Engro Vopak Terminal Limited has b e e n granted the exclusive
concession, right a n d license to design, finance, insure, construct, test, commission, complete, operate, manage and maintain an
Integrated Liquid Chemical Terminal a n d Storage Farm at the south western zone of Port Qasim on Build, Operate a n d Transfer
(BOT) basis.
2. Summary of Significant Accounting Policies

The significant accounting policies applied in the preparation of these consolidated financial statements are set out below. These
policies have been consistently applied to all years presented, unless otherwise stated.
2.1 Basis of preparation

2.1.1 These consolidated financial statements have been prepared under the historical c o s t convention, e x c e p t for remeasurement of
certain financial assets a n d financial liabilities at fair value through profit or loss, derivative financial instruments, biological assets at
fair value a n d certain staff retirement and other service benefits at present value.
2.1.2 These consolidated financial statements have been prepared in accordance with the requirements of the C o m p a n i e s Ordinance,
1984 (the Ordinance), directives issued by the Securities a n d Exchange C o m m i s s i o n of Pakistan (SECP) a n d a p p r o v e d financial
reporting standards as applicable in Pakistan. A p p r o v e d financial reporting s t a n d a r d s c o m p r i s e of s u c h International Financial
Reporting S t a n d a r d s (IFRS) issued by the International A c c o u n t i n g Standards Board as are notified under the provisions of the
Ordinance. Wherever, the requirements of the Ordinance or directives issued by the SECP differ with t h e requirements of these
standards, the requirements of the Ordinance a n d the said directives have b e e n followed.
2.1.3 The preparation of consolidated financial statements in conformity with the above requirements requires t h e use of certain critical
a c c o u n t i n g estimates. It also requires m a n a g e m e n t to exercise its j u d g m e n t in t h e p r o c e s s of applying the Group's accounting
policies. The areas involving a higher degree of j u d g m e n t or complexity, or areas where assumptions a n d estimates are significant
to t h e consolidated financial statements are disclosed in note 3.
2.1.4 Initial a p p l i c a t i o n o f s t a n d a r d s , a m e n d m e n t s o r a n interpretation t o existing s t a n d a r d s

a) S t a n d a r d s , a m e n d m e n t s to p u b l i s h e d s t a n d a r d s a n d interpretations that are effective in 2 0 1 0 a n d are relevant to t h e G r o u p
The following standards, a m e n d m e n t s to published standards and interpretation are mandatory for the financial year beginning
January 1 , 2 0 1 0 .
• IFRS 3 (revised), 'Business c o m b i n a t i o n s ' , and consequential a m e n d m e n t s to IAS 2 7 , 'Consolidated a n d separate financial
statements', are effective prospectively to business combinations for which the acquisition d a t e is on or after the beginning of
the first annual reporting period beginning on or after 1 July 2 0 0 9 .

The revised standard continues to apply the acquisition m e t h o d to business combinations but w i t h s o m e significant changes
c o m p a r e d with IFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date,
with contingent payments classified as debt subsequently remeasured through the statement of comprehensive income. There
is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or
at the non-controlling interest's proportionate share of the acquiree's net assets. All acquisition-related c o s t s are expensed. As
no business combination transaction (where IFRS 3 is applicable) has been incurred on or after the beginning of the first annual
reporting period beginning on or after 1 July 2009, therefore this amendment has no impact on the Group's financial statements.
IAS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change
in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting
w h e n control is lost. Any remaining interest in t h e entity is re-measured to fair value, and a gain or loss is recognised in profit
or loss. As on overall Group level, there is no change in control, therefore there is no impact of this amendment on the Group's
financial statements.
• IFRS 5 (amendment), 'Non-current assets held for sale and discontinued operations'. The a m e n d m e n t clarifies that IFRS 5
specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued
operations. It also clarifies that the general requirement of IAS 1 still apply, in particular paragraph 15 (to achieve a fair presentation)
and paragraph 125 (sources of estimation uncertainty) of IAS 1. Currently, as G r o u p d o e s not have any non-current asset (or
disposal group) classified as held for sale or discontinued operations, therefore this amendment has no impact on the Group's
financial statements.
• IFRS 8 (Amendment), 'Disclosure of information about segment assets'. This a m e n d m e n t clarifies that an entity is required to
disclose a measure of s e g m e n t assets only if that measure is regularly reported to the chief operating decision-maker. The
Group's current policy and disclosures are in line with this amendment.
• IAS 1 (amendment), 'Presentation of financial statements'. The amendment is part of the lASB's annual improvements project
published in April 2009. The amendment provides clarification that the potential settlement of a liability by the issue of equity is
not relevant to its classification as current or non current. By amending the definition of current liability, the amendment permits
a liability to be classified as non-current (provided that the entity has an unconditional right to defer settlement by transfer of
cash or other assets for at least 12 months after the accounting period) notwithstanding the fact that the entity could be required
by the counterparty to settle in shares at any time.
• IAS 17 (Amendment) 'Classification of leases of land a n d buildings' (effective f r o m January 1, 2010). The a m e n d m e n t deletes
the specific guidance regarding classification of leases of land, so as to eliminate inconsistency with the general guidance on
lease classification. As a result, leases of land should be classified as either finance or operating, using the general principles
of IAS 17. The Group's current accounting policy is in line with the requirements of IAS 17 and the Ordinance, a n d therefore,
there is no impact of this amendment on the Group's financial statements.
• IAS 39 (amendment); 'Cash flow hedge accounting'. This a m e n d m e n t provides clarification w h e n to recognize gains or losses
on hedging instruments as a reclassification adjustments in a cash flow hedge of a forecast transaction that results subsequently
in the recognition of a financial instrument. The a m e n d m e n t clarifies that gains or losses should be reclassified from equity to
profit or loss in the period in w h i c h the hedged forecast cash flow affects profit or loss. The Group's current accounting policy
is in compliance with this a m e n d m e n t and therefore there is no impact on the Group's financial statements.
125
• IFRIC 9, 'Reassessment of e m b e d d e d derivatives a n d IAS 3 9 , Financial instruments: Recognition a n d measurement' effective

1 July 2 0 0 9 . This a m e n d m e n t to IFRIC 9 requires an entity to assess whether an e m b e d d e d derivative should be separated
f r o m a host contract w h e n the entity reclassifies a hybrid financial asset out of the 'fair value through profit or loss' category.
This assessment is to be m a d e based on the circumstances that existed on the later of the d a t e the entity first became a party
to the contract a n d the date of any contract a m e n d m e n t s that significantly change the c a s h flows of the contract. If the entity
is unable to m a k e this assessment, that hybrid instrument m u s t remain classified as at fair value t h r o u g h profit or loss in its
entirety. Reassessment, as required by IFRIC 9, resulted in no impact on Group's financial statements.
b) S t a n d a r d s , a m e n d m e n t s t o p u b l i s h e d s t a n d a r d s a n d interpretations t h a t are effective i n 2 0 1 0 b u t n o t relevent t o t h e G r o u p .

T h e other n e w standards, a m e n d m e n t s a n d interpretations that are mandatory for accounting periods beginning on or after
January 1, 2 0 1 0 are c o n s i d e r e d not to be relevant or to have any significant effect on the G r o u p ' s financial reporting a n d
operations.
c) S t a n d a r d s , a m e n d m e n t s t o p u b l i s h e d s t a n d a r d s a n d i n t e r p r e t a t i o n s t o e x i s t i n g s t a n d a r d s t h a t are n o t y e t e f f e c t i v e a n d
h a v e not b e e n early a d o p t e d b y t h e G r o u p .
T h e following n e w standards, a m e n d m e n t s to published standards a n d interpretation are not effective (although available for
early adoption) for the accounting period beginning on or after January 1, 2 0 1 0 a n d have not been early adopted by the Company.
• IFRS 9 'Financial instruments' (effective for periods beginning on or after January 1, 2013). This standard is the first step in the
process to replace IAS 3 9 , 'Financial instruments: recognition a n d m e a s u r e m e n t ' . IFRS 9 introduces new requirements for
classifying a n d measuring financial assets and is likely to affect the Group's accounting for its financial assets. The Group is yet
to assess the full impact of IFRS 9, however, initial indications are that it may not affect the Group's financial assets significantly,
as currently t h e Group d o e s not have any material assets classified as 'available for sale'.
• IAS 24 (Revised), 'Related party disclosures'. IAS 24 (revised) is mandatory for periods beginning on or after January 1, 2 0 1 1 .
Earlier application, in whole or in part, is permitted. The revised standard clarifies a n d simplifies the definition of a related party
a n d removes the requirement for government related entities to disclose details of all transactions with the government a n d
other government related entities.
• IAS 32 (amendment) 'Classification of rights issues'. The amendment applies to annual periods beginning on or after February
1, 2 0 1 0 . Earlier application is permitted. The a m e n d m e n t addresses the accounting for rights issues that are denominated in
a currency other than t h e functional currency of the issuer. Provided certain conditions are met, s u c h rights issues are n o w
classified as equity regardless of the currency in which t h e exercise price is denominated. Previously, these issues h a d to be
a c c o u n t e d for as derivative liabilities.
• IFRIC 14 (Amendment) 'Prepayments of a minimum funding requirement' (effective for periods beginning on or after January
1, 2011). T h e a m e n d m e n t s correct an unintended c o n s e q u e n c e of IFRIC 14, 'IAS 19 - The limit on a defined benefit asset,
m i n i m u m funding requirements a n d their interaction'. Without the a m e n d m e n t s , entities are not permitted to recognize as an
asset s o m e voluntary prepayments for minimum funding contributions. This w a s not intended w h e n IFRIC 14 w a s issued, a n d
the amendment corrects this. The Group's retirement benefit funds are not subject to any minimum funding requirement, hence,
these a m e n d m e n t s will have no i m p a c t on the Group's financial statements.

• IFRIC 19 'Extinguishing financial liabilities with equity instruments' (effective for periods beginning on or after January 1, 2011).
The interpretation clarifies the accounting by an entity w h e n the t e r m s of a financial liability are renegotiated a n d result in t h e
entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap).
It requires a gain or loss to be recognized in profit or loss, which is measured as the difference between the carrying amount
of the financial liability a n d the fair value of the equity instruments issued, if t h e fair value of t h e equity instruments issued cannot
be reliably measured, the equity instruments should be measured to reflect the fair value of the financial liability extinguished.
The Group has not renegotiated the t e r m s of a financial liability a n d offered any of its shares to its creditors, therefore, this
interpretation is not expected to have any material impact on the Group's financial statements.
A m e n d m e n t s to following standards as a result of improvements to International Financial Reporting Standards 2 0 1 0 , issued by

IASB in May 2 0 1 0 :
• IFRS 7 (Amendment), 'Financial instruments: Disclosures' (effective for periods beginning on or after January 1, 2011). T h e
a m e n d m e n t emphasizes the interaction b e t w e e n quantitative a n d qualitative disclosures about the nature a n d extent of risks
a s s o c i a t e d w i t h financial i n s t r u m e n t . T h e a m e n d m e n t will only affect t h e disclosures in t h e G r o u p ' s financial s t a t e m e n t s .
• IAS 1 (Amendment) 'Presentation of financial s t a t e m e n t s ' (effective for periods beginning on or after January 1, 2 0 1 1 ) . T h e
amendment clarifies that an entity will present an analysis of other comprehensive income for each c o m p o n e n t of equity, either
in the statement of changes in equity or in the notes to the financial statements. The amendment will only affect the disclosures
in the Group's financial statements.
• IAS 34 (Amendment) 'Interim financial reporting' (effective for periods beginning on or after January 1, 2011). This a m e n d m e n t
provides g u i d a n c e to illustrate h o w to apply disclosure principles in IAS 34 a n d a d d disclosure requirements around (a) t h e
circumstances likely to affect fair values of financial instruments and their classification, (b) transfers of financial instruments
b e t w e e n different levels of the fair value hierarchy a n d (c) changes in classification of financial assets, changes in contingent
liabilities a n d assets. The a m e n d m e n t will only affect the disclosures in the G r o u p ' s c o n d e n s e d interim financial information.
2.1.5 A p p l i c a b i l i t y of IFRIC 4, ' D e t e r m i n i n g w h e t h e r an a g r e e m e n t c o n t a i n s a lease'

The Independent Power Producers (IPPs), w h o s e letter of intent have been signed on or before June 3 0 , 2 0 1 0 , have been exempted
from the application of IFRIC 4 by the Securities a n d Exchange Commission of Pakistan (SECP). This interpretation provides the
guidance on determining whether arrangements that do not t a k e t h e legal f o r m of lease s h o u l d , nonetheless, be a c c o u n t e d for as
a lease in accordance with International Accounting Standards (IAS) 1 7 , "Leases'.
Consequently, the Holding C o m p a n y is not required to account for a portion of Engro Powergen Qadirpur Limited's Power Purchase
Agreement (PPA) with NTDC as a lease under IAS - 1 7 . If the Holding C o m p a n y were to follow IFRIC - 4 / IAS - 1 7 , the arrangement
under the PPA w o u l d have been recorded as a finance lease. Had the lease been recognized as 'finance lease', the profit for the
year would have been higher by approximately Rs. 3 1 6 , 0 0 0 .
2.1.6 Basis of c o n s o l i d a t i o n
i) Subsidiaries
Subsidiaries are all entities over which the holding company has the power to govern the financial and operating policies generally
a c c o m p a n y i n g a shareholding of more than one half of the voting rights. The existence a n d effect of potential voting rights that
are currently exercisable or convertible are considered w h e n assessing whether the group controls another entity. Subsidiaries
are fully consolidated from the d a t e on w h i c h control is transferred to the G r o u p . They are de-recognized from the d a t e the
control ceases. The consolidated financial statements include Engro Corporation Limited (formerly, Engro Chemical Pakistan
Limited) a n d all c o m p a n i e s in w h i c h it directly or indirectly controls, beneficially o w n s or holds m o r e t h a n 5 0 % of t h e voting
securities or otherwise has power to elect a n d appoint more than 5 0 % of its directors.
127
The g r o u p uses the acquisition m e t h o d of accounting to a c c o u n t for business combinations. T h e consideration transferred for
the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred a n d the equity interests issued
by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration
arrangement. Acquisition-related costs are e x p e n s e d as incurred. Identifiable assets acquired a n d liabilities a n d contingent
liabilities a s s u m e d in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-
by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling
interest's proportionate share of the acquiree's net assets.
Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising
from contingent consideration a m e n d m e n t s . Cost also includes direct attributable costs of investment.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree a n d the acquisition-date
fair value of any previous equity interest in t h e acquiree over t h e fair value of t h e group's share of t h e identifiable net assets
acquired is recorded as goodwill. If this is less than the fair value of the net assets of t h e subsidiary acquired in the case of a
bargain purchase, t h e difference is recognised directly in t h e statement of comprehensive income.
Inter-company transactions, balances a n d unrealised gains on transactions between group companies are eliminated. Unrealised
losses are also eliminated. Accounting policies of subsidiaries have been c h a n g e d where necessary to ensure consistency with
the policies a d o p t e d by the G r o u p .
ii) Transactions a n d n o n - c o n t r o l l i n g interests

T h e Group treats transactions with non-controlling interests as transactions with equity o w n e r s of the Group. For purchases
f r o m non-controlling interests, the difference b e t w e e n any consideration paid a n d the relevant share acquired of the carrying
value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also
recorded in equity.
W h e n the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value,
with the c h a n g e in carrying amount recognised in profit or loss. The fair value is the initial carrying a m o u n t for the p u r p o s e s of
subsequently a c c o u n t i n g for the retained interest as an associate, joint venture or financial asset. In addition, any a m o u n t s
previously recognised in other comprehensive income in respect of that entity are a c c o u n t e d for as if the group had directly
disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income
are reclassified to profit or loss.

2.2.1 O w n e d assets
These are stated at historical c o s t less accumulated depreciation and impairment losses, if any, e x c e p t free-hold land a n d capital
w o r k in progress w h i c h are stated at cost. Historical cost includes expenditure that is directly attributable to the acquisition of the
items including borrowing costs. The cost of self constructed assets includes the cost of materials a n d direct labour, any other costs
directly attributable to bringing the asset to a w o r k i n g condition for its intended use, a n d the c o s t s of dismantling a n d removing
the items a n d restoring the site on w h i c h they are located. Purchased software that is integral to the functionality of the related
equipment is capitalised as part of that equipment.
Where major c o m p o n e n t s of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items of property, plant a n d equipment.

Subsequent c o s t s are included in the asset's carrying a m o u n t or recognised as a separate asset, as appropriate, only w h e n it is
probable that future e c o n o m i c benefits associated with the item will flow to t h e Group a n d t h e cost of the item can be measured
reliably. T h e carrying a m o u n t of the replaced part is derecognised. All other repairs a n d maintenance are charged to the profit and
loss a c c o u n t during the financial period in which they are incurred.
Disposal of asset is recognized w h e n significant risk and rewards incidental to ownership have been transferred to buyers. Gains
a n d losses on disposals are determined by c o m p a r i n g the p r o c e e d s with the carrying a m o u n t a n d are recognised within 'Other
operating expenses/ income' in the profit and loss account.
Depreciation is c h a r g e d to profit and loss account using the straight line m e t h o d whereby the cost of an operating asset less its
estimated residual value is written off over its estimated useful life. Depreciation on addition is charged from the month following
the m o n t h in which the asset is available for use a n d on disposals upto the preceding m o n t h of disposal.
Depreciation m e t h o d , useful lives a n d residual values are reviewed annually.
2.2.2 L e a s e d assets
Leases in terms of which the Group a s s u m e s substantially all the risks a n d rewards of ownership, are classified as finance lease.
Upon initial recognition, the leased asset is measured of at an amount equal to the lower of its fair value a n d present value of minimum
lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable
to that asset, Outstanding obligations under the lease less finance cost allocated to future periods are s h o w n as a liability.
Finance cost under lease agreements are allocated to the periods during t h e lease term so as to p r o d u c e a constant periodic rate
of finance cost on the remaining balance of principal liability for each period.
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company
will obtain ownership by the e n d of the lease term.
2.3 Biological assets

Livestock are measured at their fair value less estimated point-of-sale costs. Fair value of livestock is determined by an independent
valuer on the basis of best available estimate for livestock of similar attributes. Milk is initially measured at its fair value less estimated
p o i n t - o f - s a l e c o s t s at t h e t i m e of m i l k i n g . T h e fair value of milk is d e t e r m i n e d b a s e d on m a r k e t p r i c e s in t h e local area.
Gains or losses arising from changes in fair value less estimated point-of-sale costs of livestock a n d milk are recognized in the profit
a n d loss account.
Crops in the g r o u n d a n d at the point of harvest at balance sheet date are measured at cost being an approximation of fair value,
as t h e s e are presently being used as internal c o n s u m p t i o n for cattle feed a n d have a very short biological transformation a n d
consumption cycle.
2.4 Exploration and evaluation expenditure

Exploration a n d evaluation activity includes detailed feasibility study and all other related studies to ensure bankability of the Project
including other ancillary cost related thereto.
129
Expenditure relating to the aforementioned feasibility studies, which support the technical feasibility a n d commercial viability of an
area, are capitalized as exploration a n d evaluation assets.
Capitalised exploration a n d evaluation expenditure is recorded at cost less impairment charges. As the asset is not available for
use, it is not depreciated.
C a s h flows associated with exploration a n d evaluation expenditure are classified as investing activities in the statements of cash
flows.
2.5 Intangible assets

a) Goodwill
Goodwill represents the difference b e t w e e n the consideration paid for acquiring interests in a c o m p a n y a n d the value of the
G r o u p ' s share of its net assets at the d a t e of acquisition.
b) C o m p u t e r S o f t w a r e a n d Licenses
C o s t s associated with maintaining c o m p u t e r software p r o g r a m m e s are recognized as an expense w h e n incurred. However,
costs that are directly attributable to identifiable software and have probable economic benefits exceeding the cost beyond one
year, are recognized as an intangible asset. Direct costs include the purchase cost of software (license fee) and related overhead
cost.
Expenditure w h i c h enhances or extends the performance of computer software b e y o n d its original specification a n d useful life
is recognized as a capital improvement a n d a d d e d to the original cost of the software.
C o m p u t e r software a n d license cost treated as intangible assets are amortised from the date the software is put to use on a
straight-line basis over a period of 3 to 10 years.
c) Rights f o r f u t u r e gas utilization

Rights for future gas utilization represents premium paid to the Government of Pakistan for allocation of 100 M M C F D natural
gas for a period of 20 years from Qadirpur gas field at a predetermined price for a period of ten years c o m m e n c i n g from the
date of commercial production. The rights will be amortised from the date of commercial production of the Enven fertilizer plant
on a straight-line basis over the remaining allocation period.
d) O t h e r intangible assets
Other intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses. Amortisation
is charged on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed
at t h e e n d of each annual reporting period, with the effect of any c h a n g e s in estimate being a c c o u n t e d for on a prospective
basis.
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
2.6 Impairment of non-financial assets

Assets that are subject to depreciation/amortisation are reviewed at each balance sheet date to identify circumstances indicating
occurrence of impairment loss or reversal of previous impairment losses. An impairment loss is recognised for the amount by which
the asset's carrying a m o u n t exceeds its recoverable amount. T h e recoverable amount is the higher of an asset's fair value less cost
to sale a n d value in use. Reversal of impairment loss is restricted to the original cost of the asset.

2.7 Non current assets (or disposal groups) held-for-sale

Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally
through a sale transaction rather than continuing use a n d a sale is considered highly probable. T h e y are stated at the lower of
carrying a m o u n t and fair value less costs to sell. Impairment losses on initial classification as held for sale and subsequent gains
or losses on remeasurement are recognised in profit a n d loss account.
2.8 Investments
T h e Group's interest in jointly controlled entity and associated c o m p a n i e s have been a c c o u n t e d for using equity m e t h o d in these
consolidated financial statements.
2.9 Financial assets

2.9.1 Classification
The Group classifies its financial assets in the following categories: at fair value through profit or loss, held to maturity, loans a n d
receivables and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management
determines the classification of its financial assets at initial recognition.
a) Financial a s s e t s at fair v a l u e t h r o u g h profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category
if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading unless they
are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months,
otherwise, these are classified as non-current.
b) Loans a n d receivables
Loans a n d receivables are non-derivative financial assets with fixed or determinable payments that are not q u o t e d in an active
market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period,
which are classified as non-current assets.
c) Held to m a t u r i t y financial assets

Held to maturity financial assets are non derivative financial assets with fixed or determinable payments a n d fixed maturity with
a positive intention and abaility to hold to maturity.
d) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the
other categories. T h e y are included in non-current assets unless the investment matures or m a n a g e m e n t intends to dispose
of it within 12 months of the end of the reporting date.
2.9.2 Recognition and measurement

Regular purchases and sales of financial assets are recognised on the trade-date - the date on which the Group commits to purchase
or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value
through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, a n d transaction
costs are expensed in the profit a n d loss a c c o u n t . Financial assets are derecognised w h e n the rights to receive cash flows from
the investments have expired or have been transferred and the Group has transferred substantially all risks a n d rewards of ownership.
Available-for-sale financial assets a n d financial assets at fair value through profit or loss are subsequently carried at fair value. Loans
and receivables are subsequently carried at amortised cost using the effective interest m e t h o d .
131
Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented
in t h e profit a n d loss a c c o u n t within 'other operating income/expenses' in the period in w h i c h they arise. Dividend i n c o m e f r o m
financial assets at fair value through profit or loss is recognised in the profit a n d loss a c c o u n t as part of other i n c o m e w h e n the
Group's right to receive payments is established.
Changes in fair value of monetary a n d non-monetary securities classified as available-for-sale are recognised in other comprehensive
income. W h e n securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in
equity are included in the profit a n d loss a c c o u n t as 'gains a n d losses from investment securities'.
Interest on available-for-sale securities calculated using the effective interest m e t h o d is recognised in t h e profit a n d loss a c c o u n t
as part of other income. Dividends on available for sale equity instruments are recognised in the profit a n d loss a c c o u n t as part of
other income w h e n the Group's right to receive payments is established.
2.10 Impairment of financial assets

The G r o u p assesses at the e n d of each reporting period whether there is objective evidence that a financial asset or a group of
financial assets is impaired. If any s u c h evidence exists for available-for-sale financial assets, the cumulative loss is removed from
equity and recognised in the profit a n d loss account. Impairment losses recognised in the profit and loss account on equity instruments
are not reversed through the profit a n d loss account.
2.11 Financial liabilities

Financial liabilities are recognized at the time w h e n t h e G r o u p b e c o m e s a party to the contractual provisions of the instrument. All
financial liabilities are recognised initially at fair value less directly attributable transactions c o s t s , if any, a n d subsequently measured
at amortised cost using effective interest rate m e t h o d ,
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expired. Where an existing
financial liability is replaced by another from the s a m e lender on substantially different terms, or the t e r m s of an existing liability are
substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of
a n e w liability, a n d t h e d i f f e r e n c e i n r e s p e c t i v e c a r r y i n g a m o u n t s i s r e c o g n i z e d i n t h e p r o f i t a n d l o s s a c c o u n t .
2.12 Offsetting financial instruments

Financial assets a n d financial liabilities are offset and the net a m o u n t is reported in the financial statements only w h e n the Group
has a legally enforceable right to offset the recognised a m o u n t s and the Group intends either to settle on a net basis or to realise
the asset a n d settle the liability simultaneously.
2.13 Derivative financial instruments and hedging activities

Derivatives are recognised initially at fair value; attributable transaction cost are recognised in profit a n d loss account w h e n incurred.
Subsequent to initial recognition, derivatives are measured at fair values, and changes therein are accounted for as described below.
Cash flow hedges

Changes in fair value of derivative hedging instrument designated as a cash flow hedge are recognised directly in equity to the extent
that the hedge is effective. To the extent t h e hedge is ineffective, changes in fair value are recognised in profit or loss.
If the hedging instrument no longer meets the criteria for hedge a c c o u n t i n g , expires or is sold, terminated or exercised, the hedge
accounting is discontinued prospectively. The cumulative gain or loss previously recognised in equity remains there until the forecast
transaction occurs. W h e n the hedged item is a non-financial asset, the a m o u n t recognised in equity is transferred to the carrying
a m o u n t of the asset w h e n it is recognised. In other cases the amount recognised in equity is transferred to profit or loss in t h e s a m e
period that the hedge item affects profit a n d loss account.

O t h e r n o n - t r a d i n g derivatives
W h e n a derivative financial instrument is not held for trading, a n d is not designated in a qualifying hedge relationship, all changes
in its fair value are recognised immediately in profit a n d loss account.
The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposure. Further, the Holding
Company has also issued a conversion option on IFC loan to Engro Fertilizers Limited. The fair values of various derivative insturments,
the conversion option and other derivatives used for hedging purposes, are disclosed in note 10.
2 . 1 4 Stores, spares and loose tools

T h e s e are valued at w e i g h t e d average cost except for items in transit w h i c h are stated at invoice value plus other charges paid
thereon till the balance sheet date. For items w h i c h are slow moving a n d / or identified as surplus to the G r o u p ' s requirements,
adequate provision is m a d e for any excess book value over estimated realizable value. The Group reviews the carrying amount of
stores and spares on a regular basis and provision is m a d e for obsolescence.
2.15 Stock-in-trade
These are valued at the lower of c o s t a n d net realizable value. C o s t is determined using weighted average m e t h o d e x c e p t for raw
material and certain purchased products in transit which are stated at c o s t (invoice value) plus other charges incurred thereon till
the balance sheet date. Cost in relation to finished g o o d s includes applicable purchase cost and manufacturing expenses. The cost
of w o r k in process includes material and proportionate conversion costs.
Net realisable value signifies the estimated selling price in the ordinary c o u r s e of business less all estimated c o s t s of completion
a n d c o s t s necessarily to be incurred in order to make the sales.
2 . 1 6 Trade debts and other receivables

These are recognised initially at fair value plus directly attributable transaction costs, if any a n d subsequently measured at amortised
cost using effective interest rate method less provision for impairment, if any. A provision for impairment is established if there is
objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount
of provision is c h a r g e d to profit a n d loss a c c o u n t . Trade d e b t s a n d other receivables considered irrecoverable are written-off.
2 . 1 7 Cash and cash equivalents

Cash a n d cash equivalents in the s t a t e m e n t of cash flows includes cash in h a n d a n d in transit, balance with banks, other short-
term highly liquid investments with original maturities of three m o n t h s or less, a n d bank overdrafts / short t e r m borrowings. Bank
overdrafts are s h o w n within borrowings in current liabilities on the balance sheet.
2.18 Share capital

Ordinary shares are classified as equity a n d recognised at their f a c e value. Incremental c o s t s directly attributable to the issue of
n e w shares or options are s h o w n in equity as a deduction, net of tax, f r o m the proceeds.
2 . 1 9 Employees' share option scheme

The grant date fair value of equity settled share based payment to employees is initially recognized in the balance sheet as deferred
employee compensation expense with a consequent credit to equity as employee share option compensation resen/e.
The fair value determined at the grant date of the equity settled share based payments is recognized as an employee compensation
expense on a straight line basis over the vesting period.
133
W h e n an unvested option lapses by virtue of an employee not conforming to the vesting conditions after recognition of an employee
c o m p e n s a t i o n expense in profit a n d loss a c c o u n t s , employee c o m p e n s a t i o n expense in profit a n d loss a c c o u n t will be reversed
equal to the amortized portion with a corresponding effect to employee share option compensation reserve in the balance sheet.
W h e n a vested option lapses on expiry of t h e exercise period, employee c o m p e n s a t i o n expense already recognized in t h e profit
a n d loss account is reversed with a corresponding reduction to employee share option compensation reserve in the balance sheet.
When the options are exercised, employee share option compensation reserve relating to these options is transferred to share capital
a n d share premium account. An amount equivalent to the face value of related shares is transferred to share capital. A n y a m o u n t
over a n d above the share capital is transferred to share premium account.
2.20 Borrowings
Borrowings are recognised initially at fair value, net of transaction c o s t s incurred. Borrowings are subsequently carried at amortised
c o s t ; any difference b e t w e e n the proceeds (net of transaction costs) and the redemption value is recognised in the profit a n d loss
a c c o u n t over the period of the borrowings using the effective interest m e t h o d .
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at
least 12 m o n t h s after the balance sheet date.
2.21 Trade and other payables

Trade a n d other payables are recognised initially at fair value a n d subsequently measured at amortised c o s t using the effective
interest m e t h o d .
These are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business
if longer). If not, they are presented as non-current liabilities.
2.22 Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the profit a n d loss account, except to the
extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised
in other comprehensive income or directly in equity, respectively.
2.22.1 Current
The current i n c o m e tax c h a r g e is b a s e d on the taxable i n c o m e for t h e year calculated on the basis of t h e tax laws e n a c t e d or
substantively enacted at the balance sheet date, a n d any adjustment to tax payable in respect of previous years.
2222 Deferred
Deferred tax is recognised using the balance sheet m e t h o d , providing for all temporary differences b e t w e e n the carrying amounts
of assets a n d liabilities for financial reporting purposes a n d the a m o u n t s u s e d for taxation purposes. Deferred tax is measured at
the t a x rates that are e x p e c t e d to be applied to the temporary differences w h e n they reverse, b a s e d on the laws that have been
enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised to the extent that is probable that future taxable profits will be available against which temporary
difference can be utilised. Deferred tax assets are reviewed at each reporting date a n d are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.

2.23 Employees' housing subsidy scheme

Employees compensation expense under Housing Subsidy S c h e m e is recognized by the Group as an expense on a straight line
basis over the vesting p e r i o d w i t h a c o r r e s p o n d i n g credit to e m p l o y e e h o u s i n g s u b s i d y s h o w n as long t e r m liability in t h e
balance sheet.
When an employee leaves the Group before the vesting period a n d after recognition of an employee compensation expense in t h e
profit a n d loss account, employee c o m p e n s a t i o n expense in the profit a n d loss a c c o u n t will be reversed equal to the amortised
portion with a corresponding effect to employee housing subsidy in the balance sheet.
On expiry of the vesting period, a m o u n t s disbursed under the s c h e m e will be set-off against the employee housing subsidy.
2.24 Employee benefits

2 2 4 . 1 Defined c o n t r i b u t i o n p l a n s
A defined contribution plan is the post - employment benefit plan under w h i c h a Group pays fixed contribution into a separate entity
a n d will have no legal or constructive obligation to pay further a m o u n t s . Obligations for contributions to defined contribution plans
are recognized as an employee benefit expense in the profit a n d loss account when they are due. Prepaid contributions are recognized
as an asset to the extent that a cash refund or a reduction in future payments is available.
Tine Holding C o m p a n y operates:

• a defined contribution provident fund for its permanent employees. Monthly contributions are m a d e both by the Holding C o m p a n y
and employees to the fund at the rate of 1 0 % of basic salary; and
• a defined contribution pension f u n d for the benefit of m a n a g e m e n t employees. Monthly contributions are m a d e by the Holding
C o m p a n y to the fund at the rate ranging from 1 2 . 5 % to 1 3 . 7 5 % of basic salary.
Engro Fertilizers Limited a n d Engro Eximp (Private) Limited contributes in the aforementioned defined contribution plans, operated
by the Holding Company.
Engro Foods Limited, Engro Polymer a n d Chemicals Limited, Engro P o w e r G e n Limited a n d A v a n c e o n Limited o p e r a t e defined
contribution provident funds for their permanent employees. Monthly contributions are m a d e both by t h e Subsidiary C o m p a n i e s
and their employees to the funds at the rate of 1 0 % of basic salary.
2.24.2 Defined benefit p l a n s

A defined benefit plan is the post-employment benefit plan other than the defined contribution plan. The G r o u p ' s net obligation in
respect of defined benefit plans is calculated by estimating the a m o u n t of future benefit that employees have earned in return for
their service in current a n d prior periods; that benefit is discounted to determine its present value. The calculation is performed
annually by a qualified actuary using the projected unit credit m e t h o d , related details of which are given in note 41 to the financial
statements. Actuarial gains/losses in excess of corridor limit (10% of the higher of fair value of assets and present value of obligation)
are recognised over the average remaining service life of the employees.
Contributions require assumptions to be m a d e of future o u t c o m e s which mainly includes increase in remuneration, expected long-
term return on plan assets a n d the discount rate used to convert future cash flows to current values. Calculations are sensitive to
changes in the underlying assumptions.
The Holding C o m p a n y operates defined benefit funded gratuity s c h e m e s for its m a n a g e m e n t employees.
135
Annual provision is also made under a service incentive plan for certain category of experienced employees to continue in the Holding
Company's employment.
Engro Fertilizers Limited and Engro Eximp (Private) Limited contributes to the aforementioned Funded defined benefit plan, operated
by the Holding Company.
Engro Fertilizers Limited also operates:

• defined benefit funded pension s c h e m e for its management employees.
• defined benefit funded gratuity schemes for its non-management employees.
The pension s c h e m e provides life time pension to retired employees or to their spouses. Contributions are made annually to these
f u n d s on t h e basis of actuarial recommendations. The pension s c h e m e has been curtailed and effective f r o m July 0 1 , 2005, no
new m e m b e r s are inducted in this scheme.
Actuarial gains on curtailment of defined benefit pension scheme (curtailed) is recognised immediately once the certainty of recovery
is established.
Annual provision is also made under a service incentive plan for certain category of experienced employees to continue in the Engro
Fertilizers Limited's employment.
Engro Foods Limited operates:

• defined benefit funded gratuity plan for its permanent employees. The gratuity plan provides for a graduated scale of benefits
dependent on the length of service of an employee on terminal date, subject to the completion of m i n i m u m qualifying period
of service. Gratuity is based on employees' last d r a w n salary.
Actuarial gains and losses are recognized over the e x p e c t e d future services of current m e m b e r s , using t h e r e c o m m e n d e d
approach under IAS 19 - Employee Benefits as determined by the actuary.
• defined benefit unfunded pension scheme for t w o of its management employees. Pension is calculated by multiplying last d r a w n
pensionable salary, as per the Scheme, to the years of service.
Engro Polymer and Chemicals Limited operates:

• defined benefit funded pension s c h e m e for its management employees. The s c h e m e provides pension based on employees'
last d r a w n salary. Pensions are payable after retirement / optional retirement, for life and thereafter to surviving spouses a n d /
or dependent children.
• defined benefit f u n d e d gratuity s c h e m e for its management employees. The s c h e m e provides gratuity based on employees'
last d r a w n salary. Gratuity is payable on retirement, seperation or death to ex-employees, or their spouses thereafter.
• defined benefit u n f u n d e d s c h e m e for death in service gratuity for its permanent employees. Gratuity is payable on death of
employee to surviving spouse and dependent childem.
Engro Energy Limited operates:
• defined benefit funded gratuity schemes for its management and non-management employees.
Avanceon Limited operates;

• defined benefit gratuity s c h e m e for s o m e of its employees in accordance with United Arab Emirates Federal Laws.
Engro Corp. I Annual Report 2 0 1 0

224.3 Employees' compensated absences

The Group accounts for c o m p e n s a t e d absences on the basis of unavailed leave balance of each employee at the end of t h e year.
225 Provisions
Provisions are recognized w h e n the Group has a legal or constructive obligation as a result of past events a n d it is probable that
outflow of e c o n o m i c benefits will be required to settle the obligation and a reliable estimate of the a m o u n t c a n be made. However,
provisions are reviewed at each balance sheet date a n d adjusted to reflect current best estimate.
2 . 2 6 Foreign currency transactions and translation

2,26.1 These financial statements are presented in Pakistan Rupees, which is the Group's functional a n d presentation currency. Foreign
currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains a n d losses resulting from the settlement of such transactions a n d from the translation at year-end exchange
rates of m o n e t a r y assets a n d liabilities d e n o m i n a t e d in foreign c u r r e n c i e s are r e c o g n i z e d in the profit a n d loss a c c o u n t .
2.26.2The results a n d financial position of all the g r o u p entities (none of which has the currency of a hyper-inflationary economy) that have
a functional currency different from the presentation currency are translated into the presentation currency as follows:
• assets a n d liabilities for e a c h balance sheet presented are translated at t h e closing rate at the d a t e of that balance sheet;
• income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are
translated at the rate on the dates of the transactions); a n d
• all resulting exchange differences are recognised as a separate c o m p o n e n t of equity.
2.26.3 The Holding C o m p a n y ' s share of e x c h a n g e revaluation reserve on translation of foreign operations of a Subsidiary Company,
A v a n c e o n L i m i t e d , h a s n o w b e e n r e f l e c t e d a s a s e p a r a t e c o m p o n e n t o f equity. P r e v i o u s l y i t w a s r e f l e c t e d u n d e r
unappropriated profits.
2.27 Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group a n d the a m o u n t of revenue
c a n be measured reliably. Revenue is measured at the fair value of the consideration received or receivable a n d is r e d u c e d for
marketing allowances. Revenue is recognised on the following basis:
• Sales revenue is recognised when product is d e s p a t c h e d to c u s t o m e r s or services are rendered.

• Income on deposits a n d other financial assets is recognised on accrual basis.
• Dividend income from investments is recognised w h e n the Group's right to receive payment has been established.
• Revenue from sale of electricity is recognised as follows:
• Capacity revenue b a s e d on the capacity m a d e available; a n d
• Energy revenue based on the Net Electrical O u t p u t (NEO) delivered.
137
• Contract revenue a n d c o n t r a c t costs relating to long-term construction c o n t r a c t s are recognised as revenue a n d expenses
respectively by reference to stage of completion of contract activity at the balance sheet date. Stage of completion of a contract
is determined by applying 'cost-to-cost m e t h o d ' . Under c o s t - t o - c o s t m e t h o d , stage of completion of a contract is determined
by reference to the proportion that contract cost incurred to date bears to the total estimated contract cost. When it is probable
that contract c o s t s will exceed total contract revenue, the e x p e c t e d loss is recognised as an expense immediately. W h e n the
o u t c o m e of a construction contract c a n not be estimated reliably, revenue is recognised only to the extent of contract c o s t s
incurred that it is probable will be recoverable.
2.28 Borrowing costs

B o r r o w i n g c o s t s are recognized as an e x p e n s e in t h e period in w h i c h t h e y are incurred e x c e p t w h e r e s u c h c o s t s are directly
attributable to t h e acquisition, construction or production of a qualifying asset in w h i c h s u c h c o s t s are capitalized as part of the
cost of that asset. Borrowing costs includes exchange differences arising from foreign currency borrowings to the extent these are
regarded as an adjustment to borrowing costs.
2.29 Research and development costs

Research a n d development c o s t s are c h a r g e d to income as a n d w h e n incurred, e x c e p t for certain development c o s t s w h i c h are
recognised as intangible assets w h e n it is probable that, the developed project will be a s u c c e s s a n d certain criteria, including
commercial a n d technical feasibility have been m e t .
2.30 Government grant

Government grant that c o m p e n s a t e s the Group for expenses incurred is recognised in the profit a n d loss a c c o u n t on a systematic
basis in the s a m e period in which the expenses are recognised. Government grants are d e d u c t e d in reporting the related expenses.
2.31 Earnings per share

The Group presents basic a n d diluted earnings per share (EPS) d a t a for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of t h e Holding C o m p a n y by the weighted average n u m b e r of ordinary shares
outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders a n d
the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
2.32 Transactions with related parties

Sales, purchases a n d other transactions with related parties are earned out on commercial terms and conditions.
2.33 Dividend and appropriation to reserves

Dividends a n d reserve appropriations are recognized as a liability in the period in which these are a p p r o v e d .
2.34 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, w h o is responsible for allocating resources and assessing performance of the operating segments,
has been identified as the Board of Directors of the Holding C o m p a n y that makes strategic decisions.
3. Critical Accounting Estimates and Judgements

Estimates a n d j u d g m e n t s are continually evaluated a n d are based on historical experience a n d other factors, including expectations
of future events that are believed to be reasonable under the circumstances.

The G r o u p reviews appropriateness of t h e rate of depreciation, useful life, residual value u s e d in the calculation of depreciation.
Further where applicable, an estimate of recoverable amount of assets is made for possible impairment on an annual basis.

3.2 Exploration and evaluation expenditure

Exploration and evaluation expenditure are assessed on annual basis for possible impairment based on the estimated recoverable
a m o u n t thereof.
3.3 Biological assets

The fair values of biological assets - (Dairy livestock) is d e t e r m i n e d semi-annually by utilizing the services of an independent
expert/valuer. T h e s e valuations are mainly b a s e d on market a n d livestock conditions existing at t h e e n d of each reporting period.
3.4 Investments stated at fair value through profit and loss

Management has determined fair value of certain investments by using quotations from active market and conditions and information
about the financial instruments. These estimates are subjective in nature a n d involve s o m e uncertainties a n d matters of j u d g m e n t .
3.5 Derivatives
The Group reviews the changes in fair values of the derivative hedging financial instruments at each reporting d a t e b a s e d on the
valuations received from the contracting banks. These valuations represent estimated fluctuations in the relevant currencies/interest
rates over the reporting period a n d other relevant variables signifying currency a n d interest rate risks. T h e Group has calculated
the fair value of conversion option on IFC loan using the option pricing model.
3.6 Stock-in-trade and stores & spares

The Group reviews the net realizable value of stock-in-trade a n d stores & spares to assess any diminution in the respective carrying
values. Net realizable value is determined with reference to estimated selling price less estimated expenditures to m a k e the sales.
3.7 Income Taxes

In making the estimates for income taxes payable by the G r o u p , the m a n a g e m e n t looks at the applicable law a n d the decisions
of appellate authorities on certain issues in t h e past.
3.8 Fair value of employee share options

The management has determined the fair value of options issued under the Employee Share Option Scheme at the grant date using
Black Scholes pricing model. The fair value of these options and the underlying assumptions are disclosed in note 9.
3.9 Provision for retirement and other service benefits obligations

The present value of these obligations d e p e n d on a n u m b e r of factors that are determined on actuarial basis using a number of
assumptions. Any changes in these assumptions will impact the carrying amount of these obligations. The present values of these
obligation a n d the underlying assumptions are disclosed in note 4 1 .
3.10 Impairment of financial assets

In making an estimate of future cash flows from the Group's financial assets including investment in joint ventures and associates,
the management considers future dividend stream and an estimate of the terminal value of these investments.
4 Property, Plant and Equipment

2010 2009
(Rupees)
Operating assets, at net b o o k value (note 4.1) 58,106,575 26,179,073
Capital w o r k in progress
- Expansion and other projects (note 4.6) 69,528,996 84,181,544
- Capital spares (note 4.7) 1,076,577 127,326
128,712,148 110,487,943
139
4.1 Operating assets

Land Building Pipelines Flantand Catalyst Furniture Vehicles Total
Freehold Leasehold Freehold Leasehold Machinery fixture and equipments Owned Leased
Owned Leased Owned Leased
(note 4,3)
"(nULArtTal
AsatJanuary 1,2009
Cost 247,035 321,640 1,650,248 602,237 110,670 15,599,841 12,943 326,408 720.790 26,906 640,462 52,401 20,311,584
Accumulated depreciation - (55,761) (356675)

:
(109,385) (67,005) (7,211,024) (1,575) (265,429) ;442,43S) (9,419) (264,667) (33,093) (8,816,471)
Net book value 247,035 265,879 1,293,573 492,852 43,665 8,388,817 11,371 60,979 278,352 17,487 375,795 19,308 11,495,113
Year ended December 31,2009

Opening net book value 247,035 265,879 1,293,573 492,852 43.665 8,388,817 11,371 60,979 278,352 17,487 375,795 19,308 '1,495,113
Amortization of revaluation surplus (2,572) (1,140) 3,355 (33,649) (34,006)
Additions 225,488 886,007 173,439 357,309 14,310,975 103,307 175,364 295,602 15,556 16,543,047
Disposals
Cost • - (32) (2,121) (80.756) • (78,486) - (117,336) (11,043) (289.773)
Accumulated depreciation 32 2,121 48,126 76,575 81,545 10,740 219,139
- - - - (32,630) - (1,910) - (35,79!) (303) (70,634)
Reclassifications
Cost • • (5,405) 3,348 (986) • 8.371 (5,000) 8,358 (8,686)
Accumulated depreciation 3,982 (2,818) 39 1.515 (1275) 5,099 (6.542)
- - (1,423) 530 - (947) - 9,886 (6,275) 13,457 (15,228) -
Adjustments
Cost - - (2,788) - (1,375) 792 323 (3,048)
Accumulated depreciation 3,284 1,420 (102) (279) 4,323
- - 496 - - 45 690 44 1,275
Depreciation charge - (4,526; (124,350) (18,459) (14,798) (1,304,679) (2,896) (36,632) (108,067) (5,133) (124,418) (11,774) (1,755,722)
Net book value 472,523 258,781 2,054,303 547,222 389,531 21,327,887 8,475 127,654 353,680 6,769 524,645 7,603 26,179,073
AsatJanuary 1,2010
Cost 472,523 319,068 2,528,030 775,763 471,334 29,795,425 12,946 429,715 824,665 22,698 827,086 48,551 36,527,804
Accumulated depreciation (60,287) (473,727) (128,541) (81,803) (8,467,538) (4,471) (302.061) (470,985) (15,929) (302,441) (40,948) (10,348,731)
Net book value 472,523 258,781 2,054,303 647,222 389,531 21,327,887 8,475 127,654 353,680 6,769 524,645 7,603 26,179,073
Year ended December 31,2010

Opening net book value 472,523 258,781 2,054,303 647,222 389,531 21,327,887 8,475 127,654 353,680 6,769 524,645 7,603 26,179,073
Amortization of revaluation surplus (2,572) (1,140) 3,355 (33,649) (34,006)
Additions (note 4.4) 17,591 86,791 3,213,225 38,495 1,272,706 29,650,431 56,123 210.094 3,581 474,324 7,786 35.031,147
Disposals
Cost - (49,560) (18,547) - (126) - (20,558) - (115,592) (15,077) (219,460)
Accumulated depreciation 9,994 18,547 71 19,943 66,736 13,124 127,415
- (39,566) - (55) - (615) - (49,856) (1,953) (92,045)
Depreciation charge - (9,373) (205,543) (19,012) (54,158) (2,340,253) (2,630) (31,740) (129,802) (5,223) (172,408) (7,452) (2,977,594)
Net book value 490,114 294,061 5,061,985 665,565 1,611,434 48,604,361 5,845 152,037 433,357 5,127 776,705 5,984 58,106,575
As at December 31,2010
Cost 490,114 353,727 5,722.708 813,118 1,747,395 59,412,081 12,946 485,838 1,014,201 26,279 1,185,818 41,260 71,305,485
Accumulated depreciation (59,666) (660,723) (147,553) (135,961) (10,807,720) (7,101) (333,801) (580,844) (21,152) (409,113) (35,276) (13,198,910)
Net book value 490,114 294,061 5,061,985 665,565 1,611,434 48,604,361 5,845 152,037 433,357 5,127 776,705 5,984 58,106,575
Annual rate of depreciation % - 2to5 2.5 to 10 2.5 5 5 to 16.67 5 to 10 20 !o 33,33 5to33 20 12 to 25 20

4.2 Depreciation charge for the year has been allocated as follows:
2010 2009
(Rupees)
C o s t of sales (note 32) 2,634,394 1,589,923
Selling and distribution expenses (note 33) 214,488 118,112
Capital w o r k in progress (note 4.6.3) 128,712 47,687
2,977,594 1,755,722
4.3 Includes equipment costing Rs. 135,469 (2009: Rs. 129,872) having net b o o k value of Rs. 9 3 , 3 3 7 (2009: Rs. 101,720) m o u n t e d
on transport contractors' vehicles. Also includes freezers and trikes held by third parties costing Rs. 482,023 (2009: Rs. 244,634),
having net book value of Rs. 3 9 2 , 2 5 8 (2009: Rs. 218,634).
4.4 Includes exchange loss capitalised a m o u n t i n g to Rs 2 9 4 , 0 0 0 pertaining to Engro P o w e r g e n Qadirpur Limited, a subsidiary of
Engro PowerGen Limited, as more fully explained in note 3 1 . 4 .
4.5 The details of operating assets disposeoTwritten off during the year are as follows:
Description a n d Sold to Cost Accumulated Net b o o k Sale

method of disposal depreciation value Proceeds
•-(Rupees)
Building - Freehold
Immovable sheds, boundary walls etc Written off 18,547 18,547 - -
Land - Leasehold
Land at Port Qasim Coca-Cola Beverages 49,560 9,994 39,566 339,250
Company Limited
Plant and machinery

Assets written off 126 71 55 -
Vehicles
By Company policy Inamullah Naveed Khan 1,328 994 334 332
to existing/separating executives Shamsuddin Sheikh 2,750 1,848 902 875
Naveed A. Hashmi 1,859 407 1,452 1,520
Khalid Mansoor 2,750 1,977 773 875
Mr. Asif Qadir 2,750 2,020 730 875
Syed Murtaza Azhar Rizvi 1,265 433 832 925
Sarfaraz A. Rehman 1,327 996 331 332
Khawaja Rizwan 395 348 47 120
Babur Sultan 2,500 1,680 820 625
Ali Akbar 2,483 1,591 892 621
Riaz Hussain Shah 839 563 276 210
Imran Ahmed 875 623 252 300
Adeel Ahmed Khan 504 406 98 102
Babur Mughal 504 406 98 102
Usman Saif 600 439 161 237
Zainab Hameed 899 323 576 565
Saud Farooq 632 356 276 310
Azam Shighri 600 349 251 179
Naveed Shigri 654 282 372 315
Syed Imran 631 521 110 131
Mazhar Hasnani 1,269 80 1,189 1,170
Sarfaraz Ahmed Soomro 595 595 - 119
Zeeshan Mehmood 530 530 - 119
Choudary Faisal Aslam 550 550 - 119
Khurram Ali Khan 540 540 - 119
Fahim Amir 540 540 - 119
Imran Quershi 540 540 - 119
Ramzan Dogar 560 560 - 119
Sheikh Abu Bakar 520 520 - 119
Faisal Ishrat 540 540 - 119
141
Description and Sold to Cost Accumulated Net b o o k Sale

method of disposal depreciation value Proceeds
(Rupees)
Kaiser Imran 550 550 119
Zahid Tufail 900 464 436
- 408
Muhammad Iftikhar Ahmed 900 603 297 323
Rasim M. Qureshi 879 577 302 275
Imran Shamim Ahmed 890 459 431 431
Anoop Lai 900 627 273 281
Shakil ur Rehman 900 660 240 225
Syed Ashar Hussain 1,309 947 362 327
Irfan Ahmad 900 668 232 225
T a u s e e f Ali 900 651 249 225
Jawwad Hassan 1,269 278 991 932
Syed Muhammad Raza 1,239 174 1,065 1,026
Zubair Ash Choudry 900 660 240 225
Sohail Ahmed 900 660 240 225
Syed Muzammil Ali 1,269 178 1,091 1,051
Muzaffar Islam 900 668 232 225
Kaleem Asghar 900 651 249 225
Zaki A. Sharif 900 422 478 422
Tariq Raza Ahmed 1,844 605 1,239 1,066
Irfan Ahmad 1,300 81 1,219 1,198
Adil Aziz Khan 1,354 776 578 1,439
Ahmad Muneeb 900 647 253 225
Ahsan Afzaal Ahmad 879 659 220 220
Amir Mahmud 896 644 252 225
Arif Jalil 899 646 253 225
Muhammad Asad Waheed 886 651 235 219
Asghar Naveed 899 660 239 225
Awais Mushtaq Piracha 1,438 315 1,123 1,013
Bakhtiar A. Uqaili 900 661 239 225
Dr. Muzaffar A. Khan 885 664 221 222
Dr.Shahid Rashid 895 629 266 225
Eqan Ali Khan 900 436 464 464
Faisal Iftikhar 900 464 436 900
Farooq A. Qazi 886 651 235 222
Favad Soomro 886 664 222 222
Haider Ali Isani 879 659 220 249
Hammad Masood 1,329 249 1,080 1,329
Khalid Mehmood 879 632 247 225
Khusrau Nadir Gilani 900 422 478 498
M. Ali 900 408 492 486
M. Khurram Farooq 900 675 225 225
Mohammad Arshad 896 658 238 225
Muddassir Shafique Chaudhry 900 380 520 495
Muhammad Siddique 879 659 220 220
Najam Saeed 886 651 235 222
Noordin Burero 879 632 247 220
Rehman Hanif 896 630 266 225
Syed Reza J a w a d 1,359 42 1,317 1,359
Syed Shahzad Nabi 886 623 263 231
Ummat Rasool 1,809 141 1,668 1,584
vljay Kumar 1,060 315 745 728
Waqas Habib 896 672 224 225
Yousuf Mohiuddin 900 406 494 541
Zaid Bin Zeeshan 900 675 225 225
Balance carried forward 86,114 50,836 35,278 37,009

Description a n d Sold to Cost Accumulated Net b o o k Sale

m e t h o d of disposal depreciation value Proceeds
(Rupees)-
Balance carried forward 86,114 50,836 35,278 37,009
Zamir Hussain 900 661 239 225
Zeeshan Bukhari 900 492 408 900
Sale through bid Khurram Imtiaz 1,474 1,474 - 1,244
Hamid Nawaz 404 404 - 290
M.Farhan 1,474 1,420 54 1,244
Adnan Rafi 6,600 6,600 - 2,450
Anis Ahmed Khan 555 500 55 380
Arsalan Nabi Siddiqui 849 764 85 780
Farooq Raza 599 599 571
Mohammad Qasim 1,052 946 106 528
Mohsin Ahmed Khan 555 500 55 418
Muhammad Ali Qureshi 705 695 10 623
Muhammad Shahid 555 555 - 397
Saeed Ahmed 433 433 - 599
Sultan Jan Nabi 643 643 - 1,029
Syed Imran Ali 436 436 - 163
Syed Riaz Ahmed 886 709 177 838
Insurance claims EFU General Insurance Ltd. 25,535 10,193 15,342 20,822
130,669 78,860 51,809 70,510
Furniture, fixtures & equipment
Insurance claims EFU General Insurance Ltd. 386 132 254 303
Assets written off 1,921 1,921 - -
Items having net book value upto Rs.50 each 18,251 17,890 361 3,817
20,558 19,943 615 4,120
2010 219,460 127,415 92,045 413,880
2009 289,773 219,139 70,634 100,952
143
4 . 6 Capital work in progress - Expansion and other projects

Plant a n d Building & Furniture, A d v a n c e s to Other Total
machinery civil w o r k s fixture a n d suppliers ancilliary
including equipment costs
pipelines (note 4.6.3)
(Rupees)
Balance as at January 1, 2 0 0 9 37,119,405 4,131,908 171,829 647,090 4,570,408 46,640,640
Additions during the year 39,566,429 4,984,978 174,428 (18,967) 9,074,883 53,781,751
Transferred to
- operating assets (note 4.1) (12,843,185) (1,382,161) (154,062) (292,729) (1,526,559) (16,198,696)
- intangible assets (note 7) (42,151) - (42,151)
Balance a s a t December 3 1 , 2 0 0 9 63,842,649 7,734,725 192,195 293,243 12,118,732 84,181,544
Balance as at January 1, 2 0 1 0 63,842,649 7,734,725 192,195 293,243 12,118,732 84,181,544
Additions during the year 8,642,098 3,624,262 386,819 478,431 8,453,087 21,584,697
Transferred to
- operating assets (note 4.1) (26,573,208) (4,294,161) (213,540) (472,863) (3,309,084) (34,862,856)
- intangible assets (note 7) (30,890) - (50,605) (138,578) - (220,073)
- stores a n d spares (1,154,316) . . . . (1,154,316)
- Reclassification (467,615) 2,063,379 (14,355) 58,578 (1,639,987)
Balance as at December 3 1 , 2010 44,258,718 9,128,205 300,514 218,811 15,622,748 69,528,996
4.6.1 Capital w o r k in progress includes Rs. 4 4 , 2 5 6 , 9 7 6 (2009: Rs. 47,081,203) a n d Rs. 8 , 3 6 5 , 8 7 9 (2009: Rs. 7,459,458) with respect
to Enven Plant for plant & machinery and building & civil w o r k s respectively. Engro Fertilizers Limited c o m m e n c e d trial production
on D e c e m b e r 2 9 , 2 0 1 0 b u t c o u l d not continue for a reasonable period, as required for commissioning of commercial production,
d u e to curtailment of gas by Sui Northern Gas Pipeline Limited (SNGPL) for forty five days from January 7, 2 0 1 1 . Engro Fertilizers
IJmited, therefore, n o w expects to c o m m e n c e production by end of February 2011 a n d will declare commercial production o n c e
fully t e s t e d . However, certain c o m p o n e n t s related to the Enven Plant, a m o u n t i n g to Rs. 1 0 , 5 9 9 , 1 0 6 have b e e n transferred to
operating assets being c o m p l e t e in all respects for its intended use.
4.6.2 During t h e year:

- Engro Powergen Qadirpur Limited, a subsidiary of Engro PowerGen Limited on c o m m e n c e m e n t of commercial operations, has
transferred the cost of the Power Plant from capital work-in-progress to operating assets.
- Engro Polymer a n d Chemicals Limited has declared commercial operations of the V C M plant a n d transferred the related c o s t s
of the plant to operating assets.
On c o m m e n c e m e n t of commercial production of juices by Engro Foods Limited, the related plant, machinery a n d equipment
has been transferred to operating assets on February 2 8 , 2 0 1 0 . Further, drying unit of its subsidiary's rice processing plant
c o m m e n c e d commercial production and has been transferred to operating assets on November 7, 2 0 1 0 while the construction
of t h e milling plant is still in progress. Engro Foods Limited is also in the phase of expansion in respect of ice cream plant.

4.6.3 T h e ancillary c o s t s includes net borrowing cost of Rs. 1 1 , 3 3 0 , 2 4 5 (2009: Rs. 6,645,866) capitalized at borrowing rates ranging
f r o m 1 1 . 5 2 % to 17.22% ( 2 0 0 9 : 1 1 . 5 2 % to 17.22%). Other ancillary cost also includes interest on investment in Subsidiary Company
amounting to Rs. 77,508 (2009: Rs. 803,083). The ancillary c o s t s , other than net borrowing costs and storage & handling cost,
capitalised include depreciation, amortization, salaries, wages and benefits, legal and professional charges, etc. Upon aforementioned
c o m m e n c e m e n t of commercial production and transfer of cost from capital work-in-progress to operating assets, the related ancillary
cost has also been allocated to plant a n d machinery, pipelines and building & civil w o r k in their respective cost ratio.
4.7 Capital spares

These mainly include Rs. 148,712 (2009: Nil) and Rs. 758,466 (2009: Nil) in respect of Engro Fertilizers Limited (Enven Plant) and
Engro Powergen Qadipur Limited (Power Plant) respectively (note 12.1 and 12.2).
5 Exploration and Evaluation Expenditure

Represents expenditure Incurred by Sindh Engro Coal Mining Company Limited, a subsidiary of Engro PowerGen Limited, in respect
of Detailed Feasibility Study a n d other costs for the development, construction a n d operation of open cast mine facility in Block II
of Thar Coal Field, Sindh, as referred to in note 1.3.
6 Biological Assets
2010 2009
(Rupees)
Dairy livestock (note 6.1)
- mature 257,537 415,147
- immature 164,066 19,759
421,603 434,906
Crops - feed stock 6,690 3,967
428,293 438,873
Reconciliation of carrying amounts of livestock

Carrying a m o u n t at the beginning of the year 434,906 297,699
Add:
- Purchases during the year 40,830 16,299
- Gain / (Loss) arising from changes in
fair value less estimated point-of-sale costs
attributable to physical / price changes 14,309 136,677
Less: Decreases d u e to deaths / disposals (68,442) (15,769)
Carrying amount at the end of the year, which approximates the fair value 421,603 434,906
6.2 As at December 3 1 , 2 0 1 0 , Engro Foods Limited, held:

1,476 (2009:1,455) mature assets able to produce milk and 1,035 ( 2 0 0 9 : 8 0 8 ) immature assets that are being raised to produce
milk in the future. During the year, Engro Foods Limited p r o d u c e d approximately 5,273,854 liters ( 2 0 0 9 : 1 , 8 4 4 , 1 4 2 liters) of milk
from t h e s e biological assets with a fair value less estimated point-of-sale costs of Rs. 2 3 6 , 8 2 7 (2009: Rs. 66,939), determined
at the time of milking.
- 3 (2009: 15) mature Bulls a n d 77 (2009: 23) immature male calves. Mature Bulls are used for insemination and subsequent
disposal at the end of their inseminating life.
145
6.3 The deaths during the year mainly occurred a m o n g the immature dairy livestock on account of an infection, w h i c h has n o w been
fully controlled. The C o m p a n y has recovered Rs. 63,085 from the insurance c o m p a n y against s u c h deaths.
6.4 The valuation of dairy livestock as at D e c e m b e r 3 1 , 2 0 1 0 has been carried out by an independent valuer in a c c o r d a n c e with
International Valuation Standards issued by International Valuation Standards Committee. In this regard, the valuer has examined
the physical condition of the livestock as at December 3 1 , 2010, assessed the key assumptions and estimates and also relied on
representations m a d e by t h e Engro Foods Limited. Further, in the absence of an active market of Engro Foods Limited's dairy
livestock in Pakistan, market and replacement values of these animals from most relevant active market being Australia, have been
used as basis of valuation model by the independent valuer. Mature bulls a n d immature calves were not included in the fair valuation
due to the insignificant value in use.

7 Intangible Assets
Software and Rights for future Development Other Total
licenses gas utilization cost intangible
(Rupees)
As at January 1, 2009
Cost 162,122 102,312 6,000 419,912 690,346
A c c u m u l a t e d amortization (112,291) - (6,000) (1,222) (119,513)
Net b o o k value 49,831 102,312 418,690 570,833
Year e n d e d December 3 1 , 2 0 0 9
Opening net b o o k value 49,831 102,312 41 3,690 570,833
-
Additions at cost 42,151 - - - 42,151
Write-off
Cost (11,577) - - - (11,577)
A c c u m u l a t e d amortisation 11,577 - - - 11,577
Amortization charge (27,626) _ (27,626)

Closing net b o o k value 64,356 102,312 - 41 3,690 585,358
As at January 1, 2010
Cost 192,696 102,312 6,000 419,912 720,920
Net b o o k value 64,356 102,312 - 418,690 585,358
Opening net b o o k value 64,356 102,312 - 418,690 585,358
Additions at c o s t 218,022 - - 2,051 220,073
Adjustment of exchange revaluation 5 - - 117,875 117,880
Write-off
Cost (287) - - - (287)
A c c u m u l a t e d amortisation 271 - - - 271_
(16) - - - (16)
Adjustment of exchange revaluation (D " - (D (2)
Amortization charge (45,816) - - (154) (45,970)
Closing net b o o k value 236,550 102,312 - 538,461 877,323
As at December 3 1 , 2010
Cost 410,435 102,312 6,000 539,838 1,058,585
Net b o o k value 236,550 102,312 - 538,461 877,323
147
7.1 Amortization charge for the year has been allocated as follows:
2010 2009
(Rupees)
Cost of sales (note 32) 4,166 9,532
Selling a n d distribution expenses (note 33) 33,532 16,240
Capital w o r k in progress (note 4.6.3) 8,272 1,854
45,970 27,626
8 Long Term Investments

Unquoted
509,505 494,780
Joint venture c o m p a n y - (note 8.1)
Associated c o m p a n i e s
- Agrimall (Private) Limited (note 8.4)
5,000 5,000
- Arabian Sea Country Club Limited 5 0 0 , 0 0 0 Ordinary shares of Rs. 10 each
514,505 499,780
8.1 Details of Investment in Joint Venture companies
Engro V o p a k Terminal L i m i t e d
At beginning of the year 494,780 486,210
A d d : Share of i n c o m e after tax for the year 554,725 458,570
Less:
- Dividend received during the year 450,000 337,500
- Dividend receivable 90,000 112,500
509,505 494,780
8.2 Interest in Joint Venture company

No. of Ordinary Equity %
Name of Company shares of held

Rs. 10 e a c h
Engro Vopak Terminal Limited 45,000,000 50
8.3 T h e s u m m a r y of financial information as of December 3 1 , of the joint venture is as follows:
2010 2009
(Rupees)
- Total assets 5,400,154 5,512,256
- Total liabilities 4,346,350 4,487,901
- Total equity 1,053,804 1,024,355
- Total revenue 2,302,747 2,135,658
- Profit for the year 1,109,449 917,141
8.4 This represents the G r o u p ' s share in the paid-up share capital of the investee transferred free of cost to the Group under a joint
venture agreement.

9 Employees' Share Option Scheme

9.1 Engro Corporation Limited, the Holding Company
Under the Employee Share Option S c h e m e (the Scheme) of Engro Corporation Limited, the Holding Company, senior employees
w h o are critical to the business operations are granted options to purchase 5 million newly issued ordinary shares at an exercise
price of Rs. 277 per ordinary share. As per the S c h e m e , the entitlements a n d exercise price are subject to adjustments because
of issue of right shares a n d bonus shares. T h e n u m b e r of options granted to an employee is calculated in a c c o r d a n c e with the
criticality of employee to the business a n d their ability a n d is subject to approval by t h e C o m p e n s a t i o n C o m m i t t e e . No a m o u n t s
are paid or payable by the recipient on receipt of the option. The options carry neither right to dividends nor voting rights. Vesting
period has started from the date of grant for e m p l o y e e s w h o were g r a n t e d shares on or before J u n e 3 0 , 2 0 0 8 a n d e n d e d on
D e c e m b e r 3 1 , 2 0 1 0 , where after t h e s e o p t i o n s can be exercised within a period of t w o years ending D e c e m b e r 3 1 , 2 0 1 2 .
For options granted after June 3 0 , 2 0 0 8 , the vesting period will end such number of days after December 3 1 , 2 0 1 0 as is equal to
the number of days between the date the initial option letters were issued and the date of grant of the later options. However, the
latter options c a n also only be exercised upto December 3 1 , 2012.
In 2 0 0 8 , the grant date w a s c h a n g e d to August 2 3 , 2 0 0 7 , from the date approved in the original s c h e m e . Further, consequent to
the issue of right shares in 2008 a n d in the current year, the entitlements were increased to 5.5 million ordinary shares a n d 7.7 million
ordinary shares respectively a n d the exercise price w a s adjusted to Rs. 2 6 7 . 7 3 per share a n d Rs. 205.52 per share respectively.
These changes have been duly approved by the Securities and Exchange Commission of Pakistan (SECP). The aforementioned
reduction in exercise price has no effect on the fair value of share options recognized in the consolidated financial statements.
Subsequent to the demerger, as referred to in note 1.1, the employees transferred to Engro Fertilizers Limited have surrendered
their existing share options against w h i c h n e w share options have b e e n granted under a new s c h e m e of Engro Fertilizers Limited
(note 9.2).
Further, consequent to the b o n u s issue in the current year, the entitlements w e r e increased to 1,924,230 shares f r o m 1,749,300
shares respectively a n d t h e exercise price w a s adjusted to Rs. 1 8 6 . 8 4 f r o m Rs. 2 0 5 . 5 2 respectively. These c h a n g e s have been
duly approved by the SECP. The aforementioned reduction in exercise price has no effect on the fair value of share options recognized
in the consolidated financial statements.
9.2 Engro Fertilizers Limited

Consequent to the demerger, as referred to in note 1.1, the employees transferred to the Engro Fertilizers Limited a n d holding share
options of the Holding Company have been, on surrender thereof, granted share options under a new Employee Share Option Scheme
(the Scheme) of Engro Fertilizers Limited. Under the Scheme, employees have been granted options to purchase 4,937,100 ordinary
shares of the Engro Fertilizers Limited at an exercise price of Rs. 98 per ordinary share. As per the S c h e m e , the entitlements a n d
exercise price are subject to adjustments because of issue of right shares a n d bonus shares. The n u m b e r of options granted to an
employee are the same as the n u m b e r of options of the Holding C o m p a n y surrendered by t h e m . No a m o u n t s are paid or payable
by the recipient on receipt of the option. The options carry neither right to dividends nor voting rights. Vesting period for employees
w h o were initially granted options on or before June 3 0 , 2 0 0 8 in the Holding Company, has started from January 1 , 2 0 1 0 a n d ended
o n D e c e m b e r 3 1 , 2 0 1 0 , whereafter t h e s e o p t i o n s c a n b e exercised within a period o f t w o years e n d i n g D e c e m b e r 3 1 , 2 0 1 2 .
For options which were initially granted by the Holding C o m p a n y after J u n e 3 0 , 2 0 0 8 , the vesting period will e n d such n u m b e r of
days after December 3 1 , 2 0 1 0 as is equal to the number of days between the date the initial option letters were issued a n d the date
of grant of the later options by the Holding Company. However, the later options c a n also only be exercised upto December 3 1 , 2 0 1 2 .
149
The above S c h e m e w a s conceptually approved by the Securities and Exchange Commission of Pakistan (SECP) before the transfer
of Fertilizer Undertaking to Engro Fertilizers Limited, referred to in note 1.1, whereas the formal approval w a s granted subsequently
on J u n e 1 0 , 2 0 1 0 . As the vesting period has started f r o m January 1, 2 0 1 0 a n d the S c h e m e being considered a continuation of
the old S c h e m e a n n o u n c e d by t h e Holding Company, a c h a r g e b a s e d on fair value of share o p t i o n s i.e. Rs. 1 1 . 9 4 per share,
calculated as on January 1, 2 0 1 0 , has been recognised in these consolidated financial statements.
Further, post demerger a n d c o n s e q u e n t to issue of bonus shares, the exercise price w a s also adjusted to Rs. 27.22 per share,
however, such adjustment has no effect on the fair value of share options recognised in the financial statements. The approval from
SECP in this regard has been requested vide letter dated December 2 9 , 2 0 1 0 .
9.3 Engro Polymer and Chemicals Limited

T h e Employees' Share O p t i o n S c h e m e (the S c h e m e ) of Engro Polymer a n d Chemicals IJmited, the Subsidiary C o m p a n y , w a s
originally approved by the shareholders in their Extraordinary General Meeting (EGM) held on October 8, 2 0 0 7 . Under the employee
share option s h c e m e of Engro Polymer a n d Chemicals IJmited, senior employees w h o w e r e considered critical to the business
operations were granted options to purchase 5.3 million newly issued ordinary shares at an exercise price of Rs. 22 per ordinary
share. The n u m b e r of options granted w a s calculated by reference to how critical an employee w a s considered to the business
a n d his abilities, subject to approval by the Compensation Committee. The options carry neither right to dividends nor voting rights.
Vesting period started from the 'grant date' a n d ended on December 3 1 , 2 0 0 9 , whereafter the options c a n be exercised within a
period of t w o years. Further, employees w h o joined Engro Polymer and Chemicals Limited by October 3 1 , 2 0 0 8 and those promoted
to the eligible employee grade by the s a m e date have also been granted options on similar terms.
During 2 0 0 8 , Engro Polymer a n d Chemicals Limited p r o p o s e d certain changes relating to 'grant d a t e ' in the originally a p p r o v e d
S c h e m e . These changes were approved by the shareholders in their EGM held on June 2 7 , 2 0 0 8 , and subsequently by the SECP
on September 2 5 , 2 0 0 8 . As per t h e approved c h a n g e to the S c h e m e the 'grant d a t e ' is the d a t e of E G M held on October 8, 2 0 0 7 ,
w h e n the S c h e m e w a s originally a p p r o v e d .
During the year, Engro Polymer and Chemicals Limited has adjusted the exercise price of the share options from Rs. 22 per share
to Rs. 19.41 per share a n d has increased the total entitlement from 5 , 3 0 0 , 0 0 0 shares to 6 , 7 5 7 , 5 0 0 shares c o n s e q u e n t to the
issuance of right shares during the year, w h i c h has been duly approved by the SECP. The aforementioned reduction in exercise
price has no effect on the fair value of share options recognised in these consolidated financial statements.
9.4 Engro Powergen Qadirpur Limited

The Employees' Share Option Scheme (the Scheme) of Engro Powergen Qadirpur IJmited, a subsidiary of Engro PowerGen Limited,
w a s a p p r o v e d by its shareholders in their Extraordinary General Meeting (EGM) held on April 1 8 , 2 0 0 8 . A c c o r d i n g to the s c h e m e
senior employees w h o are critical to the business operations were to be granted options to purchase 9.3 million newly issued ordinary
shares. T h e options are exercisable in 2011 a n d 2 0 1 2 at t h e exercise prices of Rs. 15 per share a n d Rs. 17 per share respectively.
T h e n u m b e r of options granted has been calculated in accordance with the criticality of employee to the business a n d their ability,
subject to the approval of the Compensation Committee. The options carry neither right to dividends nor voting rights. Vesting period
has started f r o m the d a t e of grant a n d ended on D e c e m b e r 3 1 , 2 0 1 0 , where after these options c a n be exercised within a period
of t w o years. Employees w h o joined by June 30, 2 0 0 9 and those w h o were promoted by the same date, were also granted options.
However, the length of vesting period is the same as for the initial recipients of options.
9.5 Engro Foods Limited

The shareholders of the Engro Foods Limited, in their meeting held on October 8, 2 0 0 7 , have approved an Employees' Share Option
S c h e m e (the S c h e m e ) , for granting of o p t i o n s to its certain eligible critical e m p l o y e e s upto 21 million n e w ordinary shares. The
S c h e m e w a s approved by the S E C P on July 10, 2 0 0 8 (the grant date).

Under the Scheme, vesting period c o m m e n c e d from the date of grant and e n d e d on December 3 1 , 2 0 1 0 . Those eligible employees
w h o joined the Engro Foods Umited after the date of grant but before December 3 1 , 2008 are also entitled to these options, however,
their vesting period will c o m m e n c e when they attained the right to these options and will comprise of the same number of days as
the vesting period of all other eligible employees. The m a x i m u m n u m b e r of options to be issued to an eligible employee is for 2.5
million ordinary shares. The options are exercisable within 4 years in 2 0 1 1 , 2 0 1 2 , 2 0 1 3 a n d 2 0 1 4 at the exercise prices of Rs. 17
per share, Rs. 19 per share, Rs. 21 per share and Rs. 23 per share respectively.
9.6 Avanceon Limited

T h e Employees' Share Option Scheme (the Scheme) of Avanceon Limited w a s originally approved by its shareholders in their Annual
General Meeting (AGM) held on March 3 1 , 2 0 0 8 . A c c o r d i n g to the S c h e m e , senior employees w h o are critical to the business
operations, shall be granted options to p u r c h a s e 2.105 million newly issued ordinary shares. T h e n u m b e r of o p t i o n s granted is
calculated in a c c o r d a n c e with the ability a n d criticality of employee to the business, subject to approval by the C o m p e n s a t i o n
Committee. The options carry neither right to dividends nor voting rights. Vesting period shall start from the date of grant and ended
on D e c e m b e r 3 1 , 2 0 1 0 , where after the options c a n be exercised within a period of t w o years, whereas, t h e vesting period for
options granted in 2 0 1 0 shall start from the date of grant and shall e n d on December 3 1 , 2 0 1 1 , whereafter the option can be
exercised within a period of t w o years.
9.7 Deferred employee compensation expense

2010 2009
(Rupees)
Options issued during the year / transfers (note 9.1 a n d 9.2) 59,878 9,336
Options lapsed due to employee resignation (69,103) (18,114)
Amortisation for the year (86,407) (95,930)
Less: Current portion s h o w n under current assets (4,829) (97,492)
Long term portion of deferred employee compensation expense - 2,969
9.8 Employee share option compensation reserve

A d d : Options issued during t h e year 59,878 9,336
Less: Options lapsed due to employee resignation /
transfers (note 9.1 and 9.2) (215,665) (18,114)
151
9.9 The Holding C o m p a n y a n d Subsidiary Companies used Black Scholes pricing model to calculate the fair value of share options at
the grant date. T h e fair value of the share options as per the model and underlying assumptions are as follows:
Holding
Company Subsidiary C o m p a n i e s
Engro Engro Engro Engro Engro Avanceon
Corporation Fertilizers Polymer and Foods Powergen Limited
Limited Limited Chemicals Limited Qadirpur
Limited Limited
Fair value of t h e share options

at grant d a t e Rs. 6 5 . 8 6 Rs. 11.94 Rs. 1.86 Nil Rs. 1.29 Rs. 1.61
Share price at grant d a t e Rs. 2 2 0 Rs. 87.61 Rs. 18 Rs. 5.61 Rs. 9.90 Rs. 2 8 . 7 6
Exercise price Rs. 2 7 7 Rs. 98 Rs. 22 Rs. 17 Rs. 15 Rs. 4 2 . 5 8
Annual volatility 34.54% 41.64% 15.13% 10% 30.19% 36%
Risk free rate used 10.77% 12.21% 10.12% 14% 14.20% 13.39%
10 Derivative Financial Instruments

2010 2009
Assets Liabilities Assets Liabilities
Conversion option on IFC loan (note 22.5) - 367,442 - 338,647
C a s h flow hedges:
Foreign exchange forward contacts (note 10.1) 2,638 234,055 22,637 157,329
Foreign exchange option contacts (note 10.2) 510 12,464 53,572 4,468
Interest rate s w a p s (note 10.3) - 1,232,022 - 872,376
3,148 1,845,983 76,209 1,372,820
Less: Current portion s h o w n under current
assets/ liabilities
Conversion option on IFC loan - 367,442 - 338,647
C a s h flow hedges:
Foreign exchange forward c o n t a c t s 2,638 234,055 22,637 157,329
Foreign exchange option c o n t a c t s 510 12,464 53,572 4,468
Interest rate s w a p s - 426,868 - 239,599
3,148 673,387 76,209 401,396
3,148 1,040,829 76,209 740,043
- 805,154 - 632,777

10.1 Foreign exchange forward contracts

10.1.1 Engro Fertilizers Limited entered into various forward exchange contracts to hedge its foreign currency exposure. As at December
3 1 , 2 0 1 0 , Engro Fertilizers Limited had foreign exchange forward contracts to purchase Euros 2,698 (January 1, 2 0 1 0 : (note 1.1)
Euros 9,543) at various maturity dates matching the anticipated payment dates for c o m m i t m e n t s with respect to urea expansion
project. The fair value of these contracts as at December 3 1 , 2010 is positive and a m o u n t e d to Rs. 2,638 (January 1, 2 0 1 0 : (note
1.1) Rs. 22,637 positive).
10.1.2 Engro Fertilizers Limited entered into various US$: PKR forward contracts to hedge its foreign currency exposure. As at December
3 1 , 2 0 1 0 , Engro Fertilizers Limited had forward c o n t r a c t s to purchase U S $ 8 5 , 0 0 0 (January 1, 2 0 1 0 : (note 1.1) U S $ 85,000) at
various maturity dates to hedge its foreign currency loan obligations. The fair value of these contracts is negative amounting to
Rs. 2 3 4 , 0 5 5 (January 1, 2 0 1 0 : (note 1.1) Rs. 157,329 negative).
10.2 Foreign exchange option contracts

10.2.1 Engro Fertilizers Limited entered into various foreign exchange option contracts to hedge its currency exposure against US dollar
relating to t h e expansion project. As at D e c e m b e r 3 1 , 2 0 1 0 Engro Fertilizers Limited has foreign exchange options amounting to
Euro 6,371 (January 1 , 2 0 1 0 : (note 1.1) Euro 12,628). The net fair value of these contracts is negative and a m o u n t e d to Rs. 12,464
(January 1, 2 0 1 0 : (note 1.1) Rs. 4 9 , 1 0 4 positive).
10.2.2 Engro Foods Limited entered into various foreign exchange option contracts to hedge its currency exposure having maturity dates
approximately matching with the anticipated payment dates for c o m m i t m e n t s with respect to import of plant a n d machinery. The
gain on settlement of these options amounted to Rs. 9,694 and the fair value of outstanding contracts amounted to Rs. 5 1 0 positive
(2009: Nil).
10.3 Interest rates swaps

10.3.1 Engro Fertilizers Umited entered into an interest rate s w a p agreement to hedge its interest rate exposure on floating rate committed
borrowing under an Offshore Islamic Finance Facility agreement, for a notional amount of US$ 150,000 amortising upto September
2 0 1 4 . Under the s w a p agreement, Engro Fertilizers Limited w o u l d receive USD-LIBOR from Citibank N.A Pakistan on notional
amount and pay fixed 3 . 4 7 % w h i c h will be settled semi-annually. The fair value of the interest rate s w a p as at December 3 1 , 2 0 1 0
is negative and a m o u n t e d to Rs. 6 5 4 , 1 6 3 (January 1, 2 0 1 0 : (note 1.1) Rs. 5 4 2 , 3 8 5 negative).
Engro Fertilizers Limited entered into another interest rate s w a p agreement to hedge its interest rate exposure on floating rate
committed borrowing from a consortium of Development Finance Institutions for a notional amount of US$ 85,000 (January 1, 2 0 1 0 :
(note 1.1) U S $ 85,000) amortising u p t o April 2 0 1 6 . Under the s w a p agreement, t h e C o m p a n y w o u l d receive USD-LIBOR f r o m
Standard Chartered Bank on notional amount and pay fixed 3 . 7 3 % which will be settled semi-annually. T h e fair value of the interest
rate s w a p as at December 3 1 , 2010 is negative and amounted to Rs. 466,995 (January 1, 2010: (note 1.1) Rs. 310,056 negative).
103.2 During the year Engro Polymer and Chemicals Limited has entered into a cross currency interest rate s w a p agreement for the
notional a m o u n t of US $ 4,000 with a bank to hedge its interest rate exposure on floating rate local currency borrowings from a
c o n s o r t i u m of local banks under a Syndicate Finance Agreement. Under t h e s w a p agreement, the C o m p a n y w o u l d receive six
month KIBOR on the relevant Pak Rupees notional a m o u n t and will pay six m o n t h ' s USD-LIBOR plus 0 . 9 5 % , o n the relevant U S $
notional a m o u n t which will be settled semi annually. As at December 3 1 , 2 0 1 0 , Engro Polymer and Chemicals Limited has an
outstanding cross currency interest rate s w a p agreement with a local bank for a notional amount of US $ 3,594. As at December
3 1 , 2 0 1 0 , the fair value of interest rate s w a p agreement is positive Rs. 8 1 6 .
As at December 3 1 , 2 0 1 0 , the Engro Polymer a n d Chemicals Limited has outstanding interest rate s w a p agreements with banks
for the notional amounts aggregating to US$ 34,666 to hedge its interest rate exposure on the floating rate foreign currency borrowings
from Internationa! Finance Corporation (IFC). Under the swap agreements, the Engro Polymer and Chemicals Limited would received
six m o n t h s USD-LIBOR on respective notional a m o u n t s a n d will pay fix rates, w h i c h will be setted semi annually. The fair value as
at the balance sheet date of the aforementioned interest rate s w a p agreements aggregated to Rs. 111,680 negative.
153
Long Term Loans and Advances - Considered good 2010 2009

(Rupees)
Long term loans
Executives (note 11.1 to 11.3) 387,977 386,824
Other employees (note 11.3 a n d 11.4) 264,452 241,158
652,429 627,982
Less: Current portion s h o w n under current assets (note 15) 472,366 484,243
180,063 143,739
Others 13,395 7,221
193,458 150,960
11.1 Reconciliation of the carrying amount of loans and advances to Executives:

Disbursements 135,859 250,073
Repayments/amortization (134,706) (128,001)
11.2 This includes interest free services incentive loans to executives amounting to Rs. 7 1 , 7 8 2 (2009: Rs. 61,730) repayable in equal
monthly instalments over a three years period or in one lump s u m at the e n d of such period a n d disbursements to executives under
housing subsidy s c h e m e amounting to Rs.182,910 (2009: Rs. 184,002). It also includes advances of Rs. 45,802 (2009: Rs. 34,762)
a n d Rs. 8,231 (2009: Rs. 36,102) to employees for car earn out assistance a n d house rent advance respectively.
11.3 This includes interest free loans a n d advances to executives and employees of Engro Polymer a n d Chemicals Limited for house
rent, vehicles, h o m e appliances a n d investments given in accordance with the terms of employment a n d for purchase of the Engro
Polymer a n d Chemicals Limited's shares under the Employees' Share S c h e m e (ESS) introduced/announced by Engro Polymer and
Chemicals Limited Employees' Trust. Loans for house rent a n d investments are repayable in 18 to 36 equal monthly installments.
2 0 % of the loans for purchase of Engro Polymer and Chemical Limited's share under ESS are repayable at the e n d of m o n t h 1 , 1 2
a n d 24 a n d the balance 4 0 % is repayable at the end of m o n t h 30 from the expiry date of t h e Option Period. Advances for vehicles
a n d h o m e a p p l i a n c e s are c h a r g e d t o p r o f i t a n d l o s s a c c o u n t o v e r a p e r i o d o f 3 y e a r s a n d 5 y e a r s , r e s p e c t i v e l y .
11.4 Includes interest free loans given to w o r k e r s of Rs. 4 9 , 4 4 6 ( 2 0 0 9 : Rs. 6,988) pursuant to Collective L a b o u r A g r e e m e n t a n d
disbursement to workers under housing subsidy scheme amounting to Rs. 186,124 (2009: Rs. 211,450).
11.5 T h e m a x i m u m a m o u n t outstanding at the e n d of any m o n t h f r o m the executives of the G r o u p aggregated Rs. 3 9 8 , 6 5 4 (2009:
Rs. 406,504).
12 Stores, Spares and Loose Tools

2010 2009
(Rupees)
Consumable stores 441,432 179,039
Spares & loose tools, including in transit (note 12.1 a n d 12.2) 4,537,027 1,320,378
4,978,459 1,499,417
Less: Provision for surplus and slow moving items 67,518 47,885
4,910,941 1,451,532

12.1 Engro Fertilizers Limited has purchased stores and spares for its new Enven Plant aggregating Rs. 2,446,407, of w h i c h Rs. 148,712
are of capital nature (note 4.7) based on initial assessment.
12.2 Engro Powergen Qadirpur Limited, a subsidiary of Engro PowerGen Limited, purchased stores and spares with plant and machinery
under the Supply (Engineering and Procurement) Contract amounted to Rs. 1,154,316 of w h i c h , spares of capital nature amounting
to Rs. 7 5 8 , 4 6 6 have been reflected under property, plant and equipment (note 4.7).
13 Stock-in-Trade
2010 2009
(Rupees)
Raw materials and packing materials (note 13.1 & 13.2) 3,065,106 2,473,461
Unprocessed rice (note 13.3) 1,701,354 -
Fuel stock (note 13.4) 471,270 22,323
Work-in-process 53,313 62,663
Finished goods
- own manufactured product 2,105,269 863,140
- purchased product (note 13.1) 1,482,939 401,607
Less: Provision for slow moving inventory (35,574) (3,223)
3,552,634 1,261,524
8,843,677 3,819,971
13.1 This includes stocks-in-transit amounting to Rs. 1,540,653 (2009: Rs. 248,065) and s t o c k s held at t h e storage facilities of Engro
Vopak Terminal Limited, amounting to Rs. 6 0 1 , 0 5 0 (2009: Rs. 595,104) and D a w o o d Hercules Chemical Limited, a related party,
amounting to Rs. 4,425 (2009: Rs. 1,635).
13.2 This includes carrying value of PVC resin in respect of finished goods of the Engro Polymer and Chemicals Umited, net of realisable
value reduction of Rs. 17,162 (2009: Rs. 21,084). This also includes Rs. 30,731 (2009: Rs. 23,940) in respect of finished g o o d s of
Engro Foods Limited carried at net realisable value and Rs. 3 5 , 1 0 2 (2009: Rs. 19,387) in respect of stock held by third parties.
13.3 Includes unprocessed rice in possession of third party contractors amounting to Rs. 1,484,674 (2009: Nil) for processing on behalf
of Engro Eximp (Private) Limited.
13.4 Represents High Speed Diesel (HSD) purchased by Engro Powergen Qadirpur Umited, a subsidiary of Engro PowerGen Umited, for
operating the power plant in case supply of gas is unavailable. As per clause (b) of section 5.14 of the power purchase agreement, Engro
Powergen Qadirpur Limited is required to maintain HSD at a level sufficient for operating the power plant, at full load for seven days.
14 Trade Debts
2010 2009
(Rupees)
Considered g o o d
- secured (note 14.1) 4,755,732 2,794,542
- unsecured (note 14.2) 383,017 741,991
5,138,749 3,536,533
Considered doubtful 131,784 40,507
5,270,533 3,577,040
Less: Provision for impairment (note 14.3) 139,125 40,507
5,131,408 3,536,533
155
14.1 The balance of trade d e b t s are secured by w a y of b a n k guarantees a n d letters of credit from c u s t o m e r s . Trade d e b t s of Engro
P o w e r g e n Qadirpur Limited, a subsidiary of Engro PowerGen Limited, amounting to Rs. 2 , 9 6 5 , 4 3 0 (2009: Nil), are secured by a
guarantee from the Government of Pakistan under the Implementation Agreement. An amount of Rs. 527,999 (2009: Nil) with respect
to Engro Powergen Qadirpur IJmited, a subsidiary of Engro PowerGen Limited, will be invoiced after the revised tariff a n d quarterly
indexation have been notified in the official Gazzette of Government of Pakistan inclusive of the effect of the Review Petition amounting
to Rs. 6 1 , 3 0 0 , as more fully explained in n o t e 3 1 . 2 . 1 .
14.2 This includes d u e from Mitsubishi Corporation, Cadbury Pakistan Limited and D a w o o d Hercules Chemicals IJmited, related parties,
amounting to Nil (2009: Rs. 164,228), Nil (2009: Rs. 123) a n d Rs. 7 1 2 (2009: Rs. 16,318) respectively.
14.3 The movement in provision during the year is as follows:

2010 2009
(Rupees)

A d d : Provision m a d e during the year a n d
recognised in selling a n d distribution
expenses (note 33) 130,972 25,241
Less: Balances written off (32,354) (18,275)
As at D e c e m b e r 3 1 , 2 0 1 0 , trade debts aggregating to Rs. 139,125 (2009: Rs. 40,507) were impaired a n d provided for, which are
past d u e for more than six months.
As at D e c e m b e r 3 1 , 2 0 1 0 , trade d e b t s aggregating to Rs. 1,795,870 (2009: Rs. 132,741) were past d u e b u t not impaired. These
relate to various customers for w h i c h there is no recent history of default. The ageing analysis of these trade d e b t s is as follows:
2010 2009
(Rupees)
Upto 3 m o n t h s 1,640,533 118,959

3 to 6 m o n t h s 57,701 13,782
More t h a n 6 m o n t h s 97,636 -
1,795,870 132,741
Loans, Advances, Deposits and Prepayments

Current portion of long term loans a n d advances to
executives a n d other employees - considered g o o d (note 11) 472,366 484,243
Advances to executives a n d other employees (note 15.1 a n d 15.2) 35,159 27,551
Loan to Descon Engineering IJmited considered g o o d (note 15.3) 650,000 -
A d v a n c e a n d deposits 420,115 617,357

Prepayments:
- insurance 75,948 85,823
- gas charges (note 15.4) 573,843 95,843
- others 248,157 67,424
2,475,588 1,378,241
Less: Provision for impairment (note 15.5) 1,512 5,816
2,474,076 1,372,425

15.1 This represents interest free advances to executives for house rent, given in accordance with the Group's policy.
15.2 The m a x i m u m aggregate amount due from executives at the end of any m o n t h during the year w a s Rs. 7,279 (2009: Rs. 4,805).
15.3 Represents interest free loan to Descon Engineering Limited, a contractor to t h e Enven Plant, given by Engro Fertilizers Limited. The loan,
repayable on d e m a n d , is given against a Corporate Bond/Guarantee a n d promissory note.
15.4 Represents payments m a d e to Sui Northern Gas Pipeline Limited by Engro Fertilizers Limited, under Take or Pay arrangement in respect of
the Enven Plant a s p e r t h e a g r e e m e n t . E n g r o Fertilizers L i m i t e d i s c o n f i d e n t t h a t s u c h p r e p a y m e n t s will b e a d j u s t e d , p r i o r
to the expiry period against the expected gas c o n s u m p t i o n in the c o m i n g m o n t h s u p o n commisioning of Enven Plant.
15.5 As at December 3 1 , 2 0 1 0 , loans and advances aggregating to Rs. 1,512 (2009: Rs. 5,816) were impaired a n d provided for, w h i c h are past
due for more than six months. The movement in provision during the year is as follows:
2010 2009
(Rupees)
A d d : Provision made during the year (4,304) 1,295
Other Receivables
Receivable from Government of Pakistan for:
- sales tax (note 16.1 a n d 16.2) 783,775 686,507
Less: Provision for impairment 140 121,539
783,635 564,968
- Special excise duty refundable 36,687 36,687
Less: Provision for impairment 36,687 36,687
- -
- Customs duty claims refundable (note 16.3) 18,043 18,043
- Others 991 30,651

784,626 595,619
A c c r u e d income on deposits / investments 21,739 5,392
Receivable from pension fund 4,073 31,887
- Joint venture
- Engro Vopak Terminal Limited (note 16.4) 90,185 112,102
Claims on suppliers and insurance c o m p a n i e s 10,028 21,388
Less: Provision for impairment - 295
10,028 21,093
Receivable from Tetra Pak Pakistan Limited (note 16.5) 165,876 226,322
Reimbursable cost of fuel oil c o n s u m e d (note 13.4) - 84,830
Others 215,112 62,989
211,300 59,020
1,287,827 1,136,265
157
16.1 Include Rs. 5 7 , 1 3 5 of Engro Fertilizers Limited in respect of sales t a x receivable from the Government of Pakistan, levied in 2 0 0 8
on certain imports of M o n o A m m o n i u m Phosphate (MAP) 10:50:0 based on the actual import value rather than the d e e m e d value
as prescribed by SRO 609(1 )/2004. Engro Fertilizers IJmited had paid the d e m a n d m a d e under protest a n d filed an appeal before
the Collector, Sales Tax a n d Federal Excise. Further, the Ministry of Food, Agriculture and Livestock had also recommended through
its letter dated June 2 7 , 2 0 0 8 that the said grade of MAP should be assessed at d e e m e d value of import with retrospective effect.
An appeal has been filed before the Collector, Sales Tax and Federal Excise and the management is confident that it will be decided
in the Engro Fertilizers Limited's favour a n d the aforementioned a m o u n t paid under protest would be fully recovered.
16.2 Includes sales tax refundable of Engro Foods Limited, amounting to Rs. 518,439 (2009: Rs. 409,328). Sales tax has been zero rated
on Engro Foods Limited's supplies (output), raw materials, c o m p o n e n t s a n d assemblies imported or p u r c h a s e d locally by the
C o m p a n y for manufacturing in respect of its dairy operations. Further, partial sales tax refunds claim on purchase of Hydrogenated
Palm Oil (HPO), amounting to Rs. 192,293 for the year 2 0 0 7 to 2 0 0 9 were refunded by the sales tax authorities during the year
a n d accordingly entire provision of Rs. 121,539 (December 3 1 , 2 0 0 9 : Rs. 121,539) has been reversed.
16.3 The Collector of C u s t o m s through his order dated April 1 1 , 2 0 0 8 , disposed off the refund applications filed by Engro Polymer a n d
Chemicals Limited for the refund of c u s t o m duty paid amounting to Rs. 1 8 , 0 4 3 (2009: 18,043), at import stage on import of Vinyl
Chloride Monomer. Engro Polymer a n d Chemicals Limited based on the advice of its tax consultant, has filed an appeal before the
Collector of C u s t o m s (Appeals), Karachi dated May 3 1 , 2 0 0 8 against the aforementioned order on w h i c h no progress has been
made. However, based on prudence, full provision is carried against the aforementioned c u s t o m duty refundable.
16.4 The m a x i m u m a m o u n t s due from joint venture at the end of any month during the year aggregated as follows:
2010 2009
(Rupees)
Joint venture
- Engro Vopak Terminal Limited [includes dividend of
Rs. 9 0 , 0 0 0 (2009: Rs. 112,500)] 180,551 135,509
16.5 Includes marketing support subsidy receivable, under an agreement dated July 5, 2 0 1 0 , for quantity size discount and investment
support allowance, net off a m o u n t due on account of packaging material purchased by Engro Foods Limited. The receivable is less
than one m o n t h old and has been cleared subsequently.
16.6 As at December 3 1 , 2 0 1 0 receivables aggregating to Rs. 2 2 , 7 9 6 (2009: Rs. 59,061) were past d u e b u t n o t impaired. The ageing
analysis of these loans a n d advances is as follows:
2010 2009
(Rupees)
Upto 3 m o n t h s 6,988 9,953

3 to 6 m o n t h s 6,162
More than 6 m o n t h s 9.646 49,108
22,796 59,061
16.7 As at December 3 1 , 2010, receivables aggregating to Rs. 58,662 (2009: Rs. 180,533) were deemed to be impaired being outstanding
for more than six m o n t h s a n d provided for.

16.8 The movement in provision during the year is as follows:

2010 2009
(Rupees)
(Reversal) / provision m a d e during the year (121,851) 84,593
17 Short Term Investments

Financial assets at fair value through profit or loss
Fixed income placements (note 17.1) 61,303 75,795
Money market funds (note 17.2) 4,364,885 436,460
4,426,188 512,255
17.1 These represents foreign a n d local currency deposits with various banks.
17.2 These represents investments in mutual funds a n d are valued at their respective net assets values as at the balance sheet dates.
is Cash and Bank Balances

With banks
- deposit a c c o u n t s (note 18.1) 3,483,357 5,627,521
- current a c c o u n t s (note 18.2) 568,763 1,121,650
In hand
- c h e q u e s / d e m a n d drafts / cash in transit (note 18.3) 59,135 123,450
- cash 8,776 7,787
4,120,031 6,880,408
18.1 Includes Rs. 20,742 (2009: Rs. 24,193) kept in a separate b a n k a c c o u n t in respect of security deposits.
18.2 This includes Rs. 16,757 (2009: Rs. 735,898) held in foreign currency bank a c c o u n t s for letter of credit payments relating to expansion
projects of the Group.
18.3 Represents banking instruments received by Engro Foods Limited f r o m distributors at regional offices in respect of future sales but
not yet deposited in the bank account.
159
ig Share Capital
19.1 Authorised Capital
2010 2009 2010 2009
350,000,000 350,000,000 Ordinary shares of Rs. 10 each 3,500,000 3,500,000
I s s u e d , s u b s c r i b e d a n d p a i d - u p capital
2010 2009 2010 2009

185,354,484 185,354,484 Ordinary shares of Rs. 10 each fully paid in cash 1,853,545 1,853,545
Ordinary shares of Rs. 10 each issued as
142,382.335 112,588.079 fully paid b o n u s shares 1,423,824 1,125,881
327,736,819 297,942,563 Ordinary shares of Rs. 10 each 3,277,369 2,979,426
19.2 Movement in issued, subscribed and paid-up capital during the year
2010 2009 2010 2009
297,942,563 212,816.117 As at January 1 2,979,426 2,128,161
Ordinary shares of Rs. 10 e a c h

issued during the year as fully
85,126,446 paid right shares - 851,265

issued during the year as fully
29,794,256 paid b o n u s shares (note 19.3) 297,943 -_
327,736,819 297,942,563 3,277,369 2,979,426
19.3 During the year, the Holding C o m p a n y issued bonus shares in the ratio of 1 share for every 10 shares.
19.4 Associated companies held 158,516,740 (2009: 144,390,600) ordinary shares in the Holding C o m p a n y at year end.
Hedging Reserve
2010 2009
(Rupees)
Fair values of:
- Forward foreign exchange contracts (note 10.1) (231,417) (134,692)
- Foreign currency option contracts (note 10.2) (11,954) 49,104
- Interest rate s w a p s (note 10.3) (1,232,022) (872,376)
(1,475,393) (957,964)
Less: Deferred tax 516,385 335,287
Less: Minority interest 31,570 5,677
547,955 340,964
(927,438) (617.000)
20.1 Hedging reserve primarily represents the effective portion of changes in fair values of designated cash flow hedges.

21 Maintenance Reserve
In a c c o r d a n c e with the Power Purchase Agreement (PPA), Engro Powergen Qadirpur Limited, a subsidiary of Engro PowerGen
Limited, is required to establish a n d maintain a separate reserve f u n d (the Fund) with a depository institution for payment of major
maintenance expenses. Any interest i n c o m e resulting from the depository arrangements of t h e Fund shall remain in the Fund.
Under the PPA, l / 2 4 t h of the annual operating a n d maintenance budget of the Power Plant less fuel expenses is to be deposited
into the Fund on each capacity payment date untill s u c h reserve equal to nine s u c h deposits. After t h e s e c o n d agreement year and
thereafter the Fund may be re-established at such other level that the Engro Powergen Qadirpur Limited and National Transmission
and Despatch C o m p a n y (NTDC) mutually agree.
22 Borrowings
Secured (Non-participatory)
Unavailed
credit
Note Mark - up as at 2010 2009
rate p.a. Instalments year end (note 22.15)
Number Commencing
from -(Rupees)-
Engro Corporation Umited
Usted & Secured Engro Rupiya
Certificate 22.1 14.5% 6 half yearly January 15,2011 3,384,536
Engro Feritlizers Umited

Long term finance utilised
under mark-up arrangements:
National Bank of Pakistan 3 months KIBOR + 1.3% 8 quarterly October 3 1 , 2 0 0 9 225,000 525,000
MCB Bank Umited 3 months KIBOR + 1 . 3 % 8 quarterly March 1 1 , 2010 200,000 400,000
Habib Bank Limited 6 months K I B O R + 1 . 1 % 8 half yearly September 30, 2010 - 925,000 1,000,000
Allied Bank Umited 6 months K I B O R + 1 . 1 % 8 half yearly December 25, 2010 - 1,850,000 2,000,000
Askari Bank Limited 6 months K I B O R + 1 . 1 % 8 half yearly December 2 9 , 2 0 1 0 231,250 250,000
Citibank N.A. 6 months K I B O R + 1.1% 8 half yearly December 29, 2010 - 92,500 100,000
HSBC Middle East Umited 6 months K I B O R + 1.1% 8 half yearly December 2 9 , 2 0 1 0 231,250 250,000
Standard Chartered Bank
(Pakistan) Umited 6 months K I B O R + 1.1% 8 half yearly December 29, 2010 - 462,500 500,000
National Bank of Pakistan 6 months KIBOR + 1.1% 8 half yearly September 4 , 2 0 1 1 1,500,000 1,500,000
Syndicated finance 22.2 6 months K I B O R + 1.8% 11 half yearly February 27, 2012 18,165,889 12,012,004
Islamic offshore finance 22.3 6 months LIBOR + 2.57% 8 half yearly March 2 8 , 2 0 1 1 12,755,717 12,509,214
DFI Consortium finance 22.4 6 months UBOR + 2.6% 11 half yearly April 15,2011 7,284,352 7,170,987
International Finance
Corporation 22.5 6 months UBOR + 6% 3 half yearly September 15, 2015 - 3,889,941 3,794,812
Bank Islami Pakistan Umited 22.6 6 months KIBOR + 2.4% 14 half yearly May 25, 2010 499,800 500,000
Pak Kuwait Investment
Company (Private) Umited 22.6 6 months KIBOR + 2.35% 10 half yearly April 30, 2012 495,323 494,357
Faysal Bank Umited 22.6 6 months KIBOR - 2.35% 9 half yearly November 26, 2012 1,497,929 1,497,683
Dubai Islamic Bank Limited 22.6 6 Months Kibor + 2 . 1 1 % 10 half yearly December 3 1 , 2012 - 490,400 -
Silk Bank Limited 22.6 6 Months Kibor + 2.35% 10 half yearly January 2 1 , 2 0 1 3 299,405 -
Standard Chartered Bank 22.6 6 Months Kibor + 2.^0% 10 half yearly September 17, 2012 - 989,094 -
161
Unavailed
credit
Number Commencing
from (Rupees)
Samba Bank Limited 22.6 6 Months KIBOR + 2.40% 10 half yearly September 30, 2012 - 495,934 -
National Bank of Pakistan 22.7 6 Months KIBOR + 2.40% 6 half yearly March 2 8 , 2 0 1 3 990,949 -
Habib Bank IJmited 22.12 6 Months KIBOR + 1.5% Buliet October 28, 2011 1,000,000 -
Allied Bank IJmited 22.12 6 Months KIBOR + 1 % Bullet November 29,2011 - 149,942 -
Habib Metropolitan
Bank Limited 22.6 6 Months KIBOR + 2.40% 10 half yearly June 2 1 , 2013 199,965 -
Standard Chartered
Bank Limited 22.13 6 Months KIBOR + 1.5% 3 instalments April 18, 2011 1,500,000 -
Certificates
Term Finance Certificates
- 2nd Issue 22.8 6 months KIBOR + 1.55% - 3,970,694 3,968,819
Term Finance Certificates
- 3rd Issue 22.9 6 months KIBOR + 2.4% - 1,972,993 1,974,360
Sukuk Certificates 22.10 6 months KIBOR + 1.5% - 2,986,590 2,984,459
Privately Placed Sub-Ordinated
Term Finance Certificates 22.11 - 5,959,269 5,943,759
71,311,686 59,375,454
Engro Polymer and Chemicals Limited

Syndicated term finance I 6 months KIBOR + 2.25% 13 half yearly November 2010 5,428,997 5,655,127
Syndicated term finance II 6 months KIBOR + 3% 13 half yearly June 2010 1,377,948 1,485,599
Syndicated term finance III 22.16 6 months KIBOR + 2% Single June 2012 742,000 -
Master Istisna finance I 22.17 6 months KIBOR + 1.5% 6 half yearly November 2010 100,000 -
Master Istisna finance II 22.17 6 months KIBOR + 2% 3 half yearly June 2011 200,000 -
International Finance
Corporation (IFC) 6 months LIBOR+2.6 to 3% 15 half yearly June 2010 4,415,708 5,010,830
12,264,653 12,151,556
Engro Foods Limited
Royal Bank of Scotland 6 month KIBOR+ 1.4% 6 half yearly August 21,2009 175,000 291,667
Syndicated Finance I 6 month KIBOR i- 0.69% 4 half yearly February 20, 2015 1,500,000 1,500,000
Syndicated Finance II 22.19 6 month KIBOR + 2.6% 5 half yearly July 10, 2012 1,200,000 200,000
Habib Bank IJmited 6 month KIBOR + 2.25% 6 half yearly September 3, 2011 - 500,000 500,000
Syndicated Finance III 22.19 6 half yearly February 16,2013 500,000 -
Syndicated Finance IV 22.20 10.40% 6 half yearly January 22, 2013 250,000 -
Syndicated Long
Term Finance 22.20 10.40% 6 half yearly March 3,2012 665,051 -
Certificate
Sukuk Certificates 6 month KIBOR + 0.69% 4 half yearly July 13,2015 950,000 950,000
5,740,051 3,441,667

Unavailed
credit
Number Commencing
from —(Rupees)-
Avanceon Limited
MCB Bank Limited 22.22 6 months KIBOR + 2.25% 16 quarterly September 30,2009 1,250 18,750 20,000
Faysal Bank Limited 22.23 6 months KIBOR + 2% 20 quarterly September30,2008 22,500 27,500 37,500
Habib Bank Limited 22.24 3 months LIBOR + 3%
with a floor of 8% 20 quarterly December 31,2007 99,020 82,610 114,841
128,860 172,341
DFI Consortium finance 22.25 6 months LIBOR + 3% 20 half yearly December 15,2010 659,214 11,865,850 11,376,810
104,695,636 86,517,828
Less: Current portion shown under current liabilities 15,543,787 2,375,675
89,151,849 84,142,153
Engro Corporation Limited

22.1 Represents subscription money received (net of transaction c o s t of Rs. 178,319) from the general public against t h e issuance of
Term Finance Certificates Engro Rupiya Certificates (the Certificates). T h e Certificates are available by January 14, 2 0 1 1 on first
c o m e first serve basis or earlier if the issue amount of Rs. 4 , 0 0 0 , 0 0 0 is reached. The profit is payable semi-annually at the fixed
rate of 1 4 . 5 % from the date of investment by the Certificate holders. The Certificates are structured to redeem 0.1 % of principal in
five equal semi-annual installments in the first thirty months and the remaining 9 9 . 9 % principal in thirty sixth m o n t h f r o m t h e date
of issue. The Certificate holder, however, may ask Engro Corporation Limited for early redemption at any time from the date of
investment subject to service charge of 2% of the outstanding issue price.
These Certificate are secured by way of first ranking floating charge over all t h e present a n d future movable properties of Engro
Corporation Limited except for present a n d future trade mark, c o p y rights a n d certain investment in subsidiary companies.
IGI Investment Bank Limited has been appointed as trustees in respect of these certificates.
Engro Fertilizers L i m i t e d
2 2 . 2 This represents the syndicated finance agreement with Allied Bank Limited, Bank Alfalah Limited, Habib Bank Limited, M C B Bank
Limited, National Bank of Pakistan, Standard Chartered and United Bank U m i t e d , w h i c h w a s fully disbursed as at D e c e m b e r 3 1 ,
2 0 1 0 (January 1, 2010: (note 1.1) Rs. 12,175,000). S o m e of the banks have sold down their share to other banks.
2 2 . 3 This represents an offshore Islamic Finance Facility Agreement of U S $ 1 5 0 , 0 0 0 with Citi Bank, Dubai Islamic Bank, Habib Bank
Umited, National Bank of Pakistan, S A M B A Financial Group a n d Standard Chartered Bank.
2 2 . 4 This represents an agreement amounting to US$ 8 5 , 0 0 0 with a consortium of Development Finance Institutions comprising of DEG,
FMO and OFID.
163
22.5 The Holding C o m p a n y entered into a C Loan Agreement (Original Agreement) dated September 2 9 , 2 0 0 9 with International Finance
Corporation (IFC) for USS 50,000, divided into Tranche A (US$ 15,000) and Tranche B (US$ 35,000). Both Tranche A and B were
fully disbursed as at December 3 1 , 2 0 0 9 and transferred to Engro Fertilizers Limited under the scheme of demerger effective January
1, 2010. However, the option given to convert the Tranche A loan amount of US$ 15,000 shall remain upon the Holding Company's
ordinary shares at Rs. 2 0 5 per ordinary share (Rs. 186 as at December 3 1 , 2010) calculated at the dollar rupee exchange rate
prevailing on the business d a y prior to t h e date of the notices issued by IFC to exercise the conversion option. Such option is to
be exercised within a period of no more than five years from the date of disbursement of the loan (December 28, 2009). Tranche
B however, is not convertible. The Holding Company, upon shareholders' approval in the Annual General Meeting of February 27,
2010, has entered during the year into an agreement with the Engro Fertilizers Limited that in the event IFC exercises the aforementioned
conversion option (Tranche A), the loan amount then outstanding against the Engro Fertilizers Limited w o u l d stand reduced by the
conversion option a m o u n t and Engro Fertilizers IJmited w o u l d pay the rupee equivalent of the corresponding conversion amount
to the Holding C o m p a n y which w o u l d simultaneously be given to Engro Fertilizers Limited as a subordinated loan, carrying mark-
up payable by the Holding C o m p a n y for rupee finances of like maturities plus a margin of 1 %. The effect of IFC conversion in
substance w o u l d result in a loan from the Holding c o m p a n y having the s a m e repayment terms / dates as that of Tranche A. The
fair value of the conversion o p t i o n , included in note 10, on the date of disbursement and as at December 3 1 , 2 0 1 0 a m o u n t e d to
Rs. 3 3 8 , 6 4 7 a n d Rs. 3 6 7 , 4 4 2 respectively. The conversion option alongwith the residual amount of Tranche A, representing the
loan liability c o m p o n e n t , is s h o w n under current liabilities. The liability c o m p o n e n t classified as long t e r m last year has accordingly
been reclassified.
On December 2 2 , 2010, the Engro Fertilizers Limited and IFC have entered into an A m e n d e d Agreement for further disbursement
of US$ 3 0 , 0 0 0 over a n d above the aforementioned disbursed amount of US$ 50,000. Such a m e n d m e n t is pending for approval
of the State Bank of Pakistan and the Securities and Exchange Commission of Pakistan, hence the amount has not been disbursed
as at December 3 1 , 2 0 1 0 . The salient features of the Original Loan remain essentially the same. The additional loan of US$ 30,000
is divided into (i) 3 0 % convertible loan on the shares of the Engro Fertilizers Limited at Rs. 41.67 per share and (ii) 7 0 % non-convertible
loan. The additional loan is repayable by September 15, 2017 in three equal installments and carries interest at six months LIBOR
plus a spread of 6% or 1 0 % d e p e n d i n g on t h e listing status of t h e Engro Fertilizers Limited at various intervals. However, the
management of Engro Fertilizers Limited is confident that it will c o m p l y with the requirements of listing and avail the spread of 6%
for the entire loan tenure.
The entire loan is subordinated to other parallel senior debt of the Engro Fertilizers IJmited and guaranteed by the Holding C o m p a n y
to IFC through a Corporate Guarantee.
22.6 Engro Fertilizers Limited has arranged these finance facilities for the Urea expansion project.
22.7 Engro Fertilizers Limited has arranged this facility for a project related to the existing Urea facility.
22.8 This represents secured and listed Term Finance Certificates (TFCs) of Rs. 4,000,000. The TFCs are structured to redeem 0 . 2 8 %
of principal in the first 84 m o n t h s and remaining 9 9 . 7 2 % principal in t w o equal semi-annual instalments. Engro Fertilizers Limited
has appointed First D a w o o d Islamic Bank as trustees in respect of these TFCs.

22.9 This represents listed and secured Term Finance Certificates (TFCs) of Rs. 2,000,000 issued by the Engro Fertilizers Limited which
comprises of Private Placement of Rs. 1,500,000 and Initial Public Offer of Rs. 500,000. The TFCs are structured to redeem as follows:
Year Redemption % a g e
1 &2 0.04%
3&4 7.96%
5&6 12%
7 60%
IGI Investment Bank Limited has been appointed as trustee in respect of these TFCs.
22.10 Engro Fertilizers Limited has issued privately placed Sukuk Certificates based on diminishing Musharika amounting to Rs. 3,000,000.
The principal a m o u n t is payable after seven years in t w o semi-annual equal instalments.
22.11 Engro Fertilizers Umited has issued Privately Placed TFCs amounting to Rs. 4 , 0 0 0 , 0 0 0 (PPTFC Issue I) a n d Rs. 2 , 0 0 0 , 0 0 0 (PPTFC
Issue II) respectively. The PPTFCs are perpetual in nature with a five year call a n d a ten year put option. The PPTFC I issue has mark-
up of six months KIBOR plus 1.7% whereas the PPTFC II issue has mark-up of six months KIBOR plus 1.25%. IGI Investment Bank
Umited has been appointed as trustees in respect of these TFCs.
22.12 These loans are secured against a ranking charge over the assets of Engro Fertilizers Limited.
22.13 This loan is secured against a ranking c h a r g e over the assets of the Engro Fertilizers U m i t e d a n d C o r p o r a t e Guarantee by the
Holding Company.
22.14 T h e above finances, excluding those covered in notes 22.5, 2 2 . 1 1 , 22.12 a n d 2 2 . 1 3 , are secured by an equitable mortgage u p o n
the immovable property of the Engro Fertilizers Limited a n d hypothecation charge over current a n d future fixed assets of Engro
Fertilizers Limited. Perpetual subordinated TFCs and IFC loan are secured by a subordinated floating charge over all present and
future fixed assets excluding land a n d buildings of Engro Fertilizers Limited.
22.15 Prior period balance of Engro Fertilizers Limited represents amount transferred to Engro Fertilizers Limited by the Holding Company,
consequent to demerger (note 1.1).
Engro Polymer & C h e m i c a l s Limited

22.16 During the year, Engro Polymer a n d Chemicals Umited entered into a Syndicate Term Finance Agreement with a consortium of local
banks for Rs. 7 5 0 , 0 0 0 . The facility, in addition to the mark-up, also carries an arrangement fee at 1 %. As at December 3 1 , 2 0 1 0 ,
the whole a m o u n t of the facility has been drawn d o w n . This facility is secured by mortgage by deposit of title deeds over leasehold
land measuring 68 acres together with the building, plant a n d machinery a n d other equipment thereon. This charge ranks s e c o n d
to the charges listed in note 2 2 . 1 8 below and hypothecation by w a y of s e c o n d charge over all present a n d future fixed assets of
Engro Polymer and Chemicals Limited.
22.17 During the year, the Engro Polymer and Chemicals Limited has entered into t w o Master Istisna Agreements (the Agreements) for
facilities of Rs. 100,000 a n d Rs. 200,000, respectively. T h e entire amount of the facilities has been drawn d o w n by the Engro Polymer
and Chemicals Umited. All a m o u n t s d u e under the Agreements are payable in tranches by w a y of a series of Istisna transactions,
each Istisna transaction being treated as a separate agreement. Since t h e m a n a g e m e n t ' s intention is to roll over e a c h Istisna
transaction on repayment date to the expiry date of the facilities, the above mentioned financing has been included in long term
borrowings. The Istisna facilities are secured as follows:
i) Master Istisna I facility is secured by a joint pari passu equitable mortgage over land a n d buildings and a pari passu hypothecation
charge over plant a n d machinery, s t o c k s a n d receivables amounting to Rs. 134,000; a n d
165
ii) Master Istisna II facility is secured by a mortgage over land and buildings subordinated to the mortgage listed in note 2 2 . 1 8
and hypothecation by way of subordinated charge over all present and future fixed assets of the Engro Polymer and Chemicals
Limited amounting to Rs. 2 6 7 , 0 0 0 .
22.18 The finances, other than those referred to in note 22.16 a n d 22.17 are secured by:
(i) a first mortgage by deposit of title deeds over Project Properties;
(ii) a first mortgage by deposit of title deeds over leasehold land together with the buildings, plant, machinery a n d other equipment
thereon; a n d
(iii) hypothecation by w a y of:

- a first charge over all Project Assets; a n d
- a first charge over all present and future moveable fixed Assets other than Project Assets.
Engro F o o d s Limited
22.19 During the year, Engro Foods Limited has further utilized the Syndicated Term Finance Facility II obtained from a syndicate of banks
led by M C B Bank IJmited to the extent of Rs. 1,000,000 a n d also obtained a new Syndicated Term Finance Facility III amounting
to Rs. 5 0 0 , 0 0 0 from a syndicate of banks led by NIB Bank IJmited.
22.20 On June 9, 2 0 1 0 , Engro Foods Supply Chain (Private) Limited, a subsidiary of Engro Foods Limited, entered into a 5 year Syndicated
Term Finance Facility (STFF) with a syndicate of banks to the extent of Rs. 1,500,000. Subsequently, on A u g u s t 3 0 , 2 0 1 0 , a
supplemental syndicated term finance facility w a s entered into by the Engro Foods Limited with the syndicate, according to which
the STFF w a s reduced to Rs. 5 0 0 , 0 0 0 a n d the balance of Rs. 1,000,000 w a s converted into a Syndicated Long Term Finance
Facility (LTFF) in accordance with the plant and machinery scheme, set out by S B P (MFD Circular no. 7, dated December 3 1 , 2007).
LTFF currently carries m a r k - u p at the rate of 1 0 . 4 0 % per a n n u m . M a r k - u p is subject to c h a n g e by S B P f r o m time to t i m e through
its notifications.
22.21 The above finances are secured by a registered sub-ordinate floating charge / mortgage over the present a n d future operating assets
of the Engro Foods Limited u p t o m a x i m u m of Rs. 8 , 7 3 2 , 5 0 0 .
A v a n c e o n Limited
22.22 This facility is secured against 1 st registered pari passu equitable mortgage / hypothecation charge of Rs. 2 5 5 million over current
a n d fixed assets of the A v a n c e o n Limited. In addition to this the facility is collaterally secured by t h e c o r p o r a t e guarantee of the
Holding C o m p a n y covering 6 2 . 6 7 % of t h e total f u n d e d exposure a n d t h e personal guarantees of t h e sponsoring Directors.
22.23 This facility is secured against 1 st registered pari passu hypothecation c h a r g e on all present a n d future current a n d fixed assets
of Avaceon Limited for Rs. 167 million. In addition to this, the facility is collaterally secured by the corporate guarantee of the Holding
C o m p a n y covering 62.67 % of the total f u n d e d exposure and the personal guarantees of the sponsoring directors.
22.24 This facility is secured against letter of comfort from Avanceon Limited, corporate guarantees f r o m Engro Innovative Inc., personal
guarantees of three directors of A v a n c e o n Limited a n d an undertaking from the Holding C o m p a n y to maintain (at minimum) its
current shareholding in Avanceon Limited.


22.25 Engro P o w e r g e n Qadirpur Limited, a subsidiary of Engro PowerGen Limited entered into a financing agreement with c o n s o r t i u m
comprising of International Finance Corporation, DEG, FMO, Proparco, S w e d Fund and OFID amounting to USD 153,800. The
finances carry m a r k u p at the rate of six m o n t h s LIBOR plus 3% payable semi-annually over a period of twelve years, whereas the
principal is repayable from December 15, 2 0 1 0 in twenty semi-annually installments. C o m m i t m e n t fee at the rate of 0 . 5 % per anum
is also payable on that part of finance that has not been d r a w n . As at December 3 1 , 2 0 1 0 , Engro Powergen Qadirpur U m i t e d has
d r a w d o w n USD 144,000 (2009: USD 136,000) against the aforementioned amount.
The above finances are secured by an equitable mortgage u p o n the immovable property of Engro Powergen Qadirpur Umited and
the hypothecation charge against current a n d future assets of Engro P o w e r g e n Qadirpur Limited, except receivables from NTDC
in respect of Energy Purchase Price.
22.26 In view of the substance of the transactions, the sale a n d repurchase of assets under long t e r m finances have not been recorded
as such in these consolidated financial statements.
23 Obligations Under Finance Lease

2010 2009
(Rupees)
Present value of minimum lease payments 32,308 38,833
Less: Current portion s h o w n under current liabilities (13,310) (18,246)
18,998 20,587
23.1 It includes m a r k - u p free leases of milk cooling chillers, obtained by Engro Foods Limited, under a tripartite arrangement with the
Bank of Punjab and Pakistan Dairy Development Corporation (PDDC). Under this arrangement, m a r k - u p will be borne by PDDC
whereas Engro Foods Umited's obligation is restricted to the extent of principal amount, payable in 20 equal installments by April
15, 2 0 1 3 . The principal outstanding under this arrangement a m o u n t s to Rs. 7,368 (2009: Rs. 9,710).
23.2 Engro Foods Umited has entered into lease arrangements of vehicles with various financial institutions. Out of the gross present
value of minimum lease payments, Rs.1,021 (2009: Rs. 3,571) pertains to obligations arising from sale a n d lease b a c k of assets.
T h e liabilities under the lease agreements are payable by the year 2 0 1 1 a n d are subject to finance charge at the rate of 12.31 % to
1 4 . 1 0 % ( 2 0 0 9 : 1 4 . 1 9 % to 17.42%) per annum which has been used as the discount factor. Engro Foods Limited intends to exercise
its option to purchase the leased vehicles for Re. 1 each u p o n the completion of the respective lease periods under the agreements.
The gain arising on sale a n d lease b a c k arrangements, calculated as the difference between the sale proceeds (fair value) paid by
the financial institutions and carrying amount of the vehicles is deferred and amortized over the lease t e r m .
23.3 The a m o u n t of future p a y m e n t s for the finance leases a n d the period in w h i c h t h e s e p a y m e n t s will b e c o m e d u e are as follows:
2010 2009
Minimum Finance Present value of Present value of
lease p a y m e n t s costs m i n i m u m lease m i n i m u m lease
payments payments
Rupees
Not later than one year 15,904 2,594 13,310 18,246
Later than one year but not later than 5 years 20,784 1,786 18,998 20,587
36,688 4,380 32,308 38,833
167
24 Deferred Taxation
2010 2009
(Rupees)
Credit / (debit) balances arising on a c c o u n t of:
- Accelerated depreciation allowance 8,442,891 5,340,447
- Net borrowing costs capitalised - 207,133
- Fair value of hedging instruments (516,385) (335,287)
- Recoupable carried forward tax losses (note 24.1) (4,878,393) (3,352,092)
- Tax on subsidiary reserves 7,690 18,589
- Tax on fair value adjustment 139,598 153,200
- Recoupable m i n i m u m turnover t a x (513,965) (201,438)
- Unrealized foreign exchange losses, unpaid
liabilities a n d provision for retirement and other service benefits (63,004) (70,444)
- Share issuance cost (57,709)
-Others (89,497) (72,810)
2,471,226 1,687,298
24.1 Deferred i n c o m e tax asset is recognised for tax losses available for carry forward to the extent that the realization of the related
tax benefit through future taxable profits is probable. The aggregate tax losses available for carry forward on w h i c h t h e deferred
income tax asset has been recognized a s a t December 3 1 , 2 0 1 0 a m o u n t t o :
2010 2009
(Rupees)
- Engro Fertilizers Limited 928,030

- Engro Polymer a n d Chemicals IJmited 11,706,630 7,786,483
- Engro Foods Umited 1,235,746 1,790,955
- Engro Eximp (Private) Umited 29,661
- A v a n c e o n Limited 38,200
25 Employee Housing Subsidy

In 2 0 0 8 , the Holding C o m p a n y a n n o u n c e d a m e d i u m t e r m employee housing s u b s i d y s c h e m e for it's employee w h o w e r e n o t
entitled for Employee Share Options. Under this S c h e m e , the Holding C o m p a n y planned to disburse housing subsidy upto closing
d a t e i.e. December 3 1 , 2 0 0 9 . Effective January 1, 2 0 1 0 , on transfer of fertilizer undertaking to Engro Fertilizers, the unamortised
balanced a m o u n t i n g to Rs. 211,785 w a s transfered to Engro Fertilizers Umited from the Holding C o m p a n y under the S c h e m e of
A r r a n g e m e n t (note 1.1). T h e amortisation c h a r g e d , d u r i n g the year, in t h e profit a n d loss a c c o u n t a m o u n t e d to Rs. 1 0 5 , 6 6 1
(2009: Rs. 106,985)
The expected future charge will be Rs. 20,845 a n d Rs. 3 0 3 for 2 0 1 1 and 2 0 1 0 respectively.

26 Deferred Liabilities
2010 2009
(Rupees)
Deferred income on sale and leaseback arrangement for vehicles (note 26.1) 30 111
Retirement and other service benefits obligations (note 26.2) 117,249 96,052
117,279 96,163
26.1 Deferred i n c o m e on sale a n d leaseback arrangements

Balance as at January 1 111 700
Less: Amortization during the year (81) (589)
Balance as at December 31 30 111
26.2 Retirement and other service benefits obligations

Payable to Seperation Gratuity Plan - unfunded (note 41) 6,725
Other retirement and service benefit plans 140,296 112,288
Less: Current portion s h o w n under current liabilities 23,047 22,961
117,249 89,327
117,249 96,052
27 Trade and Other Payables

Creditors (note 27.1) 4,843,729 2,243,921
A c c r u e d liabilities 3,942,056 3,247,024
A d v a n c e s from c u s t o m e r s 2,663,585 1,735,730
Deposits f r o m dealers/ distributors refundable on termination of dealership 30,186 11,073
Retention money 286,773 1,803,495
Contractors'/ suppliers deposits 97,775 111,121
Workers' profits participation f u n d (note 27.2) 24,478 31,045
W o r k e r s ' welfare fund 199,069 143,583
Sales t a x payable 53,530 8,441
Provision for duty on import of raw material (note 27.3) 47,227
Provision for special excise duty (note 27.4) 83,795 70,494

Others 342,011 202,073
12,614,214 9,608,000
27.1 Include a m o u n t s d u e to related parties, Nil (2009: Rs. 730) d u e to Inbox Business Technologies (Private) Limited, Rs. 1,690,399
(2009: Rs. 1,152,402) due to Mitsubishi Corporation a n d Rs. 8 6 , 6 7 9 (2009: Rs. 77,045) due to Engro Vopak Terminal Limited.
2010 2009
(Rupees)
2 7 . 2 Workers' profits participation fund
Payable at the beginning of the year 31,045 18,887
Interest charge for the year 1,676 4,034
Allocation for the year (note 35) 294,156 280,072
Less: A m o u n t paid to the Trustees of the Fund (302,399) (271,948)
Payable to the fund 24,478 31,045
169
27.3 In 2 0 0 9 , Engro Polymer a n d Chemicals Limited received a letter from the Assistant Collector (Survey) Large Taxpayers Unit regarding
the utilization of raw materials imported under SRO 565(l)/2006 on a concessionary basis from c u s t o m s duty. T h e letter alleged
that the Engro Polymer a n d Chemicals Umited had violated the provisions of the SRO by utilizing the concessionary imports in
manufacturing a n d selling the intermediary product Ethylene Di Chloride (EDC) rather than its utilization in the production of the final
p r o d u c t Poly Vinyl Chloride (PVC). Engro Polymer a n d Chemicals Limited responded to the letter explaining its view that imports
under the said S R O w e r e allowable for 'PVC Manufacturing Industry' as a w h o l e , w h i c h includes manufacturing of intermediary
p r o d u c t s . During t h e year, the tax department has s h o w n its disagreement with the Engro Polymer a n d Chemicals Umited's view
and has d e m a n d e d further information, to which the Engro Polymer and Chemicals Limited has responded.
Although, no formal order creating a d e m a n d has yet been received by Engro Polymer and Chemicals Limited, however, based on
p r u d e n c e , a provision a m o u n t i n g to Rs. 4 7 , 2 2 7 (2009: Nil) in respect of c u s t o m d u t y on s u c h raw materials has been m a d e .
27.4 As at D e c e m b e r 3 1 , 2 0 1 0 , Engro Polymer a n d Chemicals Limited had paid Rs. 94,611 (2009: Rs. 94,611) on a c c o u n t of Special
Excise Duty (SED) on import of plant and machinery for the Project. Out of this amount Engro Polymer a n d Chemicals Umited has
adjusted Rs. 57,924 (2009: Rs. 57,924) in the monthly sales tax returns against SED on goods produced a n d sold by Engro Polymer
a n d Chemicals Umited. Engro Polymer and Chemicals Umited had approached the Federal Board of Revenue to obtain a clarification
i n r e s p e c t o f t h e a d j u s t m e n t o f S E D m a d e b y Engro P o l y m e r a n d C h e m i c a l s L i m i t e d i n m o n t h l y s a l e s t a x r e t u r n s .
Pending s u c h clarification, the Engro Polymer a n d Chemicals Limited based on p r u d e n c e h a d m a d e provision for the adjusted
a m o u n t of Rs. 5 7 , 9 2 4 a n d for the balance remaining of Rs. 36,687 included in loans, advance deposits, prepayments a n d other
receivables. However, in 2 0 0 9 , the Engro Polymer and Chemicals Limited received s h o w cause notices from the Additional Collector
(Adjudication) - Federal Board of Revenue, stating that the Engro Polymer and Chemicals Limited, by adjusting the aforementioned
SED, has violated the provisions of t h e Federal Excise Act, 2 0 0 5 a n d t h e Federal Excise Rules, 2 0 0 5 read with SRO 655(1 V 2 0 0 7
a n d that the a m o u n t adjusted is recoverable from t h e Engro Polymer a n d Chemicals Umited u n d e r the Federal Excise Act, 2 0 0 5
alongwith default surcharge a n d penalty. During the year, the Engro Polymer and Chemicals Limited w a s granted a stay order from
the Honourable High Court of Sindh against the recovery notice issued by the Additional Commissioner in respect of the d e m a n d .
Engro Polymer a n d Chemicals Limited filed an appeal with Commissioner Inland Revenue (Appeals) against t h e order issued by
the Additional Commissioner a n d the appeal w a s decided against the Engro Polymer a n d Chemicals Limited. Engro Polymer a n d
Chemicals Limited has n o w filed an appeal with the Income Tax Appellate Tribunal against the decision of Commissioner Inland
Revenue (Appeals).
Engro Polymer a n d Chemicals Limited is confident that the ultimate o u t c o m e of the matter will be in its favour, however, b a s e d on
p r u d e n c e is carrying a provision in this respect. Further, a provision surcharge a n d penalty thereon a m o u n t i n g to Rs. 2 5 , 8 7 1
(2009: Rs. 12,570) has also been m a d e .
28 Accrued Interest/Mark-Up
2010 2009
(Rupees)-
A c c r u e d interest/mark-up on secured:
- long t e r m borrowings 2,545,406 1,777,872
- short term borrowings 74,047 22,556
2,619,453 1,800,428

2 9 . Short Term Borrowings

Secured
29.1 The facility for short term running finance available to the Group from various banks amounts to Rs. 16,474,230 (2009: Rs. 12,382,200)
including Rs. 1,450,000 (2009: Rs. 200,000) for Bank Guarantees interchangeable w i t h short t e r m finance. The rates of m a r k up
range from 1 2 . 8 3 % to 1 5 . 1 9 % (2009: 1 2 % to 18.5%) and the facilities are secured by floating charge u p o n all current and future
moveable properties of the Group.
29.2 During the year, Engro Polymer a n d Chemicals Limited extended its short term financing arrangement of Rs. 2 0 0 , 0 0 0 (with a local
bank) upto February 2 8 , 2 0 1 1 . T h e finance carries mark-up at the equivalent State Bank of Pakistan rate plus 1 % per annum. The
finance is secured by a floating charge of Rs. 2 5 0 , 0 0 0 u p o n all present a n d future current assets of Engro Polymer a n d Chemicals
Limited. Further, during the year, Engro Polymer a n d Chemicals Limited has also obtained short-term finance from a local b a n k
amounting to Rs. 2 5 0 , 0 0 0 . The facility carries mark-up at the rate of 13.9% per annum and is repayable by January 19, 2 0 1 1 . The
facility is secured by a joint pari passu floating charge over all present a n d future stocks a n d receivables.
29.3 During the year, Engro Powergen Qadirpur Limited, a subsidiary of Engro PowerGen Limited, entered into the Working Capital Facility
Agreement (the Agreement) with Allied Bank Limited, NIB Bank Limited, KASB Bank Limited, The Bank of Punjab, Habib Metropolitan
Bank Limited and Soneri Bank Limited. The available working capital facility under the Agreement amounts to Rs. 2,000,000 (2009:
Nil). The facility carries m a r k - u p at t h e rate of 3 m o n t h s KIBOR plus 2 % . The facility is secured by (i) present a n d future energy
payment receivables from the Power Purchaser a n d (ii) first charge over all current assets, except receivable f r o m NTDC in respect
of Capacity Purchase Price, and subordinated charge over present and future plant, machinery equipments and other movable
assets of Engro P o w e r g e n Qadirpur Limited. The use of facility is restricted f o r payments of operations a n d maintenance cost of
the Power Plant (upto 1 0 % of the facility amount) and payments to fuel suppliers against purchase of fuel.
2 9 . 4 T h e facilities of A v a n c e o n Limited are secured by a corporate guarantee of the Holding C o m p a n y of 6 2 . 6 7 % of the total f u n d e d
exposure alongwith personal guarantees of sponsoring directors.
29.5 During t h e year, Engro Eximp (Private) Limited obtained f u n d s under the Export Refinance S c h e m e (ERF) of t h e State Bank of
Pakistan. The funds outstanding under the ERF-II facility a m o u n t to Rs 9 6 , 0 7 2 as at D e c e m b e r 3 1 , 2 0 1 0 carrying m a r k - u p at the
current rate of 1 0 % per annum.
2 9 . 6 T h e facilities for opening letters of credit a n d guarantees of subsidiary companies as at December 3 1 , 2 0 1 0 amounts to Rs. 9,417,757
(2009: Rs. 6,299,000).
Unsecured
29.7 During the year, Engro Fertilizers Limited issued a Commercial Paper in September, 2 0 1 0 having a face value of Rs. 1,000,000 at
discount, for a period of 6 m o n t h s carrying mark-up of 1 4 . 1 4 % per a n n u m . These were listed on Karachi S t o c k Exchange Over-
The-Counter market subsequent to the year end.
171
3 0 . Contingencies and Commitments

Contingencies 2010 2009
(Rupees)
30.1 Corporate Guarantees issued in favour of Subsidiary Companies:
- Engro Fertilizers Limited (note 30.2) 65,642,000
- Engro Powergen Qadirpur Limited (note 30.3) 857,000
- Engro PowerGen IJmited 53,000
30.2 The Holding C o m p a n y in addition to above has also issued a Corporate Guarantee to International Finance Corporation (IFC) for
USD 80,000 under the A m e n d e d Agreement entered into by Engro Fertilizers Limited with IFC (note 2 2 . 5 ) .
30.3 Represents Corporate Guarantee amounting to USD 10,000 issued to Allied Bank Limited to o p e n DSRA letter of credit in favour
of the Engro Powergen Qadirpur Umited senior long term lenders.
3 0 . 4 T h e Holding C o m p a n y a n d Engro Fertilizers Umited, by virtue of the s c h e m e of demerger have extended project completion support
to the lenders of the Engro P o w e r g e n Qadirpur Limited, a subsidiary of Engro P o w e r G e n Limited for U S D 15,400 (2009: U S D
15,400). These projects s u p p o r t s are contingent u p o n o c c u r r e n c e or n o n - o c c u r r e n c e of specified future events. T h e project is
c o m p l e t e a n d lender N O C s are awaited.
30.5 Claims, including pending lawsuits, against the Engro Fertilizers Limited not acknowledged as debts a m o u n t e d to Rs. 36,018 (2009:
Rs. 47,658).
30.6 Bank guarantees of Rs. 3,830,939 (2009: Rs. 2,480,283) have been issued in favour of third parties. This includes b a n k guarantee
which has been given by Engro Powergen Qadirpur Limited, a subsidiary of Engro PowerGen Umited to Sui Northern Gas Pipelines
Umited (SNGPL) amounting to Rs. 1,596,126 (2009: Rs.1,353,701) in accordance with the terms of Gas Supply Agreement between
the Engro Powergen Qadirpur Umited a n d the SNGPL. As per the aforesaid agreement, the Engro P o w e r g e n Qadirpur Limited is
required to provide b a n k guarantee in favor of S N G P L for an a m o u n t equivalent to three m o n t h s contractual quantities of gas.
30.7 Post dated cheques issued to c u s t o m s & excise department for clearance of Rockwell Automation a n d Honeywell shipments a n d
to IGI Insurance c o m p a n y limited as security against insurance guarantees issued by t h e m in favor of AES Lalpir a n d Nestle Ltd
for performance of contracts amounting to Rs. 10,003 ( 2 0 0 9 : 1 0 , 2 7 1 ) .
30.8 Engro Fertilizers Limited is contesting the penalty of Rs. 99,936 paid a n d expensed in 1997, imposed by the State Bank of Pakistan
(SBP) for alleged late payment of foreign exchange risk cover fee on long term loans a n d has filed a suit in the High Court of Sindh.
A partial refund of Rs. 6 2 , 6 1 8 w a s , however, recovered in 1999 from S B P and the recovery of the balance a m o u n t is dependent
on the Court's decision.
30.9 Engro Fertilizers Limited had c o m m e n c e d t w o separate arbitration proceedings against the Government of Pakistan for non-payment
of marketing incidentals relating to the years 1983-84 a n d 1 9 8 5 - 8 6 respectively. The sole arbitrator in the second case has awarded
the G r o u p Rs. 4 7 , 8 0 0 w h e r e a s t h e a w a r d f o r t h e earlier years is a w a i t e d . T h e a w a r d for t h e s e c o n d arbitration has not b e e n
recognised d u e to inherent uncertainties arising from its challenge in the High Court of Sindh.

30.10 During the year, a lawsuit has been filed against Engro Foods Supply Chain (Private) Limited, a subsidiary of Engro Foods Limited,
in the Civil Court, Sheikhupura by certain previous co-workers claiming pre-emptive rights over a portion of the land, acquired by
Engro Foods Supply Chain (Private) Limited of rice processing plant. Engro Foods Supply Chain (Private) Limited has filed its written
statement thereagainst and the case is currently being heard. However, Engro Foods Supply Chain, based on the opinion of legal
advisor is confident that the matter will be decided in its favour a n d accordingly, the financial effect, if any, has not been recognized
in these consolidated financial statements.
Commitments 2010 2009

(Rupees)
30.11 Property, plant & equipment 2,446,137 5,504,260
30.12 Letter of credits other than for capital expenditure 143,732 2,863,584
30.13 Avanceon LP (USA), a subsidiary of Avanceon Limited is obligated under non-cancellable operating leases for c o m p u t e r & office
equipment which expire at various dates through 2 0 1 1 .
The future lease c o m m i t m e n t s related to non-cancellable operating leases as of December 3 1 , are as follows:
2010 2009
(Rupees)-
Not later than o n e year 1,212 1,723

Later than one year and not later than five years 799
Later than five years 399
1,212 2,921
30.14 Avanceon Limited leases its facilities from Cornerstone Investments (a related party) under an operating lease at a monthly rental
of Rs. 2,349 (2009: Rs. 2,324). The lease shall expire on April 3 0 , 2 0 1 1 and future c o m m i t m e n t s in respect thereof a m o u n t to Rs.
9,396 all of which are d u e not later than one year.
30.15 Engro Polymer and Chemicals Limited has entered into operating lease arrangements with Al-Rahim Trading Terminal a n d D a w o o d
Herculies Limited - a related party, for storage a n d handling of Ethylene Di Chloride (EDC) a n d Caustic s o d a , respectively. T h e total
lease rentals due under these lease arrangements are payable in monthly installments till July 3 1 , 2019. The future aggregate lease
payments under these arrangements are as follows:
2010 2009
(Rupees)
Not later than 1 year 59,840 43,398

Later than 1 year a n d no later than 5 years 57,600 57,600
Later than 5 years 50,400 64,800
167,840 165,798
31 Net Sales
O w n manufactured product (note 31.1 to 31.3) 63,194,878 44,554,782
Less: Sales tax 2,986,339 2,167,280
60,208,539 42,387,502
Purchased p r o d u c t / services rendered 19,857,003 15,839,885

Less: Sales tax 89,777 75,019
19,767,226 15,764,866
79,975,765 58,152,368
173
31.1 Includes export sales by Engro Foods Limited, Engro Polymer and Chemicals Limited, Avanceon Limited a n d Engro Eximp (Private)
Umited amounting to Rs. 2 0 , 9 9 8 (2009: 15,994), Rs. 2 , 0 9 4 , 0 4 3 (2009: Rs.1,463,441), Rs. 185,028 (2009: Rs. 259,224) a n d Rs.
3 6 2 , 3 7 0 (2009: Rs. 114,303) respectively.
31.2 Includes sale of electricity by Engro Polymer a n d Chemcials Umited and Engro Powergen Qadirpur U m i t e d , a subsidiary of Engro
PowerGen Umited amounting to Rs. 114,541 (2009: Rs. 214,924) a n d Rs. 5,727,336 (2009: Nil) respectively.
31.2.1 Under t h e Power Purchase Agreement b e t w e e n Engro P o w e r g e n Qadirpur Limited, subsidary of Engro P o w e r G e n Limited a n d
National Transmission Company, the reference tariff a p p r o v e d by NEPRA is to be adjusted on the d a t e of start of Commercial
Operations (COD). Accordingly, Engro Powergen Qadirpur Limited u p o n achieving C O D on March 2 7 , 2 0 1 0 , filed an application
with NEPRA on April 19, 2 0 1 0 for tariff adjustment/re-determination. The NEPRA approved the revised tariff on November 2, 2 0 1 0 ,
with certain modifications, in particular revising the d e b t to USD 1 3 4 . 3 0 9 million, t h e related notification in the official gazette of
G o v e r n m e n t of Pakistan is e x p e c t e d shortly. S u c h NEPRA revised tariff resulted in an additional revenue, capacity a n d energy,
amounting to Rs. 5 2 6 , 1 9 9 , including the allowed quarterly indexations thereon. Engro P o w e r g e n Qadirpur Limited, however, has
not accepted such revised tariff a n d has filed a Review Petition thereagainst with NEPRA, in particular the arbitrary reduction of debt
to USD 134.309 million from USD 142.63 million. Engro Powergen Qadirpur Limited being confident that its Review Petition w o u l d
be upheld has recognized revenue amounting to Rs. 5 2 7 , 9 9 9 net of adjustment effect, in respect of LIBOR rate used by NEPRA.
The aforementioned amount, however, will be invoiced after the tarrif have been duly notified in the official gazette.
3 1 . 3 Sales are net of marketing allowances of Rs. 1 2 3 , 5 4 2 (2009: Rs. 177,970), special excise duty Rs. 120,773 (2009: Rs. 103,998)
a n d discounts 9 4 , 4 3 8 of Rs. (2009: Rs. 174,579).
3 1 . 4 Embedded derivatives and exchange differences

Tariff of Engro P o w e r g e n Qadirpur Limited, like other p o w e r c o m p a n i e s , c o m p r i s e s of various price c o m p o n e n t s w i t h indexations
falling within t h e ambit of e m b e d d e d derivatives. S u c h e m b e d d e d derivative as per International A c c o u n t i n g Standard (IAS) 3 9 ,
'Financial Instrument: Recognition a n d Measurement' needs to be separated from the host contract a n d accounted for as derivative
if e c o n o m i c characteristics and risks are not closely related to the host contract, an accounting policy a d o p t e d by Engro Powergen
Qadirpur Limited, a subsidiary of Engro PowerGen Limited. The e c o n o m i c characteristics a n d risks of m o s t of Engro P o w e r g e n
Qadirpur Limited's tariff indexations are closely related to the economic characteristics and risks of the Power Purchase Agreement
(the Host Contract). Hence have not been separated a n d a c c o u n t e d for under IAS 39 as a derivative. Engro P o w e r g e n Qadirpur
Umited, however, has sought clarification from the Institute of Chartered Accountants of Pakistan (ICAP) in respect of the indexations
pertaining to (i) U S D / P K R exchange rate (applicable to Engro P o w e r g e n Qadirpur Umited's price c o m p o n e n t s of debt, return on
equity, return on equity during construction); a n d (ii) US CPl & U S D / P K R exchange rate (applicable to Engro Powergen Qadirpur
U m i t e d ' s price c o m p o n e n t s of fixed a n d variable operations a n d maintenance - foreign). In addition, Engro P o w e r g e n Qadirpur
Umited has also requested ICAP to prescribe a definite basis or guidelines for the valuation of such e m b e d d e d derivatives considering
the subjectivity involved therein. Further, as indexation of USD/PKR exchange rate related to debt c o m p o n e n t being not recognized
separately as e m b e d d e d derivative, the Engro Powergen Qadirpur Limited taking cognizance of the 'matching principle' requested
the Securities a n d Exchange C o m m i s s i o n of Pakistan (SECP) to allow deferment of recognizing exchange loss on translation of
borrowings under IAS 21 - Foreign Currency Transactions in the statement of comprehensive income till the clarification sought on
the recognition of the foreign currency indexations from ICAP has been received.
S u b s e q u e n t to year e n d , SECP vide S.R.O 87(1)/2011 d a t e d February 3, 2 0 1 1 has granted waiver f r o m the requirements of IAS
21 a n d IAS 39 to all the Independent Power Projects (IPPs), not covered under Circular 11 of 2 0 0 8 , for a period of one year. Whereby,
capitalization of exchange differences, as allowed to IPPs under the 1994 p o w e r policy, is also allowed to all IPPs having foreign
c u r r e n c y l o a n s . Further, s u c h IPPs shall not be p e r m i t t e d to r e c o g n i s e e m b e d d e d derivatives as required u n d e r IAS 3 9 .
In view of the a b o v e S.R.O, e x c h a n g e loss a m o u n t i n g to Rs. 2 9 4 , 0 0 0 has b e e n capitalised to Property, plant a n d equipment
(note 4.4) a n d has not recognised the aforementioned e m b e d d e d derivatives.

32 Cost of Sales
2010 2009
(Rupees)
Raw a n d packing materials c o n s u m e d including unprocessed rice 32,634,540 21,775,169
Salaries, wages a n d staff welfare (note 32.1) 2,118,689 1,618,171
Fuel a n d power 4,833,217 4,184,779
Repairs a n d maintenance 850,164 789,094
Depreciation (note 4.2) 2,634,394 1,589,923
Amortization (note 7.1) 4,166 9,532
Consumable stores 518,701 244,636
Staff recruitment, training, safety and other expenses 48,129 60,757
Purchased services 630,855 277,735
Storage a n d handling 882,897 339,425
Travel 114,654 103,028
Communication, stationery a n d other office expenses 138,934 105,063
Insurance 319,680 234,744
Rent, rates and taxes 114,663 114,619

27,912 14,139
Stock - finished g o o d s written off
(121,539) 85,178
Provision against sales tax refundable
69,719 37,952
Other expenses
Manufact uring cost 45,819,775 31,583,944
A d d : Opening stock of work-in-progress 62,663 63,381

Less: Closing s t o c k of work-in-progress 53,313 62,663
9,350 718
Cost of g o o d s manufactured 45,829,125 31,584,662
A d d : Opening stock of finished g o o d s manufactured 863,140 1,445,233

Less: Closing stock of finished goods manufactured 2,105,269 863,140
(1,242,129) 582,093
Cost of g o o d s sold - o w n manufactured product 44,586,996 32,166,755
- purchased product (note 32.2) 13,830,863 11,414,714
- others 1,284,271 1,076,727

59,702,130 44,658,196
32.1 Salaries, wages a n d staff welfare includes Rs. 135,677 (2009: Rs. 106,944) in respect of staff retirement benefits.
2010 2009
-(Rupees)-
3 2 . 2 Cost of sales - purchased product

Opening stock 401,607 3,185,107
A d d : Purchases 14,912,195 8,631,214
Less: Closing s t o c k 1,482,939 401,607

13,830,863 11,414,714
175
33 Selling and Distribution Expenses

2010 2009
(Rupees)
Salaries, w a g e s a n d staff welfare (note 33.1) 2,017,794 1,361,411
Staff recruitment, training, safety a n d other expenses 76,120 93,541
Product transportation a n d handling 2,682,792 2,090,356
Repairs a n d maintenance 52,806 22,666
Advertising a n d sales promotion 1,667,280 1,631,022
Rent, rates a n d taxes 415,119 255,718
Communication, stationery a n d other office expenses 228,777 215,263
Travel 277,978 174,595
Depreciation (note 4.2) 214,488 118,112
Amortization (note 7.1) 33,532 16,240
Purchased services 198,669 64,724
Donations (note 48) 135,945 57,988
Provision for impairment of trade d e b t s (note 14.3) 130,972 25,241
Trade debts written off - 154
Others 157,408 88,285
8,289,680 6,215,316
Salaries, wages a n d staff welfare include Rs. 114,692 (2009: Rs. 95,432) in respect of staff retirement benefits.
Other Operating Income

2010 2009
(Rupees)
Financial assets:
Income on deposits / other financial assets 399,862 133,821
Exchange gain 11,355 23,157
Non financial assets:

Service charges 92 1,782
Gain on curtailed defined benefit pension plan 4,073 5,700
Gain on disposal of property, plant a n d equipment 321,835 30,318
Gain arising f r o m changes in fair value
less estimated point-of-sale c o s t s of
biological assets 14,309 136,667
Share option compensation scheme expense written back 101,224 -
Others 44,571 58,712
897,321 390,157

35 Other Operating Expenses

2010 2009
(Rupees)
Workers' profits participation fund (note 27.2) 294,156 280,072
Workers' welfare fund 199,069 143,737
Legal a n d professional charges 150,705 80,911
Research a n d development (including salaries and wages) 43,040 26,800
Loss on death / sales of biological assets 5,357 2,503
Foreign exchange loss 185,255 290,280
loss on fair value adjustments of e m b e d d e d derivative 28,795 -
Auditors' remuneration (note 35.1) 22,530 15,752
Professional tax 625 213
Others 28,450 3,293
957,982 843,561
Auditors' remuneration:
The aggregate a m o u n t c h a r g e d in respect of auditors' remuneration, including remuneration of auditors' of foreign subsidiaries,
is as follows:
Fee for the
- audit of annual financial statements 8,110 6,869
- review of half yearly financial statements 1,015 1,000
Certifications, audit of retirement benefit funds other
advisory services and review of compliance
with C o d e of Corporate Governance 11,972 4,891
Tax services 90 1,840
Reimbursement of expenses 1,343 1,152
22,530 15,752
Finance Cost
Interest/mark-up on
- Long term borrowings 3,324,269 1,571,528
- Short term borrowings 776,021 598,367
A c c r u e d interest on Workers' profits participation fund (note 27.2) 1,676 4,034
Others 98,920 47,810
4,200,886 2,221,739
Share of Income From Joint Venture

Engro Vopak Terminal Limited
Share of income before taxation 853,423 691,485
Less: Share of provision for taxation (298,698) (232,915)
554,725 458,570
177
38 Taxation
2010 2009
(Rupees)
Current
- for the year 1,333,929 1,613,568
- for prior years (409,471) 170,505
924,458 1,784,073
Deferred
- for the year 1,039,056 (197,303)
- for prior years (127,383) (243,289)
911,673 (440,592)
1,836,131 1,343,481
38.1 As a result of demerger, as referred to in n o t e 1.1, all pending tax issues of the Fertilizer Undertaking of the Holding C o m p a n y have
been transferred to Engro Fertilizers Limited. Major issues pending before the tax authorities are described below:
The Holding C o m p a n y in its tax return for financial years 2006 to 2 0 0 8 (tax years 2 0 0 7 to 2009) claimed the benefit of Group Relief
under section 5 9 B of the Income Tax Ordinance, 2001 (the Ordinance) on losses acquired for an equivalent cash consideration from
its wholly o w n e d subsidiary, Engro Foods Umited, amounting to Rs. 428,744, Rs. 6 2 2 , 1 0 3 and Rs. 4 5 0 , 0 0 0 respectively.
The tax department raised a d e m a n d of Rs. 4 7 6 , 4 7 9 (rectified to Rs. 406,644), Rs. 9 1 0 , 8 4 5 a n d Rs. 1,670,814 for financial years
2 0 0 6 , 2 0 0 7 a n d 2 0 0 8 respectively, mainly on a c c o u n t of disallowance of Group Relief (in all three years), inter corporate d M d e n d
(in 2 0 0 7 a n d 2008) a n d write d o w n of inventories to net realisable value (in 2008) besides certain other issues. Uptill last year, the
Holding C o m p a n y h a d paid Rs. 1 7 0 , 0 0 0 a n d Rs. 4 0 0 , 0 0 0 for 2 0 0 6 a n d 2 0 0 7 respectively. Stay by the High Court of Sindh for
payment of balance a m o u n t for financial year 2 0 0 6 w a s granted to the Holding C o m p a n y pending decision of the appeal filed by
the Holding C o m p a n y before the Income Tax Appellate Tribunal (ITAT). However, for financial year 2 0 0 7 the issue of Group Relief
w a s decided by the Commissioner Inland Revenue (Appeals I) in Holding C o m p a n y ' s favour against w h i c h the tax department filed
an appeal with ITAT. During the current year, the Engro Fertilizers Limited, n o w contesting all pending tax issues of the Holding
Company, paid Rs. 600,000 for financial year 2 0 0 8 , while stay for payment for the balance amount w a s granted by the tax department
till December 3 1 , 2 0 1 0 . Appeals has also been filed by the Engro Fertilizers Limited with the Commissioner Inland Revenue (Appeals
I). T h e tax department u p o n expiry of the stay period has raised a payment d e m a n d of Rs. 5 0 9 , 2 1 8 on January 2 7 , 2 0 1 1 , against
which the management intends to apply its refunds pending with the tax department.
The main contention for disallowance of Group Relief, a m o n g others, being the non-designation of the Holding C o m p a n y and the
Engro Foods U m i t e d as ' c o m p a n i e s ' entitled to Group Relief by the Securities & Exchange C o m m i s s i o n of Pakistan (SECP), a
requirement of section 5 9 B of the Ordinance. The Holding C o m p a n y had applied for such a designation but remained pending with
SECP for w a n t of related regulations not framed t h e n . These regulations were f r a m e d by SECP subsequently in December 2 0 0 8
a n d on resubmission of application the Holding C o m p a n y alongwith other subsidiaries have been registered as a Group. Designation
has also been granted for Group Relief and Group Taxation during the year.
During the year, orders were received for cases pending at ITAT relating to financial years 2 0 0 6 a n d 2 0 0 7 . The major issues of Group
Taxation a n d Group Relief have been decided in t h e Engro Fertilizers Limited favour in both t h e years. Further, all the assessments
of the Holding Company, for income years 1995 to 2 0 0 2 which were in appeal at the ITAT level have been decided during the year.
The major o n e being apportionment of gross profit a n d expenses between normal income a n d Final Tax Regime (FTR) income has
been remanded back to the tax department by ITAT with specific directions for apportionment of gross profit on the basis of turnover
as claimed by the Holding Company. Engro Fertilizers Umited, therefore has written back provision amounting to Rs. 4 6 3 , 7 8 4 , in
respect of the aforementioned years. The tax department however, may file reference application against the ITAT decisions before
the Sindh High Court.

{Amounts in thousand)
38.2 During the year, in respect of Engro Foods Limited, the Commissioner Inland Revenue has raised a d e m a n d of Rs. 337,386 for tax
year 2 0 0 8 by raising an order to disallow provision for gratuity, advances and stock written-off, repair and maintenance, provision
for b o n u s , sales p r o m o t i o n a n d advertisement expenses. In addition, t h e aforementioned order has treated the consideration
receivable f r o m the Holding Company, on surrender of tax loss as i n c o m e . Engro Foods Limited has filed an appeal before the
Commissioner Appeals against s u c h order, w h i c h is yet to be heard. Engro Foods Limited has also filed a petition thereagainst
before the Sindh High Court, whereby the jurisdiction of the Commissioner Inland Revenue has been challenged for passing s u c h
an order, The Sindh High Court considering the legal issues involved has instructed the tax department not to take any coercive
action till the hearing of the appeal.
38.3 Further during the year, in respect of Engro Eximp (Private) Limited, t h e tax department raised d e m a n d s of Rs 2 3 9 , 9 0 2 and Rs
1,708,621 for financial years 2 0 0 6 and 2 0 0 8 respectively, mainly on the disallowance of subsidy received by Engro Eximp (Private)
Limited on imported phosphatic fertilizer from the Government of Pakistan as allowable expense. The Commissioner Inland Revenue,
on the Engro Eximp (Private) Limited's appeal thereagainst, had set aside the aforementioned a m e n d e d orders with the directions
to the Additional Commissioner Inland Revenue for denovo proceedings.
The Additional Commissioner Inland Revenue has initiated the proceedings as directed, which are in progress. Engro Eximp (Private)
Limited is however confident that the above issue will be d e c i d e d in the their favour without any additional tax liability a n d as s u c h
the Group has not made provision for the aforementioned d e m a n d in the consolidaed financial statements.
38.4 Following are the taxation matters pertaining to Engro Polymer and Chemicals Limited:
38.4.1 During the year, Engro Polymer a n d Chemicals Limited received a notice of d e m a n d of Rs. 213,172 in respect of Tax year 2008.
The Deputy Commissioner Inland Revenue has m a d e various additions to the returned income amounting to Rs. 207,370 and has
not considered the brought forward losses amounting to Rs. 974,770 resulting in the aforementioned tax d e m a n d . The additions
to income are mainly on account of trading liabilities and finance costs incurred in relation to the expansion Project. The aforementioned
brought forward losses have been amended d u e to revision of returns as per the ITAT Order mentioned in note 38.4.3.
Engro Polymer a n d Chemicals Limited has filed an appeal against the aforementioned d e m a n d with t h e C o m m i s s i o n e r Inland
Revenue (Appeals), which is currently pending. While the appeal proceedings were pending, the Officer Inland Revenue (OIR) adjusted
a sum of Rs. 180,768 in the aforementioned demand against Engro Polymer and Chemicals Limited's assessed refunds. Consequently,
Engro Polymer and Chemicals Limited has paid the balance amount of Rs. 32,404 'under protest'. Further, the OIR has issued t w o
s h o w cause notices d a t e d D e c e m b e r 9, 2 0 1 0 for the levy of additional tax relating to Tax year 2 0 0 8 aggregating to Rs. 8,106.
Subsequent to year e n d , replies to the s h o w cause notices have been filed for withdrawal thereof. Engro Polymer and Chemicals
Limited's management is of the view that since the matter is pending with the Commissioner Inland Revenue (Appeals), no cohesive
recovery measures can be initiated unless a decision is obtained f r o m an independent f o r u m outside the departmental hierarchy.
Further, no formal order creating a demand has been received to date in response of s h o w cause replies submitted by Engro Polymer
and Chemicals Limited.
The management of Engro Polymer and Chemicals Limited, based on the advice of its tax consultant, is confident that the ultimate
o u t c o m e of the aforementioned matter w o u l d be favorable and consequently the Group has not recognized the effects for the same
384,2 During the m o n t h of December 2010, Engro Polymer and Chemicals Limited has also received a notice of d e m a n d of Rs. 163,206
in respect of Tax year 2009. The Deputy Commissioner Inland Revenue has made various additions to the returned income amounting
to Rs. 546,050 and has not considered the brought forward losses amounting to Rs. 4 9 9 , 3 7 6 resulting in the aforementioned tax
d e m a n d , The additions to income are mainly on account of trading liabilities and finance costs incurred in relation to the expansion
Project. The aforementioned brought forward losses have been amended due to revision of returns as per the ITAT Order mentioned
in note 38.4.3.
179
The entire d e m a n d of Rs. 163,206 has been adjusted vide OIR order dated December 2 0 , 2 0 1 0 against assessed refundable taxes.
Subsequent to year end, Engro Polymer and Chemicals Limited has filed an appeal against the aforementioned d e m a n d with the
Commissioner Inland Revenue (Appeals), which is currently pending.
The management of Engro Polymer and Chemicals IJmited, based on the advice of its tax consultant, is confident that the ultimate
o u t c o m e of the aforementioned matter w o u l d be favorable and consequently the Group has not recognized the effects for the s a m e
38.4.3 While finalizing t h e assessment for t h e assessment year 2 0 0 0 - 2 0 0 1 , t h e Taxation Officer h a d disallowed t h e claim of First Year
Allowance (FYA) by Engro Polymer a n d Chemicals IJmited on the grounds that Engro Polymer a n d Chemicals Limited had not met
the criteria for claiming this allowance as required under the repealed Income Tax Ordinance, 1979. Engro Polymer a n d Chemicals
IJmited h a d filed an appeal against this disallowance w h i c h w a s decided by t h e Commissioner of Income Tax (Appeals) in favor of
the Company. The department, therefore, filed second appeal before the Income Tax Appellate Tribunal (ITAT). A similar disallowance
h a d also been m a d e for the assessment year 2 0 0 1 - 2 0 0 2 by the Taxation Officer in 2 0 0 3 . However, u p o n appeal, this matter w a s
ultimately d e c i d e d in Engro Polymer a n d Chemicals Limited's favor in 2 0 0 5 by t h e Income Tax Appellate Tribunal (ITAT).
During the year, the ITAT in departmental appeal pertaining to assessment year 2 0 0 0 - 2 0 0 1 , d e c i d e d the aforementioned matter
against Engro Polymer a n d Chemicals Limited by departing from the previous order for the a s s e s s m e n t year 2 0 0 1 - 2 0 0 2 . The
disallowance of FYA a m o u n t s to Rs. 1,884,359.
This disallowance resulted in tax deductible timing differences, the effects of which have been recognized in the consolidated financial
s t a t e m e n t s after taking into a c c o u n t the consequential effects of the ITAT Order in the t a x years s u b s e q u e n t to 2 0 0 0 - 2 0 0 1 .
Consequently, Engro Polymer a n d Chemicals IJmited has revised its income tax returns for the tax years 2 0 0 3 to 2 0 0 7 a n d 2 0 0 9
resulting in a tax liability of Rs. 8 6 , 7 6 9 for Tax year 2 0 0 8 , w h i c h has been settled by adjustment o u t of recoupable minimum tax
brought forward of prior years a n d refunds available in other tax years as mentioned in note 38.4.1 above.
3 8 . 5 Relationship between tax expense and accounting profit

The tax on the G r o u p ' s profit before tax differs from the theoretical amount that w o u l d arise using the G r o u p ' s applicable t a x rate
as follows:
2010 2009
(Rupees)
Profit before tax 8,277,133 5,062,283
Tax calculated at the rate of 3 5 % 2,896,997 1,771,799

Depreciation on e x e m p t assets not deductible for t a x purposes 34,495 34,495
Effect of exemption from tax on certain income (392,005) (509,135)
Effect of applicability of lower tax rate a n d other tax credits / debits (450,035) 44,231
Prior year tax charge (406,127)
Un-recoupable m i n i m u m turnover tax 164,199 23,869
Net effect of consolidation adjustments (11,393) (21,778)
Tax charge for t h e year 1,836,131 1,343,481

39 Earnings Per Share - Basic and Diluted

2010 2009
(Rupees)
The basic earning per share of the Group is based on:

Profit after taxation (attributable to the owners of the Holding Company) 6,790,049 3,806,918
(Numbers)
(Restated)
Weighted average number of ordinary shares (in thousand) 327,737 310,913
There is no dilutive effect on the basic earnings per share of the Group since the average annual market share price of the Holding
Company's share is still marginally less than the exercise price of the options granted on the Holding Company's shares to employees
(note 9) a n d IFC (note 22.5). However, b a s e d on t h e year e n d market share price as at D e c e m b e r 3 1 , 2 0 1 0 t h e diluted earnings
per share of the Group calculates to Rs. 20.61 per share.
40 Remuneration of Chief Executive, Directors and Executives

The aggregate amounts charged in the consolidated financial statements for remuneration, including all benefits, to chief executives,
directors and executives of the Group are given below:
2010 2009
Directors Executives Di rectors Executives
Chief Others Chief Others
Executive Executive
-(Rupees)-
Managerial remuneration 176,657 18,615 1,858,348 112,273 37,066 1,580,120

Retirement benefits funds 16,795 2,236 233,696 11,660 4,154 174,333
Other benefits 43,429 6,859 371,791 35,589 15,413 303,512
Fees - 25,205 - - 8,433 -
Total 236,881 52,915 2,463,835 159,522 65,066 2,057,965
N u m b e r of persons
including those w h o
w o r k e d part of the year 8 54 1,098 8 30 922
40.1 T h e Group also makes contributions based on actuarial calculations to pension a n d gratuity funds and provides certain household
items for use of s o m e employees. Cars are also provided for use of Chief Executives and directors and s o m e employees.
40.2 Premium charged in the consolidated financial statements in respect of directors indemnity insurance policy, purchased by the Group
during the year, a m o u n t e d to Rs. 3,558.
181
41 Retirement Benefits
41.1 Defined benefit plans
The latest acturial valuation of the defined benefit plans w a s carried out as at December 3 1 , 2 0 1 0 , using the Projected Unit Credit
M e t h o d . Details of the defined benefit plans are as follows:
41.1.1 Engro C o r p o r a t i o n L i m i t e d , H o l d i n g C o m p a n y
41.1.1.1 Balance sheet reconciliation

2010 2009 2010 2009
(Rupees).
Present value of funded obligation 115,956 310,479 28,703
Surplus (9,243) (36,104) (33,942)
Unrecognised actuarial gain 15,986 28,873 2,055
Payable to assosciated c o m p a n i e s (8,421)
Unrecognised past service cost 1,678 7,231
Net (asset) / liability at e n d of the year (31,887)
41.1.1.2 M o v e m e n t in n e t (asset)/liability r e c o g n i s e d
Net (assetyiiability at beginning of the year (31,187)
(Reversal)/expense recognised 1,762 11,334 (5,700)
A m o u n t s received from/(paid to) the Fund (1,762) (11,334) 5,000
Net (assetyiiability at end of the year (31,887)
41.1.1.3 M o v e m e n t in d e f i n e d benefit o b l i g a t i o n
As at beginning of the year 68,020 267,158 - 29,311
Interest cost 8,309 39,540 - 4,172
Benefits paid during the year (4,755) - (2,501)
Actuarial (gain)/loss on obligation 27,757 540 - (2,279)
Unrecognised past service cost (10,198)
• a b i l i t y transferred in respect of inter-company transfer 8,421 849 -_ -_
As at e n d of the year 115,956 310,479 - 28,703
41.1.1.4 M o v e m e n t in fair v a l u e of plan assets

As at beginning of the year 81,520 291,946 - 67,276
Expected return on plan assets 9,579 41,882 - 9,866
(Repayment to) / Contribution by the C o m p a n y 1,762 11,334 - (5,000)
Benefits paid during the year (4,755) - (2,501)
Actuarial g a i n / (loss) on plan assets 32,338 5,327 - (6,996)
Liability transferred in respect of inter-company transfer - 849 - -_
As at e n d of the year 125,199 346,583 ~~~ 62,645

41.1.15 C h a r g e f o r t h e year
2010 2009 2010 2009
(Rupees).
Interest c o s t 8,309 39,540 4,172
Expected return on plan assets (9,579) (41,882) (9,866)
Amortisation of unrecognized past service cost (129) (64)
Amortisation of transitional obligation (439)
Recognition of past service cost (2,464)
Net actuarial (gain)/loss recognised during the year (288) (702)
1,762 11,334 (5700)
41.1.1.6 Principal actuarial a s s u m p t i o n s used in the actuarial valuation

2010 2009 2010 2009
Discount rate 14.5 12 12

Expected per annum rate of return on plan assets 14.5 12 12
Expected per annum rate of increase in pension 4.5
Expected per annum rate of increase in future salaries 14.5 12
-(Rupees)-
41.1.1.7 A c t u a l return on plan assets 41,917 47,209 2,870
2010 2009
Rupees % Rupees
41.1.18 Plan assets c o m p r i s e of t h e f o l l o w i n g

Cash 5,890 5% 23,493 6%
Others 20,847 17% 115,933 28%
125,199 409,228
41.1.1.9 The expected return on plan assets w a s determined by considering the e x p e c t e d returns available on the assets underlying the
sheet date.
183
41.1.1.10 C o m p a r i s o n of five y e a r s
2010 2009 2008 2007 2006

-(Rupees)-
Present value of defined benefit obligation (115,956) (339,182) (296,469) (587,655) (536,209)
Fair value of plan assets 125,199 409,228 359,222 683,808 722,867
Surplus / (Deficit) 9,243 70,046 62,753 96,153 186,658
41.1.1.11 Expected future c o s t for the year ending December 3 1 , 2011 in respect of the retained M P T Gratuity f u n d on demerger a m o u n t s
t o Rs.6,000.
41.1.1.12 Defined c o n t r i b u t i o n plans

An a m o u n t of Rs. 7,956 (2009: Rs. 121,044) has been charged during the year in respect of defined contribution plans maintained
by the Company.
41.1.2 Engro Fertilizers L i m i t e d , Subsidiary C o m p a n y

41.12.1 Balance sheet reconciliation
Defined Defined
Benefit Benefit
2010 2009
(Rupees)
Present value of f u n d e d obligation 269,523 31,230
Fair value of plan assets (289,580) (34,855)
Surplus (20,057) (3,625)
Payable to associated companies 2,875
Unrecognised actuarial gain 12,161 (448)
Unrecognised past service cost 5,021
Net (asset) / liability at e n d of the year (4,073)
41.1.22 M o v e m e n t in net (asset) / liability r e c o g n i s e d

Net (assetyiiability at beginning of the year
after transfer of Fertilizer Undertaking (31,887)
(Reversal)/expense recognised 15,470 (4,073)
A m o u n t s received from/(paid to) the Fund (15,470) 31,887
Net (assetyiiability at end of t h e year (4,073)
41.12.3 M o v e m e n t in d e f i n e d benefit o b l i g a t i o n
As at beginning of the year after transfer of
Fertilizer Undertaking 241,276 28,703
Current service cost 17,735
Interest cost 29,510 3,264
Actuarial (gain)/loss on obligation (8,235) 2,460
Unrecognised past service cost
• a b i l i t y transferred in respect of inter-company transfer (3,978)
As at e n d of the year 269,523 31,230

Defined Defined
Benefit Benefit
2010 2009
-(Rupees)-
41.12.4 M o v e m e n t in fair value of p l a n assets
As at beginning of the year 263,645 62,645
Expected return on plan assets 30,947 7,337
(Repayment to) / Contribution by the C o m p a n y 15,470 (31,887)
Settlement in respect of the pensioners
Actuarial gain/ (loss) on plan assets (12,594) (43)
Liability transferred in respect of inter-company transfer (1,103)
As at e n d of the year 289,580 34,855
41.125 C h a r g e f o r t h e year
Current service cost 17,735
Interest c o s t 29,510 3,264
Expected return on plan assets (30,947) (7,337)
Amortisation of unrecognized past service c o s t (372)
Amortisation of actuarial (gain) / loss (456)
15,470 (4,073)
41.125 Principal actuarial a s s u m p t i o n s u s e d in t h e actuarial v a l u a t i o n

-%-
Discount rate 14.5% 14.5%
Expected per annum rate of return on plan assets 14.5% 14.5%
Expected per annum rate of increase in pension 6.5%
Expected per annum rate of increase in future salaries 13.5% 14.5%
-(Rupees)-
41.12.7 A c t u a l return on plan assets 18,353 7,294
185
41.12.8 Plan assets c o m p r i s e of t h e f o l l o w i n g

Gratuity Plans Funded Pension Plan Funded (Curtailed)
2010 2009
Rupees % Rupees %
Cash 32,149 11% 1,526 4%
Others 51,003 18% 1,634 5%
289,580 34,855
41.1.2.9 The expected return on plan assets w a s determined by considering the e x p e c t e d returns available on the assets underlying the
c u r r e n t i n v e s t m e n t policy. E x p e c t e d yields on fixed interest i n v e s t m e n t s are b a s e d on g r o s s r e d e m p t i o n yields as at the
balance sheet date.
411210 During t h e year, the Subsidiary C o m p a n y recognised a gain of Rs. 4 , 0 7 3 on curtailed defined benefit plan. In 2 0 0 5 , the Holding
Company had setup a Defined Contribution Pension Fund known as Engro Chemical Pakistan Limited (renamed as Engro Corporation
Limited) MPT Employees Pension Fund (the Fund) for the benefit of m a n a g e m e n t employees, including those transfered to the
C o m p a n y after demerger. Employees joining the Holding C o m p a n y from July 1, 2 0 0 5 o n w a r d s to b e c o m e m e m b e r s of the new
Fund. Members of then existing pension fund (a defined benefit plan) were given a one-time option exerciseable upto June 15, 2 0 0 5
to join the n e w Fund effective July 1, 2 0 0 5 .
411211 E x p e c t e d f u t u r e c o s t f o r t h e y e a r e n d i n g D e c e m b e r 3 1 , 2 0 1 1 is as f o l l o w s :
Rupees
- M P T Pension Fund (526)
- M P T Gratuity Fund 12,752
- N o n - M P T Gratuity Fund 5,971
411212 Defined c o n t r i b u t i o n plans

An a m o u n t of Rs. 135,646 has been charged during the year in respect of defined contribution plans maintained by
the Holding Company.

41.1.3 Engro Polymer a n d C h e m i c a l s L i m i t e d , Subsidiary C o m p a n y
Pension Fund Gratuity Fund Additional Death

Gratuity Scheme
2010 2009 2010 2009 2010 2009
-Rupees-
41.13.1 B a l a n c e s h e e t reconciliation
Present value of defined
benefit obligations 110,835 78,994 35,488 26,048
Fair value of plan assets (97,803) (88,607) (30,903) (27,618)
Deficit / (Surplus) 13,032 (9,613) 4,585 (1,570)
Present value of unfunded obligations 4,977 4,523
Unrecognized net actuarial (losses) / gains (11,084) 9,613 (4,137) 1,570 460 (383)
Net liability at the end of the year 1,948 448 5,437 4,140
41.13.2 M o v e m e n t in t h e d e f i n e d benefit o b l i g a t i o n s
Obligations as at January 1 78,994 68,644 26,048 22,888 4,523 3,359
Current service cost 8,551 6,841 3,844 3,270 759 680
Interest c o s t 12,081 9,704 3,988 3,300 537 481
Actuarial losses / (gains) 12,660 - 5,683 - (842) 3
Benefits paid (1,851) (6,195) (4,130) (3,410) - -
Lability recognized in respect of transfers 400 - 55 - - -
Obligations as at December 31 110,835 78,994 35,488 26,048 4,977 4,523
M o v e m e n t in t h e fair v a l u e of plan assets

Fair value as at January 1 88,607 73,582 27,618 21,821 - -
Expected return on plan assets 12,334 10,350 3,940 3,160 - -
Actuarial losses (7,953) - (24) - - -
Employer contributions 6,266 6,195 3,444 3,410 - -
Benefits paid (1,851) (1,520) (4,130) (773) - -
Liability recognized in respect of transfers 400 - 55 - - -
Fair value as at December 31 97,803 88,607 30,903 27,618 - -
41.13.4 T h e a m o u n t s r e c o g n i z e d in t h e profit a n d loss

a c c o u n t are as f o l l o w s :
Current service cost 8,551 6,841 3,844 3,270 759 680
Interest cost 12,081 9,704 3,988 3,300 537 481
Expected return on plan assets (12,334) (10,350) (3,940) (3,160)
Recognition of actuariai(gains) / losses (84) - - - 1 3
Expense 8,214 6,195 3,892 3,410 1,297 1,164
41.13.5 A c t u a l return on plan assets 13,995 (3,867) 4,485 (222)
187
41.1.3.6 E x p e c t e d f u t u r e c o s t s f o r t h e year e n d i n g D e c e m b e r 3 1 , 2 0 1 1 :
Rupees
- P e n s i o n Fund 12,379
- Gratuity Fund 5,631
- Additional Death Gratuity S c h e m e 1,593
19,603
41.13.7 Principal a s s u m p t i o n s u s e d in t h e actuarial valuation:
Pension Fund Gratuity Fund

2010 2009 2010 2009
Discount rate 14% 14.5% 14%
14.5%
Expected rate of return per annum on plan assets 14% 14.5% 14%
14.5%
Expected rate of increase per annum on plan assets
in future salaries 13.5% 13% 13.5% 13%
41.13.8 Plan assets c o m p r i s e of f o l l o w i n g :
Pension Fund Gratuity Fund

2010 2009 2010 2009
(Rupees)
Equity 25,429 36,329 4,635 11,323
Debt 72,374 47,848 26,268 13,809
Others 4,430 2,486
97,803 88,607 30,903 27,618
41.1.89 The expected return on plan assets w a s determined by considering the expected returns available on t h e assets underlying the
sheet date.
41.1310 Historical information of staff retirement benefits:

2010 2009 2008 2007 2006
(Rupees)--
Pension F u n d
benefit obligation 110,835 78,994 68,644 53,267 44,310
Fair value of plan assets (97,803) (88,607) (73,582) (62,237) (47,516)
Deficit / (Surplus) 13,032 (9,613) (4,938) (8,970) (3,206)
Gratuity F u n d
benefit obligation 35,488 26,048 22,888 19,600 16,145
Fair value of plan assets (30,903) (27,618) (21,821) (21,742) (15,665)
Deficit / (Surplus) 4,585 (1,570) 1,067 (2,142) AW

41.13.11 During the year, Rs. 20,322 (2009: Rs. 22,620) has been recognized in the profit a n d loss account in respect of defined contribution
provident f u n d .
41.1.4 Engro P o w e r g e n I J m i t e d , Subsidiary C o m p a n y
Defined benefit plan

The latest actuarial valuation of the defined benefit plans in respect of f u n d e d defined benefit gratuity scheme w a s carried out as
at December 3 1 , 2 0 1 0 , using the Projected Unit Credit M e t h o d . Details of the defined benefit plan are as follows:
41.1.4.1 B a l a n c e s h e e t reconciliation
2010 2009
(Rupees)
Present value of defined benefit obligation 7,913 3,742
Fair value of plan assets (5,099) (2,009)
Deficit 2,814 1,733
Unrecognised actuarial loss / (gain) 68 (432)
Unrecognised past service cost (471) (504)
Net liability at end of the year 2,411 797
41.1.4.2 M o v e m e n t in net liability r e c o g n i z e d

Net liability at beginning of the year 797 187
Expense recognised 1,614 610
A m o u n t paid to the fund
Net liability at end of the year 2,411 797
41.14.3 M o v e m e n t in d e f i n e d benefit o b l i g a t i o n
As at January 1 3,742 2,186
Current service cost 1,383 531
Interest cost 529 365
Actuarial loss on obligation (87) 156
Unrecognized past service cost - 504
Liability transferred in respect of inter-company transfer 2,346
As at December 31 7,913 3,742
41.1.4.4 M o v e m e n t in fair v a l u e of plan a s s e t s

As at January 1 2,009 1,682
Expected return on plan assets 335 295
Actuarial gain on assets 409 32
•ability transferred in respect of inter-company transfer 2,346
As at December 31 5,099 2,009
189
41.1.4.5 C o s t c h a r g e d f o r t h e year
2010 2009
(Rupees)
Current service cost 1,383 531
Interest cost 529 365
Expected return on plan assets (335) (295)
Amortisation of prior service cost 33
Net actuarial loss recognized in current year 4_ 9_
1,614 610
411.4.6 Principal actuarial a s s u m p t i o n s u s e d are as f o l l o w s :
Discount rate 14.5 12
Expected per a n n u m rate of increase in future salaries 14.5 12
Expected per a n n u m rate of return on plan assets 14.5 12
41.1.4.7 A c t u a l return on plan assets (Rupees)

743 327
2010 2009
Rupees Rupees %
41.1.4.8 Plan assets c o m p r i s e of t h e f o l l o w i n g :
C a s h a n d cash equivalents 5,051 99 1,981 99
Others 48 1 28 1
5,099 100 2,009 100
411.4.9 The e x p e c t e d return on plan assets w a s determined by considering the expected returns available on the assets underlying the
sheet date.
411.4.10 C o m p a r i s o n f r o m the first year of i n c o r p o r a t i o n :
2010 2009 2008 2007

Rupees-
Present value of defined benefit obligation 7,913 3,742 2,186 49
Deficit 2,815 1,733 505 49
411.4.11 Expected future cost for the year ending December 2011 is Rs. 2,078.
4114.12 Defined c o n t r i b u t i o n plan

An a m o u n t of Rs. 13,392 (2009: Rs. 2,079) has been charged during the year in respect of defined contribution plan.

41.1.5 Engro F o o d s L i m i t e d , S u b s i d i a r y C o m p a n y
41.15.1 T h e latest actuarial valuation of the schemes w a s carried out as at December 3 1 , 2 0 1 0 using the 'Projected Unit Credit M e t h o d ' .
Details of the defined benefit plans are as follows:
Unfunded
Gratuity Fund Gratuity Scheme Pension Scheme Total
2010 2009 2010 2009 2010 2009 2010 2009
Rupees
41.15.2 Reconciliation of o b l i g a t i o n s
a s a t year e n d
benefit obligation (137,469) (77,010) (137,469) (77,010)
Fair value of plan assets 82,509 58,688 82,509 58,688
Deficit (54,960) (18,322) (54,960) (18,322)
Present value of unfunded
obligations (3,168) (1,307) (2,372) (4,475) (2,372)
Receivable from / (Payable to)
group companies (1,410) 2,530 1,120
Unrecognized actuarial
(gain)/ioss 40,593 18,322 462 (2,125) (213) 38,930 18,109
Net liability at end of the year (15,777) (176) (3,432) (2,585) (19,385) (2,585)
41.15.3 M o v e m e n t in liability
Net liability at beginning
o f t h e year . . . . (2,585) (1,892) (2,585) (1,892)
Charge for the year (31,554) (21,250) (176) - (847) (693) (32,577) (21,943)
Contributions 15,777 21,250 . . . . 15,777 2 1,250
Net liability at end of the year (15,777) - (176) (3,432) (2,585) (19,385) (2,585)
41.15.4 M o v e m e n t in fair v a l u e of
plan assets
Fair value of plan assets at
beginning of the year 58,688 29,417
- - - 58,688 29,417
Expected return on plan assets 8,752 5,508 - - - 8,752 5,508
Contributions for the year 15,777 21,250 - - - 15,777 21,250
Transfers from ECL 4,054 2,845 - - - 4,054 2,845
Benefits paid during the year (2,096) (2,096) - - - (2,096) (2,096)
Actuarial gain / (loss) on assets (2,666) 1,764 - - - (2,666) 1,764
Fair value of plan assets at e n d
of the year 82,509 58,688
- - - 82,509 58,688
191
Unfunded
Gratuity Fund Gratuity Scheme Pension Scheme Total
2010 2009 2010 2009 2010 2009 2010 2009
Rupees
41.1.55 M o v e m e n t in p r e s e n t value of
d e f i n e d benefit o b l i g a t i o n s /
unfunded obligations
Present value of defined benefit
obligations at beginning of the year 7 7 , 0 1 0 39,033 2,372 1,570 79,382 40,603
- -
Service cost 28,764 19,610 176 - 530 453 29,470 20,063
Interest cost 10,783 6,739 - - 317 252 11,100 6,991
Transfers from ECL 2,645 2,845 2,530 - - - 5,175 2,845
Benefits paid during the year (2,096) (2,096) - - - - (2,096) (2,096)
Acturial (gain) / loss 20,363 10,879 462 - (1,912) 97 18,913 10,976
Present value of defined benefit
obligation / unfunded obligation
of the year 137,469 77,010 3,168 1,307 2,372 141.944 79,382
-
41.1.56 C o s t c h a r g e d to profit
a n d loss a c c o u n t
Current service cost 28,764 19,610 176 - 530 453 29,470 20,063
Interest cost 10,783 6,739 - - 317 252 11,100 6,991
Expected return on plan assets (8,752) (5,508) - - - - (8,752) (5,508)
Recognition of actuarial
759 - 397
(gain) / loss 409 - - (12) 759
C o s t for the year 31,554 21,250 176 - 847 693 32,577 21,943
41.1.5.7 In addition, salaries, wages a n d benefits also include Rs. 7 3 , 7 0 0 (2009: Rs. 53,301) in respect of defined contribution provident fund.
41.1.58 Principal actuarial a s s u m p t i o n s u s e d are as f o l l o w s :
Unfunded
Gratuity Fund Gratuity Scheme Pension Scheme
2010 2009 2010 2009 2010 2009
Discount rate 14.5% 12% 14.5% 14.5% 14%
Expected per a n n u m rate of return on plan assets 14.5% 12% 14.5% 12%
Expected per a n n u m rate of increase in future salaries 14.5% 12% 14.5% - 14.5% 12%
Expected per a n n u m rate of increase in pension 6.5% 4%
Rupees
41.159 A c t u a l return on plan a s s e t s 6,086 5,967

411510 Plan assets are c o m p r i s e d as f o l l o w s :
Gratuity Fund
2010 2009
Rupees % Rupees %
Held to maturity investments
- Pakistan Investment Bonds (PIBs) 3,239 4% 3,313 6%
- Term Finance Certificates (TFCs) 17,351 21% 9,467 16%
- Term Deposit Receipts (TDRs) - - 6,000 10%
- Regular Income Certificates (RICs) 19,000 23% 19,000 32%
- Treasury Bills 19,479 24% 1,000 2%
59,069 72% 38,780 66%
Mutual funds (Income Fund) - Units 8,962 11% 19,005 32%
Usted securities 1,826 2% - -
Balances with b a n k s 11,537 14% - -
Others 1,115 1% 903 2%
82,509 100% 58,688 100%
411.511 The expected return on plan assets has been determined by considering the expected returns available on the assets underlying
the current investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the balance
s h e e t d a t e . E x p e c t e d r e t u r n o n e q u i t y i n v e s t m e n t s reflect l o n g - t e r m real r a t e s o f r e t u r n e x p e r i e n c e d i n t h e m a r k e t
41.1512 E x p e c t e d c o n t r i b u t i o n s t o p o s t e m p l o y m e n t b e n e f i t p l a n s f o r t h e y e a r e n d i n g D e c e m b e r 3 1 , 2 0 1 1 are R s . 5 1 , 5 7 3 .
411513 Historical i n f o r m a t i o n of staff retirement benefits:

2010 2009 2008 2007 2006
(Rupees)
Present value of obligations (141,944) (79,382) (39,033) (18,947) (8,088)
Fair value of plan assets 82,509 58,688 29,417 15,464 -_
Deficit (59,435) (20,694) (9,616) (3,483) (8,088)
41.1.6 Engro E x i m p (Private) L i m i t e d , Subsidiary C o m p a n y

411.6.1 Defined benefit p l a n s
The latest actuarial valuation of the defined benefit plans w a s carried o u t as at December 3 1 , 2 0 1 0 , using the Projected Unit Credit
Method. Details of the defined benefit plans are as follows:
41162 Balance sheet reconciliation
Defined Benefit
Gratuity Plans Funded
2010 2009
(Rupees)
Present value of funded obligation 2,670
Fair value of plan assets (2,842)
Surplus (172)
Unrecognised actuarial gain 358
Unrecognized prior service cost 29
Net liability at end of the year 215
193
41.1.63 M o v e m e n t in n e t liability r e c o g n i s e d
Defined Benefit
Gratuity Plans Funded
2010 2009
(Rupees)
Net liability at beginning of the year
Expense recognised 215
Net liability at e n d of the year 215
41.1.64 M o v e m e n t in p r e s e n t v a l u e of d e f i n e d benefit o b l i g a t i o n
As at beginning of the year
Defined benefit obligations in respect of
employees transferred from group c o m p a n i e s 1,183
Current service cost 244
Interest cost 145
Actuarial loss on obligation 1,098
As at e n d of the year 2,670
41.1.65 M o v e m e n t in fair v a l u e of plan assets

As at beginning of the year
Fair value of planned assets in respect of
employees transferred from group c o m p a n i e s 1,418
Expected return on plan assets 167
Actuarial gain on plan assets 1,257
As at e n d of the year 2,842
41.1.66 C h a r g e f o r t h e year
Current service cost 244
Interest cost 145
Expected return on plan assets (167)
Recognition of past service cost (2)
Net actuarial (gain) recognised during the year (5)
215~
41.1.67 Principal actuarial a s s u m p t i o n s u s e d in t h e actuarial valuation
Discount rate 14.5

Expected per a n n u m rate of return on plan assets 14.5
Expected per a n n u m rate of increase in future salaries 14.5
(Rupees)-
41.1.68 A c t u a l return on plan a s s e t s 1,424

411.69 Plan assets c o m p r i s e of t h e f o l l o w i n g :
2010 2009
Rupees % Rupees %
Debt Instrument 2,266 80 - -
Equity Instrument 482 17 - -
Cash, interest accrued and others 94 3 - -
2,842 - - -
41.1.610 The expected return on plan assets w a s determined by considering the expected returns available on the assets underlying the
sheet date.
41.1.611 Expected future cost for the year ending December 3 1 , 2011 is Rs 5 5 7 .
411612 Defined c o n t r i b u t i o n p l a n s
An amount of Rs 8,153 (2009: Rs 3,663) has been charged during the year in respect of defined contribution plans maintained by
the Holding Company.
42. Cash Generated From Operations

2010 2009
(Rupees)
Profit before taxation 8,277,133 5,062,283
Adjustment for non-cash charges a n d other items:
Depreciation 2,848,882 1,708,035
Amortisation 37,698 25,772
Profit on disposal of property, plant a n d equipment - net (321,835) (30,318)
Loss on sale/ death of biological assets 5,357 2,503
Provision for retirement and other service benefits 215,227 189,823
Negative goodwill arising on further issuance of shares of a subsidiary - -
Income on deposits / other financial assets (388,873) (133,821)
Share of income from joint venture c o m p a n i e s (note 37) (554,725) (458,570)
Financial charges (note 36) 4,200,886 2,221,739
Employee share compensation expense - net (30,316) 78,672
Employee Housing Subsidy expense 105,661 106,985
Provision for surplus and slow moving stores and spares 19,633 18,972
Provision for doubtful trade debts 98,618 6,966
Provision for loans a n d advances (4,304) 1,295
Provision for other receivables (157) 84,593
Working capital changes (note 42.1) (8,633,745) 6,525,241
5,875,140 15,410,170
195
42.1 Working capital changes

2010 2009
(Rupees)
(Increase) / decrease in current assets
- Stores, spares a n d loose tools (3,479,042) (355,535)
- Stock-in-trade (5,023,706) 3,309,936
- Trade d e b t s (1,693,493) (2,785,008)
- Loans, advances, deposits a n d prepayments (1,097,347) (218,013)
- Other receivables (net) (170,869) 2,590,227
(11,464,457) 2,541,607
Increase / (decrease) in current liabilities
- Trade a n d other payables 2,830,712 3,983,634
(8,633,745) 6,525,241
43. Cash and Cash Equivalents

C a s h a n d bank balances (note 18) 4,120,031 6,880,408
Short term investments (note 17) 4,426,188 512,255
Short-term borrowings (5,715,775) (1,302,766)
2,830,444 6,089,897
4 4 . Financial Instruments by Category

Financial assets as per balance sheet
- Loans and receivables
Loans a n d advances 1,723,784 1,226,222
Trade d e b t s 5,131,408 3,536,533
C a s h a n d b a n k balances 4,120,031 6,880,408
11,475,342 12,183,803
- Fair value through profit a n d loss
- Derivatives used for hedging

Derivatives 3,148 76,209
Financial liabilities as per balance sheet

- Financial liabilities measured at amortised c o s t
Borrowings 110,411,411 87,820,594
Liabilities against assets subject to finance lease 32,308 38,833
Trade a n d other payable 9,092,435 7,014,005
A c c r u e d interest / m a r k - u p 2,619,453 1,800,428
122,336,237 96,775,959
- Fair value through profit a n d loss
Conversion option on IFC loan 367,442 338,647
- Derivatives used for hedging

Derivatives 1,478,541 1,034,173

45 Financial Risk Management

45.1 Financial risk factors
The G r o u p ' s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk a n d other price
risk), credit risk and liquidity risk. The Group's overall risk management p r o g r a m m e focuses on having c o s t efficient funding as well
as to manage financial risk to minimize earnings volatility a n d provide m a x i m u m return to shareholders.
Risk management is carried out by the Group's Finance a n d Planning departments under guidance of t h e respective Management
Committees,
a) M a r k e t risk
i) C u r r e n c y risk
Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign
exchange rates.
This exists d u e to the Group's exposure resulting from outstanding import payments, foreign currency loan liabilities a n d related
interest payments. A foreign exchange risk m a n a g e m e n t policy has b e e n developed a n d a p p r o v e d by the management. The
policy allows the Group to take currency exposure for limited periods within predefined limits while o p e n exposures are rigorously
monitored. The Group ensures to the extent possible that it has options available to manage exposure, either through forward
contracts, options or prepayments, etc. subject to the prevailing foreign exchange regulations.
The Subsidiary C o m p a n y Engro Fertilizers Limited is exposed to currency risk on c o m m i t m e n t s to purchase plant a n d machinery
in connection with Urea expansion project denominated primarily in Euros. However, as at December 3 1 , 2 0 1 0 this exposure
is minimal since major procurements have been completed.
The Subsidiary C o m p a n y Engro Fertilizers Limited has entered into Euro-Dollar forward exchange contracts / options to hedge
its currency risk, most of which have a maturity of less than one year from the reporting date. The G r o u p ' s ability to mitigate
foreign exchange risk has however been curtailed by the State Bank of Pakistan which has disallowed issuance of new forward
covers against letters of credit.
On foreign currency borrowing of US$ 2 8 5 , 0 0 0 , the Subsidiary C o m p a n y Engro Fertilizers Limited has Rupee/US $ hedge of
US$ 85,000.
The impact of other devaluation/revaluation on post tax profit for the year of the Subsidiary C o m p a n y Engro Fertilizers Umited
is negligible since all foreign currency borrowings/funds relates to the project, hence gain/loss arising is capitalized.
The Subsidiary C o m p a n y Engro Foods Umited exposure to currency risk is limited as all the foreign purchases are m a d e against
on sight letter of credit where the payment is made on the date of delivery with no credit period. The subsidiary company Engro
Foods Limited imports plant a n d machinery a n d certain raw material w h i c h exposes to currency risk, primarily with respect to
liabilities d e n o m i n a t e d in US Dollars. T h e subsidiary c o m p a n y Engro Foods Limited used to manage the currency risk relating
to US Dollars through forward exchange contracts, however since 2 0 0 8 , is unable to hedge its foreign exchange risk exposure
due to restriction on forward covers i m p o s e d by The State Bank of Pakistan. Currently, t h e subsidiary c o m p a n y Engro Foods
Limited manages its currency risk through prepayments a n d close monitoring of currency markets. However during the year
the subsidiary c o m p a n y Engro Foods Limited also entered into Euro-Dollar option contracts to manage its currency risk relating
to payment against import of plant and machinery in Euros, which have a maturity of less than one year from the reporting date.
The Subsidiary C o m p a n y Engro P o w e r g e n U m i t e d ' s exposure resulting f r o m outstanding import payments, foreign currency
loan liabilities a n d related interest payments is limited as all the fluctuation in foreign exchange rates will be recovered through
adjustment in tariff as per Power Purchase Agreement.
197
The Subsidiary C o m p a n y Avanceon Limited is e x p o s e d to currency risk arising primarily with respect to the United States Dollar
(USD). Currently, the Group's foreign exchange risk exposure is restricted to foreign currency interest bearing loans and borrowings,
creditors a n d debtors. The G r o u p ' s exposure to foreign currency changes for all other currencies is not material.
The Subsidiary C o m p a n y Engro Polymers a n d Chemical Limited is e x p o s e d to currency risk arising primarily with respect to
US Dollars. The risk arises from outstanding payments for imports, recognised assets a n d liabilities in foreign currency a n d future
commercial transactions. The subsidiary c o m p a n y Engro Polymers and Chemical Limited used to m a n a g e the currency risk
relating to US Dollars through forward e x c h a n g e contracts, however since 2 0 0 8 , is unable to hedge its foreign exchange risk
exposure d u e to restriction on forward covers i m p o s e d by The State Bank of Pakistan. Currently, the subsidiary c o m p a n y Engro
Polymers a n d Chemical Limited manages its currency risk through close monitoring of currency market. At d e c e m b e r 3 1 , 2 0 1 0
the financial assets a n d liabilities exposed to foreign exchange risk amount to Rs. 265,289 (2009: Rs.248,323) and Rs. 6,055,444
(2009: Rs. 7,009,120) respectively.
The Subsidiary C o m p a n y Engro Eximp (Private) Limited is not materially exposed to currency risk as there are no material foreign
currency denominated balances as at year e n d .
At December 3 1 , 2 0 1 0 , if the Pakistan Rupee had weakened/strengthened by 5% against the US Dollars with all other variables
held c o n s t a n t , consolidated post tax profit for the year w o u l d have been lower/ higher by Rs. 3 3 2 , 9 9 2 (2009: Rs. 2 2 1 , 6 4 1 ) ,
mainly as a result of foreign exchange losses/gains on translation of US Dollar denominated liabilities.
ii) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. The G r o u p ' s interest rate risk arises f r o m short a n d long-term borrowings a n d obligations under finance
lease. These are b e n c h m a r k e d to variable rates w h i c h expose t h e Group to cash flow interest rate risk.
The Group analyses its interest rate exposure on a regular basis by monitoring interest rate trends to determine whether they
should enter into hedging alternatives.
Interest rate risk of t h e Subsidiary C o m p a n y Engro Fertilizers Limited arising on foreign currency loans are h e d g e d through
interest rate s w a p s . Rates on short term loans vary as per market movement.
Interest rate risk of the subsidiary c o m p a n y Avanceon Umited arises from long-term finances a n d running finance facilities. Long
term a n d short term running finances obtained are benchmarked to variable rates which expose the subsidiary c o m p a n y to cash
flow interest rate risk. T h e Subsidiary C o m p a n y Avanceon Umited Rupee based loans have a prepayment o p t i o n , w h i c h c a n
be exercised u p o n any adverse m o v e m e n t . Rates of short t e r m loans vary as per market m o v e m e n t of 6 - m o n t h KIBOR. T h e
Subsidiary C o m p a n y further manages its exposure to interest rate risk by managing a n d maintaining a mix of fixed a n d floating
rate borrowings.
Interest rate risk arising on foreign currency loans of Engro Fertilizers Limited a n d Engro Polymer & Chemicals U m i t e d are
h e d g e d t h r o u g h interest rate s w a p s . S u c h interest rate s w a p s have t h e e c o n o m i c effect of converting floating rates to fixed
rates. Under the interest rate s w a p agreement, the Group has agreed with the banks to exchange, at half yearly intervals, the
difference between fixed contracted rates a n d the floating rate interest amounts calculated by reference to the agreed notional
amounts. Rates on short t e r m loans vary as per market movement.
Engro P o w e r g e n U m i t e d ' s exposure to interest rate risk is limited as the unfavorable fluctuations in t h e interest rates will be
recovered through adjustment in tariff as per Power Purchase Agreement

The Subsidiary C o m p a n y Engro Foods Limited has no significant interest bearing financial assets, the Subsidiary Company's
income and opearting cashflows are substantially independent of changes in market interest rates. Further, there are no borrowings
at fixed rates, the Subsidiary C o m p a n y is not e x p o s e d to fair value interest rate risk. The Subsidiary C o m p a n y ' s interest rate
risk arises primarily from long and short term borrowing. The Subsidiary C o m p a n y is also subject to interest rate risk f r o m
obligation under finance lease. Borrowings at variable rates e x p o s e d the Subsidiary C o m p a n y to cashflow interest rate risk. As
there are no borrowings at fixed rates, t h e Subsidiary C o m p a n y is not e x p o s e d to fair value interest rate risk. T h e Subsidiary
C o m p a n y analyses its interest rate exposure on a regular basis by monitoring existing facilities against prevailing market interest
rate risk and taking into account various other financing options available. For borrowing at variable rates, the rates are determined
in advance for stipulation periods with reference to KIBOR.
To m a n a g e its c a s h flow interest rate risk, the Subsidiary C o m p a n y Engro Polymers a n d Chemical Limited has entered into
floating to fixed rate interest swaps on its foreign currency borrowings a n d floating to floating rate cross currency interest s w a p
on its local borrowings. Under the interest rate s w a p agreements, the Subsidiary C o m p a n y has agreed with the b a n k s to
exchange, at half yearly intervals, the difference between contracted rates a n d the floating rate interest a m o u n t s calculated by
reference to the agreed notional amounts.
The Subsidiary C o m p a n y Engro Eximp (Private) Umited analyses its interest rate exposure on a regular basis by monitoring base
interest rate trends in relation to the balance of utilized funds / borrowing.
A s a t D e c e m b e r 3 1 , 2 0 1 0 , i f interest rates o n G r o u p ' s b o r r o w i n g s h a d been 1 % higher/lower with all other variables held
constant, consolidated p o s t tax profit for the year w o u l d have been lower/higher by Rs. 1 6 8 , 6 2 8 (2009: Rs. 1 2 4 , 1 0 5 ) , mainly
as a result of interest exposure on variable rate borrowings.
iii) O t h e r p r i c e 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 t h o s e arising from currency risk or interest rate risk), whether t h o s e c h a n g e s are caused by factors
specific to the individual financial instrument or its issuer, or factors effecting all similar financial instruments traded in the market.
The Group's investments in money market mutual funds are exposed to price risk related to interest rate instruments.
b) Credit risk
Credit risk represents the risk of financial loss being caused if counter party fails to discharge an obligation.
Credit risk arises from deposits with banks and financial institutions, trade debts, loans, advances, deposits, bank guarantees
a n d other receivables. The credit risk on liquid funds is limited because the counter parties are banks with a reasonably high
credit rating or mutual f u n d s w h i c h in turn are d e p o s i t e d in b a n k s a n d g o v e r n m e n t securities. T h e Group maintains internal
policies to place funds with commercial banks/mutual funds having a m i n i m u m short term credit rating of A1 a n d A M 3 .
Engro Fertilzers Umited and Engro Eximp (Private) Limited is exposed to a concentration of credit risk on its trade debts by virtue
of all its customers being agri-based businesses in Pakistan. However, this risk is mitigated by applying individual credit limits
a n d by securing t h e majority of trade d e b t s against b a n k guarantees inland letter of credits a n d by t h e fact that the exposure
is spread over a w i d e c u s t o m e r base.
Engro Polymer & Chemicals Limited is not materially e x p o s e d to credit risk as unsecured credit is provided to selected parties
with no history of default. Moreover, major part of trade debts is secured by bank guarantees and letters of credit from customers.
199
T h e credit risk arising on a c c o u n t of a c c e p t a n c e of bank guarantees is m a n a g e d by ensuring that t h e b a n k guarantees are

issued by banks of reasonably high credit ratings as approved by the management.
The Subsidiary C o m p a n y Avanceon Limited is exposed to a concentration of credit risk on its trade debts, w h i c h is mitigated
by a credit control policy and applying individual credit limits. The Subsidiary C o m p a n y is also e x p o s e d to the credit risk of
commercial b a n k s on a c c o u n t of a c c e p t a n c e of bank guarantees as security against trade d e b t s . T h e Subsidiary C o m p a n y
accepts bank guarantees of banks of reasonably high credit ratings as approved by the management.
The Subsidiary C o m p a n y Engro Foods IJmited a t t e m p t s to control credit risk arising on receivable f r o m Tetra Pak Pakistan
Limited t h r o u g h legally binding contracts that are signed between t h e t w o parties. The Subsidiary C o m p a n y is not materially
exposed to credit risk on trade debts as the Subsidiary C o m p a n y has the policy of receiving the sales value prior to or at the
t i m e of supply of the products and credit is only granted to f e w reputed customers with g o o d credit standings, with w h o m the
Subsidiary C o m p a n y has written terms of arrangement.
The Group monitors the credit quality of its financial assets with reference to historical performance of such assets and available
external credit ratings. The carrying values of financial assets which are neither past due nor impaired are as under:
2010 2009
(Rupees)
Loans a n d advances 1,723,784 1,226,222
Trade d e b t s 3,335,538 3,403,792
Bank balances 4,120,031 6,880,408
14,082,864 12,504,248
The credit quality of receivables can be assessed with reference to their historical performance with no or negligible defaults in
recent history, however, no losses incurred. The credit quality of G r o u p ' s bank balances can be assessed with reference to
external credit ratings as follows:

Bank Rating a g e n c y Rating

Short term Long term
Atlas Bank Limited PACRA A2 A-
Askari Bank Limited PACRA A1 + AA
Allied Bank Limited PACRA A1 + AA
Bank Al H a b i b Limited PACRA A1 + AA+
Bank Al Falah Limited PACRA A1 + AA
Bank of Khyber PACRA A2 A-
Bank of Pubjab PACRA A1 + AA-
Barclay's Bank Pic S&P A1 + AA-
Bank Islami Pakistan PACRA A1 A
Citibank N.A. S&P A1 A+
Deutsche Bank AG S&P A1 A+
Dubai Islamic Bank JCR-VIS Al A
Faysal Bank Limited PACRA A1 + AA
Habib Bank Limited JCR-VIS A1 + AA+
Habib Metropolitan Bank PACRA A1 + AA+
H S B C Bank Middle East Ltd Moody's A1 + AA2
JS Bank PACRA P1 A
KASB Bank PACRA A1 A-
M C B Bank Limited PACRA A2 AA+
Meezan Bank Limited JCR-VIS A1 + AA-
NIB Bank PACRA A1 AA-
National Bank of Pakistan JCR-VIS A1 + AAA
Standard Chartered Bank (Pakistan) Limited PACRA A1 + AAA
S A M B A Bank Limited JCR-VIS A1 + A
Silk Bank Limited JCR-VIS A2 A
Soneri Bank Limited PACRA A1 AA-
Summit Bank JCR-VIS A2 A
United Bank Limited JCR-VIS A1 + AA+
c) Liquidity risk
Uquidity risk represents the risk that the Group will encounter difficulties in meeting obligations associated with financial liabilities.
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through
an a d e q u a t e a m o u n t of c o m m i t t e d credit facilities. Due to d y n a m i c nature of t h e business, the G r o u p maintains flexibility in
funding by maintaing c o m m i t t e d credit lines available.
The G r o u p ' s liquidity management involves projecting cash flows a n d considering the level of liquid assets necessary to meet
these, monitoring balance sheet liquidity ratios against internal a n d external regulatory requirements a n d maintaining debt
financing plans.
The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period at the
balance sheet date to contractual maturity dates. The amounts disclosed in the table are the contractual undiscounted cash flows.
201
2010 2009
Maturity Maturity Maturity Maturity
upto after Total upto after Total
o n e year o n e year o n e year one year
-(Rupees)
Financial liabilities
Derivatives 1,040,829 805,154 1,845,983 740,043 632,777 1,372,820
Trade a n d other payables 9,092,435 9,092,435 7,014,005 7,014,005
A c c r u e d interest / m a r k - u p 2,619,453 2,619,453 1,800,428 1,800,428
Liabilities against assets
subject to finance lease 13,310 18,998 32,308 18,246 20,587 38,833
Borrowings 21,259,562 89,151,849 110,411,411 3,678,441 84,142,153 87,820,594
Unclaimed dividends 180,630 180,630 102,099 102,099
34,206,219 89,976,001 124,182,220 13,353,262 84,795,517 98,148,779
45.2 Capital risk management

The Group's objective when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide
returns for share holders a n d benefit for other stake holders and to maintain an optimal capital structure to reduce the cost of capital.
The Group manages its capital structure and makes adjustments to it in the light of changes in e c o n o m i c conditions. To maintain
or adjust the capital structure, the Group may adjust the dividend payment to shareholders or issue new shares.
The regulatory regime in w h i c h the Group operates, renders the value of the equity to a b o n d given the guaranteed ROE of 1 5 %
with an indexation allowed under the Power Purchase Agreement for changes in US $ / PKR exchange rate.
The m a n a g e m e n t seeks to maintain a balance between higher returns that might be possible with higher levels of borrowings and
the advantages a n d security afforded by a s o u n d capital position.
The G r o u p ' s strategy is to ensure c o m p l i a n c e with the Prudential Regulations issued by t h e State Bank of Pakistan a n d is in
a c c o r d a n c e with agreements executed w i t h financial institutions so that t h e total long t e r m b o r r o w i n g s to equity ratio d o e s not
exceed the lender covenants. The total long term borrowings to equity ratio as at December 3 1 , 2 0 1 0 a n d 2 0 0 9 are as follows:
2010 2009
(Rupees)
Total Long Term Borrowings 104,695,636 86,517,828
Total Equity 34,115,012 29,344,395
138,810,648 115,862,223
Total borrowings to equity ratio 75% 75%
The Group finances its operations through equity, borrowings and m a n a g e m e n t of w o r k i n g capital w i t h a view to maintaining an
appropriate mix between various sources of finance to minimise risk.

4 5 . 3 Fair value estimation

The below table analyzes financial instruments carried at fair value by valuation method. The different levels have been defined as follows
- Q u o t e d prices (unadjusted) in active markets for identical assets or liabilities (level 1)
- Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (level 2)
- Inputs for the asset or liability that are not based on observable market data (level 3)
The following table presents the Group's assets a n d liabilities that are measured at fair value as at December 3 1 , 2 0 1 0 :
Level 1 Level 2 Level 3 Total

(Rupees)
Assets
Financial assets at fair value through profit a n d loss
- Short t e r m investments - Mutual Fund Securities 4,364,885 - - 4,364,885
Derivatives used for hedging
-Derivatives -_ 3,148 -_ 3,148
4,364,885 3,148 - 4,368,033
Liabilities
Derivatives
- Derivatives used for hedging - 1,478,541 - 1,478,541
- Conversion option on IFC loans -_ 338,647 -_ 338,647
~~~ 1,817,188 - 1,817,188
4 5 . 4 Fair value of financial assets and liabilities

The carrying value of all financial assets a n d liabilities reflected in the financial statements approximate their fair values.
4 6 . Segment reporting
A Business segment is a group of assets a n d operations engaged in providing products that are subject to risk a n d returns that
are different from those of other business segments.
Type o f s e g m e n t s Nature of b u s i n e s s
Fertilizer Manufacture, purchase and market fertilizers.
Polymer Manufacture, market and sell Polyvinyl Chloride (PVC), PVC compounds, Caustic soda and related chemicals.
Food Manufacture, process a n d sell dairy and other food products.
Power Includes Independent Power Projects (IPP)
Other operations Includes engineering a n d automation businesses.
203
Fertilizer Polymer Food Power Other operations Elimination - net Consolidated
2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Revenue from externa!

cutomers(note31) 36,280,206 30,285,823 14,618,594 11,632,775 21,050,039 14,665,341 5,727,336 2,284,891 1,615,499 14,699 (47,070) 79,975,765 58,152,368
Segment gross profit / (loss) 12,339,633 8,935,525 1,303,990 1,214,183 4,428,157 2,716,271 1,606,942 834,958 625,353 (240,045) 2,840 20,273,635 13,494,172
- Segment expenses -
-net of other income (2,917,985) (1,960,161) (1,106,845) (908,171) (3,500,544) (2,861,762) (110,772) (142,173) (1,074,661) (474,388) (28,407) (455,886) (8,739,214) (6,802,541)
Income on deposits / other

financial assets (note 34) 143,133 23,136 17,222 103,026 10,070 3,461 11,337 645 308,841 3,553 (101,730) 388,873 133,821
Finandal charges (note 36) (1,658,067) (1,424,970) (1,438,988) (606,175) (664,710) (515,308) (400,336) (67) (218,023) (118,451) 179,238 443,232 (4,200,886) (2,221,739)
Share of income from

joint venture (note 37) 554,725 458.570 554,725 458,570
Income tax (charge)/ credit (note 38) (2,064,641) (1,579,966) 454,340 3,441 (96,113) 222,739 (7,588) - (133,028) (11,473) 10,899 21,778 (1,836,131) (1,343,481)
Segment profit after tax / (loss) 5,842,073 3,993,564 (770,281) (193,696) 176,860 (434,599) 1,099,583 (141,595) 272,812 24,594 (180,045) 470,534 6,441,002 3,718,802
Segment assets 103,137,514 94,179,878 24,157,962 22,799,495 14,030,946 9,004,026 19,075,705 16,164,759 32,113,990 1,181,901 (28,247,170) (11,724,463) 164,268,947 131,605,596
Investment in joint venture /
associate (note 8) 509,505 499,780 509,505 499,780
Total segment assets 103,137,514 94,179,878 24,157,962 22,799,495 14,030,946 9,004,026 19,075,705 16,164,759 32,113,990 1,181,901 (27,737,651) (11,224,633) 164,778,452 132,105,376
Total segment liabilities 88,366,216 67,272,354 17,172,102 16,403,852 8,486,607 5,633,878 14,378,817 12,593,457 5,011,202 1,052,812 (2,751,504) (195,372) 130,663,440 102,760,981
Capital expenditure including

biological assets 15.035,998 36.352.358 880.042 3.745.935 4,360.135 2.012,884 763.065 10.034,224 113.667 25,416 1,722,718 21.152.907 53,893.535
Depreciation (note 4.2) 791,117 686.456 1,016,117 519.802 713,640 511.955 384,688 10.377 47.596 29.972 24,436 (2.840) 2,977,594 1.755.722
Amortization of intangibles (note 7.1) 19.111 14.808 4.764 3.701 14.160 7.793 fi.361 831 1.574 815 (32?) 45.970 27.626
47. Transactions With Related Parties

Related party comprise subsidiaries, joint venture companies, associates, other companies with c o m m o n directors, retirement benefit
funds, directors and key management personnel. Details of transactions with related parties during the period, other than those which
have been disclosed elsewhere in these financial statements, are as follows:
2010 2009
(Rupees)
Associated Companies
Purchases and services 9,994,924 9,247,750
Services rendered 126,132 1,321,901
Dividends paid 574,111 751,280
Payment of interest on TFCs a n d repayment
of principal amount 120,454 7,051
Right shares issued (including share premium) 1,777,152
Investment in mutual funds 1,632,000 799,250
Redemption of mutual funds 1,137,794 611,025
J o i n t Ventures
Purchase of services 1,030,972 1,564,559
Others
Dividends paid 19,446 50,195
Right shares issued (including share premium) 314,732
Remuneration of key management personnel 419,763 396,412
48. Donations
Donations include the following in w h i c h a director or his s p o u s e is interested:
Interest Name and address 2010 2009
in D o n e e of D o n e e
-(Rupees)-
Mr. Zafar A. Siddiqui President Rotary Club of Karachi Metropolitan 230
Mr. Hussain D a w o o d Director Pakistan Centre for Philanthropy 850
Mr. Hussain D a w o o d Chairman Karachi Education Initiative 150 13,000
a n d Mr. A s a d Umar Director
Mr. A s a d Umar and Member Lahore University of Management
Mr. Shahzada D a w o o d Sciences, Lahore 300
Mr. A s a d Umar a n d
Mr. Khalid Siraj Subhani Engro Foundation 71,040
71,190 14,380
205
49. Production Capacity

Designed Annual Actual
Capacity Production
2010 2009 2010 2009
* Urea (note 49.1) Metric Tons 975,000 975,000 971,913 952,024
*NPK Metric Tons 160,000 160,000 100,270 91,821
PVC Resin (note 49.2) Metric Tons 150,000 150,000 115,000 115,620
EDC Metric Tons 127,000 127,000 96,000 35,000
Caustic s o d a Metric Tons 106,000 1 06,000 93,000 38,739
Power (note 49.3) Mega watts 281.3 64 254 18
Dairy a n d juices Thousand Litres 446,503 375,945 314,650 247,074
Drying unit of rice processing plant (note 49.3) Tons 60,000 19,778
Ice cream Thousand Litres 19,032 10,290 12,672 6,900
* Actual production w a s below the designed annual capacity due to planned s h u t d o w n s as per market d e m a n d for N P K p r o d u c t s .
49.1 Urea plant also p r o d u c e d 611 metric tons (2009: 561) of Uquid A m m o n i a for outside sale.
49.2 The new V C M plant with a capacity of 220,000 Metric tons c o m m e n c e d commercial production from September 3 0 , 2 0 1 0 .
49.3 Engro PowerGen Limited c o m m e n c e d commercial production from March 27, 2 0 1 0
4 9 . 4 C o m m e n c e d production from November 7, 2 0 1 0 .
so. Loss of Certain Accounting Records

During 2 0 0 7 , a fire broke out at PNSC Building, Karachi where the Head Office and registered office of the Holding C o m p a n y w a s
located. Immediately following this event the Holding C o m p a n y launched its Disaster Recovery Plan d u e to w h i c h operational
disruption a n d financial impact resulting from this incident remained minimal.
The fire destroyed a substantial portion of its hard c o p y records related to the financial years 2 0 0 5 , 2 0 0 6 a n d the period January
0 1 , 2 0 0 7 to August 19, 2 0 0 7 although, electronic data remained intact due to the Company's Disaster Recovery Plan. The Holding
C o m p a n y launched an initiative to recreate significant lost records a n d w a s successful in gathering t h e s a m e in respect of the
financial year 2 0 0 7 . Hard c o p y records related to the already reported financial years 2 0 0 5 a n d 2 0 0 6 have not been recreated.
51 Non-Adjusting Event After Balance Sheet Date

The Board of Directors of the Holding C o m p a n y in its meeting held on February 14, 2011 has p r o p o s e d t h e following for approval
of the m e m b e r s at the Annual General Meeting to be held on M a r c h 3 1 , 2 0 1 1 .
- an increase in the authorised share capital of the Holding C o m p a n y from Rs. 3,500,000 to Rs. 4 , 5 0 0 , 0 0 0 ;
- a final cash divided of Rs. 2 . 0 0 per share (2009: Rs. 2.00 per share final c a s h divided);
- a b o n u s issue in t h e ratio of 1 share for every 5 shares held i.e. 2 0 % b o n u s ( 2 0 0 9 : 1 share for every 10 shares held i.e.
1 0 % bonus); a n d
- an investment of Rs. 5 6 2 , 0 0 0 in Engro Polymer & Chemicals Umited by w a y of subsicription of right shares.
The c o n s o l i d a t e d financial s t a t e m e n t s for the year e n d e d D e c e m b e r 3 1 , 2 0 1 0 do not include the effect of t h e p r o p o s e d c a s h

d M d e n d s , which will be accounted for in the consolidated financial statements for the year ending December 3 1 , 2 0 1 1 .
52. Listing of Subsidiary Companies, Associated Companies and Joint Venture
Name of subsidiaries Financial year end

Engro Fertilizers Limited D e c e m b e r 31 st
Engro Foods Limited D e c e m b e r 31 st
Engro Eximp (Private) Limited December 31 st
Engro Management Services (Private) Limited D e c e m b e r 31 st
Engro Polymer and Chemicals Limited D e c e m b e r 31 st
Avanceon Limited December 31 st
Engro PowerGen Limited D e c e m b e r 31 st
Name of Joint Venture
Engro Vopak Terminal Limited D e c e m b e r 31 st
Name of Associated Companies

Agrimall (Private Limited) June 30th
Arabian S e a Country Club Limited June 3 0 t h
53. Corresponding Figures
Coresponding figures have been rearranged and reclassified, wherever necessary, for the purpose of c o m p a r i s o n , the effects of
which are not material.
5 4 . Date of Authorisation for Issue

These consolidated financial statements were authorised for issue on Feb 1 4 , 2 0 1 1 by the Board of Directors of the Holding Company.

207
financials at a qlance
(Million Rupees) 2010 2009 2008 2007 2006 2005 2004 2003 2002
Net sales Revenue 79,976 58,152 40,973 34,120 20,240 18,756 13,067 12,010 10,893
Operatin Profit 11,983 7,278 6,608 4,399 2,821 3,308 2,642 2,885 2,327
Profit Before tax 8,277 5,062 5,184 3,952 2,917 3,260 2,811 2,709 1,989
Profit after tax* 6,790 3,807 4,126 2,877 2,107 2,279 1,719 1,595 1,156
Employee c o s t s 4,836 3,134 2,456 1,922 1,284 860 828 756 668
Taxes duties &

A
development surcharge 9,646 7,790 5,032 5,420 4,633 4,168 3,911 3,457 3,062
Worker's Funds 493 423 458 360 253 215 156 167 112
Property, Plant
a n d Equipment 130,373 111,526 59,169 24,052 10,794 7,608 7,159 7,234 7,194
Capital Expenditure 21,152 53,893 36,213 11,081 1,149 1,088 523 402 823
Total Assets 164,778 132,105 80,801 48,973 20,054 14,397 13,538 13,024 14,288
Long Term Borrowings 89,152 84,142 40,738 18,284 2,382 2,900 2,592 3,236 3,322
Net Current Assets (4,055) 3,953 8,382 15,077 4,946 2,354 1,722 1,903 804
Dividends A n d Share
Total Equity 34,115 29,344 23,547 18,006 9,796 7,540 6,791 6,298 5,334
Share Outstanding
at year e n d (in Million) 327 298 213 193 168 153 153 153 139
D M d e n d Per Share (Rs) 6.0 6.0 6.0 7.0 9.0 11.0 8.5 8.0 7.5
Dividend Payout Rate 29% 47% 31% 45% 72% 74% 76% 77% 90%
Bonus Share 20% 10% - - - - - - 10%
* Profit attributable to o w n e r s of the Holding Company.

A
Figures for years 2 0 0 2 - 2 0 0 8 represent Engro Corporation Limited (formerly Engro Chemicals Pakistan Limited).

proxy form
We
of being a m e m b e r of ENGRO CORPORATION LIMITED
and holder of
(Number of Shares)
Ordinary shares as per share Register Folio No. and/or C D C
Participant I.D. No. and Sub A c c o u n t No. , hereby appoint
of or failing him
of
as my proxy to vote for me a n d on my behalf at the annual general meeting of the C o m p a n y to be held on the 31 st day of March, 2011
a n d at any adjournment thereof.
Signed this day of 2011.
WITNESSES:
1) Signature :
Name :
Address :
CNICor :
Passport No.:
Signature
Signature should agree with the specimen
2) Signature
registered with the Company
Name
Address
C N I C or :
Passport N o . :
Note:
Proxies in order to be effective, must be received by the C o m p a n y not less than 48 hours before the meeting. A Proxy need not be a
member of the Company.
C D C Shareholders a n d their proxies are each requested to attach an attested p h o t o c o p y of their Computerized National Identity Card
or Passport with this proxy form before submission to the Company.
209
111-211-211
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enabling excellence.

Annual Report 2010

Engro Corporation Limited & Engro Fertilizers Limited

Every day, Engro enables its brand of excellence to come

values a n d spirit of Engro. In our journey to b e c o m e a profitable,

organization. Limited d e c i d e d to buy o u t Exxon's share. This w a s , a n d perhaps

Our History into an independent operating c o m p a n y to ensure undivided focus

Esso Pakistan Fertilizer C o m p a n y Limited w a s established in 1965

Engro C o r p . I Annual Report 2 0 1 0

of quality products and technical services. It also invests in developing

Engro Powergen also seeks to reduce Pakistan's power shortage

Engro C o r p . I Annual Report 2 0 1 0

Total Investment to date in USD Millie

Engro C o r p . I Annual Report 2 0 1 0

112 Auditors' Report to the Members

208 Proxy Form 209

© 2010, Engro Corp.

All Rights Reserved. No part of this publication may be reproduced

Weight Average number of

Earning per share Basic

Total Equity Rs Million Price to Earning Ratio

Allied Bank Limited e-mail: [email protected]

United Bank Limited Website: w w w . e n g r o . c o m

Habib Bank Limited

Engro C o r p . I Annual Report 2 0 1 0

"RESOLVED that the consent of the C o m p a n y in General

"5. The Share Capital of the Company is Rs. 4,500,000,000

Engro C o r p . I Annual Report 2 0 1 0

The Board of Directors r e c o m m e n d that taking into a c c o u n t the

By Order of the Board

Karachi, ANDALIB ALAVI

Engro Foods Limited

Market leader in the tea creaming segment.

Pakistan's 1 st company to cross one billion

The market leader in UHT.

Omore, Pakistan's No. 2 ice cream brand

Voted 'Best Place to Work' for consecutive

From left to right

Standing S a a d Raja Abdul S a m a d D a w o o d Shabbir Hashmi

Engro C o r p . I Annual Report 2 0 1 0

Engro C o r p . I Annual Report 2 0 1 0

Asif Qadir Arshad Nasar Shahzada Dawood

Engro C o r p . I Annual Report 2 0 1 0

of Business Unit at Reckitt Benckiser

Ruhail Mohammed Khalid S. Subhani Muhammad Aliuddin Ansari

Engro C o r p . I Annual Report 2 0 1 0

Engro C o r p . I Annual Report 2 0 1 0

the necessary managerial, professional a n d people skills to inspire

Quality & Continuous Improvement

m o t t o is, 'Quality in all we d o ' .

and that enable each of us to do our j o b s more effectively by business goals.

providing information that contributes to the quality of our judgment

Compliance Statement Risk Management Process

Engro C o r p . I Annual Report 2 0 1 0

risk within the Company, has delegated the detailed design a n d

Review: A Board of Directors' meeting calendar is issued annually that

key performance indicators. strategy.

controls. required to m a k e a decision or give its approval.

There is a c o m p a n y w i d e policy governing appraisal and approval